Chapter 20 : State-Capitalism and The Mixed Economy

While Marx’s theory of accumulation covers the mixed economy, it seems to lose its validity for the completely-controlled capitalist economy, i.e., state-capitalism or state-socialism as represented by the so-called communist societies of the Eastern power bloc, where government decisions and economic planning determine production, distribution and development. These societies are not the product of a slow transformation from a “mixed” to a state-directed economy but are the direct outcome of war and revolution. In practice, they have continued and extended the state-directed war time economy; theoretically, they regard their activity as the realization of Marxian socialism. This is somewhat plausible because they adhere to an “orthodox” interpretation of Marxism which sees in private property relations the main, or only, condition of exploitation. Actually, the conditions which Marx expected to result in the “expropriation of capital” did not even exist in the industrially underdeveloped nations engaged in social revolution. Their leaders were convinced, however, that total state control over all of the economy would bring about a more rapid capital development than would be possible under competitive market relations, and that this more rapid development under the auspices of socialist governments would enable a slow transition to socialism.

The development of capital production in the name of “socialism” or “communism” is a paradox too farfetched to have entered Marx’s mind. Yet from the vantage point of the present it is not strange at all. Although constructed with an eye on England which, at that time, represented capitalism in its most advanced and purest form, Marx’s model of capital production represented neither the national nor the world economy but was an imaginary system of basic capital-labor relationships. The actual development of capitalism brought with it a variety of more-or-less developed capitalist nations, colonization, and imperialism. Yet the world economy was inextricably interconnected with, and dependent upon, capital expansion in the dominating capitalist nations. In under developed countries revolutionary theory had to relate itself not only to still-existing pre-capitalist conditions but also to the over riding capital-labor relations that dominated world economy. As there was no way to develop new independent national economies except in opposition to the monopolistic powers and their fetishistic capital expansion, the ruling capitalist ideology could not serve national-revolutionary needs in backward countries, the less so as their own pre-capitalist ruling classes secured their existence in close collaboration with the imperialist powers. Even though it could serve no more than national capital development, the revolutionary ideology had to be an anti-capitalist ideology. And as the carriers of this ideology operated in the twentieth and not in the eighteenth century, their concept of progress by way of capital production was no longer associated with private enterprise and general competition but with the highly concentrated mixed or state-controlled economy of modern capitalism. Able only to reach those social conditions that Marxian socialism intended to eliminate, they could see themselves as “Marxists” by assuming an engagement in two revolutions at once – the “bourgeois” revolution which created the capital-labor relations of modern industry, and the “socialist” revolution, which prevented the determination and utilization of this development by private capital.

Though carried out in the name of Marx, the state-capitalist, or state-socialist, revolutions would be better described as “Keynesian revolutions.” What is usually designated as the “Keynesian revolution” is Keynes’ recognition and acceptance of the fact of intensive state interventions in the economy. It is only because of Keynes’ preoccupation with “mature” capitalism that the application of his theory has a reformatory rather than a revolutionary connotation. But as a measure of reform, stopping at the “mixed economy,” it is self-defeating, for it slows up but does not prevent the destruction of the private enterprise system. Arising at the same time as the mixed economy, the state-capitalist system may be regarded as Keynesianism in its most consistent and most developed form. It is not a mixed economy in the limited Keynesian sense of safeguarding private capital by way of government controls. But it is a mixed economy in the projected wider sense of a “comprehensive socialization of investments,” geared to the promise of alleviating the prevailing “inequitable distribution of wealth and income” by leaving it to the “common will, embodied in the policy of the state,” to determine “how far it is safe to stimulate the average propensity to consume” in a full-employment, crisis-free economy. Moreover, state-capitalism remains a “mixed economy” by being part of a world economy still largely determined by private profit production, and by virtue of the fact that it is marked by all the antagonisms that characterize private capital production except that of private profit appropriation.

Whereas the mixed economy in the narrow Keynesian sense is limited by the nature of private profit production, in its wider sense – as a complete state-capitalist system – it is limited by inter national capital competition. In theory, state-capitalism should allow for a nationally-planned determination of both the volume and the direction of production. The kind of “planning” actually undertaken is, however, determined by the needs of capital production within a setting of international capital and power competition. The possible advantages of complete government control can be only partly enjoyed and the fate of the state-capitalist economy remains bound to the fate of capitalism in general. Its economic expansion is not of the type which characterized the rise of capitalism but of the type characteristic of its decline. “Overproduction” in the form of waste-production in a relentless power competition now accompanies the early stages of capital formation and even that of “primitive accumulation.” As in the capitalism of old, the accumulation of capital, not the real needs of the producers, determines the direction of production.

As capital formation is a concern of government in the mixed as well as in the state-capitalist system, what, in the Keynesian view, divides “capitalism” from “socialism” is merely the degree of government control. But as capitalism, according to Keynes, has the “tendency to socialize itself,” socialism is now defined as a fully “socialized capitalism.” In this sense state-capitalism represents “socialism” and is generally recognized as such by spokesmen of the “Marxist” and “anti-Marxist” camps. The dissolution of the private property system through capital concentration in corporations, some of which “are units which can be thought of only in some what the way we have heretofore thought of nations,”^[1] changed the capitalist economy into “something which differs from the Russian or socialist system mainly in its philosophical content.”^[2] Contrariwise, it can also be argued that if the word capitalism is still used for the economies of the Western world, it “ought not be used to describe only the private ownership of capital; it ought to describe any community which believes in steadily increasing its wealth-creating capacity by a constant investment of resources in productive capital. So defined, there is nothing controversial about capitalism, since the leading examples in today’s world of progress-by-capital are the United States and the Soviet Union.”^[3]

Already during the Great Depression, President Roosevelt realized “that what we are doing in the United States are some of the things that are being done in Russia and even some of the things that are being done under Hitler in Germany. But we are doing them in an orderly way.”^[4] Because of the affinity of the mixed to the state-capitalist economy, their actual enmity is now largely related to “philosophical” differences that are supposed to determine their political institutions but not their socio-economic structure. To be sure, “orthodox Marxism” maintains that the mixed economy is still the capitalism of old, just as “orthodox” bourgeois theory insists that the mixed economy is a camouflaged form of socialism. Generally, however, both the state-capitalist and mixed economies are recognized as economic systems adhering to the principle of progress by way of capital accumulation.

During the Great Depression, Keynes deviated from this principle and envisioned an early change of emphasis from investment to consumption in a society of capital abundance which would render superfluous the socialism conceived by its founders and adherents. It was precisely this deviation which distinguished his theory from the “orthodoxy” of his contemporaries. After the war, however, bourgeois theory insisted again on an accelerated rate of capital formation. “The extraordinary progress in Russia, with its distinct capitalistic tendency, has contributed to this general change of attitude and has greatly impressed the rest of the world. Never before has a people imposed upon themselves such severe restrictions in order to accumulate savings to be converted into real capital. It is now clearly realized that this immense display of [Russian] power is based on an abundant supply of capital created by an abnormal reduction in current consumption. Everywhere, people are demanding an economic policy which will lead to a progress similar to that in Russia.”^[5] While in the capitalistically less-developed nations this masochistic “demand” comes to the fore in various attempts to emulate the Russian example, in the highly-developed capitalist nations it takes the form of frantic attempts to reach Russia’s higher rate of capital formation.

It also brought the question of “growth” to the forefront in a rather shamefaced return to political economy, which characterizes current bourgeois economic theory and practice in its new concern with the “macroscopic” aspects of the economy and its dynamics. However, contrary to Marxian theory, bourgeois theory holds that capitalism has proved to be reformable and is now securely on its way to solving all remaining social problems. There is, then, no need to see in the class struggle the motive force of social development, or even to approach still-existing social evils from a class position. These evils may be dealt with as general human, not specifically social, problems. (This point of view may, by the way, help explain the recent vogue of the socialist humanism of the young Marx, who considered the alienation of labor in capitalism a result of the “alienation of man from his true nature.” This un-Marxian Marx well fits the welfare-state and can even be used in the ideological war against the ideological Marxism of the state-capitalist adversary.)

At present, moreover, there exists a tendency to view the developments of both the Soviet and Western systems as converging pointing to the eventual establishment of a socio-economic structure as much removed from free enterprise principles as from those of the regimented economy. “The Soviet system does not remain the same,” it is said, “and neither does the Western system. Both are moving and the movements are, generally, converging ones.”^[6] It is no longer true, the argument goes on, that “the systems are diametrically opposite,” they have “already many features in common; elements from each can be combined, leading to new mixed systems.”^[7] But while both systems undoubtedly agree on the importance of capital formation, they disagree on the far more important question as to what particular social layers are to be its beneficiaries.

As regards this question, nationalized capital is the opposite of private capital, even though – as regards the producers – both forms of capital production thrive on exploitation. This common point encourages the empty hope for their eventual convergence; but they remain divided on all other issues. The nationalized economy is no longer a market economy, even though it may retain, or reintroduce, some quasi-market relations subordinated to over-all government control. Good or bad, it can actually plan its production and distribution, although the nature of the planning itself is co-determined by internal necessities, the world market, and the changing requirements of imperialist competition.

The strictness of the opposition between private and government ownership of means of production, between market-determined and consciously-regulated capitalist economy, seems to be contradicted by the existence of the “mixed economy” and its projection onto the international scene as a possible harmonious co-existence of different social systems. Yet an indefinite peaceful co-existence of state-capitalist and market-oriented economies is no less illusory than the indefinite existence of the “mixed economy” as a market-economy. In fact, it is precisely the advancing state-control in the private-enterprise economies which accentuates the conflict between the two different capitalistic systems. The wars between identical capitalist systems have made it clear that capital competition turns into imperialistic competition and that wars would occur even if there were not a single state-capitalist nation. The Second World War demonstrated the feasibility of temporary alliances between state-capitalist and “liberalistic” systems of capital production; but it demonstrated at the same time their fundamental irreconcilability, based not merely on newly-arising imperialistic interests but also on the difference between their social structures. Far from bringing “traditional” capitalism closer to state-controlled economies, the advent of the mixed economy intensifies the enmity between the two, if only to curtail the expansion of state-control in the market economies.

Capitalism will not turn itself into state-capitalism; and it would be just as difficult to make a state-capitalist revolution as it is to make a socialist revolution. Since a conscious organization of social production presupposes the expropriation of private capital, the transformation of the mixed economy into state-capitalism can only be a revolutionary, not an evolutionary, process. In thought, of course, it could be otherwise. In a “democracy,” it is not entirely inconceivable that a government may come to power committed to the slow or rapid nationalization of industry. But such a government would be a revolutionary, anti-capitalist government, insofar as capitalism is identified with private ownership of the means of production. In order to realize its program, it would be forced to displace the market system by a planned system. As far as the capitalists are concerned, this would be their death-warrant, and it is not easily conceivable that they would accept it without protest. Most likely, the complete nationalization of industry would lead to civil war. It is fear of the social consequences of extensive nationalization which prevents those ideologically committed to it from actually attempting its realization.

Although there is no precedent, it is not inconceivable that a state-capitalist system could be instituted with capitalist consent; the mixed economy would then have been a step in this direction. Keynesian reforms and political movements associated with them may bring about a “social climate” in which the nationalization of essential industries may appear inescapable, or even a good thing to a majority of capitalists. Arrangements may be made to safe guard property rights in terms of income while delegating control of production to national agencies. Various “socialization” schemes, based on capital-compensation, are aimed toward this end – to be achieved within the legal structure of political democracy. Nationalization of industry, however, no matter how capital owners may be compensated, amounts to their abdication as a ruling class; unless, of course, they regain this position as members of government. Compensations are based on the value of the capital turned over to the State. But accumulation now becomes the accumulation of national capital and decisions over the employment of surplus value become the decisions of government. Compensation comes out of surplus-value but cannot be productively accumulated to private account. The income it represents is secured by nothing but the good will of government and the latter may at any time repudiate this claim to unearned income and complete the expropriation of private capital. Whether by consent or by revolution, the nationalization of capital ends the class rule of private capital.

The disciples of state-capitalism can if they wish have an easy time recognizing the inconsistencies and aimlessness of the neo-liberalism of the “mixed economies.” They can point to the fact that capitalism is continuously changing in the direction of state-capitalism. For a long time, however, they were not willing to conceive of peaceful abdication by power groups in the interest of the general developmental trend. The Bolsheviks, for instance, never had the illusion of a frictionless side-by-side development of capitalism and “socialism,” nourished by the war alliances between democratic and totalitarian nations and by the growing “similarity” between the Keynesian welfare-state and the state-capitalist system. They were convinced that the transformation of a partly-controlled social system of capital production into authoritarian state-capitalism involved social struggles, and if they envisioned a future world-unity, they saw it in the image of their own social system and thus de fended the latter as much for the sake of “world-revolution” as for its own sake. Convinced of their progressive calling, theirs is an optimistic attitude and their policy is “dynamic” in contrast to the neo-liberal attempt to arrest the development at whatever particular point it happens to find itself.

Of course, like any social group, the Bolsheviks too can blow hot or cold. “Co-existence” allows for a variety of interpretations and so does the content and strategy of “Marxism.” The latter has often been played down. This was the policy during the Second World War, for instance, to allow the Grand Alliance to discover a previously non-existent harmony between Russia and the anti-Nazi Western world – and this policy also suited Russia’s internal needs, as she required at that time a return to traditional ideologies to support the war of “national liberation.” On the other hand, with the end of the war and the extension of Russia’s power the oppositional character of Bolshevik ideology and practice was stressed once more and Russian “communism” was revived with the help of Western “anti-communism.” But at the time of Stalin’s demise Russia took the initiative in attempting to moderate the world situation. In view of the precarious international situation and the still more precarious conditions in Russia, Stalin’s death was an event capable of leading to great disturbances internally and abroad. His successors sought a reduction of tensions in both areas – in the first, by scrapping the internal course planned by Stalin;^[8] in the second, by an apparent willingness to open the “socialist” market to capitalist trade.^[9]

Concord between Russia and the Western world is, of course, the hope of people horrified by the prospect of a new and more devastating war, and of those who envision a future reconciliation between East and West on economic grounds. They recognize that any rapport demands decisive changes in both the East and the West and they try to help them along by developing the appropriate ideology. They tend to believe that the industrialization of totalitarian nations and their increasing ability to trade will trans form them into more democratic systems more akin to modern welfare capitalism. A partial abandonment of “Marxism” is urged upon the Russians in the interest of their own survival and final success. “Marxism for our time,” it is said, exhausts itself in a full employment program, though not necessarily in the Keynesian fashion. But as private capital relations are declining anyway, there is no need to stress the inevitable. The general trend in the direction of a regulated economy will on its own accord serve Bolshevism better than a senseless harping on by-gone issues of expropriation and capitalist collapse. And if the Russians are not able to change their ideology, they should at least grant others what they deny themselves. Marxist propaganda in the old capitalist countries, it is pointed out, “would not necessarily lose in impressive strength were it clearly stated to non-Russians, non-Chinese, etc., that the further evolution of their national ways of life cannot simply be derived from the experiences made by civilizations with a completely different background.”^[10] In this view, Bolshevik propaganda would be more successful “if the claims for maximum realization of the original Marxist pattern were dropped,” because with the receding of the egalitarian approach in the Marxist camp, the desire “for wholesale nationalization, as distinct from that of the commanding heights of economics, has lost its raison d’etre.”^[11]

By looking at the hands of Bolshevism rather than its mouth, Western capital may then find little reason to oppose the totalitarians, because their social system seems not too different from the future of its own. This is not a one-sided matter, of course, for while the Western world tends to adopt many of the innovations of state-capitalism, the Bolshevik East seems to adapt itself to the ways of the West. “Thus some ideas which sprang from early Communist preferences but proved difficult to apply have been given up. It is no longer held that workers can manage productive units by themselves, that all incomes should be more or less equal, or that money is superfluous. Incomes are geared to productivity and money concepts are increasingly used in planning. Interest, though not recognized as a possible source of private income, has gradually been accepted as representing a real cost element.

The value of an international exchange of products has been increasingly understood and some autarkic preferences weakened. Some decentralization in economic decision-making has been introduced and consumption has been given more attention in the new party program. Mathematical methods in economic planning, at first considered ‘bourgeois’, are now increasingly applied.”^[12]

However, just as it is highly improbable that in the absence of social revolution, the market economy will slowly transform itself into a planned economy, so it is equally improbable that a once-nationalized economy will return to capitalist market relations. The restoration of the market would mean the restoration, de facto if not de jure, of private capital. In the Western capitalist nations there exists the false concept of a “people’s capitalism,” by which is meant a system wherein a wide dispersal of stock-ownership results in a division between the ownership and the control of capital. The alleged divorce between ownership and control supposedly turns the non-owning managers of industry into acting capitalists. If the functions of the capitalists can be exercised by management without ownership, the rewards of ownership may also become the rewards of management. Although hardly likely, it is not inconceivable that the managers of Russian industry, in collaboration with the government and with the consent of large layers of the population, might proceed to restore a competitive market economy based on profit production, in the sense that each enterprise would operate as any private enterprise does in the West. As before, government would siphon off the equivalent of its own requirements from both paid and unpaid labor by way of taxes. But this would constitute a private-capitalist counter-revolution under the guise of a “managerial revolution,” and would at once reintroduce into the Russian economy all the contradictions which are immanent in competitive private capital production.^[13]

What a private-enterprise economy can engage in, short of social revolution, is a form of pseudo-planning, and what the nationalized economy can restore, short of social counter-revolution, is some sort of pseudo-market. Either case, that of spurious planning or that of spurious market competition, indicates the existence of difficulties within the market system or within the planned economy. In combating these difficulties, however, the use of instrumentalities which – despite their possible temporary usefulness – are foreign to the respective systems and their special needs will have to be arrested in time if the system’s basic characteristics are to be secured. There is no congruency between the planned and the market systems, even though some economic-technical arrangements, in distinction to socio-economic relations, may be common to both.

All the state-capitalist systems resemble the capitalist market economy in their maintenance of capital-labor relations and their use of capitalistic business methods. Instead of being owned by capitalists, the means of production are now controlled by governments. The latter set a certain value (in money terms) on productive resources and expect a greater value (in money terms) following the intermediary of production. Money wages are paid to the workers, whose function it is to create a value greater than that represented by their wages. This surplus is allocated in accordance with the decisions of governments. It feeds the non-working population, secures national defense, takes care of public requirements, and is re-invested in additional capital. All economic transactions either are exchange-transactions or appear as such. Labor-power is sold to management of some enterprises and wages buy commodities from management of other enterprises. There is quasi-trade between the management of some enterprises and the management of other enterprises, like that which is carried on between the various divisions of large corporations in all capitalist nations and which reaches its complete form in the fully centralized State economy. Formally, there is not much difference between private-enterprise and state-controlled economies, except for the latter’s centralized control over the surplus-product.

All actually-existing state-controlled systems were, or are, to be found in capital-poor nations. The first requirement of such nations is the formation of capital, a presupposition for their national independence and a precondition for the intended socialization of production and distribution. Bound more or less (depending on the country and its particular situation) to the capitalist “international division of labor,” they must relate their economies to world market conditions and partake in international commercial competition. This limits or excludes any desire they may have not to make the money-economy and its expansion the motive force of their activities.

The “socialization” of the means of production is here still only the nationalization of capital as capital. Though private ownership no longer exists, the means of production still have the character of capital because they are controlled by government instead of being at the disposal of the whole of society. Although private capital accumulation is now excluded, the exploitation of men by men continues by way of an unequal system of distribution in both the conditions of production and the conditions of consumption. This inequality perpetuates competition as a struggle for the more lucrative positions and better-paid jobs, and carries the social antagonisms of capitalism into the state-capitalist system.

State-capitalism is still a “surplus-value” producing system, but it is no longer a system which finds its “regulation” through market competition and crisis. The surplus-product no longer requires market competition in order to be realized as profit; it derives its specific material character, and its distribution, from conscious decisions on the part of the state’s planning agencies. That these decisions are co-determined by international economic and political competition and by the requirements of accumulation does not alter the fact that the lack of an internal capital market demands a centrally-determined direct system of decision-making with regard to the allocation of the total social labor and the distribution of the total social product.

Under these conditions, the use of quasi-market relations is a convenience, so to speak, not a necessity, even though it may have been forced upon the state-capitalist systems by circumstances they were unwilling to resist. In the U.S.S.R., for example, the quasi market relations provide enterprises with a quasi-autonomy consumers with a quasi-freedom of choice of consumption, and workers with a quasi-choice of occupation. But all these quasi-market relations are subordinated to over-all direction by government.

Within definite limits, this restricted “free play” of market forces can be extended or contracted without seriously affecting the planning system as such. It is presently being extended, in the belief that this will make for greater “efficiency” without diminishing the effectiveness of the planning system. This involves some decentralization of the decision-making process and more self-determination for individual enterprises – in support of the overall direction of the economy as a whole. The goal is not to change the character of the economy but merely to provide it with greater profitability through a more extensive use of capitalistic techniques of incentives.

Individual enterprises are given more leeway in determining their production processes, so as to fulfill and excell their planned production quotas; a greater regard for consumers’ preferences is expected to aid production plans and to eliminate waste; interest charges on borrowed capital are supposed to lead to greater rationality in investment decisions; wage differences within the plant are left to some extent to the discretion of management; portions of the profits made through higher productivity and improved organization may be retained by management and reflected in wage in creases. These and other “innovations” are intended to accentuate what has always existed, namely, the use of capitalistic incentives in state-capitalist economy. They do not affect the control of investments by government, nor its control of total social production and its division in accordance with a general plan. Wherever the outcome of these “innovations” does not suit the general plan, a government veto can change the situation either by decree or through a change in pricing policies. The limited “free market” can at any time be suspended by the real power relations which stand behind the pseudo-market relations.

It should be obvious in any case that at a time when not even the private enterprise systems are able to exist except through extensive government intervention, no state-capitalist system will find itself on the road of return to private-enterprise. In fact, the only advantage of the latter over the former type of system consists in its complete control over economic affairs, which compensates for its economic ineffectiveness vis-à-vis the highly-developed private-capitalist systems. The state-capitalist system does not suffer that particular contradiction between profitable and non-profitable production which plagues private-property capitalism, and which offers it as an alternative to stagnation only its slow destruction. With this destruction already behind itself, the state-capitalist system may produce profitably and non-profitably, without facing stagnation.

1. A. A. Berle, Jr., Economic Power and the Free Society, New York, 1957, p. 15.

2. Ibid., p. 13.

3. The Economist, London, October 16, 1954.

4. The Secret Diary of Harold L. Ickes. The First 1000 Days, 1933-36, New York, 1953, p. 104.

5. G. Cassel, “The Role of Capital in the National Economy,” Skannaviska Banken, Quarterly Review, January, 1945.

6. J. Tinbergen, Shaping the World Economy, New York, 1962, p. 34.

7. Ibid., p. 39.

8. According to his last writings on the Economic Problems of Socialism in the U.S.S.R. (New York, 1952), Stalin thought that intra-capitalist rivalries would grant Russia time and opportunity to speed up her productive capacity by way of a further strengthening of state control. In his eyes, Russian socialism was still weak because the government controlled collective-farm property only incompletely. “In order to raise collective-farm property to the level of public property,” he wrote, “the surplus collective farm output must be excluded from the system of commodity-circulation and included in the system of products-exchange between the state-industry and the collective farms.” (p. 70) This was an expression of dissatisfaction with the existing rate of farm labor exploitation. And, as it is clear that in a still largely agricultural nation an increased rate of industrial expansion depends on increased profitability of agricultural production, Stalin’s statement formulated a policy detrimental to the interests of farm labor. A preoccupation with the agricultural problem also characterizes post-Stalinist regimes. But the latter do not seem to dare to base their policies on the assumption of a prolonged period of peace. If war is imminent it would be unwise, in their views, to alienate the farm population; if war is not imminent, more palatable, if slower, methods may be used to increase agricultural production. Most of all, it is necessary to assure a prolonged peace.

9. In Stalin’s view, the breakdown of the world market led to the rise of “two world-markets, confronting one another,” as socialism and capitalism do. He predicted that the nations of the “socialist camp” would soon “not only be in no need to import from capitalist countries, but will themselves feel the necessity of finding outside markets for their surplus products,” which would increase the capitalists’ difficulties and lead to new wars between the capitalist nations. (Economic Problems of Socialism in the U.S.S.R., p. 26). What is implied here is a program of “autarchy” for the Eastern power bloc, and beyond that, a perpetration of the “cold war” in the sphere of international trade. Against this policy, Stalin’s successors proclaimed a great interest in the strengthening of international economic relations in order to ease international tensions.

10. R. Schlesinger, Marx: His Time and Ours, New York, 1950, p. 293.

11. Ibid., p. 369.

12. J. Tinbergen, Shaping the World Economy, p. 34.

13. The Yugoslav “market socialism,” for instance, in which a combination of Workers’ Councils and professional management runs industrial and commercial enterprises in accordance with the profitability principle and in competition with other enterprises, and where agriculture is mainly carried on by private peasants, suffers all the contradictions characteristic of capitalistic market relations, such as disproportional development, business failures, unemployment, and the ups and downs of the business cycle.