JPRS ID: 8795 USSR REPORT ECONOMIC AFFAIRS

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4 ~ECEM6ER i9T9 CFOUO i2l79) i OF i
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. JPRS L/8795
4 December 1979~
USSR Re ort -
p -
- EC~JNOMIC AFF~eR~
~ (FOUO 12/79)
_ `
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.
JPRS L/8795
4 December 1979 _
USSR REPORT
ECONOMIC AFFAIRS
(FOUO 12/79)
CONTENTS PAGE
Organizational-Economic Experiments in Science, Technology
(V. Po?crovskiy; VOPROSY EKONOMIKI, Sep 79) 1
Regional Aspect of Determining Economic Efficiency
(M. Gokhberg; VOPROSY EKONOMIKI, Sep 79) 12
Territorial Production Complex Management
(Ye. Lomanov; VOPROSY EKONOMIKI, Aug 79) 25
Rearrangement of Soviet Economic Mechanism
(CENTRE D'ETUDES PROSPECTIVES ET D'TNFORMATIONS
INTERNATIONALES (CEPII), Sep 79) 29
- a - [III - US5R - 3 FOUO]
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ORGANIZATIONAL-ECONOMIC EXPERIMENTS IN SCIENCE, TECHNOLOGY
Moscow VOPRQSY EKONOMIKI in Russian No 9, Sep 79 pp 53-61
/Article by V. Pokrovskiy: "The Organizational-Economic Experiment in the
- Sphere of Science and Technology"/
/Text/ The practice of organizational-economic experiments at different
levels of the development of science and technol.ogy attests to the extensive
possibilities of utilizing this ~orm of ~pprovin.g new management ideas. In
~ particular, the new system of the planning, financing and economic stimula-
- tion of new equipment, the intrcdnction of which was 5egun in 1969 in the
_ electrical equipment industry, created a great economic interest of organiza-
tions in increasing the scientific and technical level and economic effi-
ciency of research and development. This syst~m, by analogy with a number
of sectors of physical production, calls for the formation at scientific
organizations of three economic stimulation funds: th~ economic incentive
fund, the fund for sociocultural measures and housing construction and the
fund for the development of the organization. The guaranteed economic im-
pact from the introduction of the results of scientific research and experi-
- mental design operations and their scientific and technical level are the
main fund-forming indicators. The decree of the CPSU Central Comm3.ttee and
the USSR Council of Ministers, "On the Improvement of Planning and the In-
- tensi.fication of the Influence of the Economic Mechanism on the Increase of
Production Efficiency and Work Quality," provides for the formation of the
three mentioned funds of economic stimulation at the scientific research,
planning and design and techrLological organizations of all sec'cors of ind+is-
try. Consequently, the receipC by scientific organizations of ~z porti~Li of
the economic impact (the profit), the creation of which they promoted, is
becoming the principle of their economic stimulation.
The positive influence of the mentioned system of economic stimulation and
material encouragement affected the increase of the economic impact from the
utilization of the results of research and development and the increase of
the quality of newly assimilated items. In particular, in the 10 years of
- the use of this system in the electrical equipment industry the growth rate
of the total annual economic impact from the development, assimilation and
introduction of new equipment was nearly fourfold greater than the growth
_ rate of the daductions for incentive funds, the average annual growth rate
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of production of the highest quality category was fourfold greater as com-
pared with the growth rate of the total produ~tion volume in the sector.
In seven years of work according to the new system in heavy and transport
machine b uilding the. total annual economic impact of new equipment increased
nearly threefold, while the proportion of the output of products of the -
highest quality increased approximately 3.5-fold.
The set of experimental measures, which were implemented during the adoption -
- and subsequent improvement of the system of the planning, financing and eco-
nomic stimulation of work on the development, assimilation and introduction
of new equipmert, promoted th~ concentration of the forces and assets of
scientific organizations and enterprises on the most important and urgent
directions of sciEntific and technical progress. The efficiency of the re-
search and development being performed increased, the introduction of their
results was expedited, the material, moral and administrative liability of
the clients and performers for the success and guaranteed technical and eco- _
nomic indicators of the performed work was increased.
At the same time an increase of the promise of themes was ensured, which
promoted an increase of the proportion of research and pioneering work: in
the electrical equipment industry from 1969 to 1978 by approximately 2.5-
fold, in heavy machine building and the chemical industry from 1972 to 1978
respectively by more than 1.5-fold and by nearly 4-fold. The annual percent
J increase of the economic impact for the national economy from the introduc-
tion of ineasures on new equipment is more than 20 percent in the electrica.l
equipment industry and about 5 percent in heavy machine building. The pro-
portion of products with the State Seal of Quality in the total volume of
commodity production was nearly 5-fold greater than the all-union indicators
in the electric equipment industry and more than 2.5-fold greater in heavy
and transport machine building.
The development and expansion of such an organizational form of the integra-
tion of science and production as scientific production associations Fro- ,
moted the improvement of the structure of the sectorial and territorial man-
agement of the sphere of the development of science and technology, the im-
provement of the location of the scientific and technical potential and the
assurance of the rational combination of centralized and decentralized man- ~
agement. The main advantage of scientific production associations, as mass
investigations of their activity showed, consists in the considerable short-
ening of the period of'the development and assimilation of new equipment
(by one-third to one-half), which ensures the use of unified comprehensive _
long-range plans for the entire "research-production" process and the elimi-
nation of the organization of this process on the taasis of "receipt-delivery."
- According to the data of USSR Gosplan, of al:l the developments not being used
in the national economy more than half are not being used due to losses of
time on coordination during the delivery and acceptance of stages of work.
S~ientific production associations as an integrated system increase the lia- ~
bility for the end result of scientific research and experimental design '
operations on the basis of the increase of the importan~e of promising
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directions of scientific and technical progress, which have a profound influ-
ence on the corresponding sr~ctors (subsectors) of the national economy, by
speeding up the process of renewing their production equipment base. Under
the conditions of scientific production associations the indicators of the
efficiency of their activity, particularly the economic impact per ruble of -
expendi~ures, the turnover rate af workin~ capital, the receipt of patente
pc~r LUU workere anJ c~ttiErd, tncrea~e rapidly. Tl~ie ie conf.l.rmed by tl~e dat~
of a comparative analysis (made by the State Conunittee for Science and Tech-
nology) of the indicators of the operation of a group of scientific produc-
tion associations and similar scientific organizations which did not belong
to associations: ~
_ Results of activity
Indicators 37 organizations 21 organizations belonging to
12 scientific production as- -
sociations
_ Impact per ruble of
expenditures (in
rubles/ruble). . . . . 1.6 2�3
Patents obtained per -
100 workers (each) . . 1.4 3.1
Proportion of most
important operations
(percent). . . . . . . 6.1 17.3
In order to intensify the cost accounting methods of managing the activity
of sectorial scientific research institutes and design bureaus, at a number
of scientific organizations oi the electrical equipment industry an experi-
ment was begun in 1977 on the conversion of the evaluation of the activity
of the organization from ~the indicator the amount of performed work" to the
indicator "the amount of completed and deliver~~d work." The scientific re-
search institutes and design bureaus are pr~vided with working capital in a
~ fuller amount, while they receive all the assets, which cover their expenses
and forin the profit, from the client aiter completing the work and delivering
it to him. The mentioned decree of the CPSU Central Committee and the USSR
Council of Ministers calls for the gradual conversion of scientific research,
planning and design and technological organizations to the system of settle-
ments for work, which has been completely finished and accepted by the client,
instead of the stage-by-stage payment for the work. This conversion should
be completed during the llth Five-Year Plan. With such a system of settl~-
ments the scientific organization and each of its workers are interested in
the rapid completi:on of the work, since the financial situation of the organ-
ization, the possibilities and amounts of the economic stimulation of the
collective of workers depend on this. On the whole the cycle of development
of new equipment is shortened, the efficiency of sci.zntific research and ex-
perimental design operations is increased as a result of the more rapid in-
troduction of their results and the reduction of losses from the immobiliza-
tion of capital during the ir_~~?stment period of the development of the new ~
equipment.
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The fu~ther conducting of experiments in the sphere of science and technol-
ogy can be effective on the condition that their organization will be based
not only on the generalization of the already existing practice, but also
- on theoretical studies on these questions. Beg3nning in the 1960's the
prob~ems of social and economic experimentation found a definite reflection
in scientific literature.l It is true that economic experiments in the -
sphere of physical production are mainly analyzed. -
The difficulties of performing economic experiments as applied to scientific =
' and technical development are connected first of all with such a feature of
thi~ sphEre as tYie probabilistic nature of the results of scientific research
and experimental design operations, which complicates the evaluation of the
- achieved results. Moreover, in the sphere of science ar?d technology the pos-
sibilities of selecting similar groups of subjects for expeximentation are
limited, which in many instances hinders the performance of a comparative
analysis of the obtained results. A significant distinction of economic ex-
perimenta~.ion in the sphere of science and technology is also linked with
the significantly gr,eater influence of th~ subjective factor in this sphere
- on the results of the experiment as compared with production. _
With respect to the sphere of science and technology it is possible to
formulate in the following way the essence of the organizational-economic _
- experiment: it is one of the specific methods of analyzing the systems of
the organization of the economic activity of the scientific production col-
lectives for the purpose of verifying hypotheses about the influence of'the
changes being made on the results of the activity of these collectives and
the elaboration of ineasures on the extensive use of the proposed improvements
in the practice of managing scientific and technical development. Conse-
quently, the organizational-economic experiment is one of the important
stages of the scientific elaboration of the problems of improving manage-
ment in the sphere of the development of science and technology.
A complicated problem of organizational-economic experimentation is the
establishment of the limit of its use. At times it is assumed that some ~
special restriction as compared with, for example, natural science
1. See, for example, R. V. Rybkina, A. V. Vinokur, "Sotsial'nyy eksperiment"
/The Social Experiment/, Novosibirsk, 1968i L. I. Lopatnikov, "Ekonomi- -
cheskiye eksperimenty v promyshlennosti" /F,conomic Experiments in Indus-
try/, Izdatel'stvo "Ekonomika", 1968; A. Kupriyan, "Metodologicheskiye -
problemy sotsial'nogo eksperimenta" %Methodological Problems of the So-
cial Experiment/, Moscow State University, 1971; V. A. Silin, A. S. Su-
khov, G. T. Vlasenkov, "Ekonomika: poisk, eksperiment" /Economics: Re-
search, Experiment/, Izdatel'stvo "Znaniye", 1978; "Provedeniye sotsial'no-
ekonomicheskogo eksperimenta" /The Performance of a Socio-Economic Ex-
perimentj, Tallin, 1977; "Problemy upravlencheskikh novowedeniy i ~
khozyaystvennogo eksperimentirovan~a" %Problems of Management Innova-
tions and Economic Experimentation/, Tallin, 1978.
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experiments is characteristic oF this type of experiments. It seems to us
that the determination of the scale (framework) of organizational-economic -
experiments is directly dependent only on the specific tasks of the experi-
ment. ~
The collective of an individual institute or their groups (for example, in
the exp~riment on the payment for completely finished research and develop-
ment); all scientific organizations (and even enterprises) of the sector
(as was the case, in particular, during the conversion to the new system of
the planning, financing and economic stimulation of work on new equipment of
the electrical equipment industry and other sectors); individual collectives,
= which govern scientific and technical development in the promising directions
of technical progress on the scale of the national economy of the country
_ (to which the analysis of the dynamics of the creation of scientific produc-
tion associations attests) could be the basis for performing an organizational-
economic experiment.
- The study of the practice of preparing organizational-economic experiments in
the sphere of science and technology shows that not only the scientific _
ideas, which were elaborated with respect to scientific and technical devel-
opment and served as the basis of practical recommendations on the perform-
ance of the experiment, but also the already existing practice of management
in this sphere and other sectors of the national economy are their source.
For example, the idea of directing the activity of sectorial scientific re-
search institutes and design bureaus toward the end results served as the -
theoretical basis of such an organizational-economic experiment as the approv-
al initially in one sector of the new system of the planning, financing and
economic stimulation of work on new Equipment. While the well-known Shche-
kino method of wages, which has proven itself to be good in industry, was
the basis of the experimental system of planning of the standard of the wage
fund, which is reduced by years, per ruble of the amount of work of the in- ,
stitute and the extension of the rights of the director when paying those
who perform a great~r amount of work on time and ahead of time with a higher
qua.lity .
In the first case the idea was materialized, as was alreadq noted above,
first in the electrical equipment industry, and then in another 14 sectors
by the introduction of a system of supply orders, as well as by the establish-
ment of the dependence of the econamic stimulation of workers on such ulti-
mate indicators of their labor as the economic impact and the scientific
and technical level of the results of the work. In confortnity with the
adopted decree on the improvement of planning and the intensification of the
influence of the economic mechanism the completion of the conversion of sci-
entific research institutes, planning and design and technological organiza-
- tions to the cost accounting system of the organization of work on the de-
velopment, assimilation and introduction of new equipment on the basis of
supply orders is called for by 1980. Pilot (experimental) enterprises, sci-
entific production associations and production associations will also be
converted to this system in industry. ~
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In the second case the concentration of the efforts of specialists on the
solution of important scientific and technical problems, the considerable
increase of the efficiency and quality of the work being performed and the
acceleration of the rate of its introduction in the national economy is
being ensured by permission to use the saving of the wage fund from the re-
lease of workers for supplement wage payments and the payment of bonuses.
The All-Union Institute of Welding (VISP), at which the organization of
research and development has been improved, has been operating according to
this system as an experiment since 1974: the subdivisions have been special-
ized and consolidated, the accounting of the work being performed accord-
ing to specially established forms has been introduced for evaluating the
personal contribution of each performer, standards of time for va::ious types
of jobs have been specified and are being used, official instructions for
the main categories of workers have been compiled, long-range and day-to-3ay
planning has been improved, the themes of the institute have been combined,
are linked with the main directions of its specialization and have been con-
cretized as much as possible for the conditions of the plants of the sector.
The performance of a larger amount of work with fewer people became possible
- in practice only on the basis of a set of ineasures on the increase of the
, efficiency and quality of the labor of all staff inembers, first of all the
designers and process engineers. The themes have begun to be caorked out
more carefully, the subjects have begun to be distributed more strictly, in
conformity with the profile and specialization of the performing departments,
which made it possible, in particular, to utilize the advantages of stand-
ardization and to increase the proportion of the re-application of previnus-
ly found technical decisions. -
At the institute the organization of designing is being improved, the stages
of designing and the deadlines of their completion have been delimited, com-
- prehensive schedules of work on each theme have been created. The performers
of subsequent stages of the designing are involved in the work, as a result ~
of which follow-up operations are eliminated, the patent search is improved,
, the workload of the performers of different skills in the departments are _
optimized, the scientific organization of labor is applied more and more ex-
tensively and advanced know-how is used. All this made it possible to co- ,
ordinate incentives more closely with the results of the labor of the collec-
tive and the individual staff inembers. Thus, the actual amount of work of
the institute, which one staff inember accounts for, increased in 1977 as
compared with 1973 by 11 percent. T'he supplementary payments for the over-
fulfillment of the plan assignments with a high scientific and technical
level of the developments were 7.6 percent of the average annual salary with
a saving of 102,000 rubles from the wage fund. The obtained saving was used =
for supplementary payments and the payment of bonuses to the institute staff
members, who overfulfilled the standard plan assignments with a high wcrk
quality, which considerably increased their interest in speeding up the
periods of the development, assimilation and introduction of new equipment.
The scientific and technical level of research and development was improved,
their economic efficiency increased.
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The positive results of the experiment at the Al1-Union Iitstitute of Weld-
ing attest to the substantial influence of advanced methods of remuneration
on the efficiency and quality of the labor of the workers of science and
technology. With an increase of the amount of work being performed in four
years by 3.1 percent the actual number of workers decreased by 6.5 percent.
_ The periods of the performance of research and development were cut to two-
thirds, the ninnber of received patents increased nearly twofold. The influ-
ence of the institute on the technical and economic indicators of the enter- -
prises of the sector increased appreciably. Thus, the actual economic im-
pact obtained from the use of the developments of the institute increased
from 3.67 million rubles in 1973 to 4.4 million rubles in 1977, the impact
per ruble of expenditures increased.
When preparing an organizational-economic experiment first of all it should
be proven that one current organizational-economic farm or another does not
meet the present conditions and as a result specific organizational-economic
forms, which are proposed to replace the current ones, are formulated. At
the same time the possible unfavorable consequences of the experiment should
be carefully analyzed and the sphere of its application should be established.
However, the practice of conducting organizational-economic experiments at
present is such that this preparatory work, as a rule, is carried out by
rep~esentatives of the collective, the future participant in the experiment,
with the involvement of scientific research organizations (subdivisions) of
economic specialization and higher management organs under the control of '
those institutions of state management, which will make the decision on the
conducting of the experiment. An official document, which in one form or
another sets down the main principles on the conducting of the experiment,
is the result of such work. The standards connected with the form being
experimented on and its practical use a~e also reflected in the same document. _
- The lack in officia3. documents on the conducting of an experiment of criteria
of its success, in our opinion, is a serious shortcoming of the preparation
of nearly all organizational-economic experiments. This is explained by
the complexity of their elaboration, as well as by the fact that there a~e
no specialists on the elaboration of crj.teria of the effecti.veness of er.peri- _
ments. All this complicates the ar.~.?.v~ls of their performance and the evalu-
ation of the expedience of making changes in the conditions of the perform- _
ance of one axperiment or another. The making of changes is inevitabl~e,
since owing to objective causes it is difficult, and at tiines even impossi.ble
to immediately take into account all the factors which influence the course
and results of the experiment. It is even more difficult to study their
interaction. For example, in the sectors converted to the new system of the
planning, financing and economic stimulation of work of new equipme~zt, it
- was necessary to repeatedly make more precise the individual principles and =
standards.
Now the refinements, as a rule, are made by a~oint decree of the organs ;
which made the decision to conduct the experiment, which by no means is con- _
ducive to the efficiency of the performance of this work. Therefore at the -
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stage of the drafting of the program of the experiment (which for the pres-
ent, incidentally, is also not always compiled) it is already advisab:~e, in
our opinion, to carry out the legal examination of those questions which
might be liable to changes, ~nd to differer.tiate the responsibility for
their solution according to the levels of the hierarchy. A kind of inechan- ~
ism of the "inscription" of the experiment into the system of current legi-
slations will thereby be provided.
The immediate participants in the organizational-economic experiment should
- be informed beforehand about the goals of the experiment, so that they could _
visualize more precisely their role and tasks in conducting it. Therefore,
after the issuing of the decision on conducting an organizational-economic
experiment time must necessarily be teft for the completion of its organ-
izational. preparation. The practice of gradually converting the industrial
- ministries to the new system of the planning, financing and economic stimula-
tion of work on new equipment showed that this system has been adopted most
successfully in those sectors (heavy and transport machine building, the
chemical industry), where the training and instruction of the experiment
; participants had already been carried out beforehand, the experience gained
by other sectors had been examined in detail, its positive and negative as-
pects had been analyzed collectively, exercises like "business games" had
been conducted and so on.
The organizational-economic experiment in the sphere of science and tech-
nology causes some difficulties in the activity of collectives and faczs
their members with nontraditional problems. In particular, with the conver-
sion to the evaluation of the activity of scientific research institutes and
design bureaus according to the indicator of the amount of completed and
delivered work the staff inembers of the economic services had to be taught
en masse without delay the methods of calculating the economic efficiency
of scientific research and experimental design operations and standardizing
~ the working capital. At times direct losses also arise for individual work-
ers and collectives of entire subdivisions and organizations. For example,
in the electrical equipment industry during the first year of work according
to the new system the proportion of the bonuses decreased at approximately
20 percent of the organizations.
~ Moreover, so far no special system of incentives has been created for partici-
pating in organizational-economic experiments. As a result, the encourage-
ment of the participants is becoming, as a rule, the goal of their perform-
ance in the sphere of science and technology (as well as physical production),
which is not included in the main tasks of experiments. Thus, the measures
of stimulation of the participants are being realized not directly, but in-
directly through the existing paragraph s of the conditions for performing the
experiment. In a number of cases it can be observed how "new" organization- -
al forms of the experiment are being developed for the sake of one ultimate
goal--the receipt of additional remuneration.
The problem of the criteria of the efficiency of the organizational-economic
experiment if only in a general wording, in our opinion, also requires a
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- solution. The method of analyzing the dynamics of the main indicators of
the activity of the organization (sphere), in which the experiment is being
conducted, is used most often for such an evaluation. This has the result
that all the achievements are ascribed to the influence of the experiment.
For example, the effectiveness of the new system of the planning, financing
- and economic stimulation of work on new equipment in most cases is connected
with the overall positivP trend of the dynamics of such indicators as the
- impact from the adoption of the new equipment, the proportion of products
with the State Seal of Quality in the total volume of industrial production
of the sector, the number of developed and introduced objects of new equip-
~ ment and so forth.2 The elaboration of the mentioned criteria would make it -
possible to single out clearly the achievements which resulted directly from
the experiments being conducted.
The comparative evaluation of the effectiveness of organizational-economic
exp?riments is encountered considerably less frequently, which, as was aI- _
. ready noted, for the sphere of science and technology is explained first of =
all by the difficulty of selecting the test object. However, here it is
possible to use the method of comparison with average indicators of similar
systems, which are not covered by the experiment. Let us illustrate this
possibility by the example of the same new system. The analysis showed that
in the sectors, which have been working for a long time accordin~ to Che
mentioned system, the proportion of products of the highest quality category
in the total production volume of co~nodity production is 1.5- to 2-fold
higher than in other sectors. The comparison of such an indicator of effi-
ciency as the period of recovery of the expenditures on the introduction of
more advanced equipment for the ministries which have and have not been con-
verted to the new system, also testifies in favor of the former, at which
this period is nearly one-third less, the period for the performance of re- ~
search and development is 10-15 percent shorter.
It seems to us tha~ when evaluating the effectiveness of a specific
organizational-economic experiment it is advisable on the basis of a compara-
' tive analysis of the trends of the dynamics of the main indicators before .
the experiment and during its performance to calcuZate the difference (in
absolute valuas) of the indicators which reflect their dynamics under the _
conditions of the experiment and with a simple extrapolation of the trenc~s
prior to the experiment. The ratio of this difference to the actual change
in the parameter being analyzed will show the proportionate share of the
.
2. See, for examp?e, V. Astaf'yev, "The Management of Scientific and Techni- -
= cal Progress in a Sector" (VOPROSY EKONOMIKI, No 2, 1978, pp 100-106);
N. Ryzhkov, "Economic Levers ior Expediting the Development of New Equip-
ment in Heavy and Transport Machine Building" (PLANOVOYE KHOZYAYSTVO, ~
No 8, 1978, pp 10-17). The author cf this article also does not avoid
_ such evaluations (see "Povysheni~e effekti~~~Tosti nauchnykh issledovaniy
i razrabotok (voprosy teorii)" /The IncreasE of the Effectiveness of
Scientific Research and Development (Problen~ of Theory)/, Izdatel'stvo
- "Ekonomika", 1978, pp 125-126). _
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experiment in the overall indicator of the effectiveness of the de;ielopment -
' of the system in question. The detailed calculation made by us according to
such indicators as the annual economic impact from the introduction of new
equipment and the in~:rease of the output of products of the highest quality
category in the sector o,f heavy and transport machine building for the per:Lod
_ c,f work according to the new system (1972-1978) showed that the "contribu-
tion" of this system is respectively 37 and 30 percent.
The study of the course of the experiment on the basis of a set of indica-
tors should be carried out, in our opinion, by specially created analysis _
groups like, for example, the temporary scientific and technical commission,
which was formed by the State Co~nittee for Science and Technology in 1974
= for generalizing the work experience of the Ministry of the Electrical Equip-
ment Industry and the rlinistry of H.eavy and Transport Machine Building ac-
cording to the new system of the planning, financing and economic stimulation
~ of work on new equipment. The opinion qf the group of independent experts,
as practice shows, is of interest and of great importance for people who
make management decisions. In particular, the sufficiently extensive in-
- formation of the executives of other sectors of industry and the workers of
_ the sphere of science about the results of the evaluation of the experience
of the Ministry of the Electrical Equipment Industry and the Ministry of
~ Heavy and Transport Machine Building substantially accelerated the procr.ss -
of converting the scientific organizations, associations and enterprises of
other sectors of industry to this system (as a result 15 industrial minis-
= tries are already cperating now according to this system).
The possible measures on developing organizational-economic experiments in
the sphere of science and technology should be aimed first of all at the ex-
- pansion of those already heing conducted with allowance made for the direc-
- tions stipulated by the decree of the CPSU Central Co~ittee, On the Further
Improvement of the Economic Mechanism and the Tasks of Party and State ,
Organs," and the decree of the CPSU Central Committee and the USSR Council i
of Ministers on the improvement of planning. Am~ng them there are first of i
all the methods of combining the sectorial and territorial management of the
development of sciE~nce and technology, the promising forms of the realiza- ~
tion of scientific and technical goal programs, the new forms of organiza- I
tional structures of ~he management of scientific and technical progress, '
which make it possible to overcome departmental alienation. In particular, -
the extension to al.l industrial ministries (departments) of the new system
of the planning, financing and economic stimulation of work on new equipment, ~
which has shown itself favorably, is planned on the national economic and
- sectorial levels. Such a measure, first, will m3ke it possible to create a ~
unified economic mechanism of the sphere of development of science and tech- !
nology in all the industrial sectors of the national economy and, second,
the important problem of the more complete satisfaction of the interests of i-
the users of the new equipment will be solved with Che making of some refine-
men ts . ~
~
The scientific institutions, which have been converted to the system of ,
stimulation of work on new equipment, receive de~3uctions for the incentive ~
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funds only of their own sector. This leads to some linking up of scientific
research institutes and design bureaus on the performance of research and _
development of intrasectorial importance. At the same time, as the analysis
showed, a large part of the economic impact is localized in the user sectors -
(for e~cample, in the chemical industry it is two-thirds). In order to in- -
crease the interest of developers in seeing to it that they would first of
all meet the requirements of all consumers and would aim at the greatest
total efficiency of the equipment being developed, it is advisable upon com- -
pletion of the conversion of all industrial ministries and departments to -
practice the intersectorial transfer of assets for incentives within the
sectors which are operating according to this system. The principles of the
new system should also be used more extensively when organizing the perform-
ance of work of an applied nature and development at scientific organizations
of the system of the Academy of Sciences. Suitable experience already exists
at a number of scientific research institutes of the Siberian Department of
the USSR Academy of Sciences. They have been allowed to form economic stimu-
lation funds by means of the assets received from industry, which stimulates
the scientific collectives to deal with questions of the introduction of the
results of basic research in the national economy.
The improvement of organi.zational-economic experimentation also includes
such important tasks as the increase of the level of systemicity of the or-
ganization, the conducting and evaluation of the results ef experiments.
It seems to us that, for example, the followi.ng experiments: the integration
of the methods of program-goal planning and management at all the levels of ~
the hierarchy of management with specific organizational structures and means -
of stimulation for the end result; the approval of economic standards of
scientific and technical development for the purposes of the planning and _
evaluation of the activity of scientific collectives, are of primary impor-
tances as global organizational-economic experiments.
In our opinion, in order to coordinate the scientific achievements in the
area of organizational-economic experimentation with the needs of the na-
tional economy of the country it is necessary in the plans of scientific re-
search on problems of the improvement of the economic mechanism of managing
the national economy for provision to be made for the corresponding stages
which ensure experimental verification under real conditions of the proposals
being elaborated by scientists. At the same time the analysis, generaliza- _
tion and dissemination of the know-how of organizational-economic experi-
mentation should be continued. This, no doubt, will ma.ke it possible to in- _
crease the theoretical validity of the experiments being conducted, the level -
of their completeness and the reliability of the evaluation of the obtained
results.
COPYRI~[iT: Izdatel'stvo "Pravda", "Voprosy ekonomiki", 1979
7807
CSO: 1820
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- REGIONAL ASPECT OF DETERMINING ECONOMIC EFFICIENCY
,
Moscaw VOPROSY EKONOMIKI in Russian No 9, Sep 79 pp 43-52
- [Article by M. Gokhberg: "Regional Aspect of Determining National-Economic
- Efficiency"]
[Text] The decree of the CPSU Central Committee and the USSR Council of Min-
isters "On Improving Planning and Strengthening the Influence of the Eccmomic -
Mechanism an Raising Efficiency of Production and Quality of Work" of 12 July
1979 points to the need of a radical elevation of the level of planning and ;
management and efficiency of public production. '
- Attainment of ma~cimal efficiency in all parts of the national econony of the
country is possible in consequence of a camprehensive syatems approach to the -
solution of both sectorial and tersitorial problems. This presupposes the
- creation of a scientifically based system of evaluating the efficiency of
_ public production and optimally combined sectorial and territorial principles
of managing the country's national economy. At the saiae time, analysis of -
the experience of territorial preplaa studies~-shaws that it is distinguished ~
by a lack of identical ch~racter in approaches to the ptoblem of assessment of 1
i
public production.
Calculations of efficiency used in sectorial and territorial institutes are ~
_ not distinguished by a unity of inethods and indicators. In same cases, they ;
determine absolute efficiency and in others--relative efficiency, using for
this purpose all knawn indicators. No accounting is made or no complete ac- j
counting is made of interrelaCed expenditures on aervice installations and
related pr~duction facilitiea.and replenishment of working capital, shiftinf~ ;
and training of work force despite the fact that they exert a significaat in- ~
fluence on the effectiveness of distribution of productiv~ forces and devel-
opment of regional economy. Nonproduction expenditures are underestimated, ;
~ although it is knawn that their share in the total volunie of capital invest- ;
ment in the country's central regions reaches one-third; it is even higher i
in the northern and eastern regions. Insufficient accAUnt is taken of re-
gional expenditures on the development of xhe production infrastructure i
(transport, pawer, water supply, sewerage, constructiun base an~ Che like), ~
which are as much as 20-30 percent of the total size of capital investment
for production constructio~i. .
~ ~
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In tranaport calculations rates are used in some cases and shipment coet in
others. No calculations are made to validate sizes of enterprises or ef- .
fectiveness of concentration of production and its cansequences in large
cities and agglomerations, in oblasta and rayons that are supereaturated with
industrial production; no account is taken, fula, or partial, of expenditures
an Gompensation of damage f rom the taking of valuab le ~.gricultural and forest _
lande and the elimination of contaminated water sources and air space. Cal-
culations of variants are frequently replaced with qualitative asseasments;
the comparison of variants is made on the basis of cagital investment without
taking into consideration operational outlays (pxoductian costs). There are
many cases of planners and sci~entifi~ warke~s thinking that the economic
validation of variants constitutes an "internal" element of the process of -
planning and scientific work, for which reason the results of such computa-
tions are not included in the completed work. In a number of cases, it is
argued that an ostensible need exists for curtailing the volume of explan~-
tory notes. The time f actor is rarely taken into account. Occasionally r.he
determination of generalizing indicators of efficiency for the region as a
- whole, for sectors o~ the economy and also for modernized and newly located
enterprises is made difficult by the absence in the forecasts of sectoria'
inst3tutes of ministries and departments of the necessarq renge of refereT?ce
- indicators for the territory as a whole, making it possible to calculate
derivative indicators of efficiency.
No unified approach exists to the studied problem even in publications de:il- -
ing with problems of distribution of productive forces and of the econonry -
for regions of the USSR. The analysis of many works has made it possible,
albeit with a certain amount of conc~itionality, to single out the followit?g
two� pr�incipal directions: (1) denial of general regional efficiency toget}ier
with ati acknowledgment of particular categories of effective development ~~f
sector~~ of the economy in the regiona; (2) combination of generalizing in~ii-
cators pertaining to the sphere of material production of the regions witli
local indicators f or sectors; the approach to the determination of effici~:ncy
which takes into account sectorial and regional interests on the b asis of a
syatem of interacting economic models is of serious value. Naturally, th~~
second direction may be considered as the only correct ane, but in instan~~es
of its use the follawing defects are encountered when recommending these ~~r
those indicators: they do not encompass the whole system of taxonomic an~i
economic ties and all b asic elements of production (direct) and related e~
penditures; in a number of cases they are not oriented taaard the real po:3-
sibilities to be found in territorial statistic and forecasting projectio~ts.
They ace not always base~ on experimentR] verification and they frequentl�r
do not follaw the aim of coa~ ining sectorial and territorial planninge I,1 _
some f orms of preplan work (in rayo~n plan compilations, resettlement pla:le
and general plans of cities), little attention is paid to prob lems of evalu-
ation of productioa efficiency and urban development solutiona.
All this requires the development of unif ied approaches to the determinatton
of efficiencq of public production in territorial preplan work. The situa-
tion is made more difficult because the presently used system of indicators
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of efficiency of public production ir.cluded in the Methodical Instructions
of Goaplan SSSR for the Development of State Plans of Development of the Na-
tional Economy of the USSR (1975) do not provided for. its use in assesement
of the efficiency of material production of the economic region (kray, oblast~
~ ASSR) and other regiona in preplan work. On the other hand, the use for this _
end of all indicators without exception of the methodical instructions is _
made difficult by the collection and processing of excessively large informa-
tion, which at the present tim~ is not fully taken into account by statistic~l
organs and is not determined over the long range in region al researchee be-
cause of ob~ective diff iculties.
The formulations contributed below in the form of a proposal for the develop-
ment of a unified approach to the determination of the eff iciency of public
production in ter~itorial preplan studies are based an the achievements of
- contemporary Soviet theory and practice,2 the use (with coneideration of
necessary correctives) of indicatora of the Methodical Instructions of Gosplan
SSSR and close connectian to indicators of the plan and territorial stat-
iatics. These proposals are verified by means of experimental calculations
in the process of working out different forms of territorial forecaste for the
Central Economic Region of Che USSR.
A criterion of national-economic efficiency is the ability to secure the ma~
imum possib le grawtli of national income with minimal expenditures of living
and embodied labor. On the basis of these requirements, the criterion of
efficiency of production of an economic region of any rank must aim at its
maximum contribution to the national income of the country (union republic)
with planned (or predicted) reduction of expenditures of living and embodied
labor aud also improved material-phqsical atructure of the production of
~he region aimed at increasing its all-union specialization and deepening of
the complexity of the economy and raising the population's livinR standard
and preserving (restoring) the ecological equilibrium of the environment.
Such a formulation takes into account the "open" character of the region's
economy, the main goals of its development and also the f act that the reaource
part depends on the relation of accumulation to consumption funds being
- formed for tt~e country es a whole. Experimental calculations sl~awed that the
use of the follawing indicators of efficiency is practicab le in territorial
preplan studies for the evaluation of efficiency of material production and
its sectors:
(1) living labor (laboi: productivity, economy of manpawer and wage fund as
the result of its gra~wth) ;
(2) fixed capital as a whole and its active part3 and as auxiliarq indica-
tors--capital-labor ratio, work shift ccefficient, use o~ capacity, relation _
of the dynamics of grawth of the cost of machinery and equipment to their
productivity, required in the calculation of the output-capital ratio;
(3) capita.l investments (specific capital inve~tment or capital intensive-
- ness) ;
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(4) materials~tntensiveness of production determined on the basis of terri- _
torial balances (in the fo~tm of sizes of use of the moet important material
expenditures in physical form:, for example, rolled ferrous metals, fuel,
~ electric pawer and so forth per million rubles of cost ~i producta of indus- _
try and its sectors or correlation of their grawth raCeFi) . j+ -
These indicators make it possible to reliably assPSS forecast variants, to
quickly disclose a less efficient variant and to devise a solution.
The use of regional generalizing indicators of efficiency in territorial pre-
plan studies on the basis of national income is hindered by the fact that
_ this category is caXculated for the country and union republics taken in their
entirety. In addition to this, the practice of planning and accounting of
normative net production on the basis of the Methodical Recom~nendations of
Gosplan SSSR (in this cannection its volume was determined according to norms
per product unit on the basis of wholesale price, excluding material expendi-
tures taken into acCOUnt in it) showed that this indicator on the level of
- enterprises, associations and sectors of industry reflects more correctly than
gross production the results of production, eliminates the distorting effect
of repeated counting of material expenditures and in a more re~l fashion helps
to plan labor productivity, the output-cap~.tal ratio, wage and material- -
incentive funds. The gradual transition of industry and other sectors of
- material production to the system of planning according to the method of
normative net production will make it poasible to determine its planned and -
~ctual size for the territory of an economic region (kray, oblast, ASSR) as
a whole.
Deapite the absence of territorial intersectorial balances, the means exist
for computing net production for ob lasts, krays and ASSR's on the b asis of
statistical reports, but in this cannection a part of the produced turnover
tax of a given region for products sold outside its borders will have to be
ignored or determined through computation, which would be quite difficult.
For territorial preplaa studies there is the possibility of utilization of
generalizing indicators of eff iciency of material production on the b asis of
produced net production. At the same time, the present-day orientation to-
ward end natianal-economic results "does not mean that gross (commodity) pro-
duction will never be used in national-economic planning or in the economic
mechaaism. It can be used as a generalizing indicator of growth of p roduc-
tian volume on the scale of induatry of the country, union republic or econ-
omic region for che determination of correlations of grawth rates of ineans of
production to ot?~ects of consumption and for other national-economic purpoaes.i5
Various points of vieW exist on the use of r~ational income (net product) as a
geaeralizing indicator in territexfal preplan studies. Thus, Academician
V. Nemchinov, A. Vedishchev, A Probst, Ye. Silayev, L. T~lepko and other
scientist~c have observed that it is a basic ind~cator of efficiencq. R. Shni-
per considsre it practicable to use this indicator in analysis of int~rre-
gional efficiency. V. Kistanov, acknowledging the importance of the indiza-
tor of national income (net product),has called it supplementary in relation =
to the indicator on the basis of the aggregate social product.
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It also appears to us that the indicator of net product for interregional
comparisons is~ of limited usefulness because of diff erences in industrial
structures. It would be more advantageous to use it in deterwining the share
of individual economic regions and zones in the production of net product for
the country or a union repub lic. This indicator. cansidered dynamically illus-
' trates the contribution of the region to the country's national income. Re-
gione are distinguiehed by uniqueness in the structure of material production;
consequently the cotaparab ilitq of any generalizing indicatora of efficiency
is most relative. For example, the share of the Central Regian in the pro-
duction of net prodiict of the RSFSR is approximately double that of the North-
western Region. Sut� at the same time this does not mean that the fornier re-
gion is more efficient than the second. Such a atatement would not be right
either theoretically or practically.
For general interregional comparisons of efficiency, indicators of labor pro- ,
- ductivity (output of net product of material production and its sectors by
one worker) and growth of net product per ruble of capital investment
(output-capital ratio). For sectorial interregional comparisons, it is
advantageous to use indicators of labor productivity and output-capital ratio
on the basis of net production, capital-labor ratio and profitability for the
most important types of products. ~
- Practice has shown that the most effeetive method of using the adduced ex-
penditures f or the comparison of separate products of regions is their compar-
ison with closing outlays. Indicators of the adduced expenditures make ~.t
possible to measure together simultaneously current outlays on the production
of the most important products in different reqions, which is of importance to
- the solution of problems of rational distribution of production. Thia method
is being successfully used in regional researches. But any assessments--
be they intraregional or interregional--require some kind of criterion; one
- such could be the use of all-union average sectoria~. and even the best indi-
cators according to economic regions. Such a method permits one to determine ,
deviations of regional indicators f rom those that serve as criteria and on
the basis of subsequent analysis to establish the reasons for their devi~r
- tions. The nat~ire of such an approach may be illustrated in the form of the
follawing inequality:
3Q ~3II i3Q ~ (1) -
where .3~ stands for presented expen~itures per product unit of the region
for which a forecast is b~ing made; 3~ standa for an average sectorial indi-
cator;3 ~ stands for the best indicator of the economic regions. Here it is
necessary to take into account the complexit:y of developing criterional indi-
cators f or the long term. The mos~ accessitle method for this is extrapola-
tion.
On the basis of the indicator of net production, it is practic.able to
determine the chief generalizing regional it.dicator of labor productivity:
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y (I
I7,, _ , ( 2 ) _
TM
where ~T stands f or labor productivity in the sphere of material production;
y~ stands for the cost of net production of material production; Tiy� stands
for the number of workers. In this case, the use of the indicator of net -
production makes it possibl~ to reflect more precisely the contribution of
the region to the grawth of productivity of collectivized labor. For calcu-
lating regional indicators of eff iciency of capital investment, the follawin$
fosznula may be used:
Kor = = 4I7' , (3)
KM K~
wherel~CoT is the yield on capital in the sphere of material production; ~M
and ~(c stands for capital investment (direct and related); S'i?~ stands for _
grawth of net production. Calculations show that the indicator has a tendency
to reduction (by 12-15 percent over 10- 15 years) because of the grawth of
capital intensiveness stetmni.ng from changes in the structure of the economy*,
one-time expenditures on the introduction of new equipment, technology and so
on. Thus, for example, wholesale prices for individual types of new equipment -
in the textile industry grew by a factor of 1.5-3.0, while labor productivity
grew only 15-50 percent. .
- The number of persons employed in material production is reflected in the
labor balance, while capital investment is computed with the direct count
methodo For separate sectors of industry and the national economy not in-
cluded in sectorial studies f or the perspective period, it is possible to
~ determine them with the help of approximate calculations. For some aectors,
especially in the nonproduction sphere, the absolute size of capital invest-
ment can be determined through a forecasting of the dynamic~ of their rela-
tive share in the total structure of capital expenditures. When calculating
effectiveness of capital investment according to the indicator of grawth of
net production per unit of capital expenditures~ it is important to take into
' account both direct investment in material production and aimultaneous expend-
i,tures in the nonproducCirnn sphere. But it would not be ri~;ht to relate all
capital expenditures of the nonproduction sphere to interrelated expenditures
for the region., Capital expenditures for higher and secondary specialized -
education for science and scientific services are of all-union imp~rtance.
It is therefore more logical to include capital investment in regional calcu-
latians in housing, social-cultural and municipal constructio~, the share of
which in total capital investment aimed at the development of the economy of
the Central Economic Region reaches 26-27 percent.
The tendency to lawering of the indicator of yield on capital (rouRhly 15
percent over 10-15 years because of the mounting grawth of the cost of fixed
production capital compared to the growth of eqriipment productivity and also -
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because of the rapid increase in the cc,st of the passive part of fixed cap-
ital and insufficiently full use of their active part) makes feasible the use
of supplementary indicators to explain the dynamics of the indicator of yield
on capital. As supplements to the regular indicator of yield on capital, the
following auxiliary indicators are propoaed in a regional context: (1) the `
relatian of net production to the cost of the active part of fixed production
capital; (2) the correlation between growth of cost of equipment and its
productivity; (3) indicators of use of fixed capital (use of capacity, mach-
ine shift coeff icient and so on) .
It is interesting to note that the use of indicators (of cost of gross and
net product) for an evaluation of the comparative eff iciency o� production of
a regian affects primarily the absolute results of the computations, but has
an insignificant effect correlations of variants. Our calculations showed
- that the folluwing are important conditions for the carrying out of such cal-
culations: (1) use of a single method of evaluating efficiency for the
sphere of material production of the region as a whole, ita most incportent
sectors and territorial units; (2) a comprehensive approach to the asseasment
of eff iciency, presupposing calculations on the b asis of indicators of use of
living and embodied labor, capital investment (with account beinR taken of
related expenditures) and material outlays. Such an approach makes it pos-
sible to detect a less efficient part for the purpose of revising the fore-
cast variant; (3) as generalizing indicators of efficiency of material pro-
duction of a region it would be reliable to use not one but several indica~
tors characterizing fuller utilization of expenditures of living and embodied
labor. Consequently in adding to the general indicators,as proposed above
(see f ormulas 2 and 3), it would be possib le to use for determination of the
dynamics of efficiency of material production of regions an indicator of ef-
ficiency of use of fixed and working capital determined on the basis of the
following formula: -
y!1
3m ~o~ ~oa + ~g (4) -
where ~/7 stanc~ for the cost of net production; ~o~ and ~~6 stands for the _
cost of production fixed and working capital; stande for the cost of pro-
duction capital used in the restoration and ma ntenance of the ecolo~ical e
equilibrium of the environment; ~,y stands for the cost of nonproduction fixed -
capital (facilities of the social-everyday inf rastructure). Since determi:.a-
- tion of the indicator of working capital for regions over the long term is
burdensoiae, it is proposed to use as an alternative the indicator of eff i-
ciency of fixed production capital:
yR a ~5~
30.~. - ' -
~OC T w3.OC ~ ~H
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In the procedure of Gosplan SSSR, it is recommended to define the indicator af
material expenditures as the ratio of their sum (without amortization deduc-
tions) to the volume of social product, gross and commodi~~,~ production (work).
But in terr~.torial preplan studies thie indicator is not d~~ermined because
of the abaence of reporting and long-term intersectorial balances within the
caatext of krays, oblasts and ASSR's. The computations we made shawed that
- in preplan territorial studies it is advantageous to calculate indicatore
characterizing the aocial needs of the economy and the population of the re-
gion and also the poasibility of their satisfaction from local production.
' Tak~n in the dynamics for the most important tqpes of produets, they charac-
terize changes in the comprehensiveness of development of a region~s economy. -
These indicators may be calculated on the basis of long-term material bal-
ances, at the basis of which there are scientifically based norms of produc-
tion and individual use. Among such indicators, it is practicable to deter-
mine the use of the most importan t forms of material resotirces (rolled metal,
fuel, electric�power)expressed in physical terms per million rubles of the -
gross production of the industry of a union republic, economic region and
other regions as a whole and its chief sectors. Of course, the indicator oF
materials intensiveness expressed in monetary terms would be more effective,
but it would be unrealistic to count upon the development of an intersectorial
balance in a regional context in the immediate years ahead.
Such calculations are pertinent for the development of e~unomic regions of
the European part of the country, since the canception of their development F
over an extended perspective st~ms from the need to hold back the rates of
growth of pawer-and fuel-intensive and metal-intensive production operations, _
especially those of them whose products are used primarily far from their
- borders. Another approach to this problem is unacceptable because it would be -
- in opposition to the economic specialization of the given region and would
bring ab out the growth of material expenditures as the result of increased
transportation costs.
The indicaCed indicators of materia~s intensiveness may be used for the
assessment of variant solutiona in the process of long-range forecastinR of
_ regions.
Despite certain defects in the method of adduced expenditures, its use in
territorial preplan studies is most helpful for the comparison and evaluation
of efficiency of production vf basic types of produc~ts, variants of distribu-
tion of production and resettlement, selection of types of raw materials,
- fuel and transport. The method of adduced expenditutes helps to select the
optimal variant of a concretie solution, which has a positive effe~t on Che
overall effectiveness of the forecast solutiona. Consequently its use in
the development of long-range territorial forecasts of any form not only does
- not contradict proposals for the creation of a unified system of evaluation
of the efficiency of pub lic production but also presupposes its use in the
indicated system.~ Calculations of adduced expenditure~ may be successfully
~ used in regional schemes, in rayon planning and in general plans of cities and
other types of planning studies.
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The practice of territorial preplan work shows th at the effectiveness method -
of adduced expenditures is diminished because of incomplete accounting of re-
lated expenditures for the development of related production operations and
of the production and social-everyday infrastructure, for compensation of the _
- damaged caused by allocation and construction, f or example, the taking of
valuable lands for nonagricultural purposes, their f looding and underflood-
ing [podtopleniyeJ,8 for measures for restoring the environment, for ahifting
and securing of workers and their families and so forth). Such casea are
frequently encountered in the solution of problems of location of enterprises -
_ and their modernization.
Analysis of contemporary practice and procedures of validatin~ the effective-
ness of locating and modernizing enterprises in territorial forecastra and
sectorial technical-economic validations (technical-economic reports) ahawed
the nonidenticalness of the solution of this problem. But planning organs
attach important significance to a comprehensive approach to validation of
location and modernization of larg~ enterprises in preplan work of all kinds,
considering it as a significant factor in boosting efficiency of public
production.
In sectorial and region~l schemes, pro~ects and achemes of rayon planning
and other studies, proposals for the location of large new construction pro-
jects and the modernization of existing enterprises are not always properly
validated. It is necessary for ministries and departments when compiling
- long-range achemes of development of sectors to establish a number of indi-
cators characterizing the effectiveness of location and modernization of
enterprises. Our calculations h ave shown the feasibility of usinp, the method
of grouping of indicators of enterprises being modernized according to size
of growth of capacity (production) expressed in monetary terms per unit of
capital investment and subsequent computation according to the formula:
M2-lbt~ , ~6~
3p = K
_ where .~p denotes effectiveness of modernization; NI'~ and M'~ stand for the
capacity of the enterprises following and prior to modernization; and /t is
the size of capital investment. The obtained indicators may be compared with
similar data of newly constructed enterprises. This method, which has been
used in calculations f or 122 machine-building enterprises (for 78 percent of
the enterpriaes this indicator was 1-5 or more rubles per ruble of capital
investment and f or 22 percent it was belaw one ruble), permits the use of
data of preliminary sectorial forecasts and listings of enterprises.
For more detailed calculations there may be used another method of determininR
the indicator of effectiveness of modernization: -
3~ - ~y~~ , (7)
. P -
~oc ~06 ~e
2~
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where ~(y~ stand~ for grawth of profits (of net praduction) ;~o~ and �~o~
stand for the cost of fixed and working production capital;~;, stands for
growth of cost of nonproduction capital (housing, cultural-everyday and mun- _
icipal construction). In addition to this it would appear necessary to de- -
- termine the indicator of efficiency of use of l~ving labor and capital
investment.
Effectiveness of concentratian of production and settlement in regions is
determined extremely rarely in preplan territorial studies. At the same time,
group location of enterprises creating conditions for the combining and coop-
eration of basic auxiliary and technical servicing production facilities and -
also ob~ects of the production infrastructure is most effective. The combin- _
ing of inetallurgical and nitrogen planta makea it possible to lawer s~ecific
capital investment by 10-15 percent, of petrochemical production f acilities
by 25-35 percent and production cost by 10-15 and more percent in comparison
. to separate enterpriaes. Group distribution of enterprises makea it poasib le
to create common networks and structures for traneport and water supply. At
the same time, there is attained the reduction of estlmated cost of conetruc-
tion by 3-10 percent, operational expenditures by 10-15 percent and need in
tttie territory by 10-15 percent, length of railroad routes by 18-20 percent
and engineering systems by 10-15 percent.
Such calculations are no less important in studies on the distribution of
installations of the agroindustrial complex and the development of a system .
~ of rural settlement. Thus, enlargement of villagea in the courae of reatruo-
turing the system of rural settlement frequently contributes to the reduction
of specific capital investment by 10-15 percent and operational expenditures
by 10 percent. Concentration of production, auxiliary and technical servi.cinR -
f acilities of the agroindustrial complex in production zones of rural setr_le-
ments makes it possible to reduce one-time expenditures by 16 percent and
operational expenditures by 6-8 percent compared to dispersed construction.
Despite adverse social and economic consequences from the development of
- large cities, the opinion is f requently stated of the high effectivenees of
the industry of these cities, which directly or indirectly iuatifiea the cle-
sire of of ministries and branches to locate in them new enterprisea or to
significantly expand those already in operation. In a number of instances,
the efficiency of industrial production in large and medium-size cities is
- determined as proof of this on the basis of a comparison of indicators of
output per worker and yield an capital (f or gross production) for separate
enterprises or sectors. At the same time, a comprehensive systems national-
economic approach is absent and social-economic consequences of the develop-
~ent of large citiss and direct and related one-time expenditures are not
taken into account. There is the absence in such calculations of the ele- -
mentary requirements of comparability needed for the determination of effi-
ciency (cansideration of the special features of sectorial structure, special-
ization and sizes of enterprises and iden~ticality in the selection of analog
enterprises). The calculations performed as a whole for induetry of the Cen-
tral Region and for 5 of its large sectors and 42 enterprises (with their
differentiation according to number of personnel, level of specializaCion and
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the like) made it possible to draw certain conclusions. In the determination
of the comparative efficiency or industry in cities of different size, there
should be fully taken into account capital investment in construction of ana-
log enterpriaes (with account being taken of relasewera endelectrictandaheat
syatems and building of transport, water supply, A,
supply ~d also expenditures for municipal services in proportion to the nunr _
ber of workers). One-time expenditures on extra-area systems and the building
- of industrial enterprises in large cities of the Central Region are 10-15 per-
cent higher and expenditures on municipal services are 15-20 percent higher _
than in small and mediuursize cities (computed per capita of the population).
The average cost of engineering preparation and equipment of the territory
and provisian of services and utilities reached 150,000-200,000 rub lea in
the largest cities and 120,000-140,000 rubles in large cities9 and 60,000-
80,000 rub les per hectare in medium-size and amall cities. As a result, total
capital expenditures on the construction of analog enterprises in large cities
turn out to be approximately 15-18 percent higher than in amall and medium-size
cities. The calculations f siled to conf irm a direct dependen ce of indicators
of labor productivity, yield on capital and profits for industry as a whole
and its main sectors and analog enterprise on city size. In this connection
there should b e taken into account that comparisons of the eff iciency of all
industry and its sectors for cities of diff erent size is of a most conditional
character because of structural differences.
In the solution of the problem under consideration, it is necessary to take
into account also the f act that certain advantages of concent ration of indus- _
try, science and culture in large cities cannot compensate f.or the adverse
ecological and social consequences of their excessive development. As effec-
tive measures of regulating the size of the population of large cities, in-.
creasing importance is being given to prohibition of modernization and expan-
sion of exiating enterprises, which would require gro~wth of industrial-
production personnel, preferential development of the service sphere awing
to the release of portion of workera from material production, location of
enterprises and facilities for serving the population and providing municipal
services in the su~ urban zone with account being taken of permissible radii
of accessibility, the withdrawal and moving of enterprises th at are not suit-
- able or harmful in a sanitary sense and so forth.
The assessment of solutions in the distribution of productive forces muat
stem not only from the criterion of a quantiative effect but also from the
necessity of creating most favorable conditions for labor, everyday life and
recreation of the population. The development of an effective unified system
of indicators of assessmenC of the efficiency of public production in terri- -
torial preplan work is possible ff it is based on a comparable system~e de-
porting indicators systematicaily worked out by statistical organs.
velopment of unified approaches to the evaluation of the efficiency of public
- production in sectorial and territorial preplan work of all kinds is an im-
portant means of validating plans of economic and social development.
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= FOOTNOTES
1. Ter~itorial preplan studies comprehen d composite elements of the unified
national-economic ~omplex of the coun try, union republics~ economic re-
giona, krays, ASSR's, oblasts, industrial rayons, a variety of which are
the new ly developed territorial p roduction complexes, industrial centers, _
urban settlements and agglomerations. This type of preplan studies, in
addition to s chemes of development and distribution of the productive
forces of the country, un~on republic and economic regions of varyinR
rank, includes achemes ~plans) of ,rayon planning, general plans of urban
and rural settlements, long-term forecasts of development of large cities
~ and agglomerations, sectorial investigations, planning forecasts (tech-
nical-economic validations, technical-economic reports and the like)
ca!anected with the disposition of economic sectors and resettlement on -
th~a territory of the country.
2. We have in mind the works of academicians A. Aganbegyan, L. Kantorovich,
V. Nemchinov, N. Nekrasov, N. Fedorenko, T. Khachaturov; A. Granberg~
G. Granik, V. Ivanchenko, V. Kistanov, L. Kozlov, V. Krasovskiy, V. Ma- ~
zhin, V. Novozhilov~ S. Shatalin and other scientists, the works of the
Economics Institute of the USSR Academy of Sciences [AS USSR], the Cen-
tral Economico-t4athematics Institute AS USSR, Scientific-R~search Econ-
omics Institute attached to Gosplan SSSR, Council for the Study of Pro-
ductive Forces attached to Gosplan SSSR, Economics Insti~ute and OPP [ex- _
pansion unaertain] of the Siberian Department AS USSR, Central Economics
- Scientific-Research Institute under Gosplan RSFSR, and publi~ations o~n
problema of efficiency in location of productive forces and the economy
of regions of the USSR for the period 1965-1979, Standard Procedure o�
Determining the Economic Effectiveness of Capital Investment (Moscaw,
1969) and a number of sectorial methods of determining the economic ef-
fectiveness of capital investment.
3. For the purpose of determining the results of intensification of produc-
= tion on the b asis of grawth of its technical equipment.
4. Indicators of materials intensiveness expressed in monetary terms are not
determined due to the absence of regional intersectorial balances.
5. See "Plan Indicators and Criteria of Evaluation" (EKONOMICHESKAYA GAZETA,
No 35, 1979, p S).
6. Formulas 4 and 5 may be most eff ectively used for intraregional calcula-
tions, inasmuch as in such a case structural differences are excluded
that would sharply distort results, something which is to be found in
interregional comparisons.
,
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7. In this connection, as Academician T. Khachaturov pointed out, "adduced
expenditures were proposed f or a comparison of variants in planning and
pro~ection, and no consideration wae given to their use in the determina- -
tion of the full magnitude of the effect; the fact is that the norm of
effectiveness is not the mean but its lower permissible limit" (PLANOVOYE
KHOZYAYSTVO, No 6~ 1974. p 19) .
~ 8. Investigation of the p ractice of setting aside agri~ultural land and of
the system of eomputing compensations for the damage done showed serious
' shortcomings in this field: land was set aside without adequate valida-
- tion of reasons; the amounts of compensations cover 10 to 50 percent of
real aggregate expendi~ures on restoration of the land and its fertility
and do not compensate f or the gains loet; the compensating amounts are
frequently used for other purposes and do not provide for the restoration
of land of farms or rayons where the withdrawal was made; as a result,
the responsibility of the landholders is lost b oth in regard to its with-
drawal and in regard to its restoration on the principle of "a hectare
~ for a hectare"; an3~ sizes of compensations do not hinder withdrawals
since they are planned in the estimated cost of new constructions and
comprise only a small part of Che latter.
9. In industry expenditures per hectare of induatrial territories comprise
51,000-56,000 rubles f or enterprises of the petrochemical induetry.
107,000 rubles for basic chemistrq and ferrous metallurgy, 25,000-41,000
rub les for machine building and metalworking, 48,000 rubles for food in-
dustry and 66,000 rubles for light industry.
COPYRIGHT: Izdatel~stvo "Pravda", "Voprosy ekonomiki", 1979 -
i
169 7
CSO: 1820 '
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TERRITORIAL PRODUCTION COMPLEX MANAGEMENT
Moscow VOPROSY EKONOMIKI in Russian No 8, Aug 79 pp 154-156
/Article by Ye. Lomanov: "The Management o� Territorial Production Com- -
plexes"/
/Text/ The annual theoretical science seminar on management problems was
- held in February 1979 in Tarusa. This year the problems of managing terri-
torial production complexes were submitted for discussion. The seminar or-
ganizers were Che Center for Problems of the Management of Social Production
- of the Economics Department of Moscow State University imeni M. V. Lomonosov,
the Scientific Council for the Problem "The Organization and Economics of
Scientific and Technical Research and Development" of the State Committee
for Science and Technology, the Scientific Council "Socio-Economic and Ideo-
logical Problems of the Scientific and Technical Revolution" of the USSR
Academy of Sciences and the Moscow Institute of the National Economy imeni
G. V. Plekhanov.
_ Representatives of ministries and departments, scientific research and sec- _
torial institutes, WZ's of Moscow, Leningrad, Riga, Kiev, Kishinev, Krasno-
yarsk, Novosibirsk, Gor`kiy and other cities and enterprise executives took
part in the work of the seminar.
In opening the seminar, Doctor of Economic Sciences G. Popov (Moscow State
University) emphasized that the rapid development of the scientific and tech-
nical revolution and the complication of intersectorial ties had been respon-
sible for the need for the comprehensive study and solution of the questions
�pertaining to this area. With the increase of the scale of social produc-
tion and the number of sectors the processes of specialization and the social
division of labor, as well as the integrational trends are intensified. All
this requires the planned coordination of all economic contacts. Therefore, _
the importance of the coordination of the activity of sectorial and terri-
torial organs, the coordination of the plans of development of individual
sectors and the comprehensive solution of econamic and social problems is
increasing more and more. One of the forms of the comprehensive solution
- of the intersectorial questions of management, which are connected with the
economic utilization of specific territories, is the territorial production
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complexes (TPK's), the formation of which has received new stimulation in -
recent years.
The reports and co~nunications at the seminar on the nature of the broached
problems can be conditionally divided into three groups: the general theore-
tical problems of the management of TPK's, the functional and organizational
problems of the management of TPK's, the management of TPK's by componenta
of production.
In his report Academician A. Aganbegyan stressed that TPK's are determining
to a greater and greater extent the face of the individual regions of the
country; the social infrastructure is also being developed in::ensively.
l~ie gained experience of the formation and functioning of TPK's makes it
possible to refine a number of theoretical and methodological theses. First
of all when solving the question of the expedience of developing one TPK or
another it is necessary to proceed from its contribution to the increase of
the efficiency of all social production, to correctly determining the lead-
ing sectors of the TPK and their agglomeration on the territory and to com-
bine their technological process into the "spacecraft" system when using
natural resources. The questions of the planning of TPK's within the na-
tional economic plan and the formation of management bodies of TPK's are
- also important methodological problems. The creation within USSR Gosplan
of a body for the planning and coordination of the development of TPK's
would be one of the forms of the solution of this problem; in the regions
its functions could be performed in part by territorial scientific research -
institutes for the complete utilization of the resources of the region.
Developing several tenets of the report of A. Aganbegyan, Doctor of Economic _
Sciences G. Dzhavadov (Moscow State University) noted that when forming and
_ organizing the management of TPK's it is necessary to take into account the
favorable experience of the program-goal management of intersectorial scien-
tific and technical programs, the mechanism of whose drafting and their in-
clusion in the national economic plan have more or less been worked out.
It would be advisable when forming TPK's to organize special-purpose financ-
ing and material and technical supply, having transformed the TPK's into
ob j ects of planning.
~ In the opinion of Doctors of Economic Sciences L. Davydov and A. Sysoyev
(Moscow State University), on the methodological level the question of the
classification of TPK's is especially important; they propose to classify
them by using a matrix system.
At present territorial production complexes and industrial centers with a
common production infrastructure, complexes of the "producer-consumer" type
and territorial sectorial complexes (the Volga Motor Vehicle Plant and the
Kama Motor Vehicle Plant) are operating in the national economy. The di-
versity of the complexes is a reflection of the diversity of the organiza-
tional forms of the objects of management, the result of the process of the
division of labor and cooperation in social production. As was noted in
the report of Doctors of Economic Sciences N. Kalinin, I. Bautin and Ya.
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Peterson (Moscow State University), for the present there is no unanimous
point of view on a number of questions: the place of TPK's in the system of
the territorial division of labor; the definition of TPK`s; the composition
and interrelations of the components of the complex; the types of TPK's ~nd
their classification; the factors influencing the formation of TPK's; Che
mechunism of the management of TPK's. The authors made a number of propoeals
on these problems, devoting particular attention to the improvement of the
management of TPK's. On a territory questions arise, the solution o� which -
requires consistency in the activity of the organs of sectorial, territorial
and intersectorial management, the establishment of the best territorial
production ties, the improvement of the intersectorial proportions of the
development of production. All these factors in interrelation with the in-
tegrational processes of the planned formation of a stable structure of pro-
duction on the scale of the entire country and the individual economic re-
gions cause the need for the development of the organization structure of
the management of TPK's of an economic region.
G. Ruban (Kishinev) told about the development of the organizational struc-
ture of the management of TPK's of an economic region using the example of
= the Moldavian SSR, T. Belyakov (Krasnoyarsk) told about the experience of -
- organizing and managing the territorial production complex in Krasnoyar-
skiy Kray.
Kh. Luyk (Estonian SSR Ministry of Forestry and the Conservation of Natural
Resources) characterized the experience of organizing the management of the
- use of nature in the Shale Basin (Estonian SSR). The statement of Candidate
of Economic Sciences R. Papayan (Moscow State University) was devoted to the
problems of organizing TPK's in Siberia and the Far East. In spite of the
considerable initial outlays on the production and social infrastructures and
- the expenditures on the transportation of products, the production efficiency
of the TPK's of Siberia and the Far East for a large number of indicators is
higher than in the European part of the USSR. Here the transportation costs
are being reduced to the extent that the completeness of production within _
the TPK's is being ensured. At the same time the existing practice of organ-
izing TPK's does not ensure the adequate consolidation of forces for the de-
signing, construction and placement into opera*~on of m~~or projects, the
components of TPK's are not being planned comprehensively, but by sectors.
- At the design stage miscalculations are occurring with respect to the inter-
related types of production, in the construction process the untimely de-
livery of materials and equipment and the need for personnel are threatening
the timely placement into operation of the planned facilities. The produc-
tion and social infrastructure~ are especially suffering. The speaker pro-
posed one of the possible plans of the organization of the construction of
TPK's.
The formation of the mechanism for managing TPK's requires the solution of
the complicated questions of providing management personnel. Personnel prob-
lems should be s~trictly linked ~rlth the main goals and tasks of TPK's and
their role in the national economic complex. Since program-goal structures
are considered the most acceptable organizational form of the management of
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TPK's, in the opinion of Candidate of Economic Sciences A. Panov (Higher
Party School, Gor'kiy), it is legitimate to raise the question of the pro-
gra~goal approach to the training and use of managerial personnel of re-
gional and sectorial programs. The development of a mechanism of the co- _
' operation of the executives of the enterprises and subdivisions belonging _
to TPK's is also of great importance. They can be advisory groups like the
- council of directors, committees or working groups for individual questions
= and so forth. It is important for these organs to have a legal and organ-
izational makeup and to be a part of the official plan of the management of
the TPK's.
_ A number of reports at the seminar were devoted to questions of the forma-
; tion and operation of TPK's, the forms and methods of control as applied to
them. At present the formation and operation of TPK's are backed by a uni-
form legal base. The problems of developing the legal concept of the TPK _
as a unified subject of legal regulation, which reflects its economic nature
and role in social production, in the opinion of N. Barabasheva (Moscow
State University), require the close cooperation of economic and legal
sciences and the clear definition of the goals and nature of the TPK. In
speaking about the types and kinds of control as applied to TPK's, Candidate
of Legal Sciences V. Igitov (USSR Ministry of Higher and Secondary Special-
ized Education) noted that it is necessary to clearly delimit the functions ~
of the organs of control, which operate under the conditions of TPK's, to
make more precise their interrelations with other organs of control both
- horizontally and vertically.
_ A number of reports were devoted to the foreign experience of managing re-
gional programs.
Summarizing thc seminar, G. Popov noted that the entire group of production
complexes, being a dynaini.c unity, is constantZy being developed, improved
and manifested in new forms. The solution of the problems facing the social-
ist economy during the period of developed socialism presumes the emergence '
of new modifications of the complex systems. At present the intensive de-
velopment of a new complex--the management complex--is taking place in the
system of the unified national economic complex. Therefore, the solution of
the problems of managing TPK's is an important task facing economic science, -
and the held seminar is one of the forms of its solution.
COPYRIGIiT: Izdatel'stvo "Pravda", "Voprosy ekonomiki", 1979
7807
CSO: 1820 -
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- REARRANGEMENT OF SOVIET ECONOMIC MECHAI~?ISM
Paris CENTRE D'ETUDES PROSPECTIVES ET D'INFORMATIONS INTERNATIONALES
(CEPII) in French Sep 1979
[Text] Brezhnev said to the 25th Party Congress: "The Central Cammittee
_ is against hasty and precipitate reshufflings of the leadership structure
aad of established methads of administration. One mv.st consider and then
reconsider before speaking. But if we are already cF�rtain of our fact, if
we have already un~erstood that the constantly exp~.~nding economy is now
too restricted within the framework of the existing economic mechanism,
then we must resolutely improve it."1
Apparently the party is now certain of its fact. After a public
discussion, though quite insignificant, some options were determined.
First, by the party, itself, "in a recent decision of the Central
Committee concerning the future improvement of the economic mechanism and _
the duties of the party and state organs"2. Then, ~ointly, by the Central
Committee of the party and the USSR Council of Ministers in a decree -
eatitled,"Improved Planning and Stronger Acti.on on the Part of the
Economic Mechanism With Resp~ct: to At~taining Greater Production Capability
- and Quality of Work."
In the present state of the documentation the latter decree was made
known to us thanks to:
- a commentary of about 4,000 words in PRAVDA, 29/07/79.
the publication of the text, itself, three times longer, in
No 32 of the newspaper, EKONOMICESKAJA GAZETA3. The decree appears as a
series of 63 articles (the longest being sections in paragraphs) grouped
under three main chapter headings: the first, devoted to improved
~ planning; the second, to the more specific matter of investment operations;
the third, to econamic incentives for producers.
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The following pages contain the text of the decree--rendered as
faithfully ae possible with regard to structure and contenta4.
_ Improved Planning
The planners are asked chiefly to think immediately in terms of aims .
(to resolve a sacio-economic matter of national interest) rather than to _
confine themselves to the means (to stimulate the production of a sector).
- The plan must be able to set forth priorities--sectorial or territorial--
in order to improve economic structures. Another aspect of the same
concern regarding the "attainment ~f aims," is that everything must be
done to improve the yield from productive resources, to avoid their waste
(art. 1).
Statement of Plans ~
The overall system of the plans includes "technological development
programs" over a period of 20 years, made by the Academy of Sciences, the
GI~TT, and the GOSSTROJ of the USSRS; projects that are mainly oriented
toward economic and social development," with the GOSPLAN of the USSR as
chief architect; five-year and an~ual plans. '
Doubtless in order to avoid the statement of these plans from
appearing merely arithmetical, strict time limits for their transmission ~
t~ the organizations concerned are indicated. Thus, the GOSPLAN must
calculate a five-year draft plan one year in advance; submitted by their
administrative ministry to the groups6 and enterprises, these figures will
help them to elaborate their own five-year draft plans, which then go to
the GOSPI~AN. Finally, the latter must give the Council of Ministers a ~
coherent five-year draft plan five months in advance (art. 2). i
I
The time limits accorded the GOSPLAN seem all the more tight since ~
it is necessary to detail the five-year plan by years: real and financial ;
statement of affairs, reserve resources. Detailed salary and incentive I
standards thus must always be established on the basis of an actual
prospective effort (art. 3). In addition, prior to the start of a five-year ;
period, the GOSPLAN must define programs having te,chnological, social,
~ economic, or territorial aims: for example, the parcelling of the BAM !
zone, the reduction of manual labor, the economizing of fuel and metal
_ (art. 6).
Finally, the annual plans are based on the aims and the standards of
the five-year plans, but with the more specific dimension that their '
actuality confers on them. They are elaborated on the init3.ative of !
groups and of enterprises, which in particular include the range of their i
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production according to the contracts made with their clients. The overall
a~ministrative senior organizations at that point formulate yearly plans, _
by branch and republic, the aims of which cannot be inferior to those of
the "annual portioii'' of the five-year plan. And everything must be com-
pleted in such a way that the Council of Ministers of the USSR will be
informed by the GOSPLAN of the annual draft plan four months in advance
(art. 4). The technical quality of the annual plans, their compatibility
with the actual means of tlte enterprises, their control at all levels are
the ob3 ect of special attention (art. 5).
The Indicators of the Plans
The following articles in the decree describe the system of the
indicators and economic standards of the plans, that is, the kinds of aims
the realization of which will make it possible to appraise to the utmost
the results of the producers' activity. These indicators cover production,
work and social development, financial questions, investment operations,
technological innovation, and supplies.
- The decree mentions 20 5-year inaicators (detailed by year), which
include in particular the rate of increased value, production in actual
quantities, increase in work productivity, the salary rate of production in
roubles, the maximum employment ceiling, profit, the putting into operation
of production capabilities, the authorized ceiling of state investments, the
technological innovations to be made, the main supplies needed (art. 7).
In a general way, the choice of indicators that are kept is for the purpose
- of emphasing better use of resources and better quality products.
The annual indicators are necessarily the same type. Nevertheless, a
distinction is made between those that characterize the activity of the
ministries on the one hand and of the groups and enterprises on the other.
In addition, at the latter level in particular, the indicators take on a
more concrete and precise nature. Thus, among the production indicators
appears the voliune of sales, reflecting the manner in which the contracts
for deliveries to clients are filled. (art. 8). -
Taking into account the role of planning in actual terms, the GOSPLAN
must bring into focus in 1979-1980 more refined instruments to measure the
quality and useful characteristics of products, especially of equipment
(the production of which up to has been evaluated in tons)(art. 9).
The Technological Dimension of Plans
Various measures are designed to emphasize the thematic side of the -
plans. Thus the latter will include chapters that summarize all of the
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social-type ob~ectives. (art. 12). But the technological dimension of
the tasks to be resolved is stressed most of all. Along with their
technological ta.sks, to extend over a period of 20 years, the GKNT, the
GOSSTROJ, and tf?e Academy of Sciences will present to the GOSPLAN programs
that will make :it possible to resolve, from the stage of basic research to
that of production, major technological problems. The responsibility
for these programs is entrusted to leadership administrations (art. 13).
The technical standards that define the quality of equipment must be
revised in 1979-1980 (art. 14). The materials for the equipment of enter-
~ prises must answer to the most exacting technological standards, a scru-
pulous control of the application of this principle to be made by the
GOSSTROJ and the GKNT. The latter organization must also evaluate the
technical level of the Soviet production of equipment in 1979-1980
(art. 15).
The Organization of Trade
Estimated balance sheets of resources and the use of products, all _
the more detailed as.the aimed at perspecti~re becomes closer (10 years,
5 years, 1 year), pave the way to the normal provisioning of the various -
users (art. 16)...The detailed range of the products to be traded and
their time limits for delivery will be established by the suppliers and
clients, with the participation of the State Committee for Material and
Technical Supply (GOSSNAB). The latter is to be the chief architect of
the implementation, in 1980, of a network of stable trade relations among
the economic operators. Within this framework, the groups and the enter-
prises, the supply centers, the transport organizations, and the commercial
establishments make five-year contracts. The ranges of anticipated pro-
ducts in these contracts are detailed annually (art. 17-18). -
In order to assure a befiter supply of consumer goods, the USSR
directorates general of the Ministry of Trade and the Industrial Unions~
make five-year agreements aiming at improvement in consumer goods, by
means of fluctuation of prices and commercial margins (with the consent
- of the State Committee for Prices). These agreements serve as a basis .
for the making of detailed annual contracts for delivery between groups
and enterprises on the one hand and commercial establishments on the
other (art. 21). Contractual relations likewise establish the reciprocal
responsibilities of commercial wholesale and retail establishments (art. 22).
J
- The Search for Balance
Articles 23 to 29 of the decree contain various provisions having as
their common purpose a search for economic balance at all levels. The
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availability of manpower firsr of all, with a view to assuring sufficient
resources for all planning perspectives and in all regions (art. 23).
In addition, emphasis is placed on financial and monetary balance; the
GOSPLAN in particular each year must establish, with the help of the
Ministry of Finance and of the GOSBANK, a register ~f management~ mon~tary
, receipts and expenditures (art. 24). Likewise, stress is placed on the
necessity of harmonizing the sectorial aspects of plans with their terri-
torial implications (art. 25), of strengthening the participation of
~ regional authorities in the el~boration of the plans in cooperation with
the federal authorities (art. 26-27). The latter in particular must deal
with matters of parcelling the land, effecting a territorial division of
balances by products, finding solutions for specific regional problems,
establishing plans for the localization of branches (art. 28).
2- The Matter of Investments
This part of the decree deals with measures that aim at increasing the
yield from invested capital, accelerating the putting into operation of
production capabilities, reducing the total amount of current bills for
investment, and aagmenting the participation of machines in the investmer~~t
structure (art. 31). In order to improve the counstruction sector, stress
is laid chiefly on the implementation of stable five-year plans, covered by
the necessary resources for work, equipment, and materials (art. 32).
- Investments are allocated to the directorates that are responsible for
the various sectors of activity connected with the planned increase in
production. Resources are appropriated to them for the creation of addi-
tional production capabilit3es, by creation or extension, only if the
existing capabilities, once modernized and re-equipped, are still
inadequate (art. 33).
_ An adapted system of indicators is to encourage the builders to favor
the execution of their final obligations: the putting into operation of
constructed capabilities. These indicators notably include the "sale
value of construction," that is, the total amount for the work represented
by the programs, ready for exploitation, and delivered by the builder to
the one who is charge of the work (art. 35). This type of indicator, as
well as the execution of the tasks concerning production and profit, .
serve as criteria to detiermine the bonuses for the personnel of the construc-
- tion enterprises (art. 36)~~eginning with 1981, the estimate of the "con-
struction sale value" will serve also as a basis for settlements between
the ones in charge of the work and the constructors. The latter will not
receive further discounts for work in progress. They will be financed
through bank loans; interest rates will increase in case of nonobservance
of time limits. The progressive generalization of this system should lead -
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to the delivery of completed installations that are fully equipped, financed
through the aid of loans from the STROJBANK (State Bank for Construction)
(art. 37).
The decree also provides for a series of ineasures concerning the
constitution of lists of investment programs, the establishment of estimates,
- the financing of construction enterprises, supplies for construction
yards, salaries and bonuses for the building trade employees (art 38-44).
From 1979 to 1981, the organization of this sector is to be modified, taking
into account what industry has produced, with the "construction and assembly
groups" as the basis (art. 45).
3 - Responsibility and Incentive
This concluding portion of the decree defines the measures intended to
enc~urage producers to execute the plans. Basically, these measures provide
for planning over a five-year period for groups and enterprises and a
consequent continuing share in overall resources: this, taking into account
the final results of their activity and of the obligation to assume a
continuing growth in the matter of resources to be supplied to the state
budget.
The final results that determine the economic incentives for producers
above all are the carrying out of the plans for delivery, in accordance
with the range and within the established time limits of the orders
received; an increase in production; improvement in the quality of products
and an increase in profit (art. 46).
- The total amount for incentive funds will come from the application of ~
continuing rates, beginning with the llth plan. They will be differentiated '
yearly and modified according to the annual plans. For each group or
enterprise, they will be part of the general incentive quota provided at the
level of the ministry in charge of the branch: Producers of production and -
consumer goods of particularly high quality will be favored.
The incentive fund is divided into funds for bonuses, funds for .
socio-cultural and habitat accomplishments, and funds for development.
Their allocation is determined by the directorate of the group and the
labor union committee, with the active participation of the personnel. Each
of the three funds is used strictly in accordance with its assignment. The
suma. that are not used by the end of the fiscal year are not returned to
the budget.
The bonus fund is drawn from the profit and depends on the execution
of production plans, the quality of production, and regard for the list of
orders; funde for r~ocio-cultural and habit accomplishments represent' ,
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30 to 50 percent of total incentive funds, according to local needs. The
development fund is sustained from levies on profit, amortizations for
renovations, and the proceeds from the sale of fixed capital that ia fruitless
to the group; it serves to selfini~an~investmentnplan~ofmthe ministry~inhich
are included in their totality
charge and are covered as a priority by real resources (art. 47).
The Part of the Ministries and of the State
Article 30 of the decree aims to reinforce the r.esponsibility of the
~ ministerial apparatus with regard to the drawing up and the forwarding of
plans. In addition, it threatens the officials with disciplinary and
pecuniary sanctions in the event that they accept a revision downward of
the plans of the groups and enterprises depending on them. The diercents
of the latter in that case would then be deprived of at least 50 p
of their bonuses.
Further, a new rule for the distribution of prof~hehindustrialstituted,
beginning with the llth plan. As they become ready,
ministries will be allocated, in accordance with a fixed rate for the
five-year period, a portion of the profits that are intended for the overall
development of their sector. Also, 50 percent of the profits realized
- over and above the plan will be at the disposal of tr~ ~i~.i-Qrries. -
Finally, the levies on the profits owed the state ~decreasing theeministerial
of nonexecution of plans and will be guaranteed by
share.
Incentive for Technological Progress
A fund for technological development, set up at the level~of each
ministry, serves to finance research-development projects and also to balance
the extra expenditures accompanying technological innovation at the initial
stage of its application.
- The various Soviet organizations for study and research-development
will be made responsible for their own administration before 1e80fiedech-
nological innovation will be the subject of contracts, with sp
parameters for the products ordered. This system assumes that one will
specify the various intervening services in the projects, their time
limits, the necessary resources, and the final results expected, inc1uding
those at the macro-economic 1eve1. As in the building trade, settlement
will be made with the research-development organizations upon definitive
receipt of their studies; and they wi11 be financed with the help of bank
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loans, with the commitment being met by abrogation through the present
system of settle~nent through progressive payments. The research-
development organizations will have funds for bonuses, development, and
socio-cultural accamplishments (art. 51). _
The system already in effect for incentives toward innovation through
prices is being developed. Increases are added to the wholesale price of
production goods bearing the trade union label of quality, whereas second
class products are reduced.
- Up to 70 percent of the additional profit from the increases for better
quality is depoaited in the bonus funds for the production and research-
development es;:ablishments involved. Analogous modifications in the
wholesale and retail prices encourage the offer of quality conscmier goods,
- (art. 52).
Salary Incentives
The introduction of a stable salary rate per product unit should lead
to an increase in work productivity. The establishments that effect overall
salary savings compared with this rate may distribute the excess among the
workers who perform several jobs and, more generally, among the personnel ~
who accomplish a given volume of work with fewer members. Increases in
salaries for plurality of jobs and reductions in personnel can amount to
50 percent of the base salary for workers, 30 percent for foremen, 50
percent for builders and technicians (up to a limit of 1 percent of the
remunerations of the establishment). The adoption, on the initiative of
the personnel, of higher standards of work entitles them to exceptional
bonuses; there could also be an increase, up to 20 percent, of the salary ;
rates. Parallelly, social security contributions are increased (art. 53). i.
Teamwork
The group ing of personnel by teams is to become a routine form of work
organization in industry and the building trade. Within the limit of
available resources and of the various existing ratios, the team has the
right to determine the total amount for salaries and bonuses,"taking into
account the actual contribution of each person with respect to overall
work"; to designate the candidates for salary increases; to recommend to
the directorate and the trade union committee a change in job for a worker
according to the quality of his work; to designate the prize winners of
"the socialist emulation" award at the team level, etc. (art. 54).
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Supplementary and Final Provisions
Incentives for better utilization of f ixed capital, exploitation assets,
land, water, and costly raw material complete the decree (art. 55). The
decree mentions the importance of contracts between suppliers and clients
and their reciprocal obligations (art. 56-57). While the systeui that
it introduces directly concerns only industry and construction, the orderly
regtulat~on of other branches of activity, such as provision of material
and t~ch}~ical supplies, especially transports, is judged necessary to its
proper ~unctioning (art. 56-60). The various Soviet directorates involved
are called upon to take the regulatory measures needed to make it possible
to implement the text (art. 62-63).
FOOTNOTES
1, PRAVDA, 25 February 1976.
2. Mentioned in SOVERSHENSTVOVANIYE KHOZYAYSTVENNOGO MEKHANIZMA
~KONOMICHESICAYA GAZETA,No 33, August 1979. No text is available
concerning this decision, which was also announced in PRAVDA, 28 July ~
1979.
3. No 33 of the same newspaper also contains a commentary on the text in
the article cited in the preceding note.
4. Sections 1, 2, and 3 of the following analysis refer to the chapter
headings of the decree; the nim?bers in parenthesis, its articles. In
addition, the liberty has been taken to introduce certain sub-titles,
- not included in the original text, in order to more clearly.present
its organization.
5. GKNT: State Committee for Science and Technology.
GOSSTROY: State Committee for Construction.
6. The groups of enterprises (or "pro~uction unions") constitute the chief -
form of organization of the basic industrial operators, notably since
the decisions of April 1973. Between them and the technical ministries,
one finds the intermediary organization of the "Industrial Unions."
7. That is, two administrative organizations.
- 8255
CSO: 8119/1954 E~
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