Net Social Income

a part of national income that takes the form of surplus product. The division of national income into necessary and surplus product is an objective economic necessity irrespective of the mode of social production. The ways of forming the net social income and the principles underlying its distribution and use are determined, however, by the socioeconomic conditions of reproduction.

Under capitalism, the net social income takes the form of surplus product and a corresponding surplus value. K. Marx, analyzing the reproduction of the total social product and its individual elements, revealed the essence of the net social income, under the capitalist mode of production, as an economic category. “The net . . . income is the surplus value—and therefore the surplus product—that remains after deducting wages; it represents the surplus value realized by capital and to be divided with the landlord and the surplus product measured by this surplus value” (K. Marx and F. Engels, Soch., 2nd ed., vol. 25, part 2, p. 409).

Under capitalism, the net social income is a product of exploitation of the working people. As Marx noted, “Surplus labor in general, as labor performed over and above the given requirements, must always remain. In the capitalist as well as in the slave system it merely assumes an antagonistic form and is supplemented by complete idleness of a stratum of society” (ibid., pp. 385–86). In the process of distribution, the net social income of capitalist society appears in two basic monetary forms: profit and rent.

Under socialism, the net social income, as an expression of the surplus product, does not become surplus value but is used in the interests of the society as a whole. “Even though all surplus value is represented in some surplus product, the surplus product in itself, on the contrary, does not represent surplus value” (ibid., vol. 26, part 3, p. 383). In accordance with the two forms of socialist ownership, the net social income comprises the net income of the state (public) sector and the net income of the cooperative and collective-farm sector. Both net incomes are created at socialist enterprises and in socioeconomic terms are essentially the same.

The net social income created in the state sector takes the following monetary forms: the turnover tax, the profit of enterprises (associations) from production and economic activity, and the payments of enterprises (associations) to the social insurance fund. In the cooperative and collective-farm sector, unlike the state sector, the net social income has both a monetary and physical aspect. The monetary part of net income is profit realized from the sale of commodity output. The other part of net income represents payments in kind consumed within the kolkhoz economy: seed, fodder, young livestock to be fattened, and insurance funds.

As the net income of socialist society is distributed, redistributed, and used, it is broken down into two parts—centralized and decentralized net income—with the help of the financial mechanism and prices. The centralized net income of the state includes the turnover tax, payments by state enterprises (associations) from profits (for example, capital charges, fixed payments, rent payments, and payments from the free profit remainder), and payments into the social insurance fund.

Kolkhozes and cooperatives augment the centralized fund through their income tax payments and insurance payments. The state disburses the centralized net income on a planned basis to meet public needs: the financing of the national economy, the defraying of expenditures on defense and administration, and the creation of social consumption funds and reserve funds. Some of the net social income remains at the disposal of state enterprises, cooperatives, and kolkhozes and is used, on a decentralized basis, to finance some capital investments, to augment current capital, to pay loan interest, to improve production technology, to augment indivisible funds, and to form incentive funds. Such a system of distribution, redistribution and utilization of the net income of socialist society is in keeping with the principles of democratic centralism and the profit-and-loss method of management.