Work-Standard Accounting Practices: Material Product System (MPS)

The Soviets were already employing their own accounting system to measure economic performance well before the Liberal Capitalists adopted theirs at the United Nations during the 1950s. The Material Product System (MPS) was designed to provide an accounting system catering to Marxist-Leninist ideology, accommodating among other things the Labor Theory of Value (LTV) with its rejection of the Exchange-Value in favor of Use-Value. Its equivalent to the GDP (Gross Domestic Product) in the UNSNA and the Work-Standard’s TPP (Total Productive Potential) was called the “Net Material Product (NMP).” But the Soviets did not use NMP domestically. The formal technical term was simply “National Income.”  

If GDP serves as the metric for the Quantities of Kapital and Schuld created by a given nation, then MPS is meant to represent the production of raw materials and finished goods by the Natural and Manufacturing Sectors. All economic life was categorized into “Productive Enterprises” (Read: the Natural and Manufacturing Sectors), “Non-Productive Enterprises” (Read: the rest of the national economy), and the Households themselves. There are economic activities which were meant to create the wealth that other economic activities would then use for their own purposes. The former creates wealth, the other does not.  This differs greatly from the Work-Standard, which recognizes all Economic Sectors of the national economy as being capable of creating wealth and not just the Natural and Manufacturing Sectors.

The peculiar decision on which economic activities create wealth and which do not is more so a consequence of Karl Marx never bothering to develop a proper accounting system. It was beyond the immediate purview of Marx’s analysis, even though accounting would undoubtedly become necessary if any nation were to adopt their any conception of Pure Socialism. Marx made that omission because he held onto the concept of “Productive and Unproductive Labor.” It originated from Adam Smith and is in many respects a byproduct of the period in which Marx wrote much of his analysis.

The general idea behind NMP was to find the general sum of the consumption inputs, the production outputs, and final uses of whatever was finished. Any sales that occurred at any point during the production process would also be included along with the costs incurred.  If the Soviets relied on imports or exports in any of their production processes, Domestic and International Prices as well as Exchange Rates would also be factored into NMP as well. Domestic Prices were denominated in Soviet Rubles, whereas International Prices adjusted to the current Exchange Rate between the Soviet Ruble and the other Currency.       

NMP had three different methods comparable to the Expenditure, Income, and Output Approaches of GDP. There was the “Production Method,” the “Distribution Method,” and the “Final Use Method.” Like the three Approaches of GDP, the three Methods of NMP were meant to be equal to each other.

  1. The Production Method signified the difference between the sum of the “Gross Social Product” and the “Intermediate Material Consumption.” The Gross Social Product represents the Value of the outputs of ‘productive’ economic activities under Soviet-Type Economic Planning (STEP). The final value acquired by deducting the Value of the outputs from the Price associated with the inputs of consumption.  
  2. The Distribution Method was the sum of incomes from two sources: Households and Enterprises. Since all Households and Enterprises reaped much of their wealth from economic activities under STEP, the Soviet Totality would receive a portion of the wealth as their income. The rest belonged to the Enterprises themselves.
  3. The Final Use Method involved the sum of “Final Material Consumption,” the “Accumulation of Fixed Assets” and “Inventories Changes and other Expenses,” all known Expenditures, and Net Exports. It is meant to represent how much is being consumed, how many finished goods and raw materials are being accumulated, the known expenditures of both, and how much is being exported.

The biggest problem with MPS is there are long-standing doubts about whether it can be a reliable metric for gauging the Prices of goods and services as well as measuring Price changes across a discernible timeframe. Another concerning issue is whether it can be used to gauge the spending patterns of the Totality and the Self. Since the Services Sector is considered ‘non-productive’, it is difficult to gather relevant data from the Retail and Hospitality Industries for instance. Without relevant data, there is no way of discerning whether the Totality is trying to purchase specific products or a wider variety of products. It becomes fairly easy to create an artificial shortage of goods and services as a result.  

There are other issues with MPS that make it impractical for the Work-Standard. Apart from the fact that the Work-Standard does account for all Economic Sectors, the most obvious is the Theory of Value employed by MPS, which is the Labor Theory of Value. The Work-Standard relies on the Reciprocal Theory of Value (RTV), which comes with its own metrics and definitions of wealth. Another is the Theory of Money, in which MPS is inclined to believe that there is need to justify the existence of one. On the other hand, the Work-Standard does advocate for one in the form of the Work Theory of Money (WTM).

What can be learned from MPS is that the national accounts of any nation are ultimately dependent on the Theory of Value and the Theory of Money that governs its conception of Currency and overall economic life. Accountants and auditors apply the Theories whenever they are trying to find the true values of economic activities, providing them their true meanings. Given the Work-Standard’s RTV and WTM, it becomes inevitable to envisage the national accounts of the nation which pegs its own Currency to the Work-Standard. Ways of devising how Arbeit and Geld are being created, contributed, converted, spent, destroyed, and wasted will enable the State, the Totality, and the Self to make important decisions, including the need to live within their own means of production. The Work-Standard’s vehement rejection of both Exchange-Value and Use-Value signifies the determination to realize an entirely different Mode of Production.

Categories: Work-Standard Accounting Practices

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