Table Of ContentPAPERS IN
ECONOMICS AND
SOCIOLOGY
by
OSKAR LANGE
Translation edited by
P. F. Knightsfield
PERGAMON PRESS
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Copyright (§) 1970
Panstwowe Wydawnictwo Naukowe
First English edition 1970
Library of Congress Catalog Card No. 68-22080
Printed in Poland
08 012352 X
PREFACE TO THE POLISH EDITION
When it was decided to publish a collection of my papers, written
over a period of thirty years, I had certain doubts about the interest my
early work could arouse today, for writings in the social sciences quickly
become out of date. Moreover, I am at present engaged upon setting out
the results of my work, covering a long period of time, in a book entitled
Political Economy, the first volume of which has recently appeared. Is
there, then, any need to collect and publish my early works?
I have been convinced, however, by two arguments. One is that in
Political Economy, on the remaining volumes of which I am working at
present, I shall not be able to cover all the details of the problems with
which I have been concerned in my research. This book will not, therefore,
summarize the whole of my work. The second argument is to show the
path I took which has led me to my present conclusions. This shows
in a way the whole field of my research and what it covers, together with
the gradual development of my conclusions.
It is these considerations which have determined the choice of papers
in this collection. I have chosen papers directly connected with the general
trend of my social and scientific interests and have left out those con-
cerned with problems outside this general trend, namely those which
are exclusively technical or political, and those which I consider as being
of no interest whatsoever today. As a result, the collection consists of
papers which I consider to be most characteristic of the development
of my work and which, in spite of the time that has elapsed since they
were written, are still of interest today.
To allow for the variety of topics with which these papers deal, the
collection is divided into five parts. It seems to me, however, that from
among these various topics the reader will perceive a single guiding idea,
namely, an attempt to link a strictly scientific treatment of economic
investigation with the needs of social practice, and in particular with the
working-class movement and the question of socialism. This aim is
served even by abstract, mathematical economic arguments, seemingly
so remote from social practice.
vii
viii Preface to the Polish Edition
I think, moreover, that in these papers, written over a period of
thirty years, the reader will detect a definite line of development. This
line is not always a straight one, more than once breaking off and starting
forward anew. This is brought about by the development both of
scientific thought as such and of historical conditions, coupled with
historical experience, which throws new light on a given problem.
For this reason, individual papers obviously do not always reflect my
present views on a given problem ; many of them show the path which
led me to the views I hold today. In order to help the reader to see both
this path and my present view on a given problem, some earlier papers
are included next to more recent ones on the same subject. In this
way, the reader can compare papers on the same problem written at
different periods, and thus see which of my earlier views I still hold
and which of those I have since abandoned.
Even papers published relatively recently do not always fully reflect
my present views on a given problem. As an example I can quote certain
proposals from the article How I See the Polish Economic Model (Jak
sobie wyobrazam polski model gospodarczy) and in particular the
proposal to establish a second Chamber in the Seym to represent the
various branches of the socialist economy. The Polish Seym has worked
out a different way of parliamentary control of the socialist economy with
the help of a good number of permanent committees. This way has
proved efficient and must be the basis for the further development of
socialist democracy in Poland.
The papers contained in this collection have been reprinted without
any major revision. In some cases the text has been condensed, and
stylistic alterations have occasionally been made. On the other hand, the
quotations contained in these papers are generally taken from the
newest Polish edition of the given book. Thus, for example, in the paper
published in 1931, the quotation by Lenin is taken from the present
edition of the Works (Dziela), published by Ksi^zka i Wiedza. In this
paper, the quotation from Hilferding's book Das Finanzkapital is taken
from the Polish translation published in 1958. This rule is observed
throughout, thus making it easier for the reader to find the sources of the
quotations.
Many of the papers were originally published in languages other than
Polish.
At the end of the book a bibliography is given of the most important
Preface to the Polish Edition jx
of my economic and sociological publications. This does not contain
publications of lesser or only passing significance, nor those of a purely
political nature.
OSKAR LANGE
Warsaw, September 1961.
FOREWORD
The table of contents of this volume points to the unusually wide
interests of the author: they encompass not only all the economics, in
the strict sense, but also related problems of sociology on the one hand
and those of mathematics or mathematical statistics on the other.
However, in Lange's work three lines of thought seem to me most
important: (a) the problem of functioning of the socialist system;
(b) dynamics of capitalist and socialist economics; (c) historical mate-
rialism.
His essay on the modus operandi of a socialist economy, Economic
Theory of Socialism, published first in 1937, was one of the most important
of Lange's contributions. It played a crucial role in the discussion
about the feasibility of rational management of a socialist economy
which at that time was in full swing in the West. In reply to the point that
such management would require a solution of an enormous number of
equations, laboured by reactionary economists, Lange emphasized that
the authorities of a socialist economy may always resort to a certain
measure of market mechanism. This essay does not appear in the present
volume since it was subsequently published in book form conjointly
with a paper of Taylor. However, two items related directly to this
subject are included: How I See the Polish Economic Model and The Role
of the Co-operative Movement in the Construction of Socialism. It
should be noted that the ideas expressed in these papers are not
necessarily identical with those of Economic Theory of Socialism. This
is, in fact, natural since they are not concerned with demonstrating the
possibility of rational operation of the socialist system in abstracto, but
with a specific analysis of the role of the market (or quasi-market)
within the framework of a centrally planned economy. In addition,
Lange's views on the subject are clearly influenced by his first-hand
experience of the actual functioning of a socialist economy.
Lange's research in economic dynamics at the early stage of which
he produced the well-known paper The Rate of Interest and the Optimum
Propensity to Consume (1938) is represented in the present volume in
xi
xii Foreword
particular by "Some Observations on Input-Output Analysis". This
essay established the connexion between the Marxian schemes of
reproduction and the input-output matrices. In the same category may
be included two papers on planning economic development in the so-
called mixed economies: Observations on the Second Five-Year Plan in
India and The Tasks of Economic Planning in Ceylon.
Finally, a brilliant presentation of the gist of historical materialism
is contained in an early paper (1936) included in this volume, Ludwik Krzy-
wicki—Theorist of Historical Materialism. In another paper of the
present volume, Current Problems of Economic Science in Poland, the
applicability of the method of historical materialism to the evolution
of socialist systems is developed.
All these lines of research as well as others were to converge in
a great three-volume treaty on Political Economy which was to be in
a sense the crowning stone of Lange's work. Unfortunately, only the
most valuable first volume and a part of the second were published. The
illness and the untimely death prevented bringing this great undertaking
to an end. In the present volume Lange's ability of synthesis of the most
important problems of economics is exemplified by the paper on The
Political Economy of Socialism which was written initially for the Polish
General Encyclopedia.
It follows from the above that the present book concerned with
manifold subjects constitutes at the same time an essay on the subject
Oskar Lange — a Universal Economist.
M. KALECKI
THE ROLE OF THE STATE
IN MONOPOLY CAPITALISM
The most important problem facing the working-class movement
today is the need to be clearly aware of the economic role which the
State plays at the present stage of monopoly capitalism, and of the funda-
mental change taking place which is affecting its social function; for, the
attitude the working-class movement adopts to all present-day economic
and political problems may depend on just such awareness.
The transformation of freely competitive capitalism into monopoly
capitalism begins with the concentration of production and capital.
When a high level of concentration is reached, there must necessarily
appear among the capitalist groups, controlling concentrated production
plants, the desire to use their power to secure for themselves a mono-
polistic position and additional monopoly profits exceeding the level
of profit resulting from free competition. This is achieved by agreements
between the biggest capitalist magnates to form cartels, trusts or syn-
dicates and to refrain from competing against each other. By this means
they operate monopoly price and production policies and force the
smaller producers of a given branch of production to follow these
policies, threatening them with complete ruin should they fail to comply.
Thus, the basis of capitalist monopoly is the economic power which
results from the concentration of large amounts of capital in the hands of
a small group of capitalist potentates. Concentration of capital is the
basis upon which certain capitalist groups gain monopolistic positions,
since by this means all the capitalists of a certain branch of production
can be forced into a monopolistic agreement and all recalcitrant outsiders
rendered harmless. This is the fundamental condition of the development
of capitalist monopoly.
However, economic power resulting from concentration is not of
itself enough to create a monopoly, for it meets with two serious obstacles.
The most important obstacle is that as long as the agreement does not
cover the capitalists of a given branch of production throughout the
whole world, the fact that particular groups of capitalists have set up
3
4 Marxist and Socialist Theory
cartels or trusts does not yet establish a monopoly, since the various
groups of capitalists continue to compete among themselves. The only
change which occurs is in the level at which the competitive struggle is
carried out: competition between individual capitalists is replaced by
competition between organized capitalist groups such as cartels, trusts,
syndicates, large joint-stock banks, and so on. It is only the organizational
form of competition which is changed ; its economic content remains as
before.
The second obstacle is the possibility that substitution goods may
be brought into the market against the goods produced by monopolies,
e.g. gas, electricity, oil, coal and so on. This would mean that a cartel
would have to compete with the producers of substitution goods, and
allow in its policy of prices and production for the possibility of a shift
in consumption towards such goods. This difficulty can only be overcome
by also drawing the producers of all these substitution goods into
monopoly agreements, thus limiting the monopoly activities of rivalling
cartels and trusts.1
It appears that the economic power of capitalist combinations, the
concentration of control in the hands of a few groups with large amounts
of capital, is in itself not enough to secure a monopoly position. Some-
thing more than economic power is needed for this: political power is
also necessary—the need to exert appropriate influence on the State
which alone can, by certain political acts, protect the monopoly com-
binations within its territory from competition of foreign capitalists.
This protection must extend not only to goods produced within the
monopolized sector, but also to all substitution goods. It is only State
intervention that can create monopoly conditions for capitalist combina-
tions, such as cartels, trusts and large joint-stock banks. Monopoly
1 There is yet a third factor limiting monopoly control by capitalist combinations.
Outsiders may appear for whom production is worth while even at higher costs than
those prevailing in the cartel when the monopolists raise the price. The influence of
this factor is usually over-estimated, for it cannot break up the monopoly since it is
itself dependent on monopoly prices. On the break-up of the monopoly and the
subsequent fall in prices, the outsider is eliminated since he is producing at higher
than marginal costs. He can reduce the surplus profits of the monopolists, but he
cannot earn them himself without being forced into liquidation. For this reason also,
cartels and trusts tolerate such outsiders fairly willingly, especially during a boom,
allowing them to meet part of the increased demand which the boom creates. However,
it is on these outsiders that the whole weight of a crisis falls.
The Role of the State in Monopoly Capitalism 5
conditions are accomplished by a policy of tariffs and foreign trade
regulations, a suitable system of trade agreements, a tariff policy for
State railways, a colonial policy, and so on. Only such intervention by
the State can transform the economic power of the capitalist combina-
tions so that they occupy a monopoly position, assuring to certain groups
of capitalist potentates monopoly profits exceeding profits which would
result from free competition, due to the operation of the law of profit
equalization.
Thus, the age of monopoly capitalism is increasingly characterized
by the intervention of the State. With the end of the nineteenth and the
beginning of the twentieth centuries, a fundamental change takes place
in the function of the capitalist State. This change is connected in capi-
talist systems with growing trends towards the formation of monopolies.
In the age of freely competitive capitalism, in the age of comparative
liberalism, the bourgeois State followed the principle of non-intervention
in economic life. It is true that this rule was quite frequently broken,
but the State's general attitude to economic life was based on the principle
of laissez faire, which was then the generally accepted ideal of the whole
capitalist world. During the period of liberalism, the State confined itself
to forming and supporting the general conditions of the capitalist
economy, such as private ownership, maintenance of law and order,
communications, the monetary system, legal security, and so on. How-
ever, with the appearance of capitalist combinations with clearly mono-
polistic tendencies, such as cartels, trusts, etc., the function of the
capitalist State fundamentally changed. Henceforth the capitalist State
does no longer confine itself to maintaining the general conditions of the
capitalist economy, but actively intervenes in economic life. The principle
of laissez-faire is left to the universities, and active intervention in
economic life is considered by the State to be its highest duty. In this
way, it contributes enthusiastically to "the favourable development of
the national economy" and to the "protection of the nation's most
vital interests", that is, to the creation of privileges for cartels, trusts and
large joint-stock banks—privileges which give rise to high monopoly
profits.
Thus, begins a great wave of protection by tariffs and control of
foreign trade. In contrast to former "development" tariffs, which were
designed to give less industrialized countries an equal start with highly
industrialized England, and which were, therefore, of a temporary
