JPRS ID: 9752 USSR REPORT ECONOMIC AFFAIRS

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• Document Page Count: 28
• Document Creation Date: November 1, 2016
• Sequence Number: 48
• Content Type: REPORTS

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JPRS L/9752
22 May 1981
USSR Re ort
p
ECONOMIC AFFAIRS
CFOUO 7~/81)
FB~$ FOREIGN BROADCAST INFORMATION SERVICE
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JPRS L/9752
22 May 1981
- ~ USSR REPORT
ECONOMIC AFFAIRS
(FOUO 7/81)
CONTENTS
INVESTMENT, PRICES, BUDGET AND FINANCE .
Soviet Fconomic Potential Weighed
(V. Krasovskiy; VOPROSY EKONOMIKI, Feb 81) 1
INTRODUCTI~N OF NEW TECHNOLOGY
Gatovskiy Examines Inc~ntives for Technicai rrogress
(L. Gatovsk~y; VOPROSY RKONOMIKI, Feb 81) 13
- a - [III - USSR - 3 FOUO]
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INVL�'ST:~I~N'P, PRICLS, BUDGET AND FItdANCE
SOVIET ECONO1~fIC PUTENTIAL WEIGHED
Moscow VOPROSY EKQNUMIKI in Ruasian No 2, Feb 81 pp 88-98
[Article by V. Krasovskiy: "T:conomic Potential: Reserves and Yield"]
- [Text] Uur country is entering the ~80s with a powerful economic and scientific-
technical potential. Ach:Leved gains in the field of economic and social develonment
make it possible to solve even bigger tasks. The share of fixed capital amounts to
. 64 percent of the national wealth. At the beginning of 198Q it equaled 1.6 trillion
rubles, that is, it had grown by one trillion rubles since 1965. This ~rowth exceed-
- ed almost twofold the value of fixed capital created in the first half century of
socialist,construction. Of the total fixed capital, production fixed capital amount-
ed to 1.1 trillion rubles. In the last 10 years, it has grown twofold. The constant
renewal of operating fixed production capital constitutes one of the most important
trendt, ~f investment policy.
The biggest volume of production fix~d capital is concentrated in industry. In the
begin:ing of 1980, it exceeded 500 billion rubles (almoat 48 percent of all produc-
_ tion fixed capital of the country). In four years of the lOth Five-Year Plan, in-
dustrial fixed capital was almost one-third renewed, Agricultural fixed production
capital equaled 223 billion rubles (21 percent of the total amount). During 1976-
- 1~379, more than 39 percent of it was renewed. Tranaport and cammunications fixed
_ capital amounted to 223 billion rubles~ In this period there were put into opera-
tion 22,9U0 km of arterial gas pipelines and branches from them, 11,900 km of main
oil pipelines and petroleum-product ~ipelines and 68,500 km of hard-surface motor
roads.
- Fixed production capital of construction and other sectors of material production
has been significantly increased.l
In ti~e beginning of 1980, the value of nonproduction fixed capital exceeded 562 bil-
lion rubles and amounted to more than one-third of the country's fixed capital.
With growth in the scale of production, there was also an increase in physical work-
ing capital--tools of laUor, raw and ott~er raw materials, semifinished products,
fuel. At the present time, their share of the national wealth amounts to 18 percent.
In the plan of the CPSU Central Committee for the 26th congress "Iiasic Directions of
Econamic and Social Uevelopment of the USSR for 1981-1985 and for the Period to
199U" provision is made for a more rational use of production capacities, wider
acale introduction of high-efficiency equipment and improvement of the etructure and -
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renew~l of operating fixed capital. It is planned to implement measures for in-
creasing return ~n investment in sectors of the national economy, associations and
enterprises.
The Potential of Fixed Capital and its Role in Socialist Reproduction
Intensive use and renewal of fixed production capital providea for economic growth
and contributes to the realization of the achievements of scientific-technical pro-
~;ress, growth of labor productivity and improvement of production conditions. Fixed
production capital is concentrated at 17,516 industrial enterprisea, at 47,OOU sov-
kliozes and ~;olkhozes and in transport.
Fixed production capital serves as a material-technical base for the development of
new aectora of industry. Ttiere tias been created a aector of atomic machine build-
ing. The construction of atomic electric po~wer stations, eapecially in the ~uropean
part of ttie country~ makes it possible to boost the ahare of atomic energy in the
total volume of production of electric pvwer and to provide for the satisfaction of
power needs in regiona that do not liave their own fuel and power resources. The
capital of the chemical indus try is growing at a rapid rate; it ia now capable of
supplying agriculture with about 100 million tons of fertilizera, plant-protection
agents and also feed aupple~aents.
In the t+farxist outline of reproduction, subdivision one, that is, means of production
always had a leading place. Within the limits of one aubdivision, special impor-
tance was attached to sectors producing the means of production, which V.I. Lenin
conaidered as a most important group for the rate of development of the national
economy. Lenin's reproduction tables contain comparisons of the dynamics of con-
stant capital and social product.2 In a polemic directed at P. Proudhon, K. Marx
examined the long-term d}mamica of economic indicators of Great Britain for 70
- years (from 1770 to 1840) while taking account of the increased capacity of tech-
nical improvements and growth of the productive part of the country~s population.
_ As a result of the comparison, there was ahawn the tremendoua importance of Prow th
of capaci ty of the production apparatus, which manyfold exceeds the growth of labor
reaources. Whereas in Che initial period~ the productivity of technical impr~ve-
ments applied to productivity of manual labor in a ratio of 4:1, at the end of the
period~ that is, in 1840, thia ratio was already 108:1.3
In ttie s tudies of Soviet economists in recent year~, increasingly frequent use is
made of labor measurements of fixed capital, which in some measure continue ttie
trend in analysis of ttieir comparative capacity reduced~ as in tlie case of K. Piarx,
to a sin~le dimension. Such measurements have been used in the works of Academi-
cian 5. Strumlin~ Ya. Kvasha, I. Doroshin, L. Noctievkina and others. In these stud-
ies, iiowever, the measurements were restricted to the consideration of labor outlays
on ttie manufacture of equipment buC failed to determine the growing capacity of the
new means of labor.
In tlie economic literature, tiiere are works alonQ a diff.erent direction. Thus,
sometimes in assessing the contribution of fixed production capital to the results
of social reproduction, tiiey are, as it were, given a"null" value in Che consider-
ation that since ti?ey have already been created and do not require additional ex-
I~enditures ttieir contribution to production can be reduced to zero. In other stud-
ies, tl~e contribution of capital is evaluated according to the share of amortization
~
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in the aggref;ate ~expenditures of production. In this case, the share participation
of tcle capital does not exceed 5-6 percent and~ naturally, does not reflect that
role wliich tiie means of labor play in the forming of the social product in its phys-
ical form. F.atios were also proposed of 1:2.5, 1:2.8 and 1:'18 where the 1:2.5 is
tae relative size of ttie contribution of fixed production capital and 1:2.5 charac-
terizes ttie relative participation of labor resources. On tkie theoretical level~
- reference is made to ttie consideration not only of used mear.s of labor, which are
detected by the indicators of amortization, but also, which is the main thing, in -
' ti~e consideration of use~l fixed capital which, as pointed out by riarx, operate~~
all its mass and all its capacity over an extended period. T~nis mass of used
capital is not ahown by tt?e indicators of amortization. In reality, the counCry
- tias a capacity of not one-twentieth of the entire masa of capital,but utilizes an-
nually in its full volume, that is, all 100 percent of it.
The postulated problen~ has a direct relation to the differentiation of the role of
of ineans of labor in the forcning of the use value of the product and its value as
proposed by Piarx; he wrote "that tlie known factor of the labor process and the known
means of production participate as a whole in the proceas of labor but only partial-
ly in the p rocesa of value formation. The difference between the process of labor
and the process of formation of value is reflected here in their material factors
in such a way that one and the same means of production as an element of the laboF
process is included entirely in the given process of production but as an element
of the formation of value is included in parts.i4 Ttius, the true economic value of
the potential of production capital is incomparably greater than is accounted by
the shares of its amortization. The possibilities of this potential are extremely `
great, and tliey sliould in full measure be studied and determined.
Economic Growth and Intensification of the LTSe of Capital
- Intensification of public oroduction predetermines the all-rotmd use of existing
fixed production capital, especially existing production capital.
It is pointed out in the CPSU program that "in all sectors of the national economy -
it is necessary to improve and strictly adhere to scientifically valid prog,ressive
- norms in the use of ineans of production. The pazty attaches Primary importance to
the boosting of effectiveness of ca~ital investment, the selection of the moat ad-
vantageous and economic directions of capital work~ assurance of the biggeat Rrowth
of production for every expended r~.ble of capital investment and reduction of tiie
pay-off period of ttiis investment.i5
In the formation of progressive nornis of return on investment, one should proceed
from the tenets of :~iar~cist theory to the effect that "with progress of science and
tectinology, the place of old machines, tools, apparatua and the like is taken by
new, more efficient and relatively cheaper ones compared to the amount of their
work."6
Many economists consider ttie indicator of return on investment to be theoretically =
unfounded. It is noted in a number of cases that lo~wer return oai investment is in-
evitable in the course of technical pro~ress and exhaustion of the best natural re-
sources. A hypothesia is even presented of the cyclic movement of the indicator of
return on investment, whicl? supposedly lawfully falls during periods of structural
changes and increasing developmental rates and, converaely,,grows durinp stabiliza-
tion of tlie rate and intensification of production.
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in this connection it is necessary to point o~t that during the '30s there was
raisecl ttie question in tt~e journal PUTI INDUSTRIALIZATSII (its responsible editor
at the time was V.V. Kuybyshev) of the wran~ness of M. Smit's conception which sub-
stantiated a modified "law" of the inevitability of reduced e�fectiveness, in part-
icular, of return on investment in connection with growth of the or~anic makeup of
the capital.~ This was explained by the predominant ~rowth of subdivision one
of puUlic production: Ly analogy with the tendency toward reduction of the profit
i~orm cited in "Capital," ti. Smit attempted to formulate a"socialist law" of the
fall in the volume of produced production in regard to used capital.
Such ideas connected witki tlie study of the comparative dynamics of Prodtiction and
fixed capital are to be encountered even today. A number of economists do not dis-
tinguisl? requirements on increase of return on investment from fixed production
capital and return on capital investment and interpret such requirements as non-
~larxist and not corresponding to the basic laws of the political economy of social-
ism. ~tut ti~inking that the indi~ators of return on investment are adopted from the
t:ieory of productivity of factors of production~ they for~et about their labor bas-
is. At tlie same time, there exists a real labor basis for the indicator of return
on inves tmen t .
Explaining ttie significance of economy of embodied labor, for example~ in spinnin~
production, K. Marx emphasized tl~at "worktime resultin~ in material of labor and
means o� labor we may consider in exactly the same way as if it were simply spent
on ~n earlier stage of tlie spinning process to that labor which was ~oined in the
end to tt~e form of spinning."8 Analyzing the process of increasing labor produc-
_ tivity, he formulates the concept of an aggregate productivity~ that is, livin~ and
- emuodied labor and cites by way of example the coal industry. "Let us assume," he
wrote, "Chat outlays of past labor have incrPased with the same output of coal
miners. In this case the ~labor of the coal miners has not become less productive,
~ but the aggregate labor spent on coal pro9uction (the labor of the coal miners plus
past labor) has taecome less productive.
Under present conditions, the tasks of raising the efficienry of embodied labo~ifnd
better utilizati.on of accumulated economic potential acquire still Rreater sir
ican~e. Indicators of return on'investMent should be considered first of all from
the positions of labor productivity in capital creatin~ sectors. It is required
from ttie workera of these sectors ttiat they produce production with the least out-
lays of labor per unit of useful effect and unit of capacity of. machin-
ery, units, production lines and the like. At the same time~ workers of the con-
struction industry have to achieve an economy of expenditure~ on the production of
elements of buildings and structures, ensurin~ a reduction of their estimated cost
since progressiion efficiencicineall sectorsrof~the~natianalreconomylconnecteduwith
ity and product Y
_ renewal of ca~ital.
Tectinical Progress and Reserves for Raising of Iteturn on Ir.vestment
In retrosPect, the USSR economy shewed a faverable correlati~n of indicators of
capital and Production. In 1978 compared to 1913, gross social product had in-
creased 65-fold, national income--7~-fold and production fixed capital of all tt~e
sectors of the national economy--37-fold. In the 60 years, the gross social ~ro-
duct increased 57-fold, national income--68-fold and production fixed capital--.
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;54-Eolu. ~t tlie same time, from 1940 to 197$ and toward the end of tue '7Us, cap-
ital dynainics si~;nificantly exceed ti~e movement of Production. :;y 1978, compared to
1~17u, ti~e :~ocial pr.oduct ?iad incre~~ed 5ti percent, national income--:i3 nercent ancl
,~roductio~~ fixed ca~~ital--F;9 percenC, that is, return on investnent nad decreased
17.~ ~~erceiit.
keservc~s for increase of returr~ on investment are connecteci t~oth with Processes of
rerrocluction of fixed cal~ital and with tlie cliaracterof load, intensive utilization
anc: pl3nned renewal of already operatin~ capital and capacities. In tf~e process of
reprociuction of canital, tiie need arises for proper organization of vast investment
l~rograms brouglit into existence by clianges in the geo~raphic distribution of materj.-
al Production and the creation of new centers of the extractive industry, incluci9n~
the fuel ~uid power complex an~i the merallur~ical industry. Ptost of thes~ Pro~;ra~ns
are bein~; im,~lemented in tlie east and north of the country, which is to l,e exnlained
Gy ttie pre:~ence tliere of raw-material and fiiel resources.
liut this tremendous anci it would seeni extremely capital intensive sector of. re~~ro-
duction of capital possesses significant r.eserves for increasin~ yiel.d and attaininQ
uigfi indicators of ef ficiency. It is essential to overcor.~e the notion of Siberia
bein~; a region distin~;uished by great increase in the cost o� capital and cs~pacities,
construction work, transport and other elements of economic potential. Rnterprises
_ of tlie eastern regions liave the possibility alonp many directions of act~i.evin~ lead-
ing indicators of return on investment and efficiency. liydroelectric pawPr stati~ns,
built on rapid rivers aboundin~ in waters, in narrow cliff canyons, are cliaracterizec~
by extremely ct~eap electric power and extremely small lo~ses from floodin~. At coal
zuts, ti~e merits of open-pit r.?ining are taken advantage of; machines are used whi.ch
cannot be employed for underground mining operations. Enterprises of nonferrous met-
allur~;y are located at deposits with a high cantent of useful components, whicli makes
them more profitable than ttieir western counterparts.
1'l~e concentration of natural wealtli makes it possible to erect in tlie eastern part of
the country tremendous enterprises with units of unique capacity and to employ ttie
most modern equipment. T'nus, at tlie Yansk-Achinsk coal basin in Krasnoyarskiy Kray,
the Berezovskiy location is being established with a capacity of 55 million tons.
Fiere there will operate electric power stations of tremendous capacity--6.4 me~a-
watts, with an individual canacity of turbines amounting to 8~0,000 kilor~atts and
~.~itFi cheapest electric powcr. Very large capacities are being also introduced at
timber-industry com~~lexes, ore-concentration combines~ at aluminum plants and so on.
1he higti effectiveness of capital investment in Siberia is shown by data of Academ-
ician A. Aganbe~;yan. Tt~us, at the West-Siberian Petroleum-Gas Complex, there were
ontained from the depths durin~; the lOtEi Five-Year Plan 1.7 billion 'ons of hvdro-
carbon raw ?~aterial (computed as petroleum). Takin~ into account only the effi-
ciency of utilization of hydrocaruons in industry, the aggregate effect for the na-
tional ecanomy froM development of petroleum and gas resources of tdestern Siberia
will ~e ~reatly above exPended outlays. We l.i~ow t1iaC production of Kuzbass coal
is distin~;uist~ed by lower relative capital investment and production cost than the
cokinF; coals of the I)onbas5 and otlier basins and t}iat their tise is econ~mi.cally ~~ci-
vantaf;eous even for ttie central regions of ttie country. At the Tobol'slc Petroct~em-
ical Complex, ttie individual capacity of units will t~e two- to tlireefold tii~tier
t?ian at ttie largest petroctiemical kliziine-Kamsk combine witti higher labor productivity
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and lower production cost. The production potential of the Noril'sk Ore Mining and
Metallurgical Combine and the high content of minerals in the extracted ores provide
the possibility for this enterprise, despite the difficult natural conditions of the
E?rctic and tt?e lack of commimication with bases of material-technical supply for
eight of the wintry mon dls, of ensuring high technical-economic indi catora.
The opening up of pioneer regions in Siberia and the Far Esst is bringing on the
- tieed of searching for new solutions in the field of technology of producti.on, trans-
port, infrastructure and so on. Attempts at a m~echanical use of the regular methods
adopted in the western regions of the country frequently lead to large losses.
Advanced experience shows ttiat a nwmber of innovative proposals practically imple-
mented in Siberia call for further dissemination. We knvw that in the next 10
years tlie ctiief growtii in oil and gas production and the chemical raw materials pro-
duced from them will take place among the deposits of Siberia. In this connection
the volume of all work will t~ave to be increased two- to threefold. In Tyumenskaya
Oblast, it will be necessary to drill thousands of wells and to cut through 21 mil-
lion meters of rock~ ttiat is, almost as many as in all tlie rest of the petroleum
production regions. Roads will have to be laid to eacti Siberian drilling site,
which is extremely difficult in the swampy morasses of ths Western-S iberian la~wland.
Transportation coats in this region are rou~hly fourfold those in the ~uropean part
of ttie coQntry. In tlie immediate years ahead, when they will start to develop dep-
osits that are more isolated than at the preaent time and with smaller holdings,
tl~e problem of transportation and ~ood roada will become even more acute. At ttie
same time, the road-uuilding organizations of Tyumenakaya Oblast can lay only 100-
12U km of roads a year, which is obviously inadequate when you coneider the tempo
of development.
In this connection, the use of platforms on an air cushion is promising. Platfotms
with a carrying capacity of ur to 60 tons have operated in all seasons of the year
witti temperatures varying from plus 25 to minus 45 degrees; they have "hovered" over
roadless terrain, overcome water barriers, growths of shrubbery~ pre cipitous banks
with ledges of up to a meter, as well as canals, gullies, mounds and even rivers at
the time of ice flaws. Transportation by them of sets of equipment and materials
nas made it posaible to cut down the time of building drill sites by 4-6 months.
But these platforms are ~eing built only at the Tyumen~ shipbuilding yard, az~?d in
limited quantitiea. Unfortunately, scientific and planning organizations~ develop-
~ ing thia form of transport, operate disconnectedly and have no tiea with industrial
_ enterprises.
Utt~er directions in rationalization and cutting down of the cost of creating new
capital in the east of tt?e country include an orAanization in Tyumen' for the fab-
rication of complete sets of equipment and another in Krasnoyarsk for the flow pro-
duction of industrial buildings made from prefabricated elements and light compo-
nents for delivery o! gas-p~ping and petroleum-pumping stations to fields for the
purpose of developing oil and gas deposits. Ttie dimensions of. this equipment are
calculated in terms of sizes of railroad cars and vessels which are to transport
them to the place of installation. They match in weight lifting equipment that is
to be found at loading and unloadinq points. Unfortunately, the Tyumen' experience
shows little adoption in ottier regions of Eastern Siberia and the Far East that are
being newly opened up.
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'I'here are, however, many unsolved problems as well as questions that t~ave been in-
correctly resolved. Thus, in the West-Siberian petroleum and gas complex, the
basic construction material is ferroconcrete, although in Tyumenskaya Oblast in
parCicular, whicti is distin~uished by its lack o� Loads, swampy territories and
weak ground foundations, tremendous difficultiea occur in the use and delivery of
heavy reinforced-concrete components. Timber traditionally for Siberia is usQd in-
adequate ly .
Load and Renewal of Existing Capital
The load and full utilization of production capital constitute a most important
candition for the increase of return on investment. A most intensive load now
characterizes the sectors of transport and electric power, which are operatin~ con-
tinuously, and maximally operating mainline railroads, petroleum pipelines, gas
pipelines and electric-power lines and the capacities of electric ~~wer stations.
Further in the degree of load are productian facilities utilizing continuous pro-
cess and multi-shift work in the metallur~ical and chemical industry, certain sec-
- tors of li~ht industry and so on. Poorer use is made of production capacities in
- sectors of the invastment complex, marked by one-shift work, and even this shift
frequently does not carry a full load. The lowest loads are to be found in aectors
of the agroindustrial complex, where in connection with seasonal variations, it is
impossible to us~ a large part of the equipment during the wintertime. The last- -
named group would include certain sectors of industry and transport, particularly
peat working, timber log~ing, river transport and so on.
The diversity of forms and types of products, as well as of inethods adopted in the
different sectors for the computation of production capacity, hinders the use of
single-type indicators, capable of providing an integrated evaluation of the use
of the potential of fixed production capital in solitary indexes.
There have been proposed in economic studies comprehensive pawer indicators based
on the registration of the readings of time counters of the operation of electric
motors operating with various equipment. A moat substantive validation of such a
method is contained in a book by Ya. Kvasha called "Reservnyye moshchnosti" [Reserve
CapacitiesJ.l~ He proposea a so-called capital-cap~city [fondomoshchnostnoy] coef-
- ficient of the relation of production fixed capital to the motor po~wer in
kilowatts (H), subsequently computed for many sectors of industry with significant
differentiation of coefficients. For example~ while the number of hours of opera-
tion of electric motore in the chemical industry has been exnressed by the indi~
cator as 4,23~J, the potential time of use of machines due to the special features
of the technology of machine building naturally would have been less than in the
chemical indus try and amounted to 1,260-1,500 percent.
Similar computations were made at the rioscaw Plant imeni Vladimir I1'icti. The aver-
age time of use of electric motors produced by the plant and used with production
capital amounts to 1,450 hours, although there is a poesibility of bocsting this
time to 4,UU0 hours~ that is by a factor of 2.7. Such global calculations require
careful verification for sectors, although they nonetheless show the size of poten-
tial reserves for increasing the capacity of capital.
Some sectors of material production have their o~um apecific reserves for boosting
the yield of capital. Thus, in the extractive sectors with an aggregate production
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' of micierals in excess of 6.5 billion tons~ the size of losaes amounta to 2.5 billion
tons, including a fully disposable 500 million tana for the sum of S-7 billion
rubles. New methods of recovery, such as bacterial leaching, offer the possibility
of working deep or already-worked depoaits and terraces with greater effectiveness
and sharply reducing areas occupied by mining enterprises. At the same time, this
eliminates the need for the creation of shafts. There also become superfluous such
labor-intensive operations as transportation, crushing and smelting of ore.
At tlie .Iovokrivorozhskiy Ore Mining and Smelting Combine there is in operation an
installation for self-pulverizing of iron ores in a~et of water. Each hour the
unit transforms about 100 tons of ore into small pebbles and powder. In pulveriza-
tion of pieces of ore in a jet of water, there is no need of expen~ive steel for
rods and cores, nor is there a need for cumbersome and power-intensive units for
medium and small crushing. The process is fully automated.
Large reserves for increasing production output are connected to better use of irri-
_ gated and drained lands. Fixed production capital for land-improvement use is val-
ued at approximately 75 billion rubles. But plan indicators reflect primarily data
for start-up of capscities but not the results of reclaimed lan d. At the same time,
_ they frequen tly go out of order because no work is done on maintenance of the drain-
age capability of drainage canals or on dealing with clogging or choking with under-
growth and the like. Therefore the main reserve for boosting of economic yield ag
water resources is to be found in yearly planning of the use qf reclaimed lands.
In industry, a most important re~erve for increasing return on inveatment is the
timely and regular renewal of the production apparatws.
In the plan of Basic Pirections, it is proposed to "improve the use of production
- capacities and capital... While taking into account the special features of indi-
vidual sectors and production facilities to employ progreasive systems of organiza-
tion of the repair of machinery and equipment, ensuring an expansion of the inter-
repair period of their operation."
The accumulation in sectors of obsolet~ and worr. out capital tiinders improvement of
economic indicators and binds large lab~r resources and also requires tremendous
outlays on repairs conducted on a la~w tec?`~nical basis. Over the course of many
years, 1-2 percent of existing fixed capital has been renewed on an annual basis.
Not more than 20 percent of ttie new equipment delivered to industry goes into the
replacement of withdrawn tools of 2abor. At the same time, reequipment of existing
enterprises and renewal of applied technology produce rapid and effective results.
In the construction-materials industry, the introduction of a progressive method of
thermal treatment of polished glass resulted in boosting lab or productivity four-
fold, reducing production cost by a factor of 2 and growth of return on investment
os~ 46 percent. Explosion stamping boots labor productivity six-to sevenfold and
ensures high quality of articles. The Patontsis/700 installation developed in the
USSR for electron-ray welding of products of the motor-vehicle industry increases
by a factor ~f 3 lab or productivity and reduces by a factor of 2 the need for cap-
ital investment.12
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Problems of Iteplacement and Renewal of Capital -
For a long time, the planning and financing of capital investment, as ~well as the
use of amortization funds in sectors of the national economy and at enterprises
t~ave been marked by the regular diversion of considerable amord.~stions swns, includ- ~
ing a part of capital-repair ftmds~ for the needa of new construction and ma~or mod-
ernization. Sometimes such a practice comes to be accepted as a rule that is char-
acCeristic no t only of the early stages of economic dev~lopment but also of the mat-
= ure socialist economy. c~n the basis of such ideas, a nimmber of economists consider
it advisable to exclude amortization sums from costs of production, assuming that
tneir use for the creation of new enterprises will provide there an additional ef-
fect. It was also proposed to discount amortization, counting on future income _
from its productive use.
Tnere were dPVeloped in this direction mater.ial-technical supply, mactiine-building ~
- production output and caPacities of construction organizations that are primarily
oriented to tlie provision of new lar~e investment programs and items. A~ a result,
unfavorable conditions tiave been created for the regular renewal of fixed capital
on a F~resent-day teci?nical basis. Rates of retirem~~nt, not exceeding 1. 5-2.0 percent
a year, are rougiitly one-tialf of what is needed on the basis of a~;e and technical
_ condition of the fixed capital. But even such obviou~3ly inadequate rates of capital
retirement remain in Practice unfulfilled, for which reaeon the basic means of
maintaining the production apparatus are capital repairs and consequently the pre-
servation of existing capital at ti?e former technical level. '
The diief reason hindering timely renewal and modernization of capital is the irrep,- .
ular and unreliable material-technical supply of this work. Let us also note inade-
quate reliability in the valuation of old and new capital, especially in connection
with the fact that the former are included in statistical materials usually in terms
of reduced values with a reduction in price for obsolescence, and new equipment--on
the basis of higher prices, whtch sometimes are not proportional compared to ~;rowth
of ~apacity and te cnnical cnaracteristics of newly ins talled machinery. In a number
of cases, the acquisition of such ~?achinery is disadvantageous for en te rprises and
. retsrds demand for new equipment.
_ For an extended period, tiie reinvestment process has been carried out ~rimaril,y
ttirou~li repeated overhauls and to a lesser degree through replacement with new
equipment. Frequently higlier efficiency equipment has been sent to new enter-
prises, while equipment for existing plants in many cases was indistin~uishable
fror~ tliat being replaced in terme of productivity and nornns of servicin~ by workers. _
Sucli a ctiaraczer of t?ie reinvestment process contributed to the encumberinR of
stocks of obs olete machines~ which increased tension in the balance of labor re-
_ sources and resulted in the operation of macliines in shift aystems.
I~tention has already been made ia ti~e economic literature of the desire to gradually
carry out the withdrawal of obsolete machines, transferring higher efficiency ma- _
chines--stan d-by machines for 3-shift work for the purpose of avoiding ttie use of
additional workers . Naturally, in this connection not only siiould the operational
regime of existing enternrises be changed but also the manufacture of h igher
efFiciency equipment, especially automatic equipment, should be continually increased.
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- Yroposala have also been made to shift completPly at the expense of amortization ~
deductions for capital repairs to the purchase of new equipment for the replacement
of obsolete equipment, but this would first re~uire appropriate reorganization of
all machine building in connection with the need of providing for a grawing demand
for the reequipment of existing fixed capital.
- It would appear that systematic curtailment of capital repairs and equalizing of
the correlations between outlays for the restoratfon of the original properties of
worn out equipment and out~aya for the production of new machines with progressive -
technical parameters should be carried out only in paralle]. with the reor~anization -
of investment machine building. The gradual reduction of capitsl repairs is neces-
sary~ t~ut it can only be acl~ieved under tlie condition that equipment balances pro-
vide for an expansion of its share in deliveries to replace obsolete and worn out _
means of labor.
T?ie solution of ttie problem of replacement and modernization in the material sphere _
and nonproduction sectors is not unique. Rational recommendations for the most ef-
fective ways of capital renewal are impossible without taking into account their
specific characteristics. _
In apparatus-type sectors, where powerful units are used (in ferrous and nonferrous
metallurgy, in the chemical, petrochemical and cement industry, in the pulp-and-
paper sector and in other similar production operations), good results are achieved
witt~ tlie combining of two or three types of reproduction, for example, reconstruc-
tion and capital repair or modernization and capital repair when the resources and
capacities of construction and repair organizations are simultaneously united~
'r'or the purl~ose of obtaining a growtti in steel they have carried out at many metal-
- lurgical enterprises in recent years tt~e conversion of open-hearth furnaces into -
two-tank [dvukhvannyye] furnaces. Especially rich experience in such work has been
acquired at the Magnitogorsk Combine where all the 5G0-ton open-hearth furnaces
were rebuilt into two-tank furnaces. But all this reconstructian was done at ttie
expense of the capital-repair fund. It has turned out to be e f fective, althou~h
it is inferior in its possibilities to perfectly new steel-smeltinR units. Recon- _
struction of enterprises iE; also combined in other sectors with capital repair and
- modernization of large units and apparatua (for example~ in the ch~mical and petro-
chemical industry and the production of construction materials) . In the cement in-
dustry, about 100 furnaces for the baking of hard-burn,t brick have been modernized
in the last lU years. Tt?eir diameter was increased, cooler units were replaced,
more advanced heat-excliange units were improved and put into operation. Labor pro-
ductivity was boosted 'LO-25 percent. As a result of the repair and modernization
of furnaces and mills as well as intensification of production proces~es, produc-
tion capacities grew as a wtiole by 8 million tons, which is the equivalent of the
capacities of four large plants. Specific capital investment for modernization,
" repair and reequipment of production amounted to 29 rubles per ton of cement; with
the new construction it amounted to 38-42 rubles per ton.
For the petrochemical and petroleum-refining industry, characteristic enterprises
have larpe-tonnage, consolidated and combined production installations. Stoppin~
them separately for repair or modernization ~s not economical as this requires the
simultaneous concentration of a large number of inetallation and repair personnel
and appropriate equipment. Moreover, stoppages of large blocs are connected with
~
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losaes of large amounts of products. In this connection~ modernization and capital
_ repairs are caordinated here in time. A aelective analysis of the results of 415
- capital-repair operations of production equipment of petroleum-refining plants
showed that repair was combined with modernization in 222 cases (53 percent).
~ It should be kept in mind that construction work connected ~vith capital repairs co-
incides with modernization and reequipment in apparatus sectors not only as to time
but also as to the character and conditions of work and orsanization of materiaY and
technical supply.
A different reinvestn~ent situation has come about in construction and agriculture.
Despite all the difference in technology and organization of production, they have
a certain similarity in the u.se of comparatively uniform machines and mechanisms,
difficult operational conditiona, the need to take into consideration seasons and
climatic conditions, the comparative rapid wear of equipment, which frequently falls
snort of normal periods of use and, finally, in an excessive development of its own~
far from always effective, repair service.
More than 300 repair plants and about 2,000 apecialized repair shops oPerate in the
country for the repair of agricultural equipment. At the same time, the concentra-
tion level at Goskomsel'kho~tekhnika plants is one-fifteenth and in shops for the
repair of tractors one-two hundredths that of the level of concentration in motor-
building and tractor plants of tl~e :iinistry of Tractor and Agricultural t�:achinc
liuildin~. As a result of the low equipment load, production output per square meter
~ of production areas at specialized enterprises of Sel'khoztekhnika is one-quarter
that of the tractor plants of the ~�Iinistry of Tractor and Agricultural ~�tacliine Build-
ing and one half that of integrated-unit plants of th~ same ministry.
The return on inves tment at the specialized repair shops of Sel'khoztekhnika is 30
percent lower and labor productivity two-thirds that at tractor plants. The equip-
menr shift coefficient at repair enterprises of Sel~khoztekhnika is equal to 1.1-1.2,
while the coefficient of intrashift use of equipment is 0.4-0.5, and they are, re-
spectively, 1.6-1.8 and 0.88-0.9 at plants of the Ministry of Tractor and tl~ricult-
ural i~achine I~uilding.
- According to calculatians of scientists at the Department of Mechanization and
Electrification of the All-Union Academy of Agricultural Sciences~ it would be
economically ~racticable to have, fnstead of. the existing 2.000 specialized repair
plants and shops under Soyuzsel'khoztekhnika~150-200 enterprises in the national
economy performing repairs on the basia of large-series indus trial production. In
the future, the network of large repair enterFrises could be fused {::to a network of
plants fabricating new machines. Then r~pair and restoration would require anly
- basic parts and possibly only certain expensive component elements. As a whole,
a transition will be made to the so-called "firm" repair of agricultural machine
building.
The plan "Basic Directions" provides for the implementation of ineasures aimed at
boosting return on inver~tment in the nation al economy and in sectors, asaociations
and at enterprises. Large reserves for increaeing the yield of capital have to be
mobilized through tt~e rational use of production capacities, wide-scale introduction
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of hi~;h-efficiency equipment~ improvement of the structure and timely renewal of
eq uipment. 5pecial attention must be devoted to the need for reducing the time
of full use of pro~ected capacities at newly started enterprises and facilities
an d for increasing the work shift coefficient, rapid replacemant of obsolete equip-
ment and reduction of proportionate capital investment.
FOOTNOTES
1. L. Volodarskiy, "National Wealth of the USSR" (EKONOMICHESKAYA G AZETA, No 50,
19 8U) .
2. "Leninskiy sbornik XXXVIII" [Lenin Collection 38]. Moscow, Politizdat, 1975,
p 90.
_ 3. See K. Marx and F. Engels, "Sochineniya" [Works], Vol 4, pp 124-125.
4. Ibidem, Vol 23, pp 215-216.
5. "Programma Kommunsticheskoy partii Sovetskogo Soyuza" [Program of the Coramunist
Pa,~ty of the Soviet UnionJ. Izdatel~stvo politicheskoy literatury, 1962.
6. K. Marx and F. Engels, op cit, Vol 23, p 619.
~ 7. See PROBLEMY EKONOMIKI, No 2, 1930, pp 11-13.
8. K. Marx and F. Engels, op cit, Vol 23, p 199.
y. Ibidem, Vol 26~ Part 1, p 177.
10. A. Aganbegyan, "Economic Problems of Development of Siberia (EKONOMIKA I
- MATEMATICHESKIYE r1ETODY, No 5. 1979, pp 844-845).
~LO. See Ya. Kvasha, "itezervnyye moshchnnsti" [Reserve Capacities]. Izdatel'stvo _
"Nauka"~ 1971, p 106. -
12~ See G. Danilin, "Ttie Specific Features of Nonmect?anical Forms of Technology
( VOPROSY EKONOriIKI , No 8~ 19 79 -
*Lranslator's note. Tne number 1~ appears twice in the original text.
COYYRIGHT: Izdatel'stvo* "Pravda", "Voprosy ekonomiki", 1981
- 76y7
CSO: 18'lU/127 -
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Ii~fT1tUDUCTIUh UF N~W TLCk1NOLOGY
GATOVSKIY L''XAI~1Ii1ES INC~;IVTIVES FOR lECHA1ICAL PROGRESS
Moscow VOPRUSY EKOtvOr:IKI in Russian No 2, Feb 81 pp 64-74
[Article by L. Gatovakiy, corresponding member of the USSR Academy of Sciences:
- "Economic Stimuli of Scientific-Technical Progress"]
[Text] In the implementation of the plan of the CPSU Central Committee for the
26th party congress "Basic 17irections of the USSR Economic and Social Development
for 1y81-1985 and the Period to 1990," a significant role belonRs to effective use
of a complex of economic stimuli aimed at acceleration of acientific- technical pro-
gress and growth of its effectiveness. A basic problem here is to have the increase
in re4uirements--with account being taken o~ world development--from the direction
of society on production and science in re~ard to the rate and effectiveness of
scientific-technical progress (through economic and scientific policy, plans, pro-
grams and norms) organically combined with the increase in the interest and initia-
tive of enterprises and their collectives, associations, regiona? or~ans, ministries
and scientific institutes in the realization of these rapidly graaing national econ-
omic requirements. ~
Economic stimuli emerge as a necessary meana for the effective realization Qf devel-
opmental plans of public production, including scientific-technical progress. At
tiie same time~ a plan and its fulfillm~nt and evaluation of this fulfillment serve
as a most important economic factor exertinR a directinR and thus a powerful stimu- -
lating influence on all operational activity. Here questions are examined relating
to ttie compretiensive solution of a number of outstanding problems of stimulation of
scientific-technical progress in the llth Five-Year Plan on the basis of a decree of
the CPSU Central Committee and the USSR Council of Ministers "On Improvinp, PlanninR
and Strengthening tlie Action of the L'conomic Mechanism on Raiaing Efficiency of. Pro-
duction and Quality of Work" of 12 July 1979, with consideration beinq given to
normative acts adopted on its basis.
Orientation of Industry Toward ~xpansion and Effectiveneas of Realization
of the Achievements of Scien ce and Technology
A necessary condition of the effectiveness of economic stimuli of acientific-tech-
- nical progress is providing it with a direction in which temporary cost-accountinq
unprofitability, which up to now has been widespread, of learning to handle new
high-efficiency equipment for the national economy yields its place to the advan-
tages provided to enterprises and associations by the adoption of auch equipment.
Although much has been done in this direction, it atill has not been sufficient for
the solution of this major national-economic prob lem. A prerequisite of its
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during ttie period of its assimilation advanced funda from the ministry's neutralized
coet-accotmting common fund for the development of science and technology for full
compensation of necessary higher outlays and losses from the temporary deterioration
of indicators. When the new equipment becomes assimilated, enterprises (assoeia-
tions) producing and using it in fact through deductions (from the profit that hae
= accumulatecl by tl?at time) into the common fund basically return the funds obtained
in ttie past; these will then be used as compensation for increased outlays and
losses of the period of assimilation of the equipment which ia naw new. This to a
certain extent is the credit principle of utilization of deductions from profits.
In our opinion, bank loans guaranteed by a miniatry should be increasingly included
in this process.
In order to fully provide compensation for socially neceseary increases in expendi-
tures and losses of the period of assimilation of new equipment through the common
fund (with consideration being given to the development of bank credit and~ in spe-
� cial cases, the use of a budgetary source), we believe the following ia required:
first, a significant increase in the total size of the common fund for the develop-
ment of science and technology through increased deductions from profits coming
- from previously assimilated equipment (which will be fully recovered through subse-
quent realization of the gains inherent in the new equipment); second, a large in-
crease in the share of the common fund assigned by ministries for the assimilation
of new equipment; third, changing of the mechaaism of formation of the common fund:
deductions of enterprises (associstions) from profit during the period of assimila-
tion of new equipment must be significantly reduced (differentiated according to
years) and after assimilation increased with growth of their annual size.
Such is the nature of the mechanism of redistribution of profits from production �
operations that were earlier assimilated in favor of newly oper$ting production
operations. As a result of this, the present correlation of profits, which is ex-
tremely disadvantageous for enterprises and associations introducing new equipment
and which slows down technical progress, will be eliminated. The transition to an
economic mechanism, fully compensating socially necessary.increased expenditures
during the elimination period, will make it possible to ensure the attainment of
normal nrofitability of production for enterprises (associations) undertaking
series output of new equipment.
A most important condition of assuring full compensation of outlays relating to
assimilation is the inCroduction (owing to a temporary increase in production labor-
intensiveness) of tlie following proced:.re of compensation for increased outlays on
wages during this period): estab lishment of wage norms according to years of each
- new product being put into production while taking into account the required temp-
orary ciigher labor incentives during the assimilation period (the pe rmisaion of
whicn in certain cases is men ioned in the decree of 12 JuJ.y 1979) , with compensa-
tion from the common fund for the development of science and technology of the dif-
ferenGe between the allowance inherent in the pr.ice and the allowances of the assim-
ilation period being compensated from the commnon fund for the development of science
and technology. Only such a way would open up real possibilities of compensation
for the necessary higher outlays on wages and utilization of normative planning of
wages for the purpose of stimulating scientific-technical progress. A source of
such compens ation (as in the case of all other increased outlays of assimilation)
would be deductions into the common fund from profits accruing followin~ assimila-
tion of tne equipment.
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solution, in our opinion~ is tHe syatematic incluaion in the economic mechanism of
the law of dynamics of the economic effect of new equipment: it is usu~lly not
manifested at once but for the most part after learning haw to uae it. As a re-
sult, during the period of learning how to handle new equipment, ecohamic indica-
tors used in the evaluatian of opeYation deteriorate temporarily and enterprises
and associationa producing and using it are provided incentives. This occurs d~-
spite the economic effect inherent in the new equipment, which is applicable to the
entire period of its production and operation.
At present the covering of expenditures relating to mastery of operation are chiefly
done for work connected with the fabrication and putting into operatian of samples.
It is planned to cover the cost of this work and to eneure their normal profitabil-
ity. Another matter is the series product~on of new equipment beiag maetered. In-
dustrial enterprises and asaociatione receive on the average only a emall share of
, the necessary fuads for covering the higher expenditures connected with the develop-
ment of series production of new equipment. Conaequently, in a significant majority
of cases~ the putting into operation of series production of new equipment reduces
profits or bringe on lossea. Frequently, the biggeat profitability comea from long
introduced equipment (for machine building in a number of cases this applies tr,
items that have been produced for 10 or more years). Temporary deterioration of in-
dicatora ia p articularly strong with the es tab lishment of essentially new equipment
and other technical items of a high qualitative level. Since this pattern is at the
present time s till insufficiently taken into account in the planning and economic
mechanism, the deaire arises among enterprises and associations, as well as in min-
istries to frequently hold back introduction or employment of new equip-
ment of high effectiveness for the national e coaomy, which in a numberc of cases is
substituted for by insignificant changes of law effectiveness of long developed
equipment (reference is not made in the paragraph to special production operations).
Therefore, an important initial problem in the use of economic stimuli for sci~ntif-
ic technical progresa is to fully neutralize during the period of assimilation the
influence of factors weakening the interest of enterprises and associations in pro-
ducing and operating new high-efficiency equipment. Such a mechanism hae so far not
been established. We mean overcoming the negative effect of auch factors: grawth
of production cost, of lab or intenaiveneas, the capital-output ratio and the materi-
als intensivenese of production, exceeding of the wage fund; drop in the grawth rate
(or an absolute reduction) of production volume and labor productivity; reduction
of volume of profit (profitability) or appearance of losses; curtailment of the size
of incentive funds. This, in our opinion, would require the solution of the following
tasks: (a) to ensure full compensation of enterprises and associations (manufacturers
and c~~nsumers) assimilating new equipment for socially necessary temporary raising of
production expenditures; (b) to establish for this period plan assignment and norms at
levels corresponding both to requirements for quality of work and to the realistic
possibilities of the assimilation period; (c) fully to compensate for reductions in
incentive funds arising not through the fault of the enterprises or associations.
The realization of the given tasks is possible given a condition where the sourcea
for this will be obtained from scientific-technical progreas itself, that is, from
those additional funds that cou~e with greater efficiency resulting from the quali-
tative and quantitative growth of production. On the atrength of a future riae of
efficiency of the equipment, whicli at the given time ia only being assimilated,
enterprises and associations ought to otstain (withia the framework of the sector)
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To neutralize during the period of assimilation of new equipment the negative ef-
fect of reduction of production volume on motivation of enterprises for its output
and use, it would be advantageous to establish (according to years of assimilation)
plaAned targets for this indicator that take into account the specific features of
the proceases of undertaking a~given type of product. It would be wrong for an un-
realistic plan to be assigned for the production of products durin~ the assimilation
period, and an enterprise assimilating new equipment is puaished, as it were, for -
the nonfulfillment of a boosted production plan. Such a"prospect" hinders the
manufacture of new and efficient equipment.
In the decree of 12 July 1979 in some cases changes of eatablished plans are p~r-
mitted for the assimilation stage. For the development of this positicn, there
skioulci be adopted on tne basis of differeiit norms, in our opinion, differentiation
of actual annual plans of production and use of equipment for different sta~es of
its series production: ~a) assimilation period, (b) during spread of equipment
following assimilation stage. The effectiveness of this approach is fully confirm-
- ed by experience abroad. It is advieable to conduct this differentation of assign-
ments (on the basis of corresponding norms) and according to profit, labor prc~duc-
tivity, labor intensiveness, capital-output ratio and materials intensiveneas.
Following the assimilation of efficient equipment, the temporary drop of indicators
and norma will be significantly covered by their growth. The reduction of economic-
incentive funds connected with the reduced productioa volume of new equipment dur-
ing the assimilation period (and heace the reduced profits) will be fully compen-
sated from the material-incentive fund and the cammon fund for the development of
science and technology, which are centralized at the ministries.
. The real provision of these measures requires the development of differentiated
norms for each type of equipment (manufacturing processes) for the size of expend-
itures and assim~lation time periods (bq years), time of attaining planned technical
and economic indicators, dynamics of the series form of production and formation and
utilization of incentive funds. The norms exclude the possibility of using funds
~ for compensation of assimilation funds for covering damage from work deficiencies
and mismanagement. At the present time, the absence of such norms hinders compensa-
tion far increased assimilation expenditures because of the imposaibility of the
necessary validation of the actually required size of this compensation. Here plan-
ning of eales volume and profit size for the asaimilation period and establishment
of valid requirementa of resource uae for this period becomes complicated. In the
fulfillment and overfulfillment of asaimilation norms it is advisable to increase
incentive sums and in the case of underfulfillment--to reduce them.
Moreover~ the purpose of such norms is the reduction of presently existing excessive-
ly large expenditures a~d assimilatian time periods in accordance with the task set
in the plan "Baeic llirections." The establishment of norms muet obligatorily be
accompanied by measures for cost reduction aad acceleration of aesimilation pro-
cesses, including regulation of planning, finaacing and resource provision for time-
ly preparatian of production, wide-scale development of standardization of compo-
nents, parts aad manufacturing proceases aad its stimulation (reduction or elimina-
tion of bonuses for des~gners in the case of un~ustified creation of "original"
components of designe).
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But neutralization alone of the negative effect of proceases of equipment assimila-
tion on economic indicators is not enough for the effective stimulation of scientif-
ic and technical progress. It is also necessary to talce into account other diffi-
culties connected with asaimilation processes hindering the tranaition to new effi-
, cient equipment. They include: insufficient reserve. capacities (they have to be
provided for ia advaace and included in the plan); impoeition of technological dis-
cipline in the creation of new production operationa; additional difficulties with
material-technical eupply and the establishment of new operational production ties
~~with cliente aad suppliera; appearence of production risk; organizational obstacles
(thus, the development of a regular standard design of a household refrigerator re-
quires the coordination of more than 50 organizatione and the collection of up to
�150 signaturesl) and the like. Many of these difficulties can and must be overcome,
for example, by means of priority resource supply during the assimilation period.
But to a large degree, the added difficulties are inevitable for assimilation pro-
cesses. They must be covered through the creation of advaatages for enterprises and
associations assimilating the new equipment primarily in two forme: (a) higher pro-
fitability (additional proff t) and (b) increase of mater.ial incentives.
A source of formation of y.dditional profit is growth of surplus product because of
aci~ntific-technical prvgress. For this additional profit for the manufacturer of
- new equipment, the growth of price increases established for the high quality of
equipment is of apecial importance. At the present time, on the average for indus-
try only a small part (about one-fifth) of the new technical products conforn?s to
- the requirementa of the highest category of quality and receivee a price increase;
moreover, the aize of the increages (which depend on their effect) are insignifi-
cant because of the low level of effectiveness of many produced new technical pro-
ducts. Thus, solution of the questio~ of additional profit is held back becauae of
an inadequate level of quality and effectivenesa of the overwhelming mass of new
equipment.
Under coaditiona where the higher.expenditures and losses of the sesimilation period
of new equipment are compensated ineignificantly, the increase in its price usually
cannot make up for the absence of required compensation and thus b rin~ ab out addi-
tional profit. Weak motivation persiats in producing high quality new equipment
that would provide the possibility of getting a markup. Thus~ because of defects in
the economic mecl?anism, the field of use of markups as a factor of acceleration of
acientific-technical progress is artificially narrowed. The presently existing pre-
valence of the sum of markugs applying to previously assimilated equipment compared
to the relativelq small sum of markups for new equipment reduces the interest of
enterprises and associa~ions in technical progrese. To the extent that the question
- of neutralization of the negative effect of assimilation processes on econmaic iadi-
cators, incentives will grow significantly--with corresponding orientation of plans
--for putting into production highly efficient equipment and correspondingly for ob-
taining price markups for it. Then the relative ahare of producta of the higheat
category of quality and their markups will increase significantly in the total vol-
ume of new equipment being produced.
1. See N. Glushkov, "On Further Improving P~.anned Price Formation and Its Influence
on Iioosting Work Efficiency and Quality" (PLANOVOYE KHOZYAYSTVO, No 6, 1980, p 4).
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At ttie same time~ in addition to the above-prnpoaed measures for atimulating higher
quality and effi~iency of new equipment (~ahich would result in the growth of higher
prices obtained for it), a transition ehould gradually be made, in our opinion, to _
a procedure whexe, as a rule, ~r.~y chat equipment selected for production would be
con~idered new which is on the level of the highest category of quality (includin~
higt? efficiency) in tt?e case of these requirements becoming more severe (concerning
whic;i mention is made below). Then the stimulating role of markups for quality
will be ev~:n higher for scientific technical progress and the question of ente r-
prises and associations adopting new efficient equipment obtaining considerable ad-
ditional profit will be resolved.
For these ends, it should also be established that high-efficiency new equipment
has a certain priority over earlier introduced equipment in regard to obtaining
a Seal of Quality, markups and their sizes. It is at preaent eatablished that a
price addition c$r. be granted for 4-5 years (for 1-2 years prior to awarding, of the
Seal of l~uality and for 3-4 years after it has been awarded. Thia means that a
price addition of the same size can be granted for new equipment and also for equip-
ment that has not been new for a number of years. Furthermore, an extension of the _
price iacrease is permitted in the same size for another 1-3 years and in certain
cases for 5 years given the condition of an improvement in technical-econrnnic para-
meters. If the technical-economic indicators in this connection are not improved,
then the Seal of Quality is atill awarded, but the aize of the price increase is
halved.2
Such periods of operation of price increases, especially in the same size, we be-
lieve to be excessively long. Their size reduction should be carried out earlier--
soon after the new equipment nas been assimilated. This would make its assimilation
more advantageous and accelerate the tempo of growth of production volutne (for the
purpose of utilizing the shorter periods of price increase). When extending the
period of price increase, it wou~.d be advisable to leave untouched its fortner size
only with significant modernization of technical products, bringing with them a
growth in efficiency of 25-30 percent or more. With a lesser efficiency lncrease,
the size of the price increase should be reduced on the basis of a correspondin~
scale to one-half or one-third. If the improvement in technical-economical indi-
cators is lacking or is insignificant (less than 10 percent of growth in efficiency), _
it would not be advisable to either award the Seal of Quality cr grant any sort of
price increase. Such increased demands on periods of operation and price-increase
size would stimulate acceleration of efficiency of technical renewal of production.
- Another factor in the creation of advantages for enterprises and asaociations as-
similating new efficient equipment is the implementation supplementing the decree
of 12 July 1979.of a ca~plex of ineasures for booating peraonal material intereats
of personnel of enterprisea, associations, ministries and departments in fulfilling _
plans for acceleratian of economically effective technical progress. Such measures
should be inplemented solely on the basis of their effect on scientifi.c-technical
progress.
Z. See "What is New in the Establishment of Incentive Price Increases"
(LI:~:IO~':IC"F.S~'A`.'A ~AZETA~ No 4R, 1QR0, ~ R).
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Developers and other engineering and technical personnal, directly enga~ed in the
creation, assimilation and use of new efficient equipment, should guarantee the re-
ceiving of a higher share of bonuses intended for this work. They frequently re-
ceive for new equipment much smaller bonuaes than those personnel who in general
are not connected wlth technical progresa. As for bonueea for general results of
operatianal activity~ it would be advisable for personnel directly engaged in carry-
ing out technical progress to have their material-incentive funds raised (roughly -
by 20-25 percent), after establishing the dependence of booating bonuses on gains -
from developcuents, degree of participation and responsibility for performance of
_ work on new equipment.
TY?ose managerial personnel of associations and enterprises who are responaib le for
the fulfillment of tasks relating to technical progress now can receive large bonuses
rebardless of the state of affairs at enterprises in this field. The marginal
sizea of bonuses namely for efficient new equipment have been reduced for these
- personnel. It would appear to be advisable to restore to managerial per-
sonnel of enterprises and associations responsible for the course of technical pro-
gresa their former maaimum limits of bonuses (paqments twice a year) under the con-
dition of achievement of high results in technical progress. At the same time, the
fulfillment of plan targets for technical progreas must become for them an obligat-
ory condition of receiving bonuses for the results of operational activity. Work-
ers engaged in pioneering learning of how to handle complex new equipment (both in
its manufacture and use) ahould have instituted for them for thia period additional
pay in the form of increases to wage rates (of about 10 to 25 percent). The grant-
ing of bonuses to personnel of ministries and departments organizing fulfillment
of targets for scientific-technical progress or participating directly in such de-
velopments should be int~oduced. The rewarding of these personnel can be done from
centralized bonus funds for new equipment existing in ministries (departments).
- Increasing ttie effectiveness of economic atimuli for scientific-technical progress
should lead to the gradual overcoming of the "dual" approach to planning which is
rather prevalent in operational practice: production plans are fulfilled and over-
fulfilled through the manufacture of previously int~oduced products aad these plans
are absolutely obligatory for fulfillment and result in profitability; plans for
the assimilation of new equipment are, as it were, "unfounded," their fulfillment
ia frequently "not advantageous" and is not that obligatory. In a number of cases,
with general fulfillment of plans relating to production, plans for new equipment
(frequently considerably reduced in regard to its quality) are not fulfilled.
To raise the effectiveness of stimulation of scientific-technical progresa~ it is
- necessary that plans for new equipment do not stop with the creation of samples or
first indus trial series but encompass the entire period of assimilation of this
_ equipment (as an ob~ect of special planning) up to the attainment of planned indi-
cators, becoming an organic and most important part of the production plan bringing
economic advantages to enterprises aad associations. It is also important for
_ tasks relating to scientific-technical progress in apecial goal proArams end aupply
authorizations to include mass realization of end results by enterpriaes and asao-
ciations and not be limited to first industrial series (as is frequently the case) _
i~ut encompass all the stages of dissemination of ttie created equipment (on the bas-
- is of these targeta) and its use according to spheres of employment. Programs and
supply authorization should also provide priority resource proviaion for the devel-
opment and disaemination of the new equipment at all stages. In long-term plans
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~~f technical development and special goal scientific-technical programs, it ie im-
portan t to provide without fail for the creation of reserve resources (including
reserve capacities) , wtiich from the moment of their formation could be used for
newly arising needs of scientific-technical progress. .
In the planning of scientific-technical progress, the time periods of output of
eacli model of new equipmenC and its service life should be precisely specified in
planning of scientific-tectinical progress. Increased control (including by the USSR
State Committee for Science and Technology and Gosstandart USSR) over adherence to
t}iese time periods will be an important factor in the timely renewal of production and
~~rodtiction capital. In our opinion, extension of time for the production of a model
af:ter determination of the time of its replacement demands permission trom the USSR
State Committee for Science and Technology and Gosstandart on the basis of study or _
a valid proposal for such an extension by ministries. Tnen the USSR State Committee
for Prices will refix the price for the model. This, in particular, is of particu-
lar importance to the forbidding of production af obsolete tec~inical products th at
belong to the second category of quality of production and also for control ove r the
establishment of price reductions for equipment belanging to this category. Such a
~ procedure should also be establiahed with respect to extenaion of the service life
of models included in the stock of equipment.
In the stimulation of scientific-technical progress, the role of planning will grow
significantly given the condition that plans and programs of technical development
of sectors became integral and leading parts of sectorial production plans. We be-
lieve that it is advisab le to carry out a gradual transition to co~non coordinated
plans of technical development of sectors and of the capital inv~stment required for
this. One of the basic tasks of scientific-technical progress is, with increased
use of economic atimuli, to bring mach ine buildin~ into accord with the requiremen ts
of reequipment of sectors. The main thing to be done here is not increasin~ the
- rate of capital invesUnent in machine building but making significant changes in the
directions and structure of capital investment in accordance with the real needs of
a radical technical transformation of sectors on the basis of increasingly greater
concentration of capital investment in production of equipmen~ based on new tec~ino~=
ogical principles or on a radical improvement of traditional principlea. It would
- be advantageous to shift to the creation of ~oint programs which determine the co-
ordinated development of machine-building production facilities and usera of their .
products by epherea of their use and the employment of supply suthorizations. P lan-
ning and stimulation of the creation of high-effieiency aectorial and also function-
al intersectorial syatems of mact:ines muat become a most important element of plans
(programs) of comprehensive reequipment of sectors.
Ttie need for a significant rise in demands on machine buildin~ and stren~thening of
economic stimuli for its development are attested to in particular by such facta as _
the reduction for many enterprises of the relative share of machinery and equipment
produced for the first time in the USSR and reduction in the total volume of pro-
ducts of the ehare of machine-building iteme in the age of the first three years of
series production with a growing share of machines aged 10 years or more. The av-
erage yearly share of zetirement (as a consequence of wear) of machinery and equip-
ment lags significantly, comprising in 1979 (in percent of the total pool) for the
industry on the average only 2.4 percent. 1'he ahare of retirement of machinery and
equipment is still lower in the machine-building, chemical and ~:etrochemical
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sectors and especially in metallurgy. Accordin~ to the calculations of the Insti-
tute of Economica of the USSR Academy of Sciences, a gradual increase (with consid-
eration of an increase in the total pool of equipment through putting new machines
into operation) of the percentage of retirement amounting to a factor of 2.0-2.5 -
(and for metallurgy, machine building aad chemical industry--even higher) is needed. _
?n plans for the development of machine buildiag, it is important to determine, .
utilizing economic stimuli~ the attainment of a aignificant turning ~oint in the -
dynamics of all these indicators. The increase in the percentage of retirement of
obsolete machines ahould be based on planning their replacement with new high-qual-
ity machines as a result of improvement of the structure of machine building with
an increasingly greater reduction of the relative share of capital repairs (fre-
quently consisting of twofold reproduction of obaolete equipment) and its use for
- the technical reaewal and modernization of equipment.
To increase the incentive of collectives and personnel of enterprises, associations
and ministries for producing and using new high-efficiency equipment, the present-
ly planned indicator of econ~?ic effect from the realization of scientific-technic-
al measures in production should be included among the indicators on whose basis
cost-accounting incentive funds are formed. Tl~e effectiveness of planning and s tim-
ulatian of scientific-technical progress largely depende on haw precisely the enter-
- prise, association and ministries knaw what economic effect, expressed in cost-
accounting indicator, is actually produced from the creation and use of new equip-
ment. The reflection of its effect in auch indicators canstitutes one of the sig-
nificant conditions of an orgaaic ~ion of cantrol of scientific-technical progress
with general economic control. Streamlining and a significant improvement of the en-
tire system of determination of the economic effect produced by new equipment are
required at the present time (with account being taken of the social reaults). At
the present time, the actusl effect is essentially determined by computation, and
it is based to the required degree on initial accounting. Inadequacy of information
on the effect produced by scientific-techaical progress reduces the quality of plan-
ning and aelection of new equipment and the effectiveness of planning and financing
of scien tific-technical progress and deprives it of stimulation of a rather pre cise
base.
Orientation of Science and Technical Developmente Toward a High Level of Quality
and Effectiveness
The creatian of advantages for enterprises, associations and ministriea, assimilat-
ing new high-quality equipment and the aignificant growth of their motivation in
producing, le arning to operate and using it make possible and necessary a conside r-
able rise in the requirements for technical developments to the qualitative level
of planned new equipment. At the same time such an orientation of technical devel-
opments can be enaured only through large changes in the direction of development
of sectorial science. A significant defect of many sectorial institutes exists in
the considerable predominance of subjects of little efficacy for the national econ-
omy. Work based on inventions (and the greater part emall ones at that) comprises
less than one-third on the average for sectorial institutea. Tt~e present order of
establishing topics namely favors such work. Assessment of the activity of ins ti-
tues is conducted frequently fram the position of "volume of work" rather than the
effect and quality of the end product aad creates greater "advan~tageoueneas" for
themea th at are of little efficacy for the national economy. Tonics, hawev~r,
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having for tt~eir aim new high-efficiency equipment for the national economy, usual-
ly requiring more extended time for research, development and assimilation, large
expenditures at this time, considerable additional effort for the solution of com-
plex tasks and the like, are frequently relatively "disadvantageous" for institutes.
It would be advisable to ~radually ct~ange over--on tlle decision and under tlie con-
trol of tt?e LSSR State Comn;ittee for Science and Technology--to a system of deter-
minin~ tiie sub~ect matter of sectorial institutes, the basis of which nrimarily
k~ould be inventions producing a big national-e conomic effect. The sources of forma-
tion and realization of sub~ect matter here would be: first, employment of the re-
sults of basic research producing discoveries and ma~or inventions; second, ttie use
- of other hignly effective inventions; third, the selection of such subjects whose end
result would be an invention�yielding a significant effect. On the basis of appro-
priaCe directive decisions in methodical instruction, it would be necessary to de-
termine for this the procedure of compilinR plans of sectorial institutes with an
obligatory condition: initially, there should be examined in detail the indicated -
sources of use and creation of inventions and only after this should the question
be brougk~t up concerning other sources of formation and realization of this or that
theme. The approval of a topic not based on an effective invention should be valid-
ated by the institute with corresponding argumentation.
Tliis will require putting the evaluation and s timulation of the operation of the
institute (norms of formation and utilization of cost-account~ng funds, sizes of
bonuses for corresponding personnel) in direct dependence on the place of effective
inventions in its work. The need has been created for ensuring unconditional pri-
ority through material incentives of highly effective works based on effective in-
ventions, while works of little efficacy should become aignificantly less "advanta-
geous" for an institute. It would be advantageous to adopt a decision on corre-
sponding changes in material encouragement of collectives and individual personnel
of scientific-research institutes. A criterion for assessment of work~must be the
economic effect witii consideration being given to the solut3.on of social problems
and also in addition to this to tlie significance of the work for the national econ-
omy, tt~e qualitative level of attained new technical parameters, comprehensiveness
of research and its prospects.
- On such a basis the results of work ~oill receive high or lower marks with a point
system for maCerial encouragement. In the p ayment of bonuses for work producing a
major effect and receiving high point ratings. it is necessary to pay advances whose
size must be related to the point rating. For work of little efficacy, advances in
general should not be paid at any time of its realization. _
For raising effectiveness in the work of sectorial institutes,there should gradually
be introduced new forms of wages aimed at the elimination of existing elements of reg-
ulations and significant strengthening of a differentiated approach to pay throu~h the
expansion of the range of positions and the es tablishment of significant differences
("forks") in pay for each position depending on the quality and effectiveness of work
of each scientific worker. The publication by the USSR State Committeefor Science and
Technology of an appropriate decree on a gradual di~semination to institutes of such
a procedure of remuneration with subsequent accounting of the specific character of _
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eacli institute would be advisable.3 New forms of remuneration at scientific-
technical institutes should be combined with considerable emphasia on the effec-
tiveness of certification of scientific workers for the pur.pose of raising the _
level of research and development'and advancing new, fruitfully working scientific
cadres.
These changes in the system of remuneration would contribute to the solution (on
the basis of an appropriate decree) of another task--the provision of greater flex-
_ ibility and maneuverability for the structure of management in sectorial institutes
thruugh a significant increase of the relative weight of problem and thematic sub-
_ divisions designed for the fulfillment of a particular theme. Changes in remunera-
tion of lab or will make it poasible to ensure material interest in the formation of
such movable subdivisions; this will create conditions for timely shifting of re-
search and development to a new t'opical theme, including one that prewiously had
not been considered. In conformity with the position of the plan of "Basic Direc-
tions" on the developmen t of cost-accounting relations at scientific-research insti-
tutes, it w~uld be advisable, in our opinion, to provide sectorial scientific insti-
tutes with working capital, which should raise ther effectiveness and responsibilitq ~
for the results of work.
The direction taken by sectorial science to the creation of highly efficient equip-
nent must be realized and continued by havin g technical development snd the system
of selection of new equipment assume the same direction. At present only a signif-
icantly smaller part of technical developments (planning new equipment) creates
equipment on the level of the highest category of quality. It would be advisable
to establish a atep-by-step boosting of requirements for a qualitative level in the
- selection of new equipment for production ia accordance with the task assigned in
the plan of "Basic Directions"and to ffialce more rigid the efficiency requirements of
new equipmen t. In the lang term, it would be advisable, in our opinion, to put
into production, as a rule either basically new equipment with nathing comparable
or other new equipment considerably superior in efficiency and quality to existinp,
either domes tic or world comparable equipment (any essentially new equipment ex-
ceeds the qualitative level of tt~e best exis ting equipment of the given type, em-
bodying the antecedent technological princ~.ple).
But, taking into account the actual situation in regard to the qualitative level of
equipment, initially it would be advisable, as has a~.ready been mentioned, to carry
out on the basis of large preparation a gradual transition to the follawing princi~
ple: each technical product created for the first time may, as a rule~ be consider-
ed new if it meets the requirements of the highest category of quality and as a min-
imum corresponds in effe ctiveness to the bes t camparable examp 1es. But in the im-
mediate future~ there st~ould be established, in our opinion, differences in the e-
va.luation of different types of new equipment exceeding the existing level of quali-
ty of the best domestic examples and corresponding to them. At the same time, it
would be expedient in the future to differentiate models: thos~ exceeding the world -
level; those corresponding to it; those lagging behind it. Between the superiority
3. In the future, there should be considered in our opinion, the question of the
broader use of such differentiated pay in tY~e spheres of academic science, technical
developments and in industry. ~
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or correspondence of the best models there exists an essential and eignificant dif-
ference in a practical sense, since the main idea of selecting equipment as new
consists in the fact that it possess technological and social-economic advantages
compared to already existing equipment. There is a need for methodological posi-
tions in correlating the relations of these groups of high-quality equipment and
establishing differences between them in incentives and size of price increases for
quality.
= At tl~e same time, changes should be introduced, in our opinion, in the conditions
of awarding the Seal of Quality. The main thing is that an insufficient relation
exists between it and the economic effect, which must become the deciding factor
in awarding the Se~l of Quality. At the same time, there is a much greater need
to tie in awarding of the Seal of Quality to technical progress and to innovation
of equipment. At the present time, new equipment occupies an insignificant share
in the mass of products (including those of production-technical use), which have
been awarded tlie Seal of Quality; ita relative share, however, in these products -
is being reduced. Z'he quality and newness of equipment, as well as the social-
eonomic results of its use by their very nature conatitute a unity. Society does
not just need newness of equipment but high-quality parameters for this newness,
which furthermore are organically combin~d with high social-economic results.
Bquipment may be considered as new by socialist society because it possesses riigh
- quality in its technological, economic and social aspects.
Awarding of the Seal of Quality must be tied in to social indicators, It is impor-
tant not to award it to products, including new equipment, if they do zvt meet so-
cial norms for improvement of working canditious and protection of the natural en-
vironment. An obligatory condition of awarding the Seal af Quality to a technical
product would be correspondence of the parameters of the new equipment to the con-
crete requirements of the spheres of its use (including improvement of the condi-
tions of operation of the equipment) . It would be advisable for awarding of the -
5ea1 of ~uality to be differentiated according to concrete specialized modifications
(varieties) of a model of new equipment intended for certain spheres of use: it
should be awarded to those of the varieities of the model which are adopted to the
needs of the sphere of use and produces in it a high effect. It is important also
to realistically take into accoimt what the competitiveness of the equipment would
be on the world market.
To raise the level of applied research and technical development, there should be
accelerated into practice the introductian of promising, "leading" atandards for
products of technical ~roduction function so that these standards are closely con-
ected to applied research and technical developr�sents and are used as norms in the
transition to new models and types of equipment.
A significant prerequisite of orientation of technical developmenta to the creation
of high-quality equipment and tlie implementation of higher requirements for its se-
lection would be ttie introduction in industry of nondepartmental certification (ex-
pertise) of technical developments. Ita aim is maximally to contriUute to raising
the level of tecrinical developments and to the gradual implementation of the prin-
ciple--every development as a rule should be directed to the creation of equipment _
of the highest category of quality. Such promotion will aerve as an effective
meana of control over the aelection of high-efficiency equipment and verification
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oE the basis of selection of an analog with which it is compared. The inclusion
oF planned new equipment in technical developments under the highest category of
quality should be (as in certification of finished pror~~�,ts) the function of
Gosstandart and be accompanied by higher material incencives for developers.
Certification of technical developments will be found to be effective if it is ac-
- companied early, that is, begins (as its first stage) with extradepartu?ental exam-
ination of technical goals for planning (it would be expedient to introduce it not
only for the most important but essentially for all types of new equipment). In a
technical assignment there should be includ~d without fail a limit price for the
_ new equipment which would be refined in the future and which servea as a barrier
against the liiking of prices for new equipment and will also help laaer the price
per unit of useful result, eliminate and pravent instances where the price for new
equipment outstrips its productivity. The second stage in the certification of
technical developments is the assessment of their result at the final staAe of cre-
ation of a work plan, an experimental model and their careful checkinR. At this
stage, the ob tained results will be compared with what was designated at the outset
of planning, and the question will be resolved of putting the equipment into pro-
duction and evaluating it according to qual~ty categories.
It seemingly would be advisable to issue while taking into account the proposals
described above: (a) a decree of the USSR State Committee for Science and Technol-
- ogy on improving the work of sectorial institutes and (b) a decree of Gosstandart
USSR and the USSR State Committee for Science and Technology on the big linkage of
quality certif ication of products with scientific-technical progress and its effec-
tiveness and on canducting certification (examination) of technical developments on
the basis of the highest category of quality.
Tlie effective, highly efficient use of economic stimuli of development of two inte ri- -
related counter processes--orientation of industry toward productive realization of
the latest achievements of science and technology and research and deve lopment for -
all-round and deep teclinical renewal of production--will serve in the eighties as a
significant factor of increase of the tempo of the country~s economic qrowth and
completion of transition of the economy to the rails of intensive development.
COPYRIGHT: Izdatel~stvo "Pravda", "Voprosy ekonomiki", 1981
769 7
CSO: 1820 /125 END
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FOR OFFICiAL USE ONLY
APPROVED FOR RELEASE: 2007/02/08: CIA-RDP82-00850R000400010048-4