Material Product System
|Part of a series on|
Material Product System (MPS) refers to the system of national accounts used in the former Soviet Union and the Eastern Bloc countries until around 1990, as well as in China 1952-1992. The MPS has now been replaced by the UNSNA accounts in most countries that used MPS, although some countries such as Cuba and North Korea have continued to use MPS alongside UNSNA-type accounts. Today it is difficult to obtain detailed information about accounting systems which are an alternative to UNSNA, and therefore few people know that such systems exist and have been used by various countries.
Differences between MPS and SNA
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.
Attribution to Marx and Smith
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. The MPS standard accounting system was adopted by CMEA countries in 1969.
Measurement of prices
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 (these market prices should not be understood as being necessarily "free market prices" - Post-Keynesian economics has shown that a large proportion of prices in Western countries are in reality administered prices or regulated 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. That is a result of the mechanization and automation of production processes. Inversely, 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 general 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 value of the annual material product is reduced thereby.
- Janos Arvay, "The Material Product System (MPS): A Retrospective," The Accounts of Nations, edited by Zoltan Kenessey, IOS Press, 1994, pp. 218
- Janos Arvay, "The material Product System (MPS): A Retrospective," The Accounts of Nations, edited by Zoltan Kenessey, IOS Press, 1994, pp. 218
- M. Yanovsky, Anatomy of Social Accounting Systems. Chicago: Aldine Publishing Company, 1965.
- Vaclav Holesovsky, "Karl Marx and Soviet National Income Theory", The American Economic Review, Vol. 51, No. 3 (Jun., 1961), pp. 325–344.
- Paul Studenski, "Methods of Estimating National Income in Soviet Russia", Studies in Income and Wealth, Vol. 8, NBER 1946 
- Carmelo Mesa-Lago, Jorge Pérez-López, A study of Cuba's material product system, its conversion to the system of national accounts, and estimation of gross domestic product per capita and growth rates. World Bank staff working papers, ISSN 0253-2115 no. 770, 1985, 104 pp.
- UN Department of international economic and social affairs, Statistical office, Comparisons of the system of national accounts and the system of balances of the national economy (2 Vols). Studies in methods. Series F / Statistical Office, ISSN 0498-014X ; no. 20. New York: United Nations, 1977-81.
- UN Department of international economic and social affairs, Statistical office, Basic principles of the System of Balances of the National Economy. Studies in Methods, Series F, no. 17,ST/STAT/ser. F/2/17. New York: United Nations, 1971.
- UN Department of international economic and social affairs, Statistical office, Basic methodological principles governing the compilation of the system of statistical balances of the national economy, Vol. 1 and 2. Studies in Methods, Series F, no. 17, rev. 1, ST/ESA/STAT/SER.F/rev.1. New York: United Nations, 1989.
- Robert Wellington Campbell, Conversion of National Income Data of the U.S.S.R. to Concepts of the System of National Accounts in Dollars and Estimation of Growth Rate (World Bank Staff Working Paper). Washington: World Bank, December 1985
- Janos Arvay, "The Material Product System (MPS): A Retrospective," The Accounts of Nations, edited by Zoltan Kenessey, IOS Press, 1994, pp. 218ff.
- Howard Nicholas, Marx's theory of price and its modern rivals. London: Palgrave Macmillan, 2011.
- Yoshiko M. Herrera, National accounts and international norms in Russia and beyond. Cornell University Press, 2010.
- Tatiana A. Khomenko, "Estimation of Gross Social Product and Net Material Product in the USSR", Institute of Economic Research, Hitotsubashi University, Discussion Paper No. 172, July 2006.
- Net material product
- Material product
- Productive and unproductive labour
- Value product
- China GDP
- Soviet-type economic planning