JPRS ID: 9771 USSR REPORT ECONOMIC AFFAIRS

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• Document Page Count: 38
• Document Creation Date: November 1, 2016
• Sequence Number: 10
• Content Type: REPORTS

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JPRS L/9 i 71
5 June 1981
USSR Report
ECONOMIC AFFAIRS
(FOUO 8/81)
FBIS FOREIGN BROADCAST INFORMATION SERVICE
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JPRS L/9771
5 June 1981
USSR REPORT
ECONOMIC AFFAIRS
(FOUO 8/81)
CONTENTS
ECONOMIC POLICY, ORGANIZATION AND MANAGEMENT
- Economic Trends for the I'ighties Projected
(P. Ignatovskiy; VOPROSY EKONOMIKI, Feb 81) 1
PLANNING AND PLAN IMPLEMENTATION
Ivanchenko Discusses Role of Plan Cantrol Figures
(V, Ivanchenko; VOPROSY EKONOMIKI, Mar 81) 13
INVESTMENT, PRICES, BUDGET AND FINANCE
Financial, Credit Levers in Economic Managemefit Described
(G, Bazarova, V. Pashkovskiy; VOPROSY EKONOMIKI, Feb 81) 23
- a - [III - USSR - 3 FOUO]
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ECON0MIC POLICY, ORGANIZATIOIv AND MANAGEMENT
ECONOMIC TRENDS FOR THE EIGHTIES PROJECTED
Moscow VOPROSY EKONOMIKI in Russiaa No 2, Feb 81 pp 76-87
[Articie by P. Ignatovskiy: "Trends of Economic Development in the '80s (Analysis
of Practical Experience)"]
[Text] The developmental prospects of the Soviet economy in the '80s are charac-
terized by the operation of tenaencies disclosed in the '70s due to the growth of
social requirements, the development of scientific-technical progreas, strengthen-
ing of collectivized production, changing coaditions of production 1.n the extrac-
tive sectors and also the demographic and ecological conditions. The influence of
these factors is felt first of all in the development of the productive forces of
the mature socialist society and also production relations, organization of produc-
tion and the results of social labor. This influence is neither straightforward
nor one-sided; it is dietinguished bp its dialectical character and the contradic-
toriness inherent in it, whicli is expressed by the fact that in addition to posi-
- tive phenomena there are to be found negative ones as well, which to a certain de-
gree are objectively related to the developmental level of productive forces and
for this reason they cannot simply be rid of. The fact is that people, ao K. Marx
emphasized, "are not free ia the selectioa of their productive forces, which form
the basis of their entire history because every productive force is an acquired
f orce, the product of prior activity.101 As a consequence.of this successian, the
developmental level of productive forcea achieved in the '70s predetermines the
p rospects of the country's economic growth in the 180s. Therefore, the special
- features of the development of the Soviet ecanemy referred to at the October (1980)
Plenum of the CPSU Cen tral Comaaittee have not been brought in from without; they
are derived from the developmental processes of productive forces and the direction
of all production toward the satisfsction of the constantly grawing social
requirementa.
A chief feature of ttie coming period of development of the Soviet economy is the
fact that the Soviet Union, as emphasized in the plan of the CPSU Central Committee
for ttie 26th party congress "Basic Directiona of LfSSR Economic and Social Develop-
ment for 1981-1985 and the Yeriod to 1990," is entering the eighties with a power-
ful economic and scientific-technical potential and highly skilled cadres. The
advances attained in the field of economic and social development make it possible
to solve even bigger tasks. In a speech at the October (1980) Plenum of the CPSU
1. K. 2-1arx and F. Engels, "Sochineniya" [Works], Vol 27, p 402.
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_ Centr.al Committee, L.I. Brezhnev again emphasized *he importance of concentratinfi
tne efforts of the Soviet state on the basic goal of socialist production--satis-
faction of man's needs. Under the conditions of the tremendous scientific-produc-
tion potential created by socialist society, th's means that the entire system of
organization of public production must be based in growing neasure on the consider-
ation of ensuring this goal. "It is necessary to develop," L,I. Brezhnev said at
the Plenum, "the production of consumer goods on the basis o� a we11 thought out
long-term program capable of uniting the effozts of all sectors on which this de-
pends." The satisfaction of the needs of tha members of socialiat society ought to
predominate and determine productive consuffiption, that is, intrasectorial and inter-
sectorial material and labor resources. In the forthcnming period, it will deter-
mine in particular both the national-economic proportioas and the structure of cap-
ital investment, moreover objectively with ten deacies inherent in the economy. And
this objective need under the conditions of the '80s cannot but help be determiniug
in the practice of planning and management.
Tiie basic objective developmental tendency of the Soviet economy of the '80s lies in
the need of a significantly aore active and systematic intensification of all public
production. Its realization depends on the direction of development of the produc-
tive forces. As is knawn, the determining elemen t in the development of productive
forces and their structure is to be found in tools of labor, primarily machines.
Zfiis ia their most mobile and revolutionizing element. But the revolutionizing in-
fluence on the production of this part of the productive forcea depends on the in-
tensiveness of use of their total aggregate on the structure of capital i:roestment.
It is manifested in close interconnection with other elements of the structure of
material productive forces, particularly with objects o� labor, especially raw-
material and fuel resources and their proportionality with tools of labor.
Intensification produces a need for changes in the structure of productive forces
so that it better contrib utes to economic grawth and the use of accumulated produc-
tion potential. Such a use predetermines the qualitative improvement of the actual
potential, improvement of its structure, especially proportiona betweem tools and
objects of labor an d between all the means of production and the work force. Con-
sequently, intensification of production determines the need for improving the
structure of capital investments. This means in economic policy a change in the ap-
proach to their distribution. The economi c aituation of the given moment calls for
making more rigid the control function of central state organs in the allocation of
capital investment and the creation of productive capacities.
The approach to questions of allocation of capital investment established in prac-
tice as the reault of employment of extensive methods of maaageinent where "getting
hold" of funds for expansion of production or construction of a new enterprises was
the chief thing in ensuring production grawth is now no longer sufficient. The so-
lution of corresponding questions ca11s for stock taking of raw-material and labor
resources and production capacities both at operating enterprises and in the caa-
struction of new facilities, particularly in the eastern regions. The aforesaid
conditions dictate such g sequence in the implementation of economic measures for
increasinR intensification of production iu which firat of all the presence of mate-
rial and labor resources, their use with accouut being taken of the character of
individual and social requirements determine the efforts of society in the develop-
ment and use of productive forces. lherefore, the effectiveness of economic policy
depends on the degree pressing changea in the structure of productive forces are
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taken into considerati.on. But the policy and its principles and economic practice
are not identical. The tasks of the state's economic policy are not always repro-
duced in operational practice. As pointed out in the plan of the CPSU Central
Committee for the 26th party congress "Baeic Directions of USSR Economic and Social
� Develogment for 1981-1985 snsi the Period to 1990" in connection with the resulCa of
- the Tenth Five-Year Plan, "the mechanism of management and planning, methods of
mangement and the level of labor aad performing discipline lagged behind contempa-
rary requirements. This hindered transference of the national economy to the path
of intensive development."
In evaluating the influence on the structure of productive forces, there should be
kept in mind that material and labor resources determine to a large degree at a
given moment the possibilities of economic growth and consequently the needs of the
country, for if this or that enterprise or sector has a shortage of raw and other
materials, fuel and manpawer, then even with t'.Ze existence of the most modern tools,
work stoppages can take place and the desireci results will not be achieved. At the
same time, in the development of productive forces, there frequently prevails in
individual sectors growth of fixed production cApital without the necessary analysis
_ and assurance of ite full use, either existing or newly created. As a consequence
of ttiis, certain cases have occttrred af work stoppages of newly constructed enter-
prises in view of the fact that they were not proviQed with raw materials and cadres.
- Such employment of production factors contradicts the economic laws of socialism and
is not in accord.with the poal of socialist production.
Thus, at the present stage, an increase af intensification of public production re-
quires a development of productive forces which is connected with the need of a
stricter accounting in the planning of material-resource problems. Here the central
problem becomes solution of the task of ensuring the quality of the make-up of the
production potential determined by the technical level of accumulated production
capital and used technologies, intrasectorial and interaectorial proportions. Elim-
ination of elamen ts of disproportion in the development of individual sectors and
also between production capital and raw and other material and labor resources de-
mands more valid economic decisions on the directions of capital investment far
purposes connected with the improvement of existing production operations and the
creation of new capacities and supplying of the national economy with fuel-pawer
and raw-material resources.
At the same time, attention is drawn to the fact that the preva]ence of the tenden-
cy for co.:struction of new enterprises with an inadequate concentration of capital
investment and a large volume of uncompleted construction, the cost of which amounts
to almost one-fourth of the yearly volume of the national income, significantly
"burdens" the structure of the economy, retards the processes of intensificaCion of
production and impinges on economic growth and the satisfaction of the needs of a11
society. The requirements of the population and the ndtional economy are growing,
but the possibilities of their satisfaction are being artif.icially limited by the
"freezing" of a significant amount of mar.erial resources. At the same time, the
possibilities of socialist expanded reproduction are narrowed and consequently, so are
accumulations and increases of capital investmen t. It turns out that such a prac-
tice in the field of capital investment "strains" its sources and threatens curtail-
ment of accumulations. To slow down today the dissipation of capital investment
and to speed uv the completion of angoing projects means to expand tomorrow the pos-
sibilities of their growth.
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It is all the more important that the tendency for growth of unfinished construc-
tion is accompanied by another tendency: the freezing over an extended period of
such a significant share of tne national income in unfinished construction aggrav-
ates the aging of exisCing fixed production capital, especially operating machines,
and mostly in those sectors that directiy work on the satisfaction of human needs,
such as the light, food and paper industry, as well as in the basic spctors of in-
dustry (ferrous metallurgy, machine building and metalworking, transport). In ad-
dition to this, a significant curtailment occurs in the named sectors of starting
up production capacities through supplementary investment both into new construc-
tion and into the modernization of existing eneerprises. Thus, over a_year on the
average has gone into the installation at textile-industry enterprises snd looms and
spinning spindles which are one-third the number in the years of the Eighth Five-
Year Plan. The same can be said about capacities for the production of outer and
under knitwear, cardboard, roo�ing materials, raw materials, rolled ferrous metals,
cast iron and other types of products.
At the present sCage, a significant f actor in raising the quality of the existing
production apparatus is growth of the share of capital investment in the reequipment
and modernization of sectors of the n ational economy and individual enterprises.
Reequipment and modernization, as they emerge from the plan of "Basic Directions,"
are becoming an imporCant repository of scientific-technical progress, its normal
conditions and a significant factor in intensification of the nat3onal economy. The
- more actively the process of intensification moves forward, the greater the acope
with which modernization and reequipment of this or that sector is apt to be car-
ried out. It is therefore no accident that in the period of growing technical im-
provement of public of our country, the scale of modernization and reconstruction is
b*eing expanded.
A special feature of reconstruction is to be found in its influence on intensifica-
tion of productian both �or the enterpri.se--supplier of the means of production,
that is, at the "point" of renewal of production capital, and for the consumer.
Intensification is proceeding not cmly in the case of existing production but also
with respect to the process of reequipment of production as-the result of use in
sectors that are users of the produce d machines. At the same timen it is very im-
portant to ensure continuity of reconstruction through systematic planning of the
proper measures within the tramework of the sector for all existing enterprises.
Unfortunately, such planning in some sectors has not yet become an obligatory pre-
requisite of technical improvement of production, while systematic reconstructton
is occasionally replaced by sporadic9 carried out as one of the measures of an
enterprise or ministry.
Of course, scales and time periods of recomstruction vary in each sector and in
each region and depend on the level of inechanization and automation of production
processes as we11 as of wear and obsolescence of machinery and equipment. But
state planning of reconstruction and reequipment of enterprises and resources. sup-
pQrt of these processes should contribute to their accomplish ment within the cal-
culated optimal perioda provided by the plan. It follows from this thaC recon-
struction and reequipment have to be of� an obligatory character, while the evalua-
tion of the work of collectives of en terprises and organizers o� production has to
be determined with account being taken of the planned volume of reconetruction of
- enterprises, providing growth of produation efficiency, higher production quality
and improvement of its uge characteristics.
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A major role in the acceleratian of technical progress, "discovery" of new precon-
ditions of ecanomic grawth, higher labor productivity and solution of social prob-
lems is pla.y.ed by the relation of capital investuent to reconetruction and n.ew con-
struction. This question was raised at the November (1979) Plenum of the CPSU Cen-
tral Committee. It concerned a problem "permeated" with contradictiona arising frbm
both objective conditions and the subjective position of some departments and cer-
tain heads of enterprises. The approach to reconstruction must be changed on the
part of ministries and planning organs. The fact ie that it is no accident that so
far more efforts are being appli,ed to get capital investment for new construction;
it is better provided with capital, labur resources and the start-up of new facil-
ities expands the production potential of a sector. Objective causes are also ex-
pressed; these are particularly characteristic of enterprises with monostructure
production, for example, tractor plants. Any sort of dislocations in the organiza-
tion of reconstruction, especially dragging out of a performance period, affects
its economic results and the operatian of enterprises and forms a relation to this
side of technical improvement of production. A tremendous role is played here by
the organization of corresponding processes. Only with clear cut arrangement, re-
construction as a factor of intensification of production, and in this is to be
found its b asic economic function, contributes to the elimination of "bottlenecks"
and consequently to the main tenance of balance of production within a given enter-
prise or associations. In this sense, reconstruction, as borne out by the experi-
ence of the ZIL Motor Vehicle Plant and other associations, has no altematives.
The fact is that with the construction of a new enterprises, "bottlenecks" are not
eliminated at an old enterprise that cannot change the atructure of its production,
nor replace models, nor adopt new patteras of products. There the planning of re-
construction must be done in advance with account being take.n of the time of wear
and obsolescence of equipment.
On the basis of this, a proportion is established between new construction
and modernization, affecting both the structure of capttal investment and *_rie dis-
tribution of material resources for the expanded raproduction of fixed prnduction
capital. And for this it is necessary to knaw the mass and the share )f canital
investment allocated namelyfor the modernization and also the expansa�::i of produc-
tion connected with reconstruction. The publication of "unfiltered" :~Ita can only
disorient the operation of these-processes.
In solving the comple:c problem of regulating the relation of capital J__-;estMent to
the distribution of material and labor resources for the purpose of Aer:zi.zation
of production and new construction, the main role belongs to the stat;~, and its cen-
tral organs. llere there may be mani�ested first and foremost the pr'nciple of dem-
ocratic centralism in economics and its implementation via the stat:! .ylan. But at
the sar.ie time, it must not be forgotten that talanted organizers arr :-eded who are
capaole of performing ttie complex tasks of reconstruction in aedt Or; to the tasks
of current production. Undervaluation of modernization means u'. 4,i f the unwill-
ingness of an operational manager to burden himself with "add. cares; it
also means limitation of his economic level, ignorance of th-~ :-e:,_a,~ons of factors
- of intensiveness and of reproduction process and, finally, of dooming
production in advance to the occurrence of "bottlenecka" :nv.-~oE ore of imbalance
and disproportion.
,And if society is ouliged to experience difficulties in ~ni-i, :action of needs,
for example, in items shaped from ferrous metals, it is idue to the
fact that specific ec:onomic leaders and organizers oL p?~-4i:ct__Jn. eglected
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technical progress and its decisive direction--modernization and ministries and de-
partments did not oppose in time these developments of the state position or did
not uphold it.
The directions of modernization are many-sided but not equivalent. Technology
which is progressive in the broadest sense of this word is of particular importance
at tYie present stage. The renovation ot technology is the most general direction
of modernizaticn, resulting in renewal of certain producer goods, xahich is especial-
ly important for rnetallurgy and machine building. At the November (1979) Plenum
of the CPSU Central Committee, it was pointed out that despite the tremendous scale
of inetal production, there is still not enough of it. At the same time, the chief
reasons for the present position were noted, in particular the slow impl.ementation
of fundamental qualitative changes in metallurgy, where efforts toward technical
progress, as L.I. Brezhnev points out, are directed slowlyo The introduction of
powerful oxygen converters, electric furna.ces and continuous steel casting clea.rly
lags, and the share of economic forms of rolled steel is growing inadequately.
With the attained level of inetal productian, the main direction of the further de-
velopment of ferrous metallurgy is not so much the quantitative p,rowth of inetal
production as a radical improvement in iCs quality and expansion of its assortment.
The quality of the metal effects the quality and technical level of machines, while
the quality of used equipment affects the quality of production of inetallurg,y.
In this sector, the determining reasons for the dissaCis�action o� users of inetal
are to be found in slow renovation of technology and wear of equipment, that is, in
those factors which to a significant degree are determined by modernization of
existing enterprises. In machine building, these problems cannot be solved solely
by the course of renovation. New technical solutions, basic theoretical develop-
ments and design planning are required. These factors in particular serve as prime
movers of technical progress in machine building under the condition of provision
of a well organized aystem of assimilation of the latest achievements of science.
Durin;* the years of the Eighth Five-Year PJ.an (1966-1970), models were created of
new types of machines, equipment and apparatus, averaoing 3,112 uniCs per year,
during the Ninth (1971-1975)--3,038 units and during 1976-1979--2,813 units. And
tiere it is not just a matter of organizing assimilation of new equipmezt but also
one of maintaining a"portfolio of new developments," that is, to the extent the
level of scientific-technical solutions "exerts a preasure on production:" This is
a serious problem. It demands improvement of economic relations in the field of
science and production and organization forms helping to strengthen their ties, as
well as the consolidation of scientific forces, engineer-designer cadres in card-
inally new constructive solutions of proUlems not only of machine buildins as a
sector but of the national economy as a whole.
With such u united national-economic approach, machine building, for example, in
order to provide fuller satisfaction of the country's food requirements could de-
velop and provide for users a system of machines (not only units) for the produc-
tion of corn under the conditions of a drough t-ridden steppe, soy beans and other
legume crops, equipment for pig farms and complexes and ao on. But this problem
was solved disconner.tedly. In Kherson, for example, the development of a new model
of a corn harvesting combine has been dragged out and at other enterprises (produc-
ing mainly machines of that type), they once worked on the creation of a precise
sowing seeder. As a result, the basic processes of cultivation of corn are
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considered mechanized; a great deal of inetal is used up and farmers are deprived of
the possibility of using modern technology on the whole area of corn sowing. This
is alsa effected by a shortage of high-qualitq herbicides.
As a result of using tierbicides, the level of sowing cultivation is raised and 8
sharp rise in yield is ensured, inasmuch as nutrients in the soil are retained for
cultivated plants rather than for weeds as is the case on farms that do not carry
out weeding aad cultivation of the sowings in time. Moreover, the need is elimi-
nate d for actual weeding, which is a boring, labor-intenaive task requiring big
outlays of seasonal manual labor, a process for the cultivation of tilled crops
which with herbicides is no longer necessary. There is eliminated the need for
cul tivators, of wtiich�a lack has existed to the present time, although the agri-
cu?tural machine-building industry increased their output in 1979 to 202,000, that
is, 14,000 more than in 1975. (We should note, howeyer, tnat the achieved level is
4,OOU below that in 1965).
Thus, the new technology used in the sector which is a user of machines, ia induc-
ing changes in the production structure in the producing sector. But such changes
are not always of $sufficien-tly effective and systematic character. Actually, since,
F^r e-xamnle, herbicides are producing such a radical change in agri.culture, it
would tie economically advantageous to reorganize the produetion of the tools of
lab o r for agriculture and even possibly shift a portion of existing mineral ferti-
lizer plants to the production of herbicides and to reduce the production of cultiva-
tors, using released metal, capacities and manpower for the production of other
machines, for example, maciiines for the applicat{on of fertilizers to the soil and
agen ts for the protection of plants or trailers for the transportation o� agricult-
ural produce from the fields.
- In a word, changes in technology demand immediate reaction on the part of the indus-
try p roducing machines for sectors directly satisfying trL needs of the population,
in p articular for agriculture, but frequently that is produced which is provided by
exis ting production capacities, although requirements change, creating the need for
ttie adaptation of capacities to them.
At the fourth session of the Tenth Convocation of the t'SSR Supreme SoviPt, the ques-
tion was raised of increasing the output of powerful tractors. The proh lem is not
new, it was referred to back at the 25th CPSU Congresa with reference to the Pavlo-
dar Tractor Plant, but the structure of the tractors being produced has changed lit-
tle. imother queseion arises: what at present is the most acute need--growth of
production of reapers, making it possible to reduce the time of i,'-.inQ in grain in
Kaza:.i:5tan and other regions or of certain machines, include passenger motor vehi-
cles? This question logically stems from the following cot!tparison: increasing the
outp ut, for example, of tractors, the industry holds back the production of
agricultural machines. In 1979, production was reduced of a number of attached
trailing agricultural implements, while the output of srxvers, beet-harvestin~ conr-
bines, potato planters and several other machines very necessary to agriculture
turned out to be lawer than tne level in 1965. As a result, growth of the output
of tractive machines (tractors) does not achieve the aim--their cap acities are be-
ing used far from completely. At the October (1980) Plenum of the CPSU Central
Committee, the question was raised of the work of the Ministry of Agricultural
Machine Building and of the development of this sector.
~
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The big growth of production of some machines compared to others is determined by
- the technical level of enterprises and the existence of production capacities. But
if in the determination 6_f the scale of production, not just capacities but also re-
quirements are taken into account, the question then ariaQs of the priority of needs, which was clearly expressed at the October (1980) Plenum of the CPSU Central
Committee in relating to the food program and the conditions of its realization as
well as of group "B" industrial sectors. A need exists for improving the structure
of producxion in sectors related to group "B", expecially with consideration being
given to the fact that the natianal economy is experiencing difficulty in the hauling
of freight, especially produce from the fields, orchards and vegetable gardens that
serve as a raw material for group "B" enterprises. Here raisin$ of the question
is sugges ted on manipulation of production capacities and material resources, long-
term restructuring of production and correspondingly use of material resources. It
goes without say that the problem is in need of more thorough working out,and the
main thing is that in the future when determining tne prodiiction volume of this or
~ tlat product we should proceed not only f-rom tlie availability of production capac-
ities but also fron tiie requirements of society, their importance and their pr.ovi-
siori with productive capacities, the distribution of materl.al resources and the
ti-hole structure of public production.
Tlie effective use of mate-rial resources and created p roduction capacities in combi-
nation with systematic modernization of sectors of industry and transport, making, it
possible to utilize the most progressive world and domestic achievements in the
field of techno?.ogy strei.gthens the possibilities of solving economic problems,
which are connected today with a shortage of capital investment, materisl resources
and raanpower. IJith respect to group "B", this means not only an expansion of the
possibilities of the national economy in the satisf action of the needs of the popu-
lation but also a direct.increase of intensification of expanded reproduction and
greater effectiveness of the r.acional economy.
Consequently, it is a question of one of the main-line tendencies stemming from the
speciai features of the economy of the '80s ard che range of needs of socialist so-
ciety exerting a definite inf luenca on the use of accumulated production potential.
Hi,unan needs as a goal of public production, conditioned by the fundamental economic
law of socialism, predetermine the structure of social production. Taking account
of such a pattern, the state determines for each se gnent of the planning period the
volume of resources required for this or that need, depending on its sociai impor-
tance and real gossibilities.
This is connected with the fact that the objective advantages of socialism--the
freedom presented to the development of public production by the character of pro-
duction relations--are attained in real life with account being taken of the exist-
_ ence of material and labor resources in each given historical period. The material
and labor resource factor, and not just the existence of production capacities, de-
termines the possibility and the r.ecessity of preference in the range of social needs
and their satisfaction. Emphasizing this feature, L.I. Brezhnev pointed out in a
speech at the October (1980) Plenum of the CPSU Central Committee, characterizing
the economic situation at the end of the five-year plan that we have had to and
still have to overc:ome many difficulties. "Our difficulties were due to the ex-
haustion of many old, including large, mineral deposits and the shifting of the
chief centers of the extractive industry to the East and the North." Nonetheless
minis tries and dep artments far from everywhere were able to overcome the force of
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inestia; resources are still not being allocated for first-priority aims. As a re-
sult, although possessing resources that were difficult to imagine 20-30 years ago
and which n o other country in tne world poasesses, we have not avoictsd shortages
and national-economic diaproportions.
In 1950, a total of 27.3 million tons of steel were smelted in the USSR and in 1979
--149.1 million tons; petroleum production (including gas condenaate) was, respect-
ively 37.9 and 585.6 million tons, gas--5.8 and 406.6 billion cubic moters and coal
--261.1 and 718.7 million tons; produced electric power amounted to 91.2 and 1,238.2
billion kilowatt-hours and mineral fertilizers--to 1.2 and 22.1 million tons. The
country attained first place in the world in the production of many kinds of fuel
and raw materials, in the production of cast iron, steel, cement, mineral fertilizers
and for a wh ole series of other indicators. Fixed capital is constantly growing and
new labor res ources are always being drawn in. "But the end result is," L.I. Brezh-
nev said, " that we are producing less than we ought to be, than our possibilitiea
permit us. Hence the disproportions, shortages and inadequate reserves." Under
these condi tions, our economic practice cannot be oriented taward increasing the
acquisition of raw materials and their production in agriculture without being con-
cerned with the means of use and preservation of raw materials, their curtailment
and subsequen tly the total elimination of their loeses. _
The difficulties of providing material and first of all raw-material supplq can hold
back the ecaaomic growth of a number of sectors. For this reason production growth
cannot be ens ured solely by the existing methoda of increase of traditional sources
of raw materi als. The need for stabilization of the rate of production or certain
kinds of raw materials and fuel and shifting of atress to the improved use of mined
and produce d raw and other materials is quite "imminent." In 1978, each t:iird ton
of steel was produced from scrap and wastes of ferrous metals, 20 percent of sulfur-
ic acid from waste gasea at metallurgical and petrochemical plants. But at the same
time more th an. 100 million tous of the wastes of chemical enterprises contain impor-
tant components, but these are hardly used. In the plan "Basic Directions," special
importance is attached to these problems. The content of the stipulated measures
takes into consideration the fact that a fuller, more rational use of resources is a
promising tendency of the econom.y of the ' 80s, which will be intensified on the basis
of new wastless and little-waste technologies in industry, the use of secondary re-
sources, a change in technology of transportation and storage of agricultural pro-
duce. It constitutes an independent line of intensiA.ication of public nroduction.
~ Its economic significance is also determined by the reduced natural qualities of
certain types of mineral raw materials, especial3.y iron ores th at require concen-
tration. In 1950, something like 37 percent of mined iron ore was concentrated; in
1980 the figure was 86.6 pe=cent. The implementation of these technological measures
has been accompanied by almost doubiing of capital investment per ton of used ore. -
In addition, this problem is not just economic, but also ecological.
In this connection, the problem of economy of inetal ia becoming increasingly acute;
it will be s olved through a change in the relation of rolled metal to castings, re-
organization of the structure of the metallurgical industry with the intention of -
loading more fully rolling mills. tJith the volume of inetal produced by our country, .
industry is experiencing its shortage because of irrational technology and a high
share of use of casting, which uses 1.5-fold more metal than with the use of rolled
metal. tiere a clear-cut direction of tpchnical policy is important in the field of -
met allurgy-- reorientation from an insufficiently economically based growth of
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new capacities to a frontal reconstruction of the exiating metallurgical set-
up and its basic reequipment. This would require really intenaive meChods of man-
agement and intensive technologies to replace extensive ones. And noC jlist in
metallurgy but also in sectors that are users ot metal, especially at en'terprises
for metalworking and machine building.
These sectors eonstitute the biggest user ancl at the aame time the biggast waster
- o� metal, although in the past .five-year plan, significant results in its ecoziomy
- were obtained in machi.ne buildir.g: almost each seventh ton of used metal was saved.
~ But at the same time, of each used ton of cast iron and steel, 266 kg goes to waste.
Shavings a?one made up 6.8 million tan:; of these a part is lost irrevocably. These
figures confirm in large degree the necessity fnr changes in the technology of
metalworking. They have heen rather fully written up in economic and special nub-
lications. In the plan "iiasic Directions," measures are provided that are meant to
r.educe in machine building and metalworking the relative share of expenditure of
ferrous netals by an average of 18-20 percent.
~
T'ne economy conaists not only of material resources and labor , the relations of
people in the production of material benefits, but also organization in the broadest
sense, including forms of functioning of production and a system of production ties,
ttie regulation of these ties and all activities in the use of the production appara-
tus and resources.
The economy of tne '70s and the start of the 180s is characterized by significant
changes in the organization of production; its forms are being improved, and produc-
tion and scientific-production associations are being created. But so far not all
of them have disclosed their possibilities; they exert a due influence on the effec-
tiveness of public production and growth o� labor productivity, especially in indus-
try and construction. The insufficient economic soundness of the size of production
associations, concentration of production and divisian of labor in them make them-
selves felt.
Frequently, there are included in production associations on I; enterprises and their
affiliates and design bureaus, which were related even prior to the association. In
the production structure,of such associations, where real collectivization of produc-
tian is renlaced by fornal renaming of an existing group o� pxoduction facilities
(plan t, its branch and des3gn bureau), little has changed. When the level of con-
centration and production specialization, technical equipmen t of the entexprise and
distribution of manpower remain unchanged, shifts in the results of economic activi
ity are hardly felt. Deficiencies in the operation of a number of a11-union indus-
trial associations are frequently due to the fact that these are transformed main
administrations, retaining their former ties and methods of operation of production.
Naturally, all this could not help bu t be felt on the level of management of produc-
tion. Consequently, as emphasized by L.I. Brezhnev, "what are needed are not just
any kind of association but those which actually raise to a new level soc3alist
collectivization of production and lab or, are based on the latest achievements of
science and technology, provide the highest productivity and give the maximum of
clieap production."
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At tlie preaent time, when the process of fonnation of production and especially
scientific-production association is growing, organization in today's economy is
assuming the forefront. Organization as managerial activity is that subjective
factor which the party may use to oppose the negative inf luence on the economy of
sucti obiective iactors as unfavorable weather conditions, thP exhaastion of old
mineral deposits and shift of ttie main centers of the extractive industry to the
East and ;lorth, reference to which was made at the October (1980) Plenum of the
CPSU Central Committee. These questions were first so broadly expressed in the
plan "Basic Directions."
Tne main core of economic organization is the structure of production operations
as well as the "conjunction" of the activity of organs of management of various
levels. Here one way is possible: relieving- of upper echelons with granting of
the rigtit to production elements, especially in the sphere of production of con-
sumer Koods, and solving questions relating to the products list and assortment
of items. At the same time, production associations must be sufficiently strong
to assume a certain risk in the introduction of new equipment for stabilizing the
satisfaction of social requirements in concrete products of the corraspor.ding qual-
ity. The concentration of production at assnciations should not be accompanied by
the negative consequences of a pcsition of prestige for some production operations
in the economy.
The organizaLional structure of VPO CAll-Union Production Associations] has to be
improved. The reasons for the organization of these or those production structures
should be carefully examined by the wide-ranging co!mnunity, especially by nroduc-
tion collectives with the participation of representatives of scientific institu-
tions for the purpose of making the necessary corrections in the structure of pro-
duction associations, their sizes and specialization. Measures are to be implemented,
as provided by the plan "Basic Directions," aimed at overcominp, departmental dis-
connectedness, and general schemes of wanagement of sectors in relation to the tasks
of the llth Five-Year Plan should be refined. It is important for this work to he
combined wit'r the analysis of the economic work experience of production associa-
tions and elucidation of the reasons for the insufficiently significant chanpes in
production efficiency for the purpose of making practically possihle the realiza-
tion of the most rational measures.
For improving the organization of production, the question of the relation of man-
agement practice to economtc policy is of imgortant signif3.cance. Uhen one e� r.er-
- prise renews production and its technology, while another, whicti possesses possibil-
ities for doing this, does not carry them out or when losses of raw materials or
agricultural produce are permitted, ithere are required in such cases more ttian mea-
sares for improvinp the motivation and indicators of management. "...Zt is neces-
sary," V.I. Lenin wrote,"to use all energies to unconditionally achieve one's own,
to acnievC the complete subordination of the apparatus to politics. Politics is a
rel.ation between classes--it determines the fate of the renublic. The apparatus,
as an auxiliary agency, the more �irm it is, the better it is suited for maneuver-
ing. But if it is not in a position to do this, it is good for nothing.i2 Tne
2. V.I. Lenin, "Polnoye sobraniye soctiineniy" [Complete Collection of [dorks],
Vol 43, pp 72-73.
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significance of this conclusion of Lenin grows under modern conditions in connec-
tion with the fact that today incomparably larKe matexial wealth is at the disposal
of ttie state. And this multiplies manqfold the responsibility of the state adminis-
trative apparatus for its use and for implementation of the partyts economic
policy.
There stems from this the problem of economic and technical activity of aper.ational
managers, their competence and ability to become oriented under an increasingly dif-
ficult economic situation and timely realistic reaction to changea imminent in the
economy, first of aZl in the technology of production, receipts of raw and other ma-
terials, change in demand and consequently in the structure of produced products.
The problem of activity and competence in management of economic processes is con-
nected to the ability of evaluating the possibility, inevitability and elimination
of risk in the adoption of an economic solution. It presupposes the independence
and cauability of the operational manager in rep.ard to disposition of material re-
sources adequate enough to permit unhindered solution of questions in the interest
- of successful production.
A system of management for an economy that is as large as the present economy o�
our country has to promote the development of operational initiative and oppose
the mushrooming of the administrative apparatus. It is necessary to restrict the
"tendency" of highly concentrated operational structures to be overgrown by auxil-
iary, nonnroduction services, structura L1y burdening the administrative system and
hindering the solution of operational questions with excessive coordinations. Some
all-union and republic associations have diverted to their staffs a portion of man-
agerial workers from amalgamated enterprises. As a result, an economically uniust-
ified removal has occurred of a portion af specialists from the sphere of production
directly managed by tiiem, and they have been shifted to a higher-costing but less
productive administraCive service. Such centralizat3.on o� management, accompanied
by a relative decrease in the number of specialists in production, is externally
- related to its concentration, but in reality the concentration is not talcing place
- everywhere.
The effectiveness of any administrative measures depends on tha solution of all
- these problems. Consequently particular attention was devoted by the October (1980)
Plenum of the CPSU Central Comm3.ttee to the ptoblems of management and its effec-
tiveness.
Economic tendeneies of the 180s, increrising demands on people and on the mechanism
of management, at the same time step up the adaptation of the economy to changing
natu�ral and social-economic developmental conditions and thus expand the country's
potentialities and its production apparatus. Our country enters the '80s with a
go*ierful economic and scientific-technical potential and highly skilled cadres.
The advances achieved in the field of ecanomic and social development will permit
the solution of still bigger tasks.
COPYIZIGHT: Izdateltstvo "Pravda", "Voprosy ekonomiki", 1981
~ 7697
� CSO: 182G/126
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PLANNING AND PLAN IMPLEMENTATION
IVANCHENKO DISCUSSES ROLE OF PLAN CONTROL FIGURES
Moscow VOPROSY EKONOMIKI in Russian Na 3, Mar 81 pp 61--69
[Article by V. Ivanchenko: "The Place of Control Figures in the Organization of
Planning"]
[Text] In the Accountability Report of the CPSU Central Committee to the 26th
party congress L. I. Brezhnev observed that "intensification of the economy,
increasing its efficiency, means above all, if we transfer this formula to the
language of practical affairs, that the results of production grow faster than
expenditures for production, that we are able to get more production witfi com-
paratively fewer resources. Planning, scientific-technical policy, and struc-
tural policy must be subordinated to solving this problem. Methods of economic
activity and management policy should also work toward efficiency." The system
of control figures is also subordinated to this goal. The July 1979 decree of
, the CPSU Central Committee and USSR Council of Ministers on improving planning
and the economic mechanism included the development of control figures as part
of the uniform procedure of drawing up future plans for economic and social de-
velopment of the country.
Control figures for the basic indicators and economic norms of the upcoming five-
- year plan are developed by USSR Gosplan and delivered to the ministries and de-
partments of the USSR and the Councils of Ministers of the Union republics.
When the enterprises, associations, and organizations receive the control
figures from their higher-ranking organizations, they work out draft five-year
plans of economic and social development (with distribution of assignments by
- years) and submit them to the higher-ranking organizations.
In conformity with the draft document "Basic Directions of Economic and Social
Development of the USSR for 1981-1985 and the Period Until 1990," control
figures are developed by USSR Gosplan for the upcoming five-year period with
distribution by years. The control figures characterize not only the basic in-
dicators for the most important sections of the plan, Tiut also social needs for
efficient use of labor, material, and financial resources. For the first time
they include economic norms, which make it possib.le as early as the stage of de-
velopment of the draft five-year plan to use the system of economic stimulation
to compile optimally intensive plans, employ existing production capacities
efficiently, and conserve resources allocated by the state.
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Providing scientifically substantiated control figures, including stable eco-
nomic norms, creates the prerequisites for the development of socialist compe-
tition and counter planning in the stage of writing draft plans at the enter-
prises and assaciations. In this case the control f igures are the starting
point not only for development of the draft five-year plan Gritfi distribution of
assignments by years, but also the first stage in the formation of economic
stimulation funds with due regard for the figures on socialist competition and
counter planning.
At the level of the ministries, departments, associations, enterprises, and organ--
izations the control figures interact with the system of progressive tecfinical-
economic norms and norms by types of work and expenditures of labor, raw and
processed ma.terials, and fuel-energy resources, and norms for the use of produc-
tion capacities and specific capital investment. TIzis per*nits fuller considera-
tion of all aspects of the reproduct3on process in thQ draft plan.
Completion of the development of enterprise passports will create a good analytic
b asis for fuller production potential, above all with respect to the use of pro-
duction capacities and describing the technical level of production.
Direct long-term economic links between enterprises and organizations are formed
(or refined) on the basis of control figures in the stage of development of
draft five-year pians. These links provide the foundation for the conclusion of
f ive-year and other contracts for the derivery of output, raw and processed ma-
terials, and assembly components.
It may be concluded from the above that control figures are expected to disclose
in concrete indicators and norms the b.asic goals, resources, and efficiency of
achievement of final results. Control figures are becoming an effective form of
' plan realization by combining key assignments and criteria "from above" witfi the
development of optimal draft plans "from below" with due regard for factors that
depend entirely on the initiative of the Iabor collective and the organization
of labor and production. Of course, control figures can only play this role if
they have a high level of scientific su6stantiation. A great deal remains to be
_ done to achieve this.
Above all we must master contemporary methods of scientific analysis and determi-
nation of the economic and social efficiency of the projected system of ineasures
in the fields of scientific-technical progress, streamlining management, and or-
ganization of labor and production so that their national economic and cost ac-
counting impacts,in their interrelated aspect, are reflected in tfie basic
direcCions of economic and social development of the country, the plans of sec-
tors, associations, enterprises, and organizations, tfie system of control
f igures, and the changes over time in progre4sive norms and standards.
Substantiation of control figures refers to a consolidated determination of the
expected national economic and cost accounting impacts from scientific-tecfinical
measures in such a way that each particular measure is substantiated tiy concrete
economic calculations during the development of the five-year plan "from above"
and "from below."
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What is new here is that the technology and organization of plauning, ahove all
the compilation of five-year plans, Fias a clearly defined stage of investiga-
tion and evaluation of the consequences of scientific-tecfinical measures, im-
provements in management, and the organization of labor and production as the
- determining factors in fundamental changes in the proportions and structure of
production and consumption, the technical and organizational levels of produc--
ticn, and production efficiency. This approacTi makes it possible to formulate
and resolve the problem of developing all sections of the plan witfi comprefiensive
use of scientific and technical advances.
Defining the system of scientific-technical measures and their socioeconomic con-
sequences is a fundamentally new approach. It does not preclude a continued
search for optimal solutions during the development of consolidated balances and
proportions and it does not replace so-called traditional metfiods of compiling
all sections of the plan in parallel.
As concerns tradition, the concept of "traditional" methods of planning has often
been used in a negative sense recently and opposed to various innovations in ap- '
proaches to the development of plans and the use of particular indicators. I
believe that in all spheres of lif e and social development the concept of
"traditions" is most often linked to everything that is best, to that which has
been selected by people over the centuries, becomes common property, and is care-
fully preserved by later generations. Traditions provide the foundation for the
continued development of culture, art, crafts, and all facets of life.
Planning is no exception in this objective process. Despite the historically
short period of time it has existed, planning has its own traditions, based on
Marxist-Leninist economic doctrine and Leninist principles of management and
economic activity. The socialist economies have developed stable planning tra-
ditions: the balance method; the combination of current and long-range plans,
and of sectorial and territorial planning; the bolstering of centralism and de-
velopment of the economic independence and initiative of labor collectives;
socialist competition; and, counter planning.
If we exclude the occurrence of volunteerism in the determination of control
figures and begin from a scientific substantiation of state needs for the de-
velopment and efficiency of production in the interests of all society, the
establishment of control figures is one of the traditional methods of planning.
It is being resurrected today and receiving further development under condi-
tions where the five-year plan is becoming the principal form of planning and
economic 3ctivity at all levels from the ministry to the enterprise.
In this sense, it is not correct, for example, to classify planning from the
level achieved as a traditional method. A starting point is objectively neces-
sary for any process because movement is determined by a start, a fintsh, the
time that passes between them, and other parampters. Planning has a special
stage of the technological process of plan development, the base (starting)
situation, where socioeconomic processes are viewed as continuous. Only in
this sense can we refer to traditions. Making the tiase the only method of de-
termining plan assignments is no longer a tradition, it is a distortion of the
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tradition that violates methodological principlea of planning work. To reject
it does not mean rejecting ttwrough analysis of the base, the starting point for
the new phase of economic and social development.
The ministries, departments, associations, and enterpr.ises are developing drafta
of the llth Five Year Plan based on the control figures delivered to them using
analysis of base data and the long-term prospects for development of production.
But what are the control figures that are being delivered to the ministries,
associations, and enterprises? The development of control figures by years of
the five-year plan is a major step toward improving future planning and reor-
ganizing the economic mechanism on the basis of stable indicators and economic
norms of the five-year plan. The control figures include many new indicators
and norms. Foremost among them are net output (normative output), profit,
ceilings on capital investment and number of workers and employees, norms for the
wages fund and formation of economic stimulation fiinde, and assignments to re-
duce the use of manual labor.
Let us look more closely at the make-up of the control figures for the basic plan
section for 1981-1985 and special features of their development. Tlie section on
the development of science and technoingy begins the system of control figures.
It envisions asaignments for proportion of output in tfie fiigfiest quality cate-
gory and basic indicators for the technical level of production and the most
important types of output produced by sectors of industry and the national
economy.
The establishment of control f.igures for technical level of production and output
is an important measure to improve the planning of the development of science and
technology. These assignments cover: the development of production of output on
the basis of new (up-to-date) equipment and technology; improving tfie structure
of production by development of the production of highly productive macfiinery
and equipment, progressive, high-quality materials and substitutes, and the like;
raisir_g the level of inechanization and automation of production processes; in-
creasing the production output in installations with large unit capacities; re-
ducing specific expenditures of the most important material and other resources
per unit of output; raising the level of use of capacities af installations, re-
cycling production waste, and several other lines of activity witfi due regard
for the special characteristics of the sectors and plants.
At the present time the control figures do not have an indicator for the eco-
nomic impact from scientific-technical measures. Solving the problems of
strengthening the role of intensive factors of economic development, raising
production effic3.ency and labor productivity, and reducing the capital-output
ratio and material-intensiveness require an integrated economic evaluation of
the return, of the final result of all scientific-technical and other measures
that secure a savings of social labor. The new "Methodological Guidelines" for
writing state plans for economic and social development of the USSR devote con-
siderable attention to the questions of planning economic and social impact on
the basis of scientific-technical progress and technical re-equipping of pro-
duction. The system of control figures should in the future envision a
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comprehensive evaluation of the iiicrease ir the efficiency of publlc production
on the basis of ineasures related to new equipment, improving managen,ent, and
scientific organization of labor and production.
To a certain extent the assignment for raising labor productivity and profit and
reducing norms of expenditures for the most important types of material re- ~
soucres characterize growth in production efficiency. But tfiey must be based on
an economic evaluation of all the factors in raising the efficiency of social
labor, above all the "return" from plan measures related to scientific-
technical progress, implementation of the system of comprehensive programs, and
reconstruction and technical re-equipping of production associations and enter-
prises.
This approach to the development of control figures is a matter for the future,
but preparation for it must be done today.
A number of n.inistries have already accumulated experience witfi planning the
national economic and cost accounting impact of scientific-technical measueres
by years of the five-year plan, including the development, incorporation, pro-
duction, and introduction of new equipment in the form of a total impact on the
producer and user of the new equipment (savings of production expenditures,
growth in profit, savings of concrete types of resources, and repayment of capi-
tal investment).
In the stage o.f development of control figures, of course, it is difficult to
determine the expected impact from all scientific-technical measures based on
calculations for each measure taken separately. Such calcu.Lations can be made
on the condition that a snecial phase of preliminary development of pro3ections
for the full program of scientific-technical measures is singled out during sub-
stantiation of the conception and Basic Directions. If there ts no such stage
in the planning procedure, and this wae the case during development of the llth
Five-Year Plan, in our opinion it is correct to use norms of the efficiency of
capital investment in new equipment and reconstruction and technical re-equipping
as the criterion uf efficiency of exnenditures for these purposes when substan-
tiating the control figures. This means that the state limits requests for
capital investment and the choice of areas of application with due regard for
maximucr, permissible payback time wh.ich, in this case,works counter to the trend
toward growth in the capital-intensiveness of production.
Payback times on capital investment in industry have increased sharply in re-
cent years owing to the decrease in the prime cost of output. In 1975 the
payback time was 11.1 years, while in 1977 it exceeded 25 years. This was a
result of the extremely low rate of decline in expenditures per ruble of com-
modity output (0.3 percent in 1977) and the high rate of growth in the cost of a
unit of increase in fixed industrial production capital.* This is evidence of
* See T. Khachaturov, "Ways to Increase the Efficiency of Capital Investment,"
VOPROSY EKONOMIKI No 7, 1979, p 124.
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the fail}ire to use reserves such as concentration of capital investment and accel-
eration of the construction, introduction, and incorporation of new capacities,
increasing rhe proportion of capital investment for technical re-equipping and
reconstruction of enterprises, improvi.ng the structure of production, and in--
creasing standards with respect to quality characteristics, the level of usP of
new equipment and tecfinology, and the production capacities of existing enter-
prises.
In other words, we are speaking of the necessity of a fundamental improvement in
the quality aspects of new equipment and its use. The volume of production of
new equipment grows each year. Between 1976 and 1979 almost 11.000 new types of
machinery, equipment, instruments, and means of automation were incorporated in
production and put into series production; 30 percent of the fixed production
capital of industry was replaced. Nonetheless, the return from the new equipment
remains low. One of the principal reasons is that supply of this equipment to
industrial sectors is not done on a comprehensive basis. Planning for raising
the technical level of production and reconstructing and re-equipping enterprises
is sti11 poorly coordinated with planning the production of new equipment. It
would seem that comprehensive programa should be developed to saturate enterprises
with new and ultramodern equipment as the result of series and mass production of
such equipment. These programs would make it possible to plan the efficiency of
scientific-technical progress not only for particular measures but also on the
basis of a planned and comprehensive rise in the technical level of sectors.
Therefore, more expedient solutions could be found to be problems of accelerating
the payback of capital investment based on growth in profit and the output-
capital ratio.
Changes in the indicators of the output-capital ratio become niore important each
year. In 1980, for examule, increasing the production of output by one kopeck pex
ruble of fised industrial capital meant the additional production of 5 billion
rubles worth of output, 800,000 tons of steel, and 4 million tons of coal. Un-
fortunately, in the stage of the development of control figures we have not yet
been able to obtain an economic assessment of the return from the systen of pro-
grams which are to be developed and carried out in the llth Five-Year Plan.
This cannot help lowering the level of substantiation of control figures.
The figures envision assignments for an average decrease in norms of expenditures
of raw and processed materials, fuel, and heat and electrical enerey in produc-
tion and set norms for the use of boiler-furnace fuel and savings of fuel-energy
resources, including both savings achieved by an average decrease in expenditure
norms and savings of basic types of material resources in construction. A com-
prehensive evaluation of tfie consequences of scientific-technical progress for
all the programs and measures is needed to raise the Jevel of scientific sub-
stantiation of changes in norms and standards.
The control assi,gnments for labor and social development are directly linke@ to
the first secti.on of the control figures. Control figures can be used to es-
tablish: assignments for growth in labor productiva.ty, in industry, construc-
tion, and railroad transportation; a ceiling on the number of workers and
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employees and the percentage of industrial workers engaged in manual labor;
standards for formation of the material incentive fund and the fund for socio-
cultural measures and housing construction. The control ffgures include norms
for wage expenditures per ruble of output (or norme for the total amount of
the wages fund). Assignments for reducing manual labor are presented in the
_ form of the proportion of workers engaged in manual labor, considerir.g that
changes in this indicator by years of the five-year plan reflect the level of
mechanized labor achieved and change in the ratio between manual and mechanized
labor.
Such norms are very important for compiling stepped-up plans if we consider that
norms for formation of the material incentive fund, whic: usually cover an aver-
age of 8-10 percent of the total wages fund, cannot exercise a determining
influence on change in the indicators of production and labor productivity or
stimulate a decline in the number of workers and employees compared to ceilings.
The control figures devote a great deal of attention to measures of social de-
velopment.
In addition to assignments for labor and social development (to reduce the use
of ranual labor and form r.he material incentive fund), a system of indicators
is envisioned for growth in re*ail trades the volume of domestic services, the
~ development of public health and preschool institutions, increase in the number
of schoolchildren, growth in the amount of printed matter produced, and intro-
duction of housing space. There shouldalso be here a system of indicators for
environmental protection and rational use of natural resources (with more than
12 areas of activity) and a program of ineasures to protect and reproduce natural
features.
As for cost indicator3 of industrial development, the control figures determine
growth and commodity output in 1 January 1975 prices and rates (in the struc-
ture of the 1980 plan), while for ministries that have transferred to planning
net output, growth in net (normative) output is used. Most of the ministries,
above all Lnachine building, will begin using the indicator of net (normative)
output in 1982, after the ratification of new whoZesale prices which include
norms of net output. All ministries of processing industry will begin using
this indicator in 1982. It has already been introduced at more than 2,500
enterprises.
The control figures envision significant changes for the most impor.tant types of
- industrial output in physical terms. Assignments are outlined by years of the
five-year plan for more than 400 types of output, including more than 160 types
of machine building output. New measures of output are used for many types of
articles and make it possible to characterize both quantitative and qualitative
parameters. Thus, the indicators of the most important types of steel pipe are
given in two measurements (thousands of running meters and thousands of tons)
while indicators for thermoplastic pipes and pipe parts are expressed in thou-
sands of tons and thousands of ki�ometers.
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A stmilar solution must be adopted for cast iron pressure pipes, which.continue
to be planned in thousands of tons. In addition, solutions have not yet been
_ found for all the types of rolled products.
Machine building has begun wider use of such units as sets per thousand
kilowatts of electricity, thousands of rons of steam per hour, articles per
thousand horsP power. millions of rubles per thousand tons, articles per
million rublPs, millions of ampere-hours per thousand tons of lead (for storage
batteries), and others.
But even here not all articles by any means are described i.n qualitative terms
in the assignments and plans that are delivered. In our opinion, a possible
alternative for solving the problem of quality characteristics for the broad
assortment of rolled products, machin.e tools, and other articles for which the
necessary units of ineasure have not yet been found is mandatory conclusion of
contracts for the delivery of such output to customers with stipulation of
quality parameters so that performance of the deliveries becomes an effective
tool to monitor whether the output produced and delivered meets the customer's
needs. But even in those cases where units such as items and tons are em-
ployed in the structure of ineasures of physical indicators it is important to
insure conditions so that they will not be used to evaluate and stimulate the
work of collectives.
Financial indicators have been included in control figures for the first t:ime.
The five-year plan broken down by years envisions ratification of a total sum
of profit (reduction in prime cost for certain sectors), and a general norm for
distribution of profit, payments to the budget, and appropriations for the state
budget (For conditions of transferring ministries to cost accounting).
The control figures envision assignments for reducing prime cost. Profit is de-
termined by calculation in this stage. The profit indicator is essential be-
cause the norms for the formation of economic stimulafiion funds and revision of
the entire mechanism of cost accounting relations on the basis of the five-year
plan are impossible without using this indicator, which defines the final result
of financial-management activity. For ministries th.at have transferred to
sector cost accounting, it woutd ba important for the control figures *_o sr.ipti-
late r_he norm for profit distribution also. This would Gignificantly enhance
the level of economic stimular,.ion to develop optimal plans.
It must be considered, however, that the development of elaborate five-year
financial plans and norms is a new and very complex activity. Dozens of factors
influence profit indicators, some depending on the activities of the particular
enterprise and some not. The structure of output produced, the quality of raw
and processed materials, timeliness of intruduction of capacities and supplying
them with material resources, and change in the need for particular types of
output affect this indicator. It is extremely difficult to consider all of them
in the stage of development of controt figures or even When ratifying the five-
year plan. It would appear necessary for the ministries and industrial associ-
ations to have significant reserves ta insure the relative stability of the indi-
catars and economic norms of the plan. In special caseg it will be necessary to
ratify assignments and norms over again.
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v
At the same titne, there must be a thnrough. review of the question of the de- "
gree of centralization of accounts with the budget. Under conditions of a
five-year financial plan and establishment of norms for profit distribution and
absol.ute amcunts of budget payments it is hardly possible to insure tfie sta-
bility of indicators, norms, and working capital at eacfi individual enterprise,
including small enterprises, without centralizing final fisancial accounting at
the level of the all-Union production association and ministries. At the same
time, both the cost accounting system of the ministries as a whole and economic
accountability for the final result of the work of a sector inevitablv demand
this approach. The instructions on profit distribution adopted rhus far do not
clearly answer this question.
The control figures for capital construction require special treatment. They en-
vision delivering ceilings on state capital investment and construction-
installation work with a breakdown for production and nonproduction purposes to -
USSR ministries and departments and the Councils of Ministers of the Union
republics. According to the decree, the five-year plan should not only set a
ceiling on capital investment as a whole when ratifying indicators for capital
construction, but also allocate resources for technical re-equipping and re-
construction of existing enterprises. The lack of such an assignment in the
control figures weakens the centralized influence on implementation of state
policy in the area of improving the structure of capital investment and raising
its efj'ir_iency. This is a complex problem, but it must be solved.
We must not underestimate the importance of the work that has been done to com-
pile control figures for the llth Five-Year Plan. But this work must be viewed
as the first attemp4 to shape a system of control figures for future planning.
A certain degree of coiisolidation in the control figures and the system of pro-
gressive norm.l and standards imposes high requirements for the quality of work
on dra�t f ive-year plans at all levels, above all in the primary management
element. It is important to secure broader introduction of the progressive know-
how of innovators, the initiatives of collectives, counter planning, and social-
ist competition to promote a more thorough search for and use of production
reserves and raise its efficiency.
In connection with the forthcoming transition, during the llth Five-Year Plan,
to the use of a number of new indicators, the essential base must be accumu-
lated this year, along with experience in the manipulation of such indicators.
In our opinion, a correct procedure was followed by those ministries which in
1980, preparing to switch to the indicator of net output, organized an experi-
mental test taking account of specific features of production and made
parallel calculations of production volumes and other indicators calculated by
normative net output.
Construction is using hypothezical net output, on an experimental basis, for
planning l.abar productjvity only. This indicator has already been set for 1981
to make the tranGition t:) the indicator of commodity construction output in the
llth Five-Xear Plan. This complex, painstaking work will make ir possible to
gain experience, determine the range of initial norms and standards, and
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identify stortcomings that must fie eliminated in tfie organization of construc-
tion work. Work is also being dane to switcFi the ulanning, accounting, and
evaluation of tfie activities and stimulation oS� construction organizations tliat
belong to large construction associations to product~on assignments, schedule$)
and indicators within the associations tfiat are or*'.ented to final construction
output and tfie efficient work of the association as a whole.
The development of economic stimulation runds in the llth Five Year Plan on the
- basis of the control figures and economic norms established by years of the
five-year plan is particularly complex. On the one hand, the resources of
these funds are considered in the plan, in proportions, for solving social
problems. On the other hand, they are tied to many quality indicators of the
plan (results of work) as both factor and final indicators and are sub3ect to
the influence of many processes that are difficult to consider snd manage,
especially for a p eriod of five years.
The stage of development of control figures is the first stage of inter-
relating planning calculations (beginning from national economic critaria and
proportions), the sizes of economic stimulation funds, and the correspondino
norms for their formation (to be more correct, planning calculations) at the
levels of the ministry, association, and enterprise. This is a highly complex
stage which is being undertaken for the first time in our planning experience.
The purpose is to strengthen the role of economic norms in mobilizing reserves to
write stepped-up plans "from below." The problem is to deliver to the minis-
tries, associations, and enterprises substantiated indicators and norms so
that stable economic norms for fund formation by years of the five-year plan
can be determined and financial plans and mutual relations between cost ac-
counting organizations and the budget compiled in conformity with them.
Po5si61e mistakes in this stage may weaken the impact of the stimulating func-
tions of the norms and improperly put certain enterprises in more or less
favorable conditions. It would seem that the solution to this problem should
be sought by holding a certain p art of stimulation resources and funds in re-
serve in this stage and precisely analyzing the factors which must not be taken
into account in reviewing change in indicators and establishing economic no rms.
Well-founded conclusions on further improvement in the development of control
figures in planning can be reached on the basis of a scientific summarization of
our initial experience with their use in the llth Five Year Plan.
COPYRIGHT: Izdatel'stvo "Yravda", "Voprosy ekonomiki", 3.981
~ 11,176
CSO: 1820/158
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,
It-XEST?'ENT, PRICES, BUllGET AND FINANCE
FIiIAiVCIAL, CREDIT LEVERS Ift ECONOMIC 1IA~ZAGETtEi1T DESCR.IBED
rfoscow VOPRUSY EKUNOMIKI in Russian No 2, Feb 81 pp 128-139
[Article by C. Bazarova and V. Pashkovskiy: "Financial-Credit Levers in the System
of :4anagement" J
[Text] Improvement of the economic mechanism is indissolubly connected to strength- ~
ening of the role of financial-credit levers and stimuli in raisinfi e�ficiency of -
production and qua],ity of work.
A great deal of attention is devoted to the solution of this task in a decree of
the CPSU Central Committee and the USSP. Council of Ministers "On ImprovinR Planning
and Strengthening the Influence of the Economic Mechanism on Raising Efficiency of
Production and Quality of Work." The plan of the CPSU Central Committee for the
26th Party Congress "Basic lli.rections of Economic and Social llevelopment of the USSP.
for 1981-1985 and the Period to 1990" emphasizes the necessity " to enhance the role
of financial-credit levers and stimuli in intensification of production, strengtti-
ening cost accounting and increasin g the regime of economy. To actively use them in
the solution of tasks of speeding up the creation and introduction of high-efficiency
new equipment and also removing obsolete equipment from production, increasina output
of consumer goods and rendering services to the population, mobilizing intraopera-
tional reserves and liquidating nonproductive expendituY�es and losses and to increase
responsibility for violation of finance discipline,"
Tne financial-credit levers and stimuli, having for their basis objectively exieting
financial-credit relations and reflecting their principal features, appear as active
instruments of planned management of the economy.
Financial-credit rel.ations present a specific sphere of the production relations of
socialisM connected with the distritution and re,41stribution of the agQregate so-
cial product and national income. They encompass a significant nart of commodity-
monetary relationstiips, mediating circulation and turnove r of capiral in the �unc-
tioning parts of the national economy in the process of er.panded reproduction. Fi-
nances and credit play a marked role in planned regulation of the production Pro-
cess on a countrywide scale and provide the poasibility to society through a sys-
tem of monetary funds to put into motion labor and material resources, to concen-
trate ttiem on the decisive sectors of the economy and to exercise control ovPr their
use. Having a common economic basis, finances and credit are differentiated accord-
- ing to sources and character of movement of funds. In contrast to fina.ncial
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relationships arising in the course of formation and utilization of special purpose
monetary funds on permanent principles, credit relaCions constitute a form of irrev-
ocable redistribution of funds.
Througn the medium of the mechanism of financing and credit extension, distribution -
of profit and payments into the budget, repayment of loans and payment of interest,
formation and utilization of the amortization fund and other monetary funds and re-
serves, the distribution and redistribtuion of the gross social product and national
income are carr3ed out; financial resources are formed and expended at all levels of
management of the economy. In this complex process, finances and credit exert an
i.nfluence on development of production, improvement of qualitative and quantitative
indicators of management. curtailment of nonproductive expenditures and loeses and
increasing revenues o� the state; they provide the possibility of exercising control
over tl:e effective use of labor, material and financial resources.
t,'ieh sucti a big diversity of f-?nancial-credit levers and stimuli, an important role
is played by ttieir classification, including the purpose of allocation of funds and
levels of control. In connection with the differences inherent in finances and
credit as special, relatively independent forms of monetary relations, it would be
propp-r to examine separately "financial levers and stimuli" and "credit levers and
stinuli." But their examination in the aggregate has its advantages. It makes it
possible to disclose more completely general patterns and to determine new tenden-
cies in the development of finances and credit and ttie tasks facinp., Chem. This is
particularly important for the analysis of the mechanism of operation of a sector of
industry, within the framework of cohich (on the level of associations and enter-
prises) the interaction of financial-crediC relations is most close.
:conomic levers and stimuli, including financial-cxedit ones, develop with improve-
ment of the economic mechanism depending on changes of objective social-economic
conditions. The reorgariixa'tion of the economic mechanism now being carried out has
required the introduction of appropriate ct,anges in the system of financial-credit
levers and stimuli. During the llth Five-Year Plan an expansion is to take place of
the sphere of operation of individual fir.ancial levers employing, formerly experi-
r.ientally, primarily the normative method of profit distribution. The new procedure
of financing work relating to science and technology will become universal, and the
meclianism of operaeion of individual financial instruments (payments for capital,
f ormation and use of e conomi c-in cent ive funds) is changing; the sizes of individual
forns of payments and installments (interest for credit, rates of s oci al- insurance
deductions, of piece payment for cut down trees, the deductions for compensation of
state outlays for geological prospacting work) are changing; new financial-credit
levers (payment for water taken by industrial enterprises for their water systems,
new forms of credit extension and payments) are being introduced and so on.
The improvement of financial--credit levers and stimuli is done in close interrela-
tion with measures for improvement of planning, further development of cost account-
ing and rep,ulation of price formation.
In t]Ze field of financial-credit planning as a component part of national-economic
planning, the task is now being solved of transition from short-term plans (annual,
quarterly) to medium-range (five-year) plans as a basic foxm of planning and in a
number ef instances to plans developed for a more extended length. The transition
from annual to five-year planning encompa.gses both the system of consolidated plans
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and balances developed at the top level o� economic management (the consolidated
financial plan of the state, the balance of monetary receipts and expenditures of
the population, consulidated calculations of state-budget receipts and expenditures,
long-term and short-term credits) and the entire system of �inancial plane and bal-
ances of ministriea, associations, enterprises and orRanizations.
It was considered for a long time that financial-credit indicators, subjected to the
action of many factors (not only physical-material but also price), could not be ad-
vantageously calculated for a number of years ahead, since their reliability becomes
less certain with lengthening of the planning period, while the effectiveness of
affecting production is reduced. With acceleration of the tempo of scientific-
tec}inical progress,whose consequences are difficult to take into account over the
long term, witli changes in the conditions of extraction and delivery of fuel and raw-
materinl resources, with the development of inCernational division of labor and fox-
eign economic ties and in connection with other factors, the difficulties of long-
range planning are increased. At the same time, the indicated difficulties are in-
_ creasingly balanced by the accumulated experience of planning and management of the
socialist econocrry as a whole and of its individual spheres and by the enrichment of
the actual planning resources (development of the program-goal method, wide use of
norms,employment of modern electronic equipment, introduction of automated control
systems). Solution of the tasks of long-term planninq is aided also by the qeneral
improvement of the system of economic ties, introduction into the practice of inter-
relations of enterprises and associations of long-term agreements and contracts,
bolstering of the system of economic stimuli for the fulfillment of outlined plans
and economic responsibility for the violation of adopted commitments and so on.
The transition to five-year plans will mal:e it possible to increase the influence
of finances and credit on growth of production and its increased effectiveness; at
the same time it will contribute to increasing the effectiveness of the system of
control as a whole, as well as of plan balance and a fuller coordination of all its
sections. Under the conditions of raising the material well-being of the popula-
tion and growth of the needs and possibilities of their satisfaction, maior signif-
icance is being given to the development of five-year balances of the income and
expenditures of the population as a means of improving the mechanism of monetarv
_ circulation, strengthening of the b alance of its proportions and assurinR atabilitv
through the creation of the neceasary reserves.
Enhancement of ttie role of the five-year plan and the development of cost-accountinF
relationsiiips in the sectors of the national economy will create conditions for the
wide use of a system of long-range nozms in financial practice.
Durjnc, thP_ llttl Five-Year Plan, a gradual transition will be car.ried out of indus-
trial mi.nistries, associations and enterprises to a normattve method of profit dis-
tribtition, wtiich Yias undergone experimental verification at a number of ministries--
Ministry of Instrument Making Automation Equipment and Control Systems, riinistry of
Tractor and Agricultural Mactiine Euilding, Ministry of Heaw and Transport Machine
Building, elinistry of Power tiachine Building and riinistry of Electrical Equipment
Industry. 1,1ith thE first year of the new five-year plan, this method of profit
distribution will be used in tcvo other ministries: the Ministry of Construction,
hoad and Municipal Machine rilsilding and trie t�iinistry of Machine Building for Animal
Jusoandry and Fodder Production. Ite broader adoption will become possible with the
introduction of new wtiolesale prices and rates.
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The use of the normative method of profit distribution, increasing Che responsibil-
ity of production associations and enterprises, industrial associations and minis-
tries for tlie results of t"eir financial-operational activity, increases their in-
terest in the most effective use of material and financial reaources. The increased
responsibility aC all levels--from enterpriaes to ministries--is achieved with the
help of obligatory paying into the budget of a planned sum of payments regardless
of the actual results achieved. Absolute sizes of deductiona from profit into the
budget for ministries transferred to this method will be estab lished in five-year
plans spread out by years. If in any year of a five-year plan, the approved profit
plan is not fulfilled, payments will nevertheless be made in the full amount into the
budget through a commensurate reduction of profit remaining at the diaposal of the
ministry. Witti expansion of ttie sphere of use of the normative method of profit
distribution, the principles of cost-accounting financing of planned outlays will
find correspondingly broader application. Normative profit deductions calculated on
tlie basis of five-year plan indicators and left at the disposal of the ministry or
association presuppose more complete mobilization of all existing owned sources of
financing of planned expenditures. At the same time, conditions are created for
the broader utilization of long-Cerm bank credit in the financing of capital
inves tr.uent.
It should be pointed out that the sphere of use of the normative method of profiC
distribution is rather narraw at present. It has inadequately touched upon the bas-
ic (primary) element--production associations and enterprises, and much work remains
to be done in this direction. Among those transferred to the new method, there is
not a single heavy-industry ministry; they do not have either ministries of light or
i! food industry with the exception of repub lic ministries, a portion of which have
been shifted to this method with the first year of the new five-year plan. The
readiness of industrial ministries to work on the basis of cost-account3ng methods
depends not only on objective factors (for the extractive industry this is connected
first of all with the introduction of new wholesale prices and rates and for the
food and partly the light industry--with improvement of the conditions of suppZy of
raw and other materials). The readiness for such transfer is largely determined by
the level of work of ministries on improving the financial position of dependent
enterprises and elimination of disproporticros in the development of subsectors and
Uolstering economic (including finance) services. A higher level for this work
would make it possible to significanCly reduce the time of cha.nging over to progres-
sive metliods of profit distribution and financing of planned expenditures.
The expansion of the sphere of use of the normative method of profit distribution
provided by the decree of 12 July 1979 is combined with strengthening of the stim-
ulating role of payment for capital as well as a certain change in the role and
place of payments �rom profit. Payment for capital will as befor.e be made into the
state budget from balence profit in the form of priority payment. At the same time,
in accordance with the new procedure payment for above-norm noncredited stocks of
physical assets and uninstalled equipment will he made from profit left at the dis-
posal of associations and enterprises. This will increase their incentive in re-
ducing stocks of materials and equipment whose sizes in a number of sectors are
most significant at the present time. Enterprises and associations with fulfill-
ment of production and profit plans with a smaller value of capital than preacribed
~ are granted the right to leave aC their disposal savinRs relative to p ayment for
capital. Here installments of paymencs into the budget are reduced by the sum of
savings prescribed for the ministry as a whole in accordance with the total norm of
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i)rofit distribution. 13oosting of the stimulatinR role of payment for capital. wi.ll
also contribute to a reduction of the list of production capital on the basis of
Grnich benefits are pranted. During the llth I'ive-Year Plan, it is expected that
tte collection of fixed payments will be expanded for highly profitable products
for production purposes that liave been put out for an extended time. This measure
~ will primarily affect enterprises of the Processing industry, includinp nossibly
r.;achine building wliere payments were formerly not employed.
Idith the transfer of ministries to the normative method of Profit distribution,
there will be a change in the character of such a payment (quite large in size) as
paymPnts of free residuum of profit into the budRet. Renamed deductions from prcr
fit, it becomes an element of absolute (guaranteed) sum of payments, which will
tiave to t:e made in full size into the budget and in case of underfulfillment of the
profit plan. The size of this payment will be determined as part of the total sum
of payments from profit w;th the approval of the five-year plan.
Simultaneously with the intraduction of the new wholesale prices, new, hieher rates
of deductions for social insurance will Uegin to be used, the size of niece payments
for cuC down trees, deductions for the reimbursement of state outlays for geolor-
ical prospecting worl:; payment will also be introduced for water withdrawn bv in-
dustrial enterprises from water supply systems. The new rates of deductions for so-
cial iilsurance,, Which are being just about doubled for basic industrial sectors, wi.ll
cor.tribute to a nore accurate determination of e conomic gains from the introduction
of ne!r equipment and stronger incentives in the use of manpower. The introdur.tion
of paynent for water withcirawn from water supply systers is aimed at more rational
use of this natural resource and at conservation of the environment. Up to the
present time, expenriitures for the construction and operation of water supply sys-
ter.,s :rcre basically mac:e from state-budget funds, and exvenditure of water was not
reflected in the Production cost of G-ater-using enterprises. The increase in the
size of piece nayrents for cut doim trees will be of important si�nifj.cance for
- fuller reimhursement of expenditures on reforsstation and cor.pensation of outlays
of the state for tt:ese purposes. State budget funds are being used at the nresent
time for tcie financitip. o-F a sifinificant nortion of outlays for ,oeoloeical. nrosnect-
ir.~z wori~ (i.n excess of u0 percent). Improvements in the s,ystem of navments into
tiie budFet Eor geolopLcal prospectina wor'r:. is primarily connected wit'i fuller in-
clusioc; in the production cost and wiiolesale nrices of expendtturPS of enterPrises
of the extractive industries for these purposes.
In accordance with the decree of the CPSli Central Committee and the USSK ('ouncil of
'iir.isters "Un Improving Planning and Strenpthening the Influence of the I:conomic
'lechanisn on Raisinp Efficiency of Production and Quality of 14ork," fin ancial l.ev-
ers of management of scientific-technical progress are heing strenpthened on the
basis of improvement of planning and organization of work in the f.ield of science
and tec:inology. In this connection important significance should be attached to
the new procedure of financinQ of scientific-technical work on the basis of the com-
mon fund for development of scieuce and tectinology created on the basis of lonn-term
norms through deductions from profit of subordinate associations and enterprises.
The new form of financing constitutes one of the elements of the so-called cost-
accounting orqanization of work for science and technology on the basis of supply
authorizations, wliich has undergone extended experimental testing at a number of in-
dustrial sectors. Like the normative wethod of profit distribution, the new proceci-
ure of financing scientific-research work, development and introduction of new
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equiprnent rind new types of products has for its aira increasinp the accountability
and motivation of ministries, associations, enterprises fxrd scientific organizations
in sPeeding up scientific-technical progress in the sector.
The establishment of norr,is for deductions from profit inCo the common fund for ttie
development of science and technology in percent of the indicator of commoditx or
normative net production will make it possible to tie in the size of the fund to
the fin al indicators of the operation of enterprises and associations. In the case
of their improvement compared to the targets of the five-year plan, the size of the
cotmnon fund may be increased, which will coffi�ensurately expand the possibilities of
conducting scientific-tectinical work. Moreover, there naw also goes into the coirmon
fund far development o� science and technology a part of additional profit formed
from bonus additions to prices cf products for efficiency and quality. The expanded
output of such products will contribute to increasing the size of t}ie common fund
for development of science and technolop,y.
Ttie new system of financing scientific-technical work from the comnon fund f or devel-
opment of science and technoloay has replaced the old system based on a multiplicitv
of independent sources (budget allocations, deductions from production cost of pro-
ducts for scientific-research work, money from the fund for assimilaCion of new
equipment and so on). Scientific-research, planninp.--and-design and technolopical ,
worl, are done cvith funds from the common fund; outlays connected with the develop-
ment and assimtlation of new types of products and manufacturing processes and the
introduction of scientific organization of labor are reimbursed; additional expend- -
itures connected with the improvement of production quality and higher costs of net�7
products in the �irst years of production are covered. This fund may be used at
associations, enterprises and organizations of machine buildinR for the Payment of
one-tine bonuses for the development, assimilation and mass production o� especially
important 3nd hignly efficient types of equipment and machines and also f or the cre-
ation and adoptirnn of basically new manuf acturing processes.
Industrial ministries are thus permiCted to turn over a portion of the money of the
coramon fund for the development of science and technology for disposal by industrial
associations and large production and scientific-production associations. Ministries
are given the right to use up to 20 percent of the common fund for the development
of science and technology for the creation of the required scientific and technical
stockpile.
Deductions into the common fund for the development of science and technology zom-
prise a significant portion o� ttie profit of those ministries where it is created.
Thus, in 1979., for 15 industrial ministries the relative share of deductions for
these purposes in the total sum of their profits amounted to on the averaf-'e 12.7
percent. The relative share of these deductions is highest at the tiinistry of
Electrical Equipment Industry (26.1 percent), the Ministry of Tractor and Agricult-
ural Machine Building (25.4 percent), the Ministry of Power riachine Building (20.8
perr_ent), the Ministry of lIeavy and Transport 1`fachine I3uilding (22.8 percent) and
the :iinistry of Instrument Making, Automation Equipment and Control Systems (12.5
percent).
Zhe creation of the common fund does not mean, however, that other sources of fi-
nancing work connected with the development of science and technology in the sec-
tors wi 11 not be used. For conducting especially important scientific-rese arch
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requiririg significant outlays and implementing complex scientific-technical pro-
grams whose importance has grown significantly, fund from the state budget may be
used in addition to money from the commwn fund for the development of science and
technology. Credit extension for this work is being expanded.
As of 1 January 1951, new normative documents are in force regulatin~ the nrocedure
of formation and expenditure of money from economic-incentive funds. They reflect
measures aimed at enhancing the role of economic-incentive funds in the solution of
pressing social-economic tasks of the llth Five-Year Plan.
Strengthening of the role of bonus funds wi11 be helped by the normative method of
their formation in percent of profit (estimated) and a closer tie-in of bonus funds
to ttie fulfillment of delivery plans, g.rowth of labor productivit,y and improvement
of production quality. Measures are no less important for strengthening the rigtits
of enterprises and associations in the use of money from economi c-incentive f.unds,
includinP the fund for the development of production. In 1980, 13.7 nercent of
state capital investment was provided from the fund for development of production
and other non-centralized sources.
For the development of the system of cost-accountinp relationships and expansion of
the economic functions of ministries and industrial associations, importance sip.nif.-
icance is to be found in raising the level of centralization of a portion of the
fin ancial resources of enterprises and associations for the purpose of solvinp- com-
mon problems of a sector and financial assistance to individual enterprises. Thus,
rninistries, departments and industrial enterprises have been Rranted the rijzht to
create from amortization deductions intended for capital repairs a reserve in the
amount of 15 percent of the total sum of these deductians to be used at those asso-
ciations and enterprises tnat do not have enough of their awn funds for capital re-
pairs. A ministry can a?.so transfer a portion of the money of economic-incentive
funds to the reserve, while industrial associations can create centralized bonus
fu;:ds and a fLmd for tlle development of production of up to 15 percent of the total
sum of f-aci of these funds. Maximum sizes of deductions from profit for the form--
ation of ttie reserve of financial aid liave been fixed in an amount var7i_nh from
1 to 4 nercent.
in t:le stimulation cf nroduct--on efficiency, a najor role is pIayed not only by
financial ijut also by credit levers. At the same time, the importance of credit
nethods of redistribution of funds Froias witli each year. The econor.dc basis for
t:ie redistrirution functions of credit lies in the change of the character and
increased size of financial resources in the national economy as well as the exist-
ence of rathe r developed cost-accounting relationships.
1. See "L'asic Positions on ttie Formation and Expenditure of the Material-Incentive
I'lind anci the Fund for Social-Cultural 1`leasures and Housing, Construction ($onus
"rtmds) for 1981-1985 in Industry" and also "Instruction on tlle Procedure of rorma-
tion and Utilization of the Resources of the Fund for Development of Production at
Froduction Associations, Enterprises and Organizations of Industry, Construction-
Installation and Planning-Prospectiniy Organizations."
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Ttie ctiange in the character of financial resources is manifested first of all in
extension of the period of their use. This applies both to the resources of enter-
prises, associations and sectors and also to centralized funds of monetary re-
sources. The increase in the size of financial resources at the disposal of enter-
prises and operational organizations can be judged to a certain degree by the res-
i.dues of temporarily free monetary resources to be found in their nayment accounts.
These residues increased by 27.8 percent from 1976 to 1979.
One of the manifestations of the expansion of redistribution relationshivs in the
national economy is an increase in the share of the national income accumulated
ttirough the state budget. From 1976 to 1979 it grew from 60.2 to 64.2 percent. The
increase in financial resources is also shoom by the growth of the population's
savings and insurance funds. In relation to the national economy, the size of de-
posits in savings banks by the population from 1976 to 1979 increased from 26.7 to
33.4 percent.
Expansion of redistribution relationships and also the implementation in recent
years of ineasures for strengthening the cost-accounting independence of enterprises
(which was especially marked under the conditions of reorganization of raanaRement of
the economy and the creation of production and induatrial associations) serves as an
economic basis for the strengthening of credit relations. The character of the loan
fund, and consequently of credit relationships, has been significantly influenced by
the increase in the length of time used for credit extension of monetary resourceq,
wm ich permits more active employment of credits for the development of the national
economy. I3ut the influence of credit levers are boosLing efficiency of management
depencls not only and not so much on the size of credits extended to enterprises as
on their types and the conditions of issue and repayment, that is, on the existing
mechanism of credit extension. The direction of thE mechanism of credit extension
is determined by the tasks of economic development at each concrete staRe.
In conformity with the requirements for the development of the economy advanced at
tne 24th and 25th CPSU Congresses and subsequently concretized in the decisions of
alenums of the CPSU Central Committee and in decrees of the iJSSR Council of Minis-
ters, tiie credit raechanism has been aimed at stimulating intensive develonrtent of
the economy, acceleration of the rate of scientific-technical progress and raisinp
the living standard of the Soviet people. These tasks, as can be dracqn from the
"Basic Directions of Economic and Social Development of the USSR for 1981-1985 and
the Period to 19909" remain central to the 11th Five-Year Plan and in the future.
ror their solution, new kinds of credits were introduced, the procedure of granting
and using formerly established credits was chanQed and the procedure of credit
planninfi tias been improved.
In t}ie process of credit planning, the basic directions of investments of credits
by types are determined; the size and main receivers are established within the sec-
torial framework, ttat is, the basis of credit relationships in the forthcomin;*
pEriod is laid. At the same time, it should be kept in mind that, as a part of
financial resources, credit exercises an influence on production-operational activ-
ity of enterprises together with the operation of other financial levers and in
close connection with them. For this reason it is important to determine in nlan-
nir.g this connection and ttie place of each source of financing, which is a prere-
quisite for their rational use. The planning tie-in of budget and credit resources
provided by the decree of the CPSU Central Committee and the tJnSR Council of
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~tinisters on improvinn, the economic mechanism makes it possible during the cor.mil.a-
tion of the country's consolidated financial balance to determine more precisely
the :;ize of monetary resources needed by the economy. An important role in this
can be played by the compilation of a single financial-credit plan at each enter-
prifAe. 'ihe development of a methodology for the comnilation of such a nlan is an
urgent ta,k of finance and bank organs.
But an economically based compilation of a credit plan is only one of the conditions
of effective utilizatfon of credit resources. Of no less importance are the effi-
cient functioning of ttle mechanism of credit extension, the creation of economical-
ly based condition of issue and repayment of loans and establishment of the size
and procedure of charping interest for the use of credit. This applies both to
stlort-term credits for current outlays and to long-term credits in the investment
sphere.
_ For the purpose of increasing the influence of credit on the operation o� enter-
prises and bolsterint, of their cost-accounting accountability, the USSR State Eank
in recent years (esnecially after the decree of the USSR Council of Ministers "On
Certain *Seasures for Imnrovement of the Procedure of Credit T:xtension and Payments
_ in tt:e `iational Economy" in 1973) expanded the ranv,e of objectives of short-term
credit estension and ctianged 'ttie conditions of granting a nur.sber of loans. In par-
ticular, the USSR State Banl; at the present, in addition to loans granted as before
in relation to above-plan reserves of commodity stocks whose development is connect-
ed witIi seasonal fluctuations of receipts of raw materials and sales of products,
the carryinp- over of times for the production of individual items, the noncoincid-
ence of times of accumulation of ptiysical assets and gr(nath of the norm of own worl:-
ing capital and tlie like, widely grants credits for the elimination of defecrG in
operational and financial activity= for stocks of extra, unnecessary and old cor~-
modity stocks wtien enterprises implement real measures f.or their sal.e; for the temp-
orary compensation of a shortage of ov~n working capital. The indicated ].oans are
arran-ed iii credit apreements bet%,?een institutions of the i1SSR State Iiank and enter-
. drises that snecifically stipulate the time periods �or renayment of tlle credits and
tiieir usc.
Tlie 1;:);;lt State 'anl_ is devot;np a nreat deal of attention at the nresent tirle to tile
creation of favorable conditions �or accelerating scientific-teclinical proPress.
I'or thi:; erid, since 1973 credit extension for expenditurEs at nrior.itv Projects lias
'oeen expanded--for getting goin~y newly oPerating enternrises, production facilities,
s,iops and assem;)lies. Such expenditu.-z.,. include costs of adiusting work and compre-
iiensive testinc of equipment durinn the start-up period. Credit is also extended
for expenses rclatin;z to the preparation and development of new tyres of Products
and tiie introduction of new manufacturinQ nrocesses: for planning and desiQn, f.or
tiie developnent of aprocess for the manufacture of a new nroduct, for sliiftins-, and
readjustinp. equiPment, for ttie faurication of experimental samoles.
Reequinment of production is favorably affected by credits granted by the USSR. State
i;anlc for above-norm production stocks, remains of unfinistied nroduction and finished
products in instances wtere the accumulation of these stocks is connected with the
manufacture of new products and raising the quality of the items.
P.mong the important measures outlined by the decree for the improvement of the econ-
omic meclianism, there may be also included the granting to ministries and departments
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ttie riglit to obtain credit for work financed from the resources of the common fund
for tIe development of science and technology under conditions where the receipt of
money from ttiis fund and the size of outlays made on the basis of this fund do not
coincide. Credit is also issued to production associations and enternrises for the
payment of worl: financed with money from the fund for the development of science and
tectinologv when the indicated work is completed in a shorter period than is snecified
- by the plan; for the imPlementation of highly effective measures for the development
of science and technology not provided by the plan with pa,yment of the credit and
interest within two years from the date of its issue at the expense of monev of the
common fund for the development of science and technology. This credit is granted
under a guarantee of ministries, departments and all-union industrial associations.
The issue of the indicated credits together with carrying out of the unification of
sources of financinR of expenditures for the development of science and technolo".
- will contribute to the development of work on technical improvement of production.
In ttiis regard, an active role is bound to be played also by credits issued for the
implementation of highly effective measures relating, to the output of new p raducts
and tiie raising of the quality of the produced items above the limit of state capi-
tal investment. Sucti credits are issued for a period of up to two years and are
paid back from the additional profit resulting from the implementation of the mea-
sures for wliich the credits were extended.
Expenditures for expansion of the production of consumer goods and imnrovement ef.
- coiisumer services also are covered by credit under the same conditions. With the
determination of the period of reimbursement of outlays and sources for paying back
of credit, it is permitted to take into account in addition to extra profits up to
5() percent of the turnover tax obtained from the sale of consumer Roods produced
because of the credit-extension measures. Such credits provide an additional econ-
omic effect. As pointed out by chairman V. Alkhimov of the board of the 11SSR State
I3ank, "in 1979 alone 13,669 such facilities went into operation because of above-
plan credit. Institutions of the State Bank granted about one billion rub les of
credits, iahicti made it possible to put out an additional production in the amount of
2.4 billion rubles and to receive an additional nrofit in excess of 600 mi llfon
rubles for the year."2
The creation of f avorable conditions for the continued improvement of the material-
technical base of production and improving the quality and reducinR the time of
york of a capital character will also contribute to carrying out the present shift-
ing of contractors to settlements for completed finishe3 facilities ("turnkey") and
ciianging in this connection the nrocedure of providinp them with worl:ing capital
and aLolition of customer advances and shiftinp., of contractors to straight bank
credit extension for expenditures xelating to unfinished production of construction
and installation work to the planned period of turning over of a completely construct-
ed euterprise or complex. Such a procedure of payments and credit extension is also
being introduced for planning organizations. All this opens up the Possib ility in
tile invesCment sphere of creating a single credit-payment mechanism that takes into
account relationships of clients, contractors, plannin� organizations and supnliers
2. V. Alktiimov, "The USSR Bankinp System in Operation" (KOtMNIST, r;o 8, 1980,
p 35).
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of ecjuipment and increases the economic accountaUility of tte indicated organizations
for the timely carrying out of cons truc ti on-ins tall ation work and their reimbursement
within a fixed tirne.
The establishment of complex credit relations in the investment sphere larfiely de-
pends on the solution of the question of expansion of long-term credit extension SPar
clients. The presently existing system of forming one's (x,7n house funds for capital
investnent, bud�et financing and credit-extension conditions hinde r the possibilitti�
of expanding lorig-term credit extension to customers. It probably would make sense
regarding planning to restrict the possibility of intra and interdepartmental redis-�
tribution of funds, to create a wider f:ield of operation for long-term credits, to
change the conditions of their issue and repayment and, in particular, to estab-
lish a longer period for their operation as proposed by ma.ny economists.
An important role in the imorovement of credit relationships and strengthening, of
cost accounting is bound to be played by such a significant element of the credit
meclianism as the interest levied for loan use.
t,s of 1 January 1981, there have been in operation new interest rates for the use
of bank credit. Their special feature is the greater differentiation depending on the
- diaracter of credit, the conditions and the lenRth of time of its use. In particu-
lar, interest rates have been raised f or loans connected with overcoming deviations
from the normal course of operational-financial activity of en terp rises: for temp-
orary making up of an insuffictency of own working canital--from 2-7 to 8 percent,
- for payment of wages--from 2-3 to 5 percent, for opening up of letters of credit
and for profit redistribution-from 1-4 to 5 percent and so on. nifferentiation of
interes t rates has been sign{ ~icAntly expanded for the use of lonr-tPrm cred3ts ; the
lowest rate was established "or credits in the case of ahead-of-schedule completion
of work; somewhat higher w),tti completian of ineasures in the planned period; the
level of interest rises s}: ~;r�-.;~y (twofold or more) in the case of violation of pJ.anned
periods for completion of woi?.; the highest interest is exacted for overdue nayments
for loans.
At ttic samc time interest rates nave been standardized for sepaxate uniform credits
regardless of sectorial affiliation of borro-winR enterprises. This nrincipallv an�-
plies to credits connected with completion of nayments. In conformity with CilESe.
rates (.5 and lU percent), payment has also been introduced for the use of .loans
above the established planned sizes and control figures in the case of credit exten-
sion from special loan accounts. Such a standardizatiou is an important conditl.on
for tlie imnler.:entation of a unified economically based credit nolicy.
='!ie oneration of ir.teresr For creclit wilt hP significar:tly increrseci i~' :tn accent-
~u,l.~ forr.i oE itr, nayr.!~i:t f.cir c-ec'its iii conr.ection ~~itl_ unsatisfactorr onr,rati.on n~'
an oT;terorise is founc: t::roupL tthe r.eans of the mater.ia.l ineentive funo.
hic'.her fir.e for overdue Payments on deliverec cor.unoditv stocks, 1)rovide(1 ser771ces
and comnlated worl_, varyinn from ).03 to 0.04 nercent of the sum of tne overduc, pav-
mpnt for each day of nonpayment will be of stiniulatinp value. The fine increase is
mear.t to cornpensate to a certain deRree losses from hreach of the norrral course of
T
tlie process of reproduction due to nonpayments bv buvers.
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':'al:tnf~ into account tlie importance of ensurinP timely nayments of bills for deliv-
ercd corrmodity stocks and services, a sif*nificant change was introduced in 1980 in
the procedure of granting to buyers credits that have to be paid �or. In order to
nrotect ttie interests of the supplier, oiho precisely fulf.i].ls his contractuAl ob-
lifiations, it was established that when payment came due and tlie purchaser tiad n
temporary lacl: of funds, ttie payment docum.ents accepted by tim would be paid by the
bank from a loan passed on to the purchaser, with renayment of the loan in 60 davs
in the order established for payment for commodity stocks and the charging of 5 ner-
cent annual interest. l?n expiration of the indicated time period, ttie credit exten-
sion is continued at a charge of 10 percent. The introduction of this procedure of
providin- credit to be paid for means the granting of significant benefits to ruyers;
it takes into account the growing cost-accounting independence and accountability o`
buyers. ?iut sucli special benefits in credit Qranting, aside from improved payment
discipline, may also exert a negative influence on the operational-f inancial activitv
of enternrises if they are granted to cover deficiencies in the worl: of operational
organs. It is therefore very important to take account in the issue of such credits
the character of the financial difficulties of enterprises and orRanizations. In the
case of financial difficulties existinp. for a long time, the issue of such credits is
economically unjustified.
- An ir,rportant condition of rational use of short-term credit is provision to enter-
prises and organizations of omm working capital in a normal size. For this end, it
was proposed to ministries to work out in coordinat3,on with the USSP. P4lnistry of Fi-
nance and to approve economically based working-capital norms and during the llth
Five-Year Plan to b ring on-hand working capital into accord with these norms, with the
use in case of necessity of bank credit in place of part of the norm. Fulfillment
of the indicated requirement will make it possible to provide a proper combination
of own and borrowed funds in the operational turnover and a timely and full return
of the credits received Uv the enterprise, which will increase the influence of the
credit mectianism on the operation of enterprises and associations.
LIST OF RECONfMEPiDED LITERATURE
1. V.I. I.enin, "Will the State Power Be Retained by the Bolsheviks?" ("Polnoye
sobraniye sochineniy" [Complete Collection of Works], p 34).
2. V.I. Lenin, "lloklad na I Vsorossiyskom s"yezde predstaviteley finansoWkh
otdelov Sovetov 18 maya 1918" [Address at the First All-Russian Congress o�
I:epresentatives of the Financial Departments of Soviets on 18 May 1918]
("Polnoye sobraniye sochineniy", op. cit., Vol 36).
3. "t4aterialy XXV s"yezda [CPSS" [Materials of the 25th CPSU Congress]. Politizdat,
1976.
4. Decree of the CPSU Central Committee and the USSR Council of Ministers of 12
,Tuly 1979 "Ob uluclishenii i usilenii vozdeystviya khozyaystvennogo mekhanizma
na povusheniye effektivnosti proizvodstva i kachestva raUoty" [(}n Imnroving
Planning and Strengthening the Influence of the Economic Piechanism on Raising
F:fficiency of Production and Quality of Work]. Politizdat, 1979.
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5. Plan of the CPSU Central Committee for the 26th Party Congress "Basic Directions
of USSR Economic and Social llevelopment for 1981-1985 and the Period to 1990"
(PRAVllA, 2 llec 1980).
6. L.I. Brezhnev, "Speech at the Plenum of the CPSU Central Committee of 21 October
1980" (E1:ONOMICHESfiAYA GAZETA, No 43, 1980).
7. "On t}ie State Plan of USSR Economic and Social Development for 1981 and on the
Progress of Fulfillment of the State Plan of USSR Economic and Social bevelop-
ment in 1980. P.eport of Chairman of Gosplan USSR N.K. Baybakov" (EY,ONOPtICfIE-
St;Al'A GA'LETA, Plo 44, 1980).
8. "On the USSR State i3udget for 1981 and on the Fulfillment of the State Budget
for 1979. Report of LSSR Minister of Finance V.F. Garguzov" (EKONOMICHFSY.AYA
GAZLTA, No 44, 1980).
9. V.S. Alkhimov, "T:ze i1SSR Banking System in Operation" (KOMM[JNIST, No 8, 1980).
10. V.V. Dementsev, "The USSR State Budget for 1980 and Tasks of Finance Organs"
(I'INANSY SSSR, No 1, 1980, p 3).
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in the System af Sector Control]. Izdatel'stvo "Fkonomika", 1980.
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System of Economic Stimulation]. Izdatellstvo "Finansy", 1979.
13. S.A. Sitaryan, "Upravleniye i pribyl"' [Management and Profit]. Izdatel'stvo
",naniye", 1979.
14. "Sovershenstvovaniye khozyaystvennogo mekhanizma" [Improvement of the Econ.omic
riechanism]. Izdatel'stvo "Pravda", 1980.
15. "Sovershenstvovaniye khozraschetnogo mekhanizma razvitiya proizvodstva" [Im-
provement of the Cost-Accounting Mechanism of Development of Production].
Edited by V.G. Starodubrovskiy and R.A. Otsason. Izdatellstvo "Ekonomika",
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COPYRIGiiT: Izdatel'stvo "Pravda", "Voprosy ekonomiki", 1981
7697
CSO; 1820/128 END
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