Material Product System
Encyclopedia
Material Product System refers to the system of national accounts
used in the former Soviet Union
and the Eastern Bloc
countries, as well as in China
until 1993 Dr. Fengbo Zhang introduced the Western SNA
system and GDP to China, . The MPS has now been replaced by the UNSNA accounts in most countries, although some countries such as Cuba
and North Korea
continue to use MPS (alongside UNSNA-type accounts).
The main structural differences between MPS and UNSNA are attributable to a different interpretation of newly created value, and of the accumulation of stocks of wealth. Consequently, there are differences in grossing and netting procedures for the main aggregates. In MPS, many services are not regarded as value-adding, and therefore excluded from total net output. Another reason is that in Soviet-type societies many social services are provided free of charge. As the name suggests, the MPS aims to measure the annual output of material goods, in contrast with services. In MPS the economy is divided up into three sectors: (1) socialist productive enterprises, (2) the non-productive sphere, and (3) households. Typically the planning authorities also collected comprehensive data on the physical units of products produced. This is normally not the case in conventional national accounts, which measure only the value of outputs produced.
The MPS accounts originated in the Soviet Union, around the same time that the first Western attempts were also made to create systematic social accounts (i.e. in the later 1920s and 1930s). They were influenced by the ideas Karl Marx
had about the creation and accumulation of wealth, and about productive and unproductive labour
in capitalist society. However, Marx himself never attempted to create any system of social accounts for socialist economies; his own economic categories concerned the capitalist mode of production
, and not a socialist economy. Further, the MPS accounts used a definition of "unproductive labor" which was closer to that of Adam Smith
than to that of Marx. For Marx, service labor was productive if it added to society's surplus value
or property income, whereas for Smith all service labor was unproductive.
Critics of MPS accounts argue that by providing a lot of detail about the value and physical quantity of tangible products produced, but very little detail about those who depended on that production as consumers, the Soviet elite in reality kept secret how income, consumer items and capital wealth were truly distributed in the USSR. However, supporters of the system argued that, if many goods and services are supplied to ordinary consumers free of charge, or below cost (a "socialized" component of household income) then valuing consumption expenditures in money prices becomes both difficult and rather meaningless. In that case, it is argued, a more appropriate strategy is to measure what physical goods and services people actually consume, and to what benefits they are entitled. Whatever the case, it is clear that there is a big difference in valuation methods between MPS and UNSNA, since MPS in large part works with administered prices whereas UNSNA largely uses (real or imputed) market prices.
Although the physical output of material goods continues to increase, the proportion of employees used to produce that output continues its historic decline, just as the direct producer's income from selling that output declines proportionally. Conversely, the number of people employed in services, and the value of those services, continues to increase in almost every country in the world as a statistical trend. If, therefore MPS accounting techniques are used, the result will be that a larger and larger fraction of the working population is shown to be employed in "non-productive" service industries, and that the real growth rate of the annual material product is reduced.
National accounts
National accounts or national account systems are the implementation of complete and consistent accounting techniques for measuring the economic activity of a nation. These include detailed underlying measures that rely on double-entry accounting...
used in the former Soviet Union
Soviet Union
The Soviet Union , officially the Union of Soviet Socialist Republics , was a constitutionally socialist state that existed in Eurasia between 1922 and 1991....
and the Eastern Bloc
Eastern bloc
The term Eastern Bloc or Communist Bloc refers to the former communist states of Eastern and Central Europe, generally the Soviet Union and the countries of the Warsaw Pact...
countries, as well as in China
China
Chinese civilization may refer to:* China for more general discussion of the country.* Chinese culture* Greater China, the transnational community of ethnic Chinese.* History of China* Sinosphere, the area historically affected by Chinese culture...
until 1993 Dr. Fengbo Zhang introduced the Western SNA
United Nations System of National Accounts
The United Nations System of National Accounts is an international standard system of national accounts, the first international standard being published in 1953...
system and GDP to China, . The MPS has now been replaced by the UNSNA accounts in most countries, although some countries such as Cuba
Cuba
The Republic of Cuba is an island nation in the Caribbean. The nation of Cuba consists of the main island of Cuba, the Isla de la Juventud, and several archipelagos. Havana is the largest city in Cuba and the country's capital. Santiago de Cuba is the second largest city...
and North Korea
North Korea
The Democratic People’s Republic of Korea , , is a country in East Asia, occupying the northern half of the Korean Peninsula. Its capital and largest city is Pyongyang. The Korean Demilitarized Zone serves as the buffer zone between North Korea and South Korea...
continue to use MPS (alongside UNSNA-type accounts).
The main structural differences between MPS and UNSNA are attributable to a different interpretation of newly created value, and of the accumulation of stocks of wealth. Consequently, there are differences in grossing and netting procedures for the main aggregates. In MPS, many services are not regarded as value-adding, and therefore excluded from total net output. Another reason is that in Soviet-type societies many social services are provided free of charge. As the name suggests, the MPS aims to measure the annual output of material goods, in contrast with services. In MPS the economy is divided up into three sectors: (1) socialist productive enterprises, (2) the non-productive sphere, and (3) households. Typically the planning authorities also collected comprehensive data on the physical units of products produced. This is normally not the case in conventional national accounts, which measure only the value of outputs produced.
The MPS accounts originated in the Soviet Union, around the same time that the first Western attempts were also made to create systematic social accounts (i.e. in the later 1920s and 1930s). They were influenced by the ideas Karl Marx
Karl Marx
Karl Heinrich Marx was a German philosopher, economist, sociologist, historian, journalist, and revolutionary socialist. His ideas played a significant role in the development of social science and the socialist political movement...
had about the creation and accumulation of wealth, and about productive and unproductive labour
Unproductive labour in economic theory
Unproductive labour is labour which does not further the end of the system. Therefore this concept has sense only with reference to a determined system. In classical economics the end is growth and development, in Marxian economics the end is capitalistic profit and in business the end is to place...
in capitalist society. However, Marx himself never attempted to create any system of social accounts for socialist economies; his own economic categories concerned the capitalist mode of production
Capitalist mode of production
In Marx's critique of political economy, the capitalist mode of production is the production system of capitalist societies, which began in Europe in the 16th century, grew rapidly in Western Europe from the end of the 18th century, and later extended to most of the world...
, and not a socialist economy. Further, the MPS accounts used a definition of "unproductive labor" which was closer to that of Adam Smith
Adam Smith
Adam Smith was a Scottish social philosopher and a pioneer of political economy. One of the key figures of the Scottish Enlightenment, Smith is the author of The Theory of Moral Sentiments and An Inquiry into the Nature and Causes of the Wealth of Nations...
than to that of Marx. For Marx, service labor was productive if it added to society's surplus value
Surplus value
Surplus value is a concept used famously by Karl Marx in his critique of political economy. Although Marx did not himself invent the term, he developed the concept...
or property income, whereas for Smith all service labor was unproductive.
Critics of MPS accounts argue that by providing a lot of detail about the value and physical quantity of tangible products produced, but very little detail about those who depended on that production as consumers, the Soviet elite in reality kept secret how income, consumer items and capital wealth were truly distributed in the USSR. However, supporters of the system argued that, if many goods and services are supplied to ordinary consumers free of charge, or below cost (a "socialized" component of household income) then valuing consumption expenditures in money prices becomes both difficult and rather meaningless. In that case, it is argued, a more appropriate strategy is to measure what physical goods and services people actually consume, and to what benefits they are entitled. Whatever the case, it is clear that there is a big difference in valuation methods between MPS and UNSNA, since MPS in large part works with administered prices whereas UNSNA largely uses (real or imputed) market prices.
Although the physical output of material goods continues to increase, the proportion of employees used to produce that output continues its historic decline, just as the direct producer's income from selling that output declines proportionally. Conversely, the number of people employed in services, and the value of those services, continues to increase in almost every country in the world as a statistical trend. If, therefore MPS accounting techniques are used, the result will be that a larger and larger fraction of the working population is shown to be employed in "non-productive" service industries, and that the real growth rate of the annual material product is reduced.
See also
- Net material productNet material productNet Material Product was the main macroeconomic indicator used for monitoring growth in national accounts of socialist countries during the Soviet era. These countries included the USSR and all the Comecon members...
- Material productMaterial productMaterial product is a category in Marxian economics and Soviet social accounting referring to the produced output of tangible material goods, including energy supplies and goods-transport. It contrasts with services and activities such as administration that do not themselves result in any tangible...
- UNSNA
- Productive and unproductive labourProductive and unproductive labourProductive and unproductive labour were concepts used in classical political economy mainly in the 18th and 19th century, which survive today to some extent in modern management discussions, economic sociology and Marxist or Marxian economic analysis...
- Unproductive labour in economic theoryUnproductive labour in economic theoryUnproductive labour is labour which does not further the end of the system. Therefore this concept has sense only with reference to a determined system. In classical economics the end is growth and development, in Marxian economics the end is capitalistic profit and in business the end is to place...
- Value productValue productThe value product is an economic concept formulated by Karl Marx in his critique of political economy during the 1860s, and used in Marxian social accounting theory for capitalist economies...
- China GDP