JPRS ID: 9011 USSR REPORT ECONOMIC AFFAIRS

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• Collection: JPRS
• Document Number (FOIA) /ESDN (CREST): CIA-RDP82-00850R000200070004-8
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• Content Type: REPORTS

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' 7

2 RPRIL 1980 CFOUO 7r80) 1 OF 1
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JPRS L/9011
2 A~ril 1980
US~R Re ort
p
E~ONOMIC AFFAiRS -
CFOUO 7/80)
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JPRS L/9011 _
2 April 1980
USSR REPORT
ECONOMIC AFFAIRS _
_ (FOUO 7/80)
CONTENTS PAGE
ECONOMIC POLICY, ORGANIZATION AND MANAGII~fEENT
Careful Management of Scientific-Technical Progress Advocated
(VOPROSY EKONOMIKI, Jan 80) 1 -
Efficiency of New Equipment, by I,. Gatovskiy
Incentives in Electrical Equipment Industry,
by V. Astaf'yev
Improvement of the Capital Investment Yield Sought
(V. Krasovskiy; VOPROSY EY~ONOMIKI, Jan 80) 30
- a - [III - U55R - 3 FOUO]
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ECONOMIC POI,ICY, ORG.INIZATION AND MANGII~IENT
CARg'UL MANAGENIENT OF SCIENTIFIC-TECHNICAL PROGRESS ADVOCATID
_ Efficiency of New Equipment
Moscow VOPROSY EKONOMIKI in Russian No l, Jan 80 pp 27-38
' LArticle by L. Gatovskiy, corresponding memloer of the USSR Academy of Sci-
ences: "Management of the EfPiciency oP Scientific and Technical Prog-
ress'J
LTex~ Improvement in the pro~ection, planning and ~timulat~on of the
growth of efficiency of new equipmient e~nd in the mQter~al, financ~al and
organizationel facilities for this growth is a significant factor in an
increase in the efficiency of all eociel production. Therefore, deter- _
mination of the ways of solving these problems at the present ste,ge oc-
cupied one of the important places in the decree of t,he Pi~ Crlegntr~~ Com- ~
mittee and the USSR Council of Miniaters "On Improving
Intensifying the Effect of the Economic Mechaniam on Enhancing the Effi-
ciency of Production and the Quslity af Work." Let us dwell on some
trends in the implementation of the indicated decree in connection with
the above-mentioned problems of managing the efPiciency of new equipment.
Enhancing the Efficiency and Quality of New Equip~ment at the Stages of
Its Selection, Production and Utilization
As~the maturity of the socialist econou~y increases, the requirements on
- the level of efficiency and quelity of ne~r equipment rise considera~ily.
However, these requirements, which are ob~ectively determined by the de-
velopment of the economy, are not yet realized suPficiently.
According to the Methods (Basic Principlea) of Determination of the Econ-
a~ic Efficiency of New Equipment, its ability to aurpass the indicatars
of the ePficiency and quality of the best foreign equipment e,nd that de-
aigned in the USSR and, if such planned studies are not ave,ilable and if
it is impossible to utilize foreign experience, to surpass the best indi-
cators of similar equipmez~t elready available in the USSR is the condi-
, tion for its introduction into production. The methoda proceed from the _
superiority of new equipment over equipm~ent "having the lowest reduced
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expenditures per unit of output (operation) turned out by neans of this
equipment (ibid, paragraph 10). These requirements are conaiderably
lower in the Basic Principles of the Procedure for ~he Certificetion of _
the Output of Machine Building e~nd Other Indset�rie~l oectors. The high-
est quality ce.tegory e6nd the Badge of Quelity are elso conferred on ar-
ticles (including new equipment) if they do not surpass the indicatora
of the best available models, but only correspond to them.
With regard to new output (including new equipment), according to the
data of the All-Union Scientific Researcti In3titute oP Standardization, -
in 1978 much lesa than one-half of the ~ew types of articles were in-
cluded in the highest quslity category. Meanwhile, GOST LA1.1-Union
5tate Standex~ 15.041-73 establishes that output sub~ect to introduction _
- into production should meet the requirements placed on the highest qual-
ity category. Thus, the present requirements on the level of efficiency _
and quelfty of new equipment are not ftiilfilled, which attests to iche in-
sufPicient efficiency of the mechanism of their implementation in the =
practice of planning and management. Such a mechanisn must be set up on
the basis of the July (1979) decree of the CP`-U Csntral Con,mittee and the ~
USSR Council of Ministers.
~t is primarily a matter of a realisti^ implementation of the following -
principle: As a rule, each ~ype of new equipanent ehould meet the level
of the highest category~of the quality of output in accordance with the ~
requirements on the selection of high-quality new equipment contalned in
the methods oP determination of the economic efPiciency of new eq~.pment a1d -
" in the principlea of the certification of the quality of output. It is -
importe,nt to specify the conditions of conferment of the highest quality
category, coordinating them with sociel and economic efficiency, and to
systematicQl.ly exerci.se the etricteat, according to the d~cree of the
CPSU Central Committee and the USSR Council of Ministers, control over
the oUservance of the required conditions. ~'or an actual guarantee of
the fulfillment of this principle it is necessa.~y to ~reate organically _
coordinated economic and organizati~na~ prerequisites.
Ensuring in scientific research institutes and technical units suffi- -
ciently important advantages .for the development of sub~ects of ma~or na- -
tional economic significance should play ~ paramount role for the subae- -
quent selection of highly efficient equipment. As is well known, the
decree opens up great opportunities for intensiPying the incentives foi~
the development and output of such equ~.pment.
With the aosolutely positive role oP the development of economic account-
ability in scientific research institutes and technical unita an3 with
- the trensition to paying for them according to completed studies, there
is a need for effic~.ent measures to overcome the still widespread rela-
ti~~e "advantage" of minor sub~ects directed toward negligible inefficient _
- correct3ons for obsolete equipment, not toward a significant qualitative
_ renovation of production. Owing to tY~e difference in the time and extent
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of stimulation, preference can be given to minor sub~ects, b~cauae they
are realized, paid for and stimulated much more rapidl.y than m~.~or eub-
~ects (with longer periods oP performence and completion oP studies and
their implementation in the presence of significant search elements, a
certain risk with regard to a guaranteed derivation of the envisaged re-
sults and eo forth). That is wt~y it is important, on the basis of the
payment to scientific research ~nstitutes and technical units for com- -
pleted studies, in practice, to enaure prompt preferential incentives for
the development of ma~or sub~ects as they are executed (within th~ esti- ~
mated cost of work) at the expense of i~nternal sources a~d credit.
, The wide dissemination of certification (with provision o.f a nondepart-
mental approach) of technical develop~ents, begir.ning wii~h technical as- _
_ signments, can become the prerequisite necessary for an improvement in
the quality and efPiciency of the new equipment selected for intr ~duction ,
into production. In our opinion, the following should the ob~ects of -
- such certification: direction of developments to~rsrd the requ9.~�cments
placed on the highest quality category; substantiation of the plan with ~
the appropriate sta.ndards of expenditures, results and periods oP reali-
zation of both the production and operation of equipment (in particulax,
_ detectfon of cases of exaggeration of the planned effect as campared with
the capabilitiea realistically inherent in it);3 concl~sion of the plan,
. finish of technical speciPications, reliability of tests and completion
- of the experimente.l model. A mande,tory application of the certification
of quality to induatrial proceeses and the introduction of the appropriate -
_ GOST establiahing the aystem and the procedure for its executi~n can be a
factor contributing to the selection of more efficient, new equipment. _
To improve t~ie quality of ~he selected new equipment, it is important to
- greatly intensi.fy in its planning the role of technical assignmeri~a so
that certification may have a prompt ePfect on the development of highly -
ePficient equipment. This will prevent the shortcomings in development -
that it is too late to eliminate at the stage of technical specifica~ions.
, Technical assignments should see to it that e, gi~ren plan far new equipment
meets the level of the highest quality category.4 ~
The fact that plans do not take sufficiently into consideration the spe-
cific needs of the spheres of cona~ption often hampers the planning and
selection of equipment at such a level. Indicators of new equipment that
by no means can be utilized under the gpecific conditions of t~ia sphere _
of its operation are planned in a number of cases. For example, often
- high-quality lathes, or machine tools with numerical program control, are
not used with a sufficient load (s~etimes 15 to 20 percent) and it is
economically more ad�vantageous (in the absence of other varieties oP high-
quality new equipment, which meet the specific needs of the spheres of
consumption to a greater extent) to re~ect their use owing to inefficiency _
under these conditions. -
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~ This also attests to the narrowixess of the list ("range") of new machine
~ tools, machines, equipment, instruments, apparatus and so forth. In our
opinion, in the planning of new equipment there is an urgent need for
- detailed descriptions and calculations of the specific conditions and
needs of each of the basic spheres of operation oP given equipment.5 At .
the same time, an economically substant'_ated expansion o: the liat of
machines and other means of labor, of ~ype sizes ana varieties of base
modele and of their specielized modifications will me.ke it posaible to
- gree,tly raise the coefficient oP utilization of equipment and ite quQlity
and efficiency. Such an expanaion of the list ehould be combined with
the introduction of systems of machines, with a significant develop~ent
of the staczdardization oP parta, units and technology and with the ovex-
. coming oP the serious lag ~xisting here. Al1 this will facilitate, ac- `
celerate and lower the coat of the mastering and introduction of new e-
quipment and will diminish the "losses" of the effect at these stages ea
- compared with the level of the efPect at the planning stage.
The national economic effect and ita real derivation axe determined ac-
coraing to the specific spheres of application. Improvement in the qual-
ity and efficiency of new equipment mesns a batter satisfaction oF spe-
cific needs and the attainment of th~ finel result. A lack of the proper _
consideration of the specific nature of the needs of the spheres of con-
sumption leads to a decline in the national economic efficiency and qual-
- ity of new equipment. If equipment directed toward the needs, for ex-
_ ample, of primaxily only one sphere of application has the highest qual-
ity category and the needs of other (important) spheres e.re ignored or
not taken into consideration suPficiently, in such a ai.tuation some con-
sumers are forced to uae not new, but less expensive and more suitable
equipment.
Modification of the models of new equipment in accordance with the spe-
- cific needs o� the spheres of consumption presupposes that with regard to
these needs new equipment will be ple:nned at the level of the highest .
quality category. Naturally, howe~rer, for adaptation to the need of a -
given sphere varieties of models of new equipment belonging to the First, -
not the highest, category can be developed in some cases. Yet, on the
_ whole, the transition to a systematic consideration of the specific nar
ture of the spheres of application in combination with the direction to~ _
ward the highest category, to be sure, will lead to its much wider dis-
semi:~atio:~.
Of indisputable intereat is the experience of the Moscow Krasnyy Proleta- ,
- riy Machine Tool Building Association in the development on the basis of
~ the base model of the 16K20 screw cutting lathe of a"family" of ma.cr.ine
tools intended for varioua type~ of production with a reflecti~n in the
modiPications of machine tools of the specific industrial conditions of a
given sphere of consumption. Depending on the specific nature of needs
machine tools were equipped with certain additional devices and attach-
~ ments. Such a"family" of machine tools included more than 40 mo~ifica-
tions unified into appropriate group4. An additional output of more than
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1,000 perts included in the mod.ificat3ons of machine tools was prepaxed.
- For this purpose the wa.y of development ~f the unification and standard-
ization of parts, not of a decrease in the techni~cal level of production,
was chosen. A total of 1+25 to ~+60 parts of the base model were taken for
~ each of the modifications of the machine tool. As a result, the level of
unification for a number of models exceeded 90 percer.t.6
Consideration of sacial needs forms the esaPnce of the program-oriented
- approach to planning directed toward an increase in the contribution of
scientific and technical progress to the final national economic results
and toward an improvement in the social and economic efficiency of social
production. In accordance with the decree of the CPSU Central Committee
and the USSR Council of Ministers there is a need for a mechanism of a
real transformation of scientific and technical intersectoriel progrems,
which culminatc: in the 4evelopment of experimental models and of the first
ser3es of new equipment, into scientific and production progrems, which
also include the processes of saturating the netional econo~r with this
equipment and of retooling the fixed capital of conaumere. This will have
a signific~r_t effect on a rise in the technical end economic level of the
national economy, of sectors and of associations (ent._rprises). Such
programs should become the key elements of general economic ple,n~.
The further development of work on the creation of diPferentiated systems
of physical, value and labor standards of both expenditures and of tech-
nical, economic and social results is the foundation for an improvement in
the management of scientific and technice,l progress. Standards, being in-
tegral elements oP the formation of the effect and quality of new equip-
ment, should be systematically calculated in the 'cime aspect in the form
of indicators of time saving and in the annual dynamics of this saving
within five-yeax plans. Scientific ar~d technical progress means a sys-
tematic increase in the requirements on the standards of reduction in ex-
penditures. At present, however, approxi.matel,y one-fifth of the produc-
- tion associations and industrial enterprises do not fulfill the plan for
lowering production costs. Acceleration of technical progress is the ba-
sis for overcoming such tendencies.
Well-organized calculati~ns of standaxds will serve as an important factor
in a successful concl~~3~on of the transfer, scheduled by the decree for
1980, of scientific research instituteg, technical units, asaociations
~ (enterprises) and industrial ministries to the economically accountable
syatem of organization of work on the development, mastering and intro-
duon of new equipmexit on the basi~ of schedule-orders (contracts). This
is a fundamentally impor~ant transition to e11-encomgassing ma.nagement of
- all the units of scientific and production cycles in combine,tion with gen-
' eral economic management. This requires a greater cobperation of the urdts
of scientific and production cycles (fro~ reseaxch to the distribution oP
- new equipment) ensuring the following: reduction or elimination of the
gaps in time during the transfer oP the results of activity of the pre~ed-
ing unit to the next one; simultaneous (paxallel) worlc of allied unita on
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the development (utilizatior.) of a given technical article (for exemple,
combination in time of a partial preparation of' production with the de-
velopment of a technical plan); reduction of the length of time of the -
, developments, mastering and introduction of new equipment and of the at-
- tainment of the outlined technical-economi^ and social indicators.
It is especially important to systematically coordinate all-encompassing
managenent according to the schedule-order method with the needs of e-
quipment, that is, to fully include in the schedule-order the final unit-- ~
ensuring the best conditions for the utilization of equipment in the
spheres of consumption. For this purpose it is advisable to introduce
into the structure of schedule-orders supplements 3irected toward their -
gre~.ter orientation toward the consideration of the needs of the spheres
of application oi new equipment. It is also advante,geous to aFply the `
schedule-order method to intersectoriel scientific and production programs. -
The decree notes the need to direct schedule-orders toward the final re- -
sults, including toward the national economic effect of new equipment, -
which is determined according to the sphere of consurlpticn.
The overall approach to the planning and stimulation of scientific and
technical progress expressed in all-encompassing management of the cycle
"research-technical developments-production of new equip*nent-its applica-
tion" according to the schedule-ord~~r method should also be applied to the
plans (and programs) for the e~cpansion of tl~e technical retooling and re-
construction of sectors and associations (enterprises) outlined by the de-
cree. This task will require the coordination of the rise in the techni-
cal and economic level of productlve capital (means and sub~ects of labor),
industrial processes and output. Hence the need for a planned combina-
tion, directed toward the final results, of intersectorial and intrasec-
torial relations among the following: a) suppliers of ineans of produc-
tion for the output of new equipment, b) manufe,cturers of this equipment
and c} its consumers. The overall nature of the technical retooling of
association3 (enterprises) will make it possible to eliminate the tend-
encies toward the underutilization the effect from new equipment, in
which the pre3ervatfon of obsolete equipment lowers the possibilities for -
the realization of the ef~ect of new equipment.
The outlined technical retoolin~ of sectors directed towaxd an increase in
the efficiency of scientific and technical progress and all social pro- ~
duction places increased demands on the development of machine building, -
on the improvement in its structure and on the rates of renovation of the
output of machinery and eq,uipment. In a number of ine,chine building plants -
during the last period the proportion�(in value) of this production at the
age of the first 3 years of output beceme lower than at the age of 10 _
years and over.7 In 1978 the withdrawal of ine.chinery and equipment (in
percent of their pool in terms of value), on the average, throughout the '
industry comprised 2.4, including in machine building, 2, in ~he chemical
and petrochemical industry, 2 and in ferrous metallurgy, 1.3� It should
also be taken into consideration that, usually, capital repe.irs do not
incltide the technical renovation of machinery and equi~ent.
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As a result, technical progress is implemented mainly through the expan-
_ sion of the pool of equipment, but with regard to the most intensive way,
that is, replacement of obsolete equipment with new equipment, there is
an obvious lag. An excessive expansion of the pool of equipment, which
replaces the processes of technical renovation of existing machines, first,
hampers the growth of labor productivity of workers engaged in the opera-
tion of obsolete equipment and, second, causes an additional need for work
places. The importance of both these factors will intensif~r in connection
with the forthcoming demographic situe,tion (reduction in the rates of
growth oi the able-bodied population). On the basis of the decree of the _
CPSU Central Committee and the USSR Council of Ministers it is necessary
to intensif~ the policy of utilization of capital. investments for the tech- _
~ nical renovation of fixed capital, which presupposes the establishment of
_ scient3.fically subst antiated optimum standard periods of renovation and
stimulation of their fulfillmen~. It is impc~rtant to attain a significant
rise in the percent of withdrawal of obsolete machines and to ever more ~
utilize ma~or repairs for a qualitative renovation of fixed capital.
The fact that often the mastering of new equipment is accompanied by a con-
_ siderable temporary lowering of indicators of economic accountability is
a restrictive aspect in tr.e development and introduction of new equipment
highly efficient for the national economy into production. Therefore, in
- a number of cases preference is given to the selection of equipment with
a small national economic effect, but whose mastering does not have such a
negative effect on the indicators c~' economic accountQbility. According
to the data of the Institute of Eca:~omics of the USSR Acade~y of Sciencea,
on the average, throughout industry only approximately one-half of the high
initiel expenditures of the period of mastering of new equipment ere com-
pensated from the appropriate funds. Up to now in a significant ma~ority
of cases the mastering of new equipment has resulted in a lowered profit
or loss. According to the available calculations, in 1975-1978, on the -
. average, in machine building ministries articles from the 4th or 5th to
the llth or 12th years of output had the greatest profitability.
l The low level of effect of new equipment during the first yeaxs limits the
increase in wholesale surcharges for the quality of output (the amount of
a surcharge depends on the extent of the effect). A negligible.extent of -
the effect of new equipment is also due to the fact that many of its type3
' do not meet the requirements of the highest quality category. In a number -
of cases, owing to the excessive profitability of this output, surchaxges
are not aet. Al1 this leads to the fact that the effect of surchargea on
profit and incentive funds throughout industry, according to the data of
the All-Union Scientific Reaearch Institute of Standardization, is still
negligible9 (although it is considerable in a number of individual enter-
prises). On the basis of the implementation of the decree of the CPSU
Central Committee and the USSR Council of Ministers it will be necessary,
overcoming these tendencies, to greatly increase the economic role of the -
~ surcharge for quality.
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- A tranaition to economic conditions that enaure right from the beginning
the maetering of the output of new equipment a preferential economic-
slly accountable advantsge Por its manufacturer and from the beginning of
introduction, for the consumer enterprise (of course, with good work and
observance of standards by both) will play an import~nt role. In a num- =
ber of trends the decree opens up prospects for an increase in the econ-
omic ally accountable material interest of enterprisea and aesociationa in
the mastering of highly efficient, new equipment. Therefore, it is im-
portant to provide the appropriate conditions for the implementation of
the adopted decisions.
First of all, it is necessary to implement measures for lowering the costs -
and periods of mastering and introduction of new equipment, which are now
(on the average) excessive. With due regard for this loweritig progressive
standards of costs and periods of mast~ring and introduction of equipment
by years and appropriate trends, standaxds differentiaced according to _
types of articles, should be developed. This involves standards of labor,
material and capital intensivenees and production costs of axticles, the _
series nature of output of new products, the time of mastering of indus-
trial p~rocesses, attainment of the entire set of planned technical and e-
conomic indicators e,nd formation and utilizati~on of incentive funds in
connection with the mastering and introduction of new equipment. When tYie
progressive stande.rds of mastering are f~zlfilled and overfulfilled, in-
centives�should be increased and, when they are underPulfilled, lowered.
At the atage of mastering and introduction tne planning indicatnra of the
_ volumas of output and profit should meet both the requirements of effi- -
ciency of work (on the basis of progressive standards) and of t?~e real
characteristics and actual capabilities of these stages. A differentiated
app2~oach, on the one hand, to the process of mastering new equipment and,
on the other, to the distribution of previously mastered equipment is
neede~! in order to ensure a sufficient economically accountable advantage -
of the new equipment highly efficien~t for the national economy. This dif-
ferentiated approach, in particular to the assignments for the volume of
output, is envisaged in the decree of the CPS[7 Central Committee and the
USSR Council of Ministers (paragraph 11). It is important to enaure a
full coverage for additional expenditurea, when such expenditures require
compensation, according to progressive standards, including for wages,
- when incentive funds axe lowered. As we a~sume, the entire set of ine~s-
ures for the attainment of an economically accountable advantage of the
_ output of new equipment should be also extended to the stage of applica-
tion (introduction) of equipment (with due regard for the specific nature
of this stage).
Process of Realization of the National Economic Effect in Economically Ac- r
countable Activity
As the transition from one unit of thz scientific and production cycle to
another occurs, there is a change in the forms of the national economic
effect of new equipment--from the pr.o~ected to the planned andy finally,
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to the actual. This is a single process with significar,t characteristics -
at i~:s varicus stages. Ttiz i.mpcrtance of managing �his process, a single
_ system of pro~ected, planned and actual effects, is now rising sharply,
The decree of the CPSU Central Committee and the USSR Council of Ministers
pays spec~al attention to the national economic effect of new equipment,
including the planned "economic effect from the imple.mentation of scien-
tific and technical measures" among the ple.nned indicato~s and assigning
an important role to the total economte cffect acttially ob~ ained in the
national econo~y from the utilization of scientific and technological
achievements. Depending on the actual efiect incentives are set for new
equipment. It should also be noted that the reflection of the national
economic effect ir. planne3 indicators, norms and standards and in their _
fulfillment is one of the basic principles of the r4ethods fcr Determin-
_ in~ the Efiiciency of Tdew Equipment, that is, it appears as an ob~ect
of mana,gement oi economic activity.
In practice, it is important for the socialist society to manege the proc-
ess of increase in the efficiency of new equipment, to know what effect _
is actually obtained and to control and stimulate this practical result,
r.ot limiting itself only to estimated data. Socialist property and th~
ob,~ective forms of its organization predetermine the supremacy of ne,tion-
al economic interests and, at trie same time, the need and pos~ibility for
their realization through an economically accountable system of reproduc-
tion at enterprises (associations). Nat,ional economic interests, the `
supreme goal of socialist production and conformity to the plan fully ex- _
tend to all the levels of the socialist econo~y, entirely encompasa the
- economically accountable activity of enterprises (associations) and form
its basis. Therefore, the r~ational aocial and econoanic effect ensuring
and embodying public interesta and the se,tisfaction of the ma.terial and
spiritual needs of socie+y wi-ch minim~~m expenditures not only does r.ot ` -
oppose the system of economic accountabi'lity, but is realized through it.
Tiie national economic effect is a criterion for the selectiori of new e-
quipment and its inclusion in production plans so that in the final anal- -
ysis this effect may be expressed in an improvement in the quantitative
and qualitative indicators of economically accountable enterprises. The
national economic effect does not at all conclude i+s role at the stage
of select~on of the best variant of new equipment. It is embodied in the
real, actually obtained results of economicall~r accountable ~etivity.
Owing to this, in accordance with the nature of the socialist economy the
need and possibility for directing this activity toward publ~,c intPrests
are realized. Thus, the national economic effect, assuming ti:~ f~?'!ll of
an economically accountable effect in indicators of economic accountability
at the stage of realization, by no means losses itS essence. The econ-
omically accountable effect does not represent an isolated and different-
type category with regard to the national economic e.ffect, a form of which
- it is.
~
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The economically accountarle effect reflects the organic unity of ~oth
- aspects of the national economic efPect, that is, the gro~rth oP the so-
ctal and economic result e,nd the saving of expenditures in terms of this
increased result. The economically accauntable effect reflects and real-
izes the same atandarda of expenditures, periods and results connected
with the develapment and e,pplication oP new equipment on the be,sis of
� the calculation of which the national eco:zomic effect is formed. Re- -
flecting the nation~,l economic a~ving, the economically accountable effect -
is built on a reduction in the production costs and labor, material and
- capital intensivenesa of articles and in specif~tc capital expenditures.
First of all, the "coming into effect" at the stage ~Y realization of the
national economic eff'ect in the economically accountable effect of such _
categories as gross and net profit is connected with thia saving. ~con-
oraic accountability is not reduced to the saling oP expendi~ures and
- profit. It is ob~ectively direc~ed toward meeting the needs of society
and towa,rd the supreme goal of socialist production. The profit and net
profit of socialist enterprises themselves are organically connected with
the entire set of indicators oP social and economic efficiency and of the
level of satisfaction of society's needs and directly depend on the ape-
cific saving of expenditures, on the mass output of articles and on the
quality of output. "
Thus, the economically accountable effect as a form of the national econ-
' omic effect also has a apecific aspect including the indicators of the
volume, structure and qu~lity of output and services. It reflecte the
expen3itures and results of improvement in warking conditions and of the
protection of the natural environmez~t and the unity of social and econ-
omic factors. In their nature the indicatora of econanic accountability
of the saving of expenditures must be connected with the indicators of
social and economic resulte, with the planned assignments f-~~^ production
and deliveries in the products list and with the actual record of their
Pulfillment. The calculations of the same indicators in a more tentative
conaolidated form axe made during the determination of the national econ-
omic effect at the drafting stage (volumes of production and the acale of
- utilization of given outgut ia the basic spheres of consumption). In
practice, expenditures and profit do not f~inetion at all outeide the vol-
ume a.nd atructure results of production, because they are calculated in
- terms of a unit and bulk of output, operations, services and various so-
cial results (reduction in production costs of plaru~Pd and manufactured
output of a certain assortment and quality).
The national econo~ic effect and its economically e,ccountable form ref7~ect
national economic interests. At the same time, the economic accountabil-
ity of socialist enterprises ob~ectively apecifies the combiilation oP na-
tional economic in~erests as determining wit;z the intereats of enter-
prises, their operational economic independence, me,terial responsibility
and economically accountable concern in the reaulta of their work. Econ-
omic accountability is r~alized in the self-support and profitability of
- ente~prises and in providing incentives for collectives depending on e-
conomi.c results and on proPit.
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Therefore, being a form of realization of the national economic effect,
the economically accountable effect of an enterpriee (association) elso
includes such a Pactor as the "economically accountable e,dvantagz'~ of
given output (operation). The socialist economic system determines the -
- ob~ective need and possibility for the correspondence of this economic-
~ ally accountable adve.ntage of enterprise work to national economic in-
terests. However, there is no automatism here--often contradictions
arise between the direction of the actually formed economice,lly account- -
able incentives of an enterprise (association) and the interests of the
national economy. For example, sometimes profit is formed not on the
� basis of the efficiency and sQVing of expenditures, improvement ~n the -
quality of production and increase in the scale of its output, but as a -
result of an overstatement of pricea and an assortment that is "profit-
_ able," but does not meet public needs. There is a need for a direction
in the planning, evaluations and stimulation of the economic activity of
enterprises the,t would constantly dire~t economically accountable incen-
tives toward national economic interests. .
The fac~~ the,t the economically accountable effect of new equipment, like
the system of economic accountability as a whole, under specific economic
c~nditions directly reflects the real movement of resources and the actual
results obtained in the process is an important ~'eature of the economic-
- ally accountable effect of new equipment. Therefore, the economically
accountable effect of new equipment appears both as planned (envisaging
the attainment of really obtainable levels of indicators of economic e,c-
countability) and actual, whoae goal is to ensure the maximwn possibl~
reliability of the record of obtained results. Only with such an approach
to the economically accountable effect is it possible to organically com-
bine the management of scientific and technical progress with the specif-
ic economica1.13- accountable e.etivity of enterprises and associations.
2'he record of the obtained effect cannot be sufPiciently reliable if it
is not expressed in really existing economic values and in actually at-
tained results of economic activity, including in profit. The formula of -
reduced expenditures, according to which the nationa,l economic ~Pfect is
legitimately calculated at the preindustrial stage during the selection -
of new equipment, does not include profit, but it ia a mandatory element
in the economically accountable effect at the stage of the output and ap- -
plication of this equipment. The planning of the effect of new equipment
- and the record of its actual realizati~n reflec'c the real processes of
the technical renovation of productian and fixed capital. Therefore, at
this stage new equipment should be compared with actually replaced equip-
ment. Next, at the stage of selection of equipment the national economic _
effect is calculated for the sphere of conaumption, which is quite valid.
However, at the economically accountable stage it is necessary to re-
_ flect in the effect its distribution between the consumers and producers
of new equipment--both actually participa~ed in its creation and on thia
basis they have economically accountable results. Therefore, the econ- _
omically accountable effect is calculated separately for the manufac- -
turers and consumers of new equip~?ent.
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Ignoring the indicated circumstances and characteristics of the stages -
of formation and realization of the national economic effect and confua-
~ ing the tasks of the aelection of new equipment and ite functioning under
the specific conditions of ecanomically accountable activity would lead
to the separati~n cf this effect from the real proceases of management �
and would deprive the record of the obtained effect of its reliability.l0 _
The problem of the nature of actual effect is especially significant for
the management of scientific and technical progress and for an improve-
ment in the efficiency and quality of new equipment. The insufficient
reliability of the record of the obtained effect and its separation from ~
real economic values sharply lower the importance of the planned effect -
and worsen the conditions of planning of new equipment. A feedback from
the reliability of the record of the actual effect to the planned and pro-
~ected effects intensifies their role, which makes it possible to greatly
raise the qualitative level of determination of the planned and pro~ected
' effects and to greatly increase the responsibility for their subatantia-
- tion. The responsibility of consumers and manufacturers of new equipment _
fo~ a real attainment of the effect anc~ its calculation will greatly in-
crease if the record of the actual effect is made in the obtained econ-
omically accounte,ble values.
From the essence of the economically accountable actuel and planned effect
f'rom new equipment it follows that it should approximately reflect (in -
actually obtained values) the national economic effect calculate~.for the
sphere of consumption according to the formula of reduced expenditures.
This involves the following reflection: first, the saving of production
costs (C1--C2) and, second, subtraction from this saving of additional
capital investments for new equtpment (~K), which produced this saving,
reduced to the annuel scale through multiplication by such an importe,nt
social standard as the standaxd coefficient of efficiency of. capital in-
vestments (EH). Without a subtraction of the expenditures on additional
_ capital investments (in the formula of reduced expenditures this is
EH~K) from the saving of current expenditures (forming gross profit) the
calculation of the national economic effect of new equipment would be in-
sufficient, that is, distorted. Under the specific conditions of econom-
_ ically accountable activity this subtraction EH~K is reflected in the
form of deductions to the state from the gross profit obtained from tech-
nical measures, that is, payments in a certain percent of the additional _
capital investments in new equipment. This means the transformation of
gross profit into net profit as the final, actually obtained economic ef-
~ fect from new equipment.
We have in mind net profit sepaxate~y for the manufacturer and consumer
obtained from the realize.tion of scientific and technological achievements -
as a result of a decrease in expenditures (in terms of a social and econ-
omic result) and improvement in the quality of output (through prices and
surchaxges). The bulk of produced new equipment is calculated for the
manufacturer and the volume of output based on this equipment, for the
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= consumer enterprise. Thus, in our opinion, net profit is an economice~.lly
accountable form, which approximately reflects the national economic e~-
- fect calculated according to the formula of reduced expe~nditures. Thie
is due to the foll~wing ob~ective factore.
1) The category of net profit represents the real result of the process
of distribution of the total national economic effect emong all three
aub~ects--consumers of new equipment, its manufacturere and society at
lerge (ste,te). There is a distribution of this efz'ect between manufac-
turers and consumers through the wholesale price of equipment (incl.uding ~
_ the surcharge for the manufacturer) and next, the state receives from
_ manufacturers and consumers paxt oP the profit divided between manufac-
turers and consumers through a system of payments based on its ste.ndard
distribution.
2) Pekymenta from gross profit approxim.gtely (but in actually existing
amounts) reflect EHQI{ in the formula of reduced expenditures. These an-
nual payments expressed in percent of th~~ additional capite.l investments -
on technical measures a~~e represented by the payment for capital and for
cre3i~, payments of a rent nature and as comvensation for the damage done
to the natural environment and so forth. Al1 of them are connected w.'~th
technical measures.
3) Deductions (subtractions) irom gross profit in large measure "purify" ~
it from the effect of factors not connected with the saving of expendi-
tures and with an improvement in the quality and increase in the acale of
_ production, that is, from unaubstantiated profitability (subatractions
Prom profit for exceasive profitabilitV will be increased, according to
the decree, which will increase the interest in a rise in the efficiency
of new equipment).
Thus, net profit in combination with the indicators of the social and
economic result of production and of the application of new equipment ~
(which was discussed above) retains the ob~ective foundations of the na-
tional economic effect that have already been laid down during the se-
lection of new equipment. At the same time, net profit also embodies
- economically accountable interests to the greatest degree, bece,use it -
represents the paxt of gross profit that rEme,ins at the disposal o~ en-
terprises (associations}. It is comparative].y simple to record and
plan the economically accountable effect in the form os' net profi~t es a
real value (forms 2-HT and 10-HT with the appropriate modifications have
a sufficient basis for this). There is a need for some additional meas-
ures for improving the primary record (subaccount and chaxt of
articles)
_ on the basis of the experience of a number of ministries, which has proved
its value. In our opinion, between the determination of the national e-
conomic pro~ected effect for the selection of new equipment and its real-
ization in an economically accountable form--net profit--there should be
an intermediaxy link in the form of calculated planning of the national
economic effect in reduced expenditures with a partial consideration of
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_ the specific conditions of management. In such a calculation of the ef-
fect equipment slated for replacement should be taken as the basis for
comparison. The effect is calculated for the planned period and all _
~tandards, volume and structure indicators of production and the ecale
. of bQSic spheres of applice,tion are refined. Planning indicators include
- wholesale prices and surcharges. After that there is a transition to the
- economically accountable form of the planned effect in the form of assign-
ments in indicators of econQmic accountability and a recnrd of the actue,l
economically accountable effect is made.
For analytical purposes (conditionally) the obtained effect should also be
calculated according to reduced expenditures. Of importance is a compara-
tive analytical calculation of the difference between the t~.mount of prof-
it and net prnfit, which during the calculated period (period of output
and service of yew equipment) would be obtained if previous equipment were . -
not replaced. At the same time, as we assume, grice reductions as a re-
sult of the obsolescence of previous equipment should also be taken into
account (in accordance with the decree of the CPSU Central Committee and
tr,e USSR Council of Ministers these reductions will reach 50 to 100 perceYt
of the profit). Such a calculation can be constructed on previously es-
tablished ste.ndard periods of output and service of replaced equipment.
The transition ~rom the calculated national economic effect expressed in _
the difference in the reduced expenditurea of base and new equipment to
the planned and actual economically accountable ePfect expresaed in profit
- and net profit is based primarily on two factors: s~andards of expendi-
tures and wholesale price. The standards of the saving of expenditures
(in the final calculation of the growth of combined labor productivity)
included during the calculation of the national economic effect in reduced
expenditures serve as a connecting link with the economically accountable
effect, because profit and net profit are constructed on the same stand-
ards, but in their real execution. The wholesale price, being the initial
factor for the economically accountable effect,reflects the national econ-
omic effect (primarily through the difference between its upper and lower -
limits) and plays the role of a tool in the distribution of the sum of
_ this effect between the manufacturer and consumer in the form of the proY-
it of both of them.
The economically accountable effect of new equipment (both planned and ac-
tue.l) is calculated to~ally (each of them separately) for an enterprise
(association) as a whole for all technical measures on the basis of the
fact that an enterprise acts as a producer and consumer simultaneously.
On s sectorwide scale the effect can be expressed in the impact of scien-
tific and techni.cal progress on an inerease in net output and on the na-
tional economic level, on an increase in the r:stional income.
Scientific and practical solutions of the problems of improving the mech-
anism of management of the efficiency of scientific and technical progress.
will serve as one of the necessary f^ctors Por a successful solution of
the ma~or tasks of the social and economic development of our coiin~ry.
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FOOTNOTES
1. See A. Glichev and Ya. Kotlikov, "Stimulation of Improvement in the
- Quality of Output" (VOPROSY EKONOMIKI, No 12, 1979, p 39)� It atates -
that in 1978 the proportion of riew certified industrial articles in- _
cluded in the higheat quality category comprised approximately one-
fifth of the new types of induatrial products (although this propor- -
ticn is riaing).
2. At the same time, we have in mind a gradual increase in the proportion
_ of new equipment surpassing in quality and ePficiency the best domes-
tic and world mo4els.
3. Often two different factors "live well together'~ in the practice of
planning and design work: On the one hand, standards obviously fn-
sufficiently high, as compared with the actual possibilities for the
utilization of the latest scientific and technological achievements,
are included in a plan and, on the other, even these lowered indica-
tors are not supported and insufficiently substantiated with the ap-
propriate calculations.
4. The problem of e gradual transition to such a system under which in
individual cases the output of new equipment corresponding to the
first quality category can occur only with a coordination with the
- system of the USSR Al1-Union State Standard (including its ramified
network of local supervision bodies) should be worked out. In con-
nection with this registratiQn of te~hnical assignments, indicating
either the correspondence of a plan to the conditions of the highest ,
quality category, or to a coordinated permission for planning given
equipment at the level of the first quality category is advisable.
5. It would be important to introduce sufficiently comprehensive and
detailed data on the techniques of utilization of technical articles,
conditions of their operation, performance and repair chsracteristics
~ in ple,nnin~ documents and standards.
6. See the article by 0. Korolev, director-general of the Krasnyy Prole-
tariy Production Association, "Orientation Toward Final National Econ- ~
omic Results'~ (KOMMfJNIST, No 8, 1978, P~+9) �
7. See, for example, VOPROSY EKONOMIKI, No 5, 1977, p 12~. The correla-
tion of' the proportions of these groups remained e,pproximately the
same right up to 1978.
8. See "Narodnoye Khozyaystva SSSR v 1978" LUSSR National Econoiqy in
197~, Statistical Yearbook, Izdatel'stvo Statistika, 1979, P 132.
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9. See the above-mentioned article by A. Glichev and Ya. Kotlikov
(VOPROSY EKONOMIKI, No 12, 1979). In 1977 the additional profit
- from surcharges, on the average, comprised 4 percent of the price ~
of a technical article and 10 percent of its total effect. With
regard to the entire profit in industry in 1977 this additional
_ pr~fit from a surchexge was only approximately one-third of a per-
cent and the proportion of surcharges in the formation of material
~ incentive funda in a number of industrial ministries comprised one-
~hird to one-half of a percent (in the Ministry of Electrical equip- .
ment Industry, 3.6 percent). Bonuses from the additional profit _
from surcharges in 1~? industrial ministries compriaed 1.7 percent of
_ the total amount of bonuses per worker. Ttie role of. surchexges will =
now be increased considerably.
10. It should also be taken into account that, when the actual effects -
_ calculated according to the formula of reduced expenditures are
summed up, a recalculation takes place (the same effect is calculated
twice for the manufacturer and consumer), whereas, when economically
- accountable eff~:cts are summed up, each of them through profit is
calculated once.
11. Naturally, scientific and technical progress should also be expressed
in the growth of the surplus product, profit and net profit.
Incentivea in Electrical Equ3pment Industry
Moacow VOPROSY EKONOMIKI in Russian No 1, Jan 80 pp k9-59
LArticle by V. Astaf'yev: ~'System of Incentives for New Equipment (Ex-
perience, Results and Prospects for Development)"~ -
LTex~ The practical experience oP national economic sectors under the
conditions of the economic reform and the economic experimente conducted _
in a number of industrial sectors have convincingly shown the need to im- -
prove planning methods and to increase the role of economi:c accountabil-
ity and of economic levers and incentives. The decree of the CPSU Cen-
tral Committee and the USSR Council of Ministers "On Improving Planning
and Intensifying the Effect of the Economic Mechanism on Enhancing the =
Efficiency of Production and the Quality of Work" assigns an important
place to the further improvement in economic methods of ine.naging scien-
tific and technical progress, whose acceleration was determined by the
25th CPSU Congress as a decisive condition for an increase in the effi-
ciency and intensification of social production. An efficient manage-
ment af the development of science and technology becomes one of the basic
factors ensuring an organic connection between the achievements of the
scientific and technical revolution and the advantages of the socialist
economic system.
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- New methods of planning, financing ~.nd economic stimulation of scientific
and technicai progress were worked out in the electrical equipment indus-
- try over a period of 10 years. Economic levers and incentives for an ac-
celerated development of science and technology became widespread. There
was a large reorganization of scientific institutions for the purpose of
bringing science closer to production and increasing the efficiency of
scientific and technical development~. The sector's practical experience
under the new conditions shows the high efficiency of the implemented
measures. The basic principles of economic methods of managing scientif-
ic and technical progress developed and approved in the electrical equip-
ment industry were introduced in a number of machine building sectors and
were reflected in the decree of the CPSU Central Committee and the USSR
Council of Ministers on improving the economic mechanism.
Economic Mechanism of Managemen~~ of Scientific and Technical Progress
The transition to the latest technology and production techniques based
on fundamentally new scientifYC and technical solutions is the distinctive
feature of the scientific and technical revolution at the present stage.
Acceleration of scientific and technical progress should be inseparably
connected with an increase in its efficiency on a national economic scale.
In other words, the high level of economic efficiency of the development
of science and new technology is the source of acceleration of both the
- progress of technology and of all economic development. Conversely, the
low efficiency of scientific and techz~ical progress hampers science and
technology and the economic anr3 social development of the national econ-
omy. Hence the need, first, to constantly improve the form~ and methods
- of management of scientific and technical progress r~nd, second, to refine
an economically substantiated evaluation of the efficiency of scientific
and technological development.
Improvement in the system of economic management of scientific and tech-
nical progress should be directed primarily toward a.fuller satisfaction
of social needs and toward ensuring the community of national economic,
~ collective and personal interests during the production and consumption of
. new equipment. An economic evaluation of the activity of the producer and
consumer of new advanced equipment should be based on a certain system of
economic indicators reflecting the final national economic results. Total
current and one-time expenditures in a single, organically connected
"producer-consumer" chain are such indicators.
The national economic approach to the detection of the final result of
scientiLic and technical progress requires a system management of the
entire "science-technology-production-consumption" cycle. The system
approach to the development of the economic mechanism of management of
applied resea,rch, technical developments and the production and consump-
tion of new equipment makes it possible to take into account both the gen-
eral tendencies inherent in all the stages of this cycle and their speci-
fic features giving rise to the contradictions among these stages. The
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mastering of new articles disrupts the stability of production and tempo-
rarily lowers the indicators of the economically accountable activity of
industrial enterprises, as a result oP which contradictions between na-
tional economic and collective interests P.rise.
- These contradictions can be resol~ved on the basis of an improvement in =
the economic mechanism based on the community of intereats of all the _
- participants in the "science-technology-production" cycle. The problem
of a close interconnection between the re.tes of acceleration of acientif- -
ic and technical progress and the rates of growth of its efficiency on a
- national economic scale can be solved successfully with the establiahment
of a criterion common for the econo~nically accountable activity of both
ecientific organizations and enterprises. The results of activity of sci-
entific organizations are nanifested not only in the Pulfillment of the
volume of scientific research and experimental design work and the sub~ect
- plan, but mainly in the final results attained in the production and oper-
ation of industrial output. Therefore, the economic effect of scientific
and technical progress determined on the basis of reduced expenditures
should become such a co~on criterion for economically accountable activ-
ity. The planning of economic sffect from the implementation of ecien-
tific and technical measures is envisaged by the new decree in the five-
year plans for the economic and social 3evelopment of industrial minis-
tries, associations and enterprises.
The components of economic ePfect in the form of reduction in the specifYc
expenditures of all types of resources should be more fully rEflected in `
the existing system of indicators of economic accountability of industrial
enterprises--production volume, profit and labor prc~ductivity. At the
same time, the mechanism of distribution of the economic effect,muat be
built with due regard for the economic interest of all the participants
_ in the developm~nt, mastering, production e,nd application of new equip-
ment. The unity of national economic and collective interests and the
common criterion for an evaluation of the economically account~able activ-
ity of scientific organizations and enterprises will create the condi-
tions for the orientation of scientific and technical progresa toward ao-
cial and economic efficiency. Therefore, overall nature is the basic
methodological requirement ensuring an organic unity of all the elements
within this specific system of management of scientific and technical
progress and its interaction with the general syatem of management of the
national economy.
Planning is the basic element in the economic mechanism of management of
scientific and ~technical progress. The development of science and tech-
nology according to a unified plan is one of the most important advan-
tages of the socialist systexc of management. The method of all-encom-
passing (continuous) planning on the basis of schedule-orders is an ef- _
ficient method of planning science, technology and production enauring
their systematic and synchronous development.
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The experience in the application of this method in the electrical equip-
ment inc~ustry shows that a11-encompassing planning and execution of work
according to a single network schedule ensure a significant increase in _
the economic effect, oecause, covering the entire "science-technology-
production-consumption" cycle, they coordinate the volumes of work on the
development and introduction of new equipment with the appropriate mate-
rial and financial security, prompt development of production capacities
and formation and utilization of material incentive funds.
The new approach to the planning of new equipment in the electrical equip- -
- ment industry required a change in the system of financing measures Por
scienti~ic and technical progress. The overall nature of the investiga-
tions, developments and production of new equipment predetermines the
need for an appropriate financing of the volumes of work of the entire
"science-technology-production" cycle from a single source. Following
the experience of the electrical equipment industry, the single fund for -
the development of science and technology formed from profit has become
such a source in a number of machine building sectors.
The financing of work from a single fund fer the development of science
and technology makes it possible to ensure a unity of the technical,
planning a,nd financial management of scientific and technical develop-
ments and to concentrate funds on important problems, on the successful
solution of which the final results depend. Hence the need for an over-
all approach to the solution of problems of improving economic account-
ability and of bringing it into accord with other elements of the econ-
omic mechanism. For the further development of economic accountability
in scientific organizations the new decree on improvement in planning en-
visages a transition to payment for fully completed end accepted opera- _
tions with~a simultaneous allotment of circulating capital to scientific
~ research institutes and design offices. This will ensure a more effi-
cient implementation of ineasures for saving monetary and labor resources
and reducing the stages of investigation and incomplete studies in sci-
entiPic research and experi~ental design work.
An important direction in the improvement in the planning and financing
of scientific and technical progress is connected with the development of
scientifically substantiated standaxds of economic indicators reflecting
- varioua aspects of the development of science and technology. The foll-
owing ere such long-efPect economic standards introduced into the elec-
trical equipment industry: the standaxd of deductions from profit into -
~ a single fund for the development of science e~nd technology in percent -
of the planned volume of production of co~nodity output in comparable
, prices with due regard for the quality and effec+ of new types of axti-
cles; the standexd of determination of the volume of expenditures on sci-
entific research, experimental design and technological work in percent
of the planned volume of production of commodity output in comparable
prices with du~ regard for the quality and efPect of new types of arti-
cles; the standard oP determination of wages in scientific organizations
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in percent of the volume of expenditures on scientiPic research and ex-
perimental design work. Qn the basis of the decisions adopted in the
decree the effect of these atandards should be extended not only to the
sector as a whole, but to all-Union industrial associations, enterprises
~ and scientific orge.nizations.
Price formation is e.n important unit of the system of economic management
of scientific and technical progrees in the sector. The wholesale price
of the sector's output should envisage both a full reflection in prices
oY the economically substantiated expenditures on output and oP the
standard of profitability with regard to productive capital, on the one
hand, and the consideration in them of the econom3.c effect from the use
_ of this output. As is well known, thia share of the economic eYPect is _
included in the incentive surcharge.
A system of incentive wholesale surcharges for new output of the highest
quality category was developed and introduced in the electrical equipment
industry for the first time in the practice of price formatian. During
the 10 years of operation of the new system the amount oP incentive sur-
charges increased by a factor of 4.5. In 1969 incentive surcharges in
above-plan sales comprised only 9�7 percent and in 1978 they reached 30
percent; 0.9 and 3.6 percent in the balance profit and 22.1 and 90.4 per-
cent in the above-plan profit. The measures envisaged by the decree on
improvement in the economic mechaniam,in the part of fncrease in the extent
and period of effect of incentive surcherges, e,nd the introduction of a
eystem of reductions in wholESale prices of obsolete output are directed
toward an accelerated introduction of scientific and technical innove,-
tions into production.
Meterial incentives for the development a.nd mastering of new equipment
occupy a special place in the system of economic management oP scien-
tific and technical progress. Increasing the interest of collectives oY
scientific organizations and enterprises in improving the efPiciency of
_ new equipment and in speeding ~ the periods of introduction of innovationa
into production is the general ob~ect of incentives Por scientific and
technical progress. The unity of interests of collectives in the entire _
"science-technology-production" chain can be ensured on the basis of the
general principles and sources of formation oP incentive funds for the
- develop~ent and introduction of new equipment. The decree defines the
economic effect as such a criterion and profit obtained as a result of
the introduction of innovations into production, as a source of Pormstion
of incentive funds. '
Basic Results of Wcry Under the New Conditions
The results of work of the electrical equipment in~ustry under the condi-
tions of the exemined system of economic incentives for new equipment in-
dicate that it had a significant effect on an-acceleration oP the rates
and increa~e in the economic efficiency of scientific and technical prog-
ress both in this sector and in sectors associated with it (power engi-
neering, machine building and so forth). The overall a~proach to economic
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management of scientific and technical progress in the electrical equip-
- ment industry made it possible to increase the final results of both each
element of the economic mEChanism and of its system as a whole. The uni-
ty of the entire "sciencQ-technology-production cycle was ensured, which
made it possible to increase the efficiency of scientific and technolog- _
ical development. The basic data on the efPicienryo uf scientific and
technical progress in the sector during the 1969-1978 period are pre-
_ sented in the table.
197$ Average Annual
in of ~ Rates of
Indicators 1968 Ir.crease (in ~
- Commodity output 21 .0 8.0
including of highest quality category 10.4-fold 26.4 _
National economic effect from the pro- ~
- duction and utilization of new equipment 531.0 18.2
Single fund for the develop~ent of science
_ and technology 246.0 9�~?
Volume of scientific research and exper-
imental design work 270.0 10.5 _
Economic effect:
per new article 217.0 8.0
_ per ruble of new articles 366.0 13.8
per ruble of a single furid 215 � ~ 8. 0
per ruble of scien~;ific research and
exper3.mental design work 241.0 7.2
Incentive funds for new equipment 292.0 11.3 '
- Incentive surcharges ~53.0 18.3 -
During the period of experimentation, as compared with the previous 5
years, the cycle of work from basic and applied research to the mastering
' of the first experimental batch of articles was shortened from two-thirds
to one-half throughout the aector. In 1978, as compared with 1968, the
national economic effect increased by a factor of 5.3 (in 1969-1978 its
amount totaled about 8.0 billion rubles).
The specific efficiency of new articles increased considerably. For ex-
. ample, the economic effect per new article increased from 294,000 rubles
in 1968 to 637,000 rubles in 1978, per ruble of the single fund for the
development of science and technology, from 1 rubles 42 kopecks to 3 ru-
bles 06 kopeckes and per ruble of scientific research and experimental
design work, from 1 ruble 15 kopecks to 2 rubles 77 kopecks respectively.
The proportion of the output of the highest quality category in the vol-
ume of output sub~ect to certification increased from 12.2 to 58.9 per-
cent during that period and of the first and second category was lowered -
- from 60 to ~2.5 percent and Yrom 27.8 to 1.6 percent respectively.
The overall system of economic management of scientific and technical
progress in the sector built on a single criterion of the efficiency ~f
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new equipment makes it possible to determine the trends and resulte of
the technical policy in the electrical equipment industry, which is the
technical base for the electrification of the national econo~y. As is
~rell known, the level of development of this sector largely determines
not only the scale of production of electric power, but also the possi-
bility for its utilization in a large number of productior~ processes and
in homes.
Highly efficient electrical engineering axticles were developed and intro-
duced during s short period. A aet of high-voltage and transformer elec-
trical equipment of a voltage of 1,150 kw and Y~ydrogenerators of a capac- _
- ity of 640 Mw for the Ssyano-Shushenskaya GES were developed for the needs
of power engineering. A single series of turbogeneratora of a capacity
of up to 800 Mw makea it possible to increase the output of electric pow-
er by raising the efficiency by 0. 1 percent and to prolong the periods
between ~aa~or repairs to 5 Yeara. The introduction of elegas metel-clad
switchgear redur.es material intensiveness by a factor of 1.7, as compaxed
' with traditional equipment, increases the period between repairs to 10
years and greatly decreases tlie size of the aervice personnel. The set -
of electrical equipment for the transfer of mines with steep aeams from
pneumatic to electric power doubles or triples the productivity of mining
machines and mechaniams.
The greatest effect is ensured as a result of the development of equipmezt
operating on the basis of new principles--transformers on the basis of
. power semiconductor rectifiers, metal units with the use of standaxdized
block control systems and light sources based on new principlea of gas
discharge and direct tranaformation of chemical energy into electric en-
ergy. Extensive work has been done on increasing the unit capacity,
voltages and currents of electric machines and appaxatus and on d.evelop-
- ing new series with improved technical and economic parameters--turbogen-
erators, electric locamotives, high voltege equipment and a new series oP
asynchronous motors for general industrial purposes. The e~'ficiency of
production largely depends on the service life and reliability of opera-
tion of electrical engineering equipment. An increase in the reliabil-
ity of equipment operation attained in the sector makes it possible not
only to save on the expenditures on repairs or disconnection of electric
tranamission lines, but also to greatly lower the expenditures on reserv- ~
- ing electrical equipment in case of a breakdown in electric supply sys-
tems.
Investigations in the sector made it possible to outline progreseive
trends in the development of science and technology for the immediate and
long-term periods. It is primarily a matter of utilizing the economic
effect of new equipment as the basic indicator on which the economic -
mechanism of management of scientific and technical progress is based.
At the same time, the economic experiment in the electrical engineering
industry attests to the insufficient connection between the indicatore
and results of scientific and technical progresa and the indicators of -
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the economically acceuntabie acti~ity of industri~l enterprises and to
the need to increase their economic interest in mastering the production -
of highly efficient, new articles.
National Economic and Economically Accountable Effects of New Equipment
The decree on improving planning calls for the establishment of a new in-
_ dicator--economic effect from the implementation of scientific and tech- ~
nical measures. The methods of calculations of the economic effect of ~
new equipment axe specifi.ed in the Methods (Basic Principles) of Deter-
mination of the Economic Efficiency of TJtilization of New Equipment in
the National Economy. The task is to use these unified methodological
principles of determination of the economic efficiency of new equipment
in practice for planning and recording the economic effect and for re-
flecting it in the standards and indicators of economically accounta.ble
activity of industrial en+erprises and sectors (production costs, profit,
_ labor productivity, profitability, material intensiveness and so forth).
In the electrical equipment industry some experience has been accumulated
in the planning and recording of the economic effect of new equipment. In
annual plans the total economic effect is approved for every enterprise
and all-Union production association--from measures in the area of im-
provement in technology, techniques, organization and management of pro-
duction--that is, from a rise in the organizational and technical level
- of production, and from measures in the area of introduction of new types _
of products of the highest quality category into production--from the -
production and utilization of ne�.. articles in the natione.l econo~y.
The economic effect from the introduction of ineasures for raising the or-
ganizational and technical 1eve1 of production is calculated at two -
- stages. A preliminary calculation of the annual economic effect is per-
- formed at the first stage on the basis of planned data. It serves to
coordinate the efficiency of ineasures for technical progress durin? the
planning of the indicators for labor, profit, profitability and proc?uc-
tion costs and to determine the planned deductions into incent~ve :'~.:nds
for the development and introduction of new equipment. At the second
stage a calculation is performed after the introduction of ineasures based _
on the factual data formulated by the document of introduction. This
calculation serves as the basis for reflecting the actual results of ineas-
ures in the indicators of economic accountability of the work of enter-
prises and for the actual deductions of the capital of the fund for in- -
centives for new equipment.
- A record card is opened for each of the measures accepted for introduc-
tion. All the elements in the full production costs of output and capi-
tal investments (according to the plan and actually after the introduc-
tion) are stated in it. To coordinate the planned and actual results of
measures with the indicators of economic accountability, data on shop
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production costs (with the deduction of depreciation and other shop ex- ~
penditures) and on the number of workers calculated for the planned and
actual volume of production are presented in the card. At the eame time,
_ ecor.omic indicators (production costa and the number of workers) are de-
termined during the firat calendar year of introduction of the entire
- volume of production pla,nned or actual~jr obtained and during the second, -
for the incree,se in the volume of ~roduction. A measure is considered
introduced only from the moment of change in the material and labor
norms of articles, for the improvement in which thie measure is imple-
mented. This gives the right to sign the document on the introduction -
- of the measure and calculation of the flznds for incentives for its intro-
duction.
~ Thus, the annusl economic effect from the implementation of ineasures for
raiaing the organi:.ational and technical level of production serves as
the technical and economic substantiation for the selection of their best
variants, for the reflection of the effect in the norms and indicators of `
economic accountability of the work of enterprises, all-Union production
- associations and the sector as a whole and for the determina~ion of the
amount of the fund for incentives for the development and introduction of
new equipment. The additional capital investments necessary for the in-
= t~oduction of ineasures are coordinated with ~he plan for the expenditure
of capital from the sing?.e fund for the develop~ent of science and tech-
nology and the production development fund with due regard For the plan
- for s-cate capital investments, capital for ma~or repairs and short- and
long-term bank credits.
When the economic effect from the implementation of ineasures for raising
_ the organizational and technical level of product:ion is calculated, the
technical and economic evaluation of the results of their introduction
represents the greatest complexity, which is due to the imperfection of
the standexd base, lack of prices of the introduced materials and equip- -
ment and so forth. Furthermore, every enterprise introduces hundreds of
different measures every yee,r and, when their effect is calculated, often
, methodological errors are made. All this requires the maximum formaliza-
tion and typification of ineasures and data for the calculation of their
effect . -
To further i.mprove the quality oP calculations of the economic effect and -
to lower the expenditures of labor on their performance and check, stand-
ards of the c~ponents of the economic effect on the basis of typifica-
tton of ineasures, as well as an algorithm of calculations and programa
for their execution on computers, are developed in the electrical engin-
eering industry. The testing o~' programs after the examples of calcular
tions of the economic effect from the introduction of new industrial
processes in the Zaporozhtransformator Production Aasociation has shown
_ that the time of perfoYmance of one calcule.tion with due regaxd for the ~
collection of initial data, completion of the appropriate tables and eo
forth is shortened to two-fifths or to ane-third. The forms, algorithms
= 21~
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and programa for calculations of the effect on computers can be ueed by -
any machine building enterprise. There is a search for methods of inech-
anizing the calculations of the planned emount of deductions into the
funds for incentives for the development and introduction of new equip-
ment, as well as for forma of the plan for measures for improving the or-
- ganizati~nal and technical level of production.
Great methodological and practical difPiculties occur during the coordi-
nation of the national economic and economically accountable effects Prom
the production and utilization of new types of products. In the sphere _
of production of a new axticle the economically accountable effect is de-
- termined by the same methods as for measures for raising the organization-
al and technical level of production. Therefore, the consolidated econ- _
omically accountable effect of production from the output e,nd utilization _
of new equipment can be expressed as the diPference between the increase
of profit from all measures a,nd capital investments multiplied by the -
standard coefficient of efficiency (0.15).
~ In the sphere of application of new articles, as is well known, their man- -
ufacturer determines the economic effect and coordinatea it with the con-
sumer. The economice.lly accountable effect, reduction in production costs
- (increase in profit) and saving of capital investments from the utiliza-
tion of new articles for the consumer can be determined by the manufaetur-
er and, methodologically, this problem has been solved. At the seme time,
- the manufacturer cannot present these data to planning bodies in terms of
all conswners for teking them into account in the economically accountable
- planned indicatora of work of the appropriate sectors consuming this.new
output, because not all conaumers are known to him during the el~bore,tion
of the plan. Furtherniore, the time lag between the delivery and utiliza-
tion of new output existing for the conaumer prevents the determination _
of these indicators for the appropriate calendax period. Therefore, in
our opinion, the economically accountable efPect from the application of
new articles should be calculated and recorded only by the consumer in his
indicators of economic accounte,bility.
Thus, in the sphere of utilization of new equipment it is neceseary to de-
termine the consolidated economically accountable effect of production and
to coordinate it with the indicators of economic accountability of both
the implementation of ineasures for raising the organizational and techni-
cal level of production and the production of new axticlea. The economic
ef~'ect from the production of new types of products and their utili2ation
in the national economy should be intended for a technical and economic -
substantiation of the selection of the optimal variants of development and
ir~troduction of new (refined) articles with improved qualitative character-
istics (rise in productivity, incr~ase in durability, reduction in operat-
ing costs and saving of accompa~ying capital investments). It should also
be utilized for the development of optimal trends in the development of
the entire "science-technology-production" cycle and ma~de the ob~ect of
planning, recording, analysis and control. The economically accountable
effect in coordination with the indicators of economic accountability
should be determined and planned by the consumer of new articles.
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Improvement in Economic Indicators
The decree of the CPSU Central Committee and the USSR Council of Ministers
on improving planning also envisages a wide range of ineasures for refining
planning, increasing the ePficiency of capital investments and intenai-
fying the role of economic accountability and of economic levers and in- ~
centives. Large-ecale organizational e,nd methodologicel wnrk on improving _
the economic mechenism oP management of the sector on the basis of the
' adopted deciaions is carried out in the electrical equipment industry.
- Economic indicators, the basic trends in the further improvement of which _
result from the ob~ective conditions of the development of productive
? forces and individual aspects of production relations, occupy an important
= place in the 3mprovement in the economic mechanism and provision of an in-
terconnection of the economic mechanism of management of scientific and
technical progress with the overall system of planning and stimulating the
sector~e development. At the same time, the degree of correspondence of -
the system of indicators to the ob,~ective requirements of economic devel-
opment depends on how prompt],y these requirements are studied snd taken
into account and how refined the mechaniam of knowledge of the effect of
ob~ective economic laws is. The new economic indicatora envisaged by the
decree, that is, growth of net output and, in some sectors, of commodity
_ output in comparable prices, fulfillment of the specific orders of con-
sumers and long-effect standards, now meet such requirements. These in-
dice,tors and standarda reflect the real movement of pY~ysical asseta and
labor expenditures to a large measure.
For the purpose of e~ccelerating the rates of scientific and technical
progress and creating economic conditione ensuring the interest of col-
. lectives of enterpri~es in e constant improvement in equipment, a new econ-
omic indicator of t~e growth of the volume of commodity Autput in compax- -
able prices with due regard for the quality and efficiency of the manufac-
tured equipment will be tested in the electrical equipment industry on a
sectorwide scale in 1.980. This means that with the output of highly ef-
ficient products of the highest quality category the rates of,growth of -
commodity output will be determined by converting the volume of commodity
output of the previous year into a coefficient taking into account the ef-
ficiency of new output as compared with replaced output. -
The proportion of the economic effect from th~ production and utilization
of output during the planned period (3B) taken into account during e, re-
ce,lculation of the volume oP commodity output of the previous year 3n _
comparable prices according to the following formula is established for
every new article of the higheat quality category:
3,~=3XK~(B, (1)
where 3 is the economic effect from the production and utilization of a
unit of a new axticle, K is the coefficient for the determination of the
proportion of the economic efPect difPerentiated by groups of axticles and
B is the number oP axticles sub~ect to output during the planned period.
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To determine the volume of commodity output during the previous year with
due regaxd for the efficiency of new outFut (O~n),this proportion of the
economic effect is summed up for all new articles and the obtained emount -
i& excluded from the volume of commodity output of the base year (06):
~
~fin = ~b ~j 3fl � (2)
The rate of growth of the vqlume of commodity output during the planned
yPar (On) in relation to the volume of commodity output during the pre- -
- vious year with due regaxd for the effic~ency of new output (O~n) is de-
termined according to the following formula:
. 4" IOU.
~ ~a~~ . ~ 3 )
The rate of growth of the volume of co~mmodity output with due regard for
the effect will be established for the planned period in terms of quax- -
tersin a running total. The planned assignment for labor productivity
growth and the standard of the wage fund are also determined on its basis. _
The indicators of the rate of growth of the volume of commodity output
with due regard for the effect, labor productivity and proportion of the
output of the highest quality ce,tegory become the basic fund forming in-
dicators. The indicator of the annual plan for the volume of sold output
is planned by the ministry itself in coordination rrrith the USSR Gosplan
for an evaluation of the fulfillment by associations and enterprises of
the obligations for the deliveries of output for production purposes and
- consumer goods in the products list (assortment) according to the concluded
contracts and schedule-orders ioz� L'ne delivery of output for export.
In case of utilization in production of relatively cheaper materials and
substitutes and of more productive methods of processing bringing ebout a
reduction in the wholesale prices of finished output, or in case of out-
put of cheaper, new products which in their technical and economic para-
meters and quality are equivalent or superior to the replaced products
the wholesaie pi~i~:as oi ~chese producte are set with due regard for the
preservation of the amount of profit obtained from the ssle of previous
products. At the same time, to determine the volumes of production e,nd
labor productivity before the end of the five-year plazi, wholesale pricea
adopted in the plan for the replaced products are used.
The economic effect from the implementation of scientific and technical
- measures for raising the level of production, improving labor organiza-
tion and refining management becomes the basic economic indicator. Its
use ensures the saving of material, labor and other expenditures within
every industrial enterprise. Thus, the new economic indicators are di-
rected toward ensuring high final results--the saving of national economic,
not only internal, expenditures. Nonfulfillment of the plan for new out-
put or a reduction in its efficiency lead to the nonfulfillment of all the
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basic indicators (reduction in the rates of growth of the volume of pro-
duction and labor productivity, the planned wage fund and incentive
funds). Economic c~nditions ensuring the interest of collectives~of as-
sociations (enterprises) in lowering labor intensiveness and in replac-
ing expensive raw materials, aupplies and accessories with cheaper ones
are created for them. All this makea it possible to strengthen the con-
nection of the results of technical progress with the indicators of econ-
omic accountability of the work of industrial enterpriaes and to ensure
the combination of collective interests wi~h general state interests.
The introduction of long-effect economic stande,rds into practice is an
important element in the improvement in the planning system. They make
it possible, on the one hand, to strengthen the centralized management of
public production and, on the other, to increase the initiative and oper-
ative independence of production collectives. ReflECting certain aspects
of the relations of production, distribution and consumption, these stand- -
ards are an important factor in an increase in the efficiency of produc-
tion within a specific economically accountable unit Eenterprise, all- -
Union production asaociation or aector). _
The standards of the wage fund occupy an important place among economic
norms and standards. The introduction of long-term standards will increase
the dependence of wages on an increase in labor productivity. In the e-
lectrical equipment industry beginning Prom 1980 this standard will be es-
tablished for every enterprise on the basis of the correlatian between the
growth of labor productivity and average wages and increase in the valume
of production as a result of labor productivity growth so as to ensure a
- reduction in the specific expenditure of wages on the volume of output. ~
_ It is calcule,ted according to the following formula (in kopecks per ruble
of commodity output):
~h~ 100 3
fi,,, o f--- X--~ oo + n X i oo , )
where Ii~3 is the standard of determination of the wage fund (without pay- _
ments from the material incentive fund) per unit of volume of commodity
~ output during the planned period,kopecks;~~ is the expected or actualwage
fund of the industrial and production peraonnel during the base year,
thousand rubles; 0~ is the expected or actual volume of commodity output
during the same year, thousand rubles; 3 is the planned increase in aver-
age wages, II is the increaee in labor productivity envisaged during the
planned period, ~
The value 3 is calculated as follows: 3=CX1I, where C is the increase in
average wages per percent of labor productivity growth.
During the determination oP the planned wage fund oP the industrial and
production personnel in annuel plans a recalculation of the volume of com-
modity output in comparable prices of the preceding year on the basis of
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the coefficient of efficiency is taken into account. In case of devia-
tion of the actual output of new products of the highest quality c~te-
gory from the planned one the planned wage fund of the industrial and
production personnel is refined in a running total from the beginning of
the year. Therefore, both the planned and e,ctual emounts of the wage
fund are made dependent on the number of new articles and the extent of
the economic effect obtained from the use of these articles by the con-
sumer. _
The implementation of the measures for improving the economic mechanism
adopted by the party and government will require large-scale organiza- ,
tional work on developing and explaining standaxd documents and on pro- _
viding specific help in the mastering and introduction of the new meth- -
ods of planning and economic ince~tives. In the electrical equipment in-
dustry key workers at industrial enterprises, associations and scientific
organizations are already being trained, teaching aids are being developed
and advanced ~,ractical experience is being widely popularized. The prac-
tical implementation of the set of ineasures for improving the economic
mechanism will contribute to~a further rise in the efficiency of produc-
tion and qua.lity of work. _
~ COPYRIGH'r: Izdatel'stvo "Pravda", "Voprosy ekonomiki", 1.980 ~
- 11,439
Cso: i82o
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ECONOMIC POLICY, ORGANIZATION AND ~SANAGEMENT
IMPROVEMENT QF THE CAPIT~I, INVESTMENT YIELD SOUGHT
Moscow VOPROSY EKONOMIKI in Russian No 1, Jan 80 pp 106-117
[Article by V. Krasovskiy: "The Economic Problems of the Output--Capital
Ratio"]
[TextJ The years of the Soviet five-year plafis have seen a continuous
growth of the economic and scientific-technical power of the Soviet Union.
Our country now possesses enormous economic potential. L. I. Brezhnev has .
said: "The plants and mines, the blast furnaces and machines, the in-
struments and latest automatic devices--everything that we call productive ~
capital--constitute the enormous wealth of the people. But we muat be
- capable of exploiting this wealth in truly effective fashion. Without ef-
ficient scientific organization of ~abor, without effective planning and
good management, and without increased responsibility for all the work-
ers--from the production commanders to the production performers--, this
wealth will not yield the return we have a right to expect."1
`
The CPSU Central Committee and USSR Council of Ministers decree on "Improv-
ing Planning 8nd Strengthening the Influence of the Economic Mechanism on
Increasing Production Efficiency and Work Quality" instructs us when plan-
ning investments to keep in mind the potentialities for increasing output
production in the operating enter~,rises by the fullest and most intenaive
use of their productive capacities and fixed capital. The decree calls for
allotment on a first-priority basis of the resources necessary for techni-
cal retooling and remodeling of the existing enterprises. For purposes of
- more accurate ~ustification of the plans we are introducing apecial enter-
prise certificates which should, on the basie of engineering and economic
calculations, specify the extent of utilization of the capital, its tech-
nical level, and the basic technical and economic indicators. -
_ ~
Intenaification of Production and the Expanding Role of the Capital Yield
- Indicators
The intensification of production entails not only reduction of the input
- of living labor along with increase of its capital-labor ratio but at the
same time also reduction of tlte capital-output ratio and the production
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material input. The chief thing we should count on is increased produc-
tion efficiency, To put it in simple terms, the essence of the problem is
seeing to it that f~r every unit of input--labor, material and financial--
' we obtain a significant increase in the volume of production and national
income. This ultimately means a stepping up of the productivity of national `
_ labor."2
Under the present-day conditiona, particular importance attaches to evalu-
ation of the effectivenesa and extent of utilization of the already de-
veloped production potential and national wealth as well as mobilization of
all the resource~.
It was comparatively recently that the rates of econamic growth were deter-
mined in a number of cases in terms of the norm of accumulation in national
income and the effectiveness of each unit of this norm.3 Thus, with a norm
of accumulation of 25 percent and an 0.4 percent effectiveness of each unit
of the norm, it was not difficult to arrive at economic growth rates of 10
percent. However, it was also believed that the economic growth was contin-
gent only on the increased accumulations or capital investments in the var-
ious sectors of the national economy. In such calculations, the basig sig-
nificance now attaches to the indicators for the use of the capacities al-
ready developed, that is, the growth of the yield of the productive capital.
Academician T. Khachaturov calculated the dynamics of the capital-output
ratio in the 1970-1977 period. In 1977 the capital-output ratio, in com-
parison with 1970, was 119.6 percent for the national economy, 117.9 per-
cent for industry, 138.3 percent for agriculture, 104.2 percent for trans-
port and communications, and 136.6 percent for construction.4
In other words, whereas in 1970 1.21 rubles of national product wae pro-
duced per ruble of capital, in 1977 the capital yield declined to 1.(11
rubles, a decrease of 20 kopecks. What is the "price" of this decrease on
the scale of the national economy? At the December (1974) CPSU Central
Committee plenum it was noted that every kopeck of reduction of yield per -
ruble of capltal was equivalent to a loss of approximately 3 billion
- rubles. Consequently, in 1977 the reductions amounted to approximately
60 billion rubles or 72 percent of all the capital investments in the
production sector.
According to Ye. Ivanov's figures, of the 200 billion rubles of growth of
national income obtained in t`~e Ninth Five-Year Plan as a result of in-
- creased labor productivity, about 100 billion rubles were used to compen-
sate for the decline in the yield on capital.5
It is often noted that the increase in capital-output ratio and capital
intensiveness is a natural phenomenon because it is recovered through the
saving in the cux~rent production costs. However, the figures cited by
Academician T� Khachaturov in the article which opens this discussion, -
refute this idea. According to his data, where in 1960 the period for
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recovery of capital investments in induatry was 5.1 yeara, in 1975 it was
11.1 yeara and in 1977 the wholly intolerable period of 25 yeare~ which
was three cimea the permiasible normative langth for this period.6 Thus~
the undesirable movement of the output-capital rat{o that is observed ie
only wi~th great difficulty made up by the effectiveneae of other production
factors.
The basic factors which determine the dynamics of the yield on capitol com-
- prise the changes in the sectorial structure of production and capital in- -
- vestmenta, the extent of utilization of the fixed capital of the existii:g
enterprises, and the change in the value of a unit of production capacities
newly put into operation. At present these factors alsn include the sub-
stantially growing ecological costs and important changes in the territor-
ial distribution of production and capital construction.
The significance of each of these factors is not the same. Analysis shows
that the effect on capital yield produced by structural changes in indus-
try, particularly the growth of the relative share of the sectors with a
low absolute level of capital yield,--this effect is small and has a
tendency to diminish. Even a substantial change in the extractive indus-
try of the country's eastern region, which is characterized by a higher
level of capital-output ratio, is not a dominant factor because on the
scale of the investments of Siberia and the Far Eaet they compriae not
more than 15-16 percent of the total volume of investments. Moreover, the
geographic changes in thn distribution of induetry is not by any means
always the result of an increase in capital-output ratio because the coal
induetry is putting into operation more productive deposits with open-cut
- mining and the oil and gas induatry is putting into operation special-
purpose concentration resources, at least in the nearly inaccessible
regions; in electric power engineering they are buildiig very large
stations on the powerful rivers with rocky banks and more favorable con-
ditions for obtaining cheap energy with a saving of one-time costs, etc. ~
In elucidatfng the economic prablems connected with the develonment of .
Siberia, we took note of the favorable mining, geological and natural con-
- ditions in the East (more productive seams in the coal industry--rich ores
in nonferrous metallurgy--better quality wood in the timber industry).~ ;
Despite the fact that in a number of inatances the ecological coste are
' large and their share of the overall cost increase sometimes riaes to 30
percent, they make a negligible impact on the overall growth of the capital-
output ratio (the proportion does not exceed 10-11 percent).8
On the basis of the indicators for both the shift system and the intrashift
equipment load as well as many technical and economic indicators, the level
of the utilization of the existing capacities is insufficient but in the
dynamics it is not subject to significant changes of an unfavorable kind
and therefore cannot account for the undesirable movement of the output-
- capital ratio.
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The chief reason for the decline of the output-capital ratio in industry
and agriculture is the slow growth of labor productivity despite the con-
tinuous large increases of fixed capital. Also, the growth of the capital-
labor ratio is exceeding the increase of labor productivity. Increaeing at
the same time is the coet of a unit of new capacities and the unit coet of
the nonproduction installations. It is no coincidence that reduction of
the cost per unit capacity of the production apparatus is considered a
paramount task in the realm of reproduction of fixed capital. "The most
important requirement in the development of new designs for machines, in-
struments and apparatuses," according to "The Basic Directions of the De-
velopment of the USSR National Economy in the 1976-1980 Period," "should be
the achievement of maximum national economic effectiveness with a reduc-
tion in the cost per unit of capacity."
On the face of it, the industry wholesale price indexes applied by our
statistics do not confirm the unfavorable movement of the cost of the means
of production in comparison with the other sectors of industry. Thus, in
_ 1978 the overall index of wholesale prices (1948 = 100 percent) was 63
percent for all of industry, 127 perr.ent in the fuel industry, 113 percent
in the timber and woodworking industry, and 80 percent in the electrical
engineering industry; in th2 building materials industry, however, it was
on a level of 67 percent and in machine building and metal working 33 per-
cent.9 At the same time, there was a reduction, but not such a precipitous
one, in the actual cost of construction and inetallation work, which in
1978 was equal to 98.4 percent10 (1970 s 100 percent). Thus, the sectors
of the investment complex--machine building, the construction induatry, and
the building materials industry--are characterized, according to the TsSU
_ [Central Statistical Administration] data~ by a price and cost reduction
which exceeds that of the raw material and fuel sectors, power engineering,
and metallurgy. This data seems to us of doubtful validity. It tnay be
suggested that the indexes for the movement of prices were compiled on a
comparatively narrow basls which is not representative of the entire volume
of capital investments of the comparable output group.
- In practice the overwhelming portion of the new capital and capacities are
~ not affected by a reduction in prices. On the other hand, the investment
output ia characterized by a substantial, and at times also an extreme,
price or cost increase. This is exceptionally important because it leads
directly to a substantial increase in the capital-output ratio for all the
new and renovated enterprises and, consequently, to a reduction of the
output-capital ratio.
Reduction of the Cost of Reproduction of Fixed Capital
The group of investment complex sectors exhibits the sharpest and steadiest
deviation from the system of comparable prices adopted in the planning and
in the operational work. However, it is the sectors of this complex which
accumulate capital. In contemporary economics the focus of value changes
is assumed to be primarily the prices for nonreproducible fuel and energy
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resources. At the same time, the most unregulated and uncontrolled price
changes take place in the construction industry sector and the machine-
- building sector.
In the last 10 years the cost of construction and equipment--the most im-
portant components of fixed capital--has not declined but rather has sig- -
nificantly increased. Processing of the Stroybank [All-iJnion Bank for the
Financing of Capital Investmente] USSR-compiled data on the dynamics of
estimate pricea ahowed that pricea rose 18 percent in 1970, 10.4 percent in -
1911, 9.6 percent in 1972 and 13.6 percent in 1973. According to the approx-
imate figures, a further riae of not leea than 10 percent was observed in the
. Ninth Five-Year Plan estimates, that is, an increase amounting to about 50
_ billion rubles. A considerable increase in the estimated costs is being
observed in the lOth Five-Year Plan. In a number of cases a large proportion
of the allotted capital investments is being directed not to increasing the
effect in the form of final product, but to compensating for the eatimated
cost increase.
According to the available data, the capital intensiveness per ton of ateel
= was equal to 431.3 rubles in the 1965-1970 period and 586.1 rubles in the
1971-1975 period, or 135.9 percent of the Eighth Five-Year Plan figure. In
the 1976-1980 period it equalled 760.5 rubles or 129.8 percent of the amount
for the preceding five-year period. The overall rise in cost, as against the
- Eighth Five-Year Plan, was 176.3 percent, an increase of 146.8 and 126.1
percent respectively in capital inteneivenesa per ton of rolled stock.
A study of the dynamics of the eatimated coat and the increased coet of new
capital was made in the TeNIIchermet [Central Scientific Research Inetitute
of Ferrous MetallurgyJ, which gathered exteneive data for a number of large
metallurgical plants. Thus, for purpoaes of evaluating the conatruction
capital intensivenEes for hot roliing sheet mills a comparison was made of
the No.1700 mills of the Karaganda Metallurgical Cambine (put into operation
in 1967) and the Metal2urgical Plant imeni I1'ich (put into operation in
1960); also, a compariaon of the No.2000 mills of the Novoligetsk Metallurgi-
cal Plant (put into operation in 1970) and the Cherepovets Metallurgical
Plant, the first section of which was turned over for operation in 1975. The
comparison showed that the capital intensiveness per ton of yearly planned
capacity fcr the strip mill of the plant imeni I1'ich was equal to 15.1 rubles
- and for approximately the same mill at the Karaganda combine it was 21.8
rubles, that is, 44 percent higher; correspondingly, the amount of technolog-
ical equipment increased from 5.6 tons per 1,000 tons of planned capacity to
9,500 tons, or nearly 1.7-fold. The cost of planned capacity per ton at the
Cherepovets plant was 11 percent higher than at the Novolipetsk plant, the
cost of the technological equipment was 32 percent higher, and the coat of
the materials handling equipment 43 percent higher.~l For the converter
shops the capital intensivenesa per unit of production capacity was approxi- -
mately 8-10 rubles per ton in the 1966-1970 period and rose to 14-16 rublea
per ton in the 1971-1975 period. The price per megawatt for a turbine
with a unit capacity of 800 megawatts is nearly double that for a turbin~ with a
unit capacity of 300 megawatts.
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~ In many cases an attempt is made to attribute the increase in estimated cost
to "the increase in capacity" of the installations under construction in com-
parieon with the original drafts. Sometimea they also cite the need to take
account of the new technical improvements. But after all, when there is a ~
mass increase in the capacity of new installations, this would necessarily
affect the growth of the stockpile of semifinished products for them. How-
ever, on the contrary, the planning organs have been taking note of the scant
readiness of the available reserve of capacities. _
We cannot agree with the arguments concerning the "inevitability" of the cost -
rises and the refinements in the estimated cost in the process of planning
from the so-called technical and economic justification for the developed
technical plan. Domestic and foreign experience indicates that skillful
preparation of the planning documentation,careful examination by experts,
and strict inspection of the finished products make it possible to sharply
curtail the number of such correctives. It is also impoasible to understand
why the "refinements" are always geared for increasing the cost in the esti- -
mate and why they are made every year.
Sometimes they ciCe the utilization in the investment process of comparable
- an~ unchanging current prices for construction output or machine-building
products. However, the so-called constant estimate prices are by no means
prices for finished production output, *_hat is, prices which take into ac- `
count the capacity of the enterprises with a specific output production or
prices for nonproduction installations which are fully ready �or use; they
function as prices for intermediate output, either individual types or
larger-scale stages of the work. Changes can also be made in the technology
of performance and the materials used. This specific character of the esti-
mate prices explains the emergence of the potentiality for large-scale in-
crease of the materials intensiveness of construction and replacement of cheap
materials and technology with more expensive ones. It seems that the more ex-
pensive the materials used the easier it is to fulfill the plan for conatruc-
tion and installation work and to obtain a large wage fund and a large profit
as well as a definite interest rate~ which is applied to the cost of the
construction and installation work. At the same time, the volume of the
planning work was also determined by the scala of the construction and in-
stallation work stipulated in the plan; this promptsd the planning workers to
step up the cost of the installations being planned. All this at the same
time created the conditions for the selection of materials-intensive solutions
associated with the use of expenaive designs, heavy machines, excessive-
strength reserves, etc. Thus, the increase in prices for the output of the
capital-accumulating industries also took place through orientation of the
planning decisions for heavy and expensive materials, particularly for the
widespread use of precast ferroconcrete. There was ultimately a consider-
able escalation of the capital intensiveness of ~:he new installations and
this led to an increase in the capital-output ratio for all the fixed produc- -
tion capital. Other factors, of course, contributed to the increase of
capital-output ratio but the decisive role was played by the investment
process, which is accompanied by a continuous escalation of prices. The
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incidental reductions in the prices for construction and installation work
pertained largely to old or little-used products and consequently made no
substantial impact on the overall index of investment prices.
Improving Che Economic Mechanism and the Yield on Capital
A CPSU Central Committee and USSR Council of Ministers decree (July 1979)
stipulates measurea for accelerating the process of putting production
capacities and installations into operation and increaeing the effectiveness
of the capital investments. As the decree indicated, evaiuation of the oper-
ational activity of thca construction and ins~allation organizations will be
based on the results of the completed assignments for putting production
capacities and installations and commodity construction output into operation
and for increasing labor productivity and profit. The decree ordered that
~ there be completed in 1981 the introduction of settlements between the cus-
tomers and the contractors for enterprises fully completed and turned over
for operation and underway complexes, sections and projects prepared for the
production of output and the rendering of services in accordance with the
eatima ted value of the commodity output.
For purposes of a more accurate evaluation of the work of the construction
organizations, the decree provides for the conduct of preparatory work for
conversion in the llth Five-Year Plan to the planning of labor productivity
in the construction and inetallation organizations on the baeis of a net out-
put norm and planning of wages on the baeis of a norm for a ruble of output.
The use of thie type of indicator will make it possible to correctly evalu-
- ate the true contribution of the conatruction organization to the creation of -
fixed capita1.12 -
The state plans and the plans of the miniatries and departments of the USSR
and the Union republics should first of all take account of the potentialities
for increasing output production in the existing enterprises by a fuller
utilization of their production capacities. The next few years will see a -
substantial increase in their share of the costs for remodeling and technical
retooling of the production potential already developed.
Within the framework of the decisions taken, additional requirements must be
applied to the capital yield indicators. As a rule, this does not include
_ the indicators which allow for repeat accounting of output and growth of in- -
~ termediate production according to type of gross turnover or gross production.
The accounting must be based on the yield of fi*~al product. The iandicatore
for sale of output may be used but only if this output conforme to the con- -
tracts, that is, is based on the preacribed product assortment and output
quality.
_ In the system of effectiveness indicators the yield on capital can only be
' determined on the basis of the result in the form of physical or final product
expressed in value terms (but in comparable prices). Computation of th~
output-capital ratio on the basis of profit would make this indicator a�
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measure of profitability and on the hasis of net output an indicator of the
overall effectiveness of the capital. As it is, the specific character of
thz indicator of yield on car�ital is expressly commensurate with the physical
volume of the output and the value of the means of labor.
We know that Marx repeatedly used the re~ationship between the mass of out-
put and the value of the machines in the context of technical progress and
he established a governing principle with respect to reduction of the cost
of machines with the growth of their capacity and productivity. He wrote:
"Production of machines with the help of machines reducea their cost in
relation to their dimensions and their performance." In his opinion, the
ratio of the physical volume of production to the value of *_he means of
labor becomes greater when we go over to machine technology. In the methods
plan the output which is designated in the numerator of the fraction convey-
ing the simplest formula of capital yield, must, witt: all its modifi-
cations, reflect tha physical volume of output, either in physical terms or =
in comparable prices which convey this physical volume with certain qualifi-
cations. As far as the nominator is concerned, fulfillment of this require-
ment is not mandatory. Assessment of the volume of fixed capital in compar-
able prices and moreover in prices of the year which was used for evaluation
of the output makes the capital yield indicator a measure of the physical
yield (for example, for the type of skimming of inetal from one square meter
of open-hearth furnace, where both the metal and the furnace bottom are
described in physical parameters). Indicators of this kind are useful but
they have no economic cogency. The economic indicator of yield on capital
must expressly reflect the depreciation or appreciation of. capital per
physical unit of output. It follows from this that the volume of capital in _
the denominator of the fraction must be expresaed in current prices which
allow for the changes in these pricea during the period being analyzed but
eliminate the market changes in prices for materials and fuel being delivered.
Coming into tocus is the question of how the amount of the capital is af-
fected by price c~i;anges which increase the volume of this capital not because
of its greater labor intensiveness or materials intensiveness but because of -
the purely value changes which take place outside of the capital-generating
industries, such as, for example, the fuel industry, electric power engineer-
- ing, metallurgy, and others. auch changes in the raw materials price hand-
book should perhaps be eliminated when the output-capital ratio is computed
- on the basis of the indexes adopted when the prices were reviewed.
The indicators for yield on capital are determined both on the higher levels
of planning and management and on the level of the shops, departments, units ~
[blokyJ and centers of the enterprises.
In keeping with the new decisions aimed at intensifying the impact of the op-
erationa.~ mechanism in enhancing the efficiency of production and the quality
of the work, the capital-output ratio must gradually become not only one of
the technical-economic parameters for the activity of the enterprises and
associations but also the chief cost accounting indicator. In its current
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stage the process of reproduction of fixed capital makes it necessary to in-
corporate in the investment sector the delivery for operation of capital con-
struction installations "under key," that is tully ready to produce output or
render services. This kind of system for putting new installations into oper-
ation provides for a stable contract evaluation of the installations ~nstead
of the variable estimate value for them. This evaluation ehould also be the
basis for the customer's.appraisal of the completed capital work. In line
with this, the capital-output ratio or its opposite output-capital ratio
indicator will serve as an important measure of the price for a unit of pro-
duction capacity. This latter should also be stipulated in the relevant
contracts (as, for example, the pxice of large machines, transport means,
residential houses and other investment output). Such prices become an im-
portant element of the estimate of the cost and profitability of output pro-
duced in the new enterprises and installations. The arbitrary change in these
prices whic:h takes place in present-day capital construction has an immediate
adverse effect on the production costs incurred by the shops, sections and
units of the new enterprises.
The consistent expansion of the cost accounting requireme.*ts placed on the
- final investment output must be reinforced by motivating the planners and
contract construction organizations to maintain stable contract prices for
the output of construction and machine building. Using the indicator of
volume of construction and installation work for motivation led to incxeased
- use of heavy and expensive buildir_g materials; thie~ in turn, greatly in-
_ creased the cost of the new fixed capital and reduced ita output--c:apital =
ratio and its profitability.
In the past there was frequently advanced the idea of using the normative
capital intensiveness and capital-output ratic~ in the capacity of prices for
investment output. This even gave rise to the idea of establishing such price
handbooks for some of the model structures and installations which are covered
by the planning standards. The idea was to determine, first, the price of an
actual model installation and, in addition, the cost of "harmonizing" this
installation with a specific territory. We believe this kind of standardi- -
, zatirn cE prices is a matter of great interest in bath industrial and agri- -
cultu.~al construction and also in the erectio:~ of many civil structures.
Seemingly, even h~me construction combines would have handbooks of prices for
_ model schools, polyclinics, hospitals, atores, etc. The fact tha~ the idea
of "investment price handbooks" did not proliferate in the past is due, we~
believe, to the char~cteristics of the. operation of the previous economic
mechanism, when they did not place the necessary emphasis on payment ex-
pressly for a fully completed pro~ect and when they had an intermediate in-
spection of the construction out~ut at the various stages of the work or else
payment far the achievement of partial results. Orientation in the direction
of a gross indicator for volume of construction and installation work did not
provide motivation for the use of investment price handbooks because they as-
sumed payment for a fully completed installation. Now, on the other hand, -
- there is evolving a favorable situation for widespread proliferation af this
progressive undertaking.
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Tne problem of prices has still another aspect, one which is very imporCant in
relation to determination of the level and trend of the movement of the output-
capital radio, We refer to the fixing of prices for the means or production,
prices which take into account their effect on the consumers and which in-
corporate a considerable part of this effect in the so-called limit price or =
the price at a permissible higher level. Because the forthcon~ing effect in
consumption is generally a very rough guide and frequently not achieved in
practice but is embodied in the price as a wholly real amount, the consumer"s
capital-output ratio increases and is by no means always made up by a reiluc- -
tion of the current costs in the subsequent operation of the new fixed capital.
This method of price fixing~ particularly for machine building output, has
a significant effect on reduction of the yield on capital and apparently re-
' quires definite correctives.
Methods of Determining and Measuring Yield on Capital
The operational purpose of the capital yield indicators entails the selection
of the most progressive and economical means of laborr which are character-
ized by a relative reduction in the cost of the production capacities. It
also entails the determination of the load and degree of use of the fixed
production capital already on hand.
It is consequently essential to take a critical view of the capital yield -
indicators, which cannot, by their very nature, serve as a reliable guide-
post in analysis of the use and effectiveness of the production capital. We
should first of all be aware of the doubtful value of such oversimplified
gauges employed in the nonproduction sector as one school seat, one bed in
the hospitals, one seat in the motion picture theaters, one seat in the
dining-rooms, one s~udy place in the WZ's, one square meter of housing, -
etc. In transport indicators of this kind are one kilometer of railroad
tracks or motor roads, one kilometer of canals or 100 meters of moorage and
wharfs at the ports, etc. and in agriculture one cattle place, one hectare
of cultivated areas, etc. The fallibility of such a selection o� guages lies
in the fact that in dynamics the course of technical progress will entail the
, continuous growth of the extent to which these industries are equipped with
instruments, computer equipment, apparatuses and machines. In ~transport the -
modern improved motor highways accommodate far more freight turnover and the
high degree of machine equipment in the livestock breeding complexes makes
possible a significant increase in the animal husbandry output. However, _
- despite the growth of the fund of equipment, the "immobile," abstract physi- -
cal guage creates the ir~pression of a continuously declining capital yield.
But this impression is incorrect. The fact is the growth of the fund of -
equipm~nt results in incomparably greater comfort in the nonproduction realm
and greater potentialities for education, medical treatment, etc. In trans- -
port the increase in the fund of equipment means breakdown-free operation,
reliability and speed of transport of the freight mass, etc.; in~ agriculture
it will make it possible to obtain more output per hectare or per animal hus-
bandry space.
I
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Thus. the poor choice of ineasures of capital yield disorient the planning and
create a false picture of a general decline of the output-capital ratio.
Diatortions of a similar kind are generated in comparing the current and the
earlier funde without regard for the new eocial and ecological functions per-
formed by the new funde. They provide not only new vol~mes of output but
also additional social effects which are reflected in improvement of the
conditions of labor, a sharp reduction in harmful discharges, better lighting -
and ventilation, reduced noise, etc. If we do not take into account the
social consequences generated by the group of "social" funds and if we com-
pare all the outlays only with the production of output, then we create the
impression of a declining yield on capital even though this will be an er-
roneous conclusion. In the future, new fixed capital will to an ever greater
degree be equipped with ecological and social installations and it is conse-
quently wrong to artificiaXly exclude them from the overall capital balance.
In determining the results ohtained we must without fail take account of the
- inereasing social effects and not measure the output only against the entire
quantity of new capital.
In computing the indicators for yield on capital we also need to improve the
procedure for making the correct selection of a basis for comparison. This
is particularly true of the evaluation of the capital in determining the
comparative effectiveness of new construction and remodeling and also in
comparing the economic indicators for the remodeled enterprise before and
after remodeling. Serving as the basic indicators in all the comparisona of
- thia type are the evaluationa of the existing capital in previous years'
prices which do not embod,y the subsequent reviaions of the price handbooks
_ for the output of machine building an3 construction. The evaluationa of the
existing capital are usually lower than the current prices for reproduction
of it> Only in the years of revaluations and general inventories do the
price levels catch up and become comparable. But the general inventories
take place infrequently, approximately once every 10 years, and hence most of
the comparisons of old and new capital are made in prices of a different
level.
= It can therefore be recommended that evaluation of the existing capital be
made on the basis of the renewal cost, that is~ the cost of reproducing it in _
- terms of the current estimate and handbook p.rices. Another method of correct-
ing this data is to calculate the cumulative cost of the capital repairs made
in recent years, where payment was carried out in current prices, and to add
these costs to the residual value of the capital. We must avoid investment
decisions based on uncompared data, which usually exaggerates the effective-
- ness of the old capital and artifically increases the size of the yield it
~ generates.
- There are specific features characterizing the output-capital ratios obtained
in accomplishment of the work of maintaining the existing capacities and mak-
ing the necessary capital repairs. Such forma of reproduction of capital
usually do not exist in pure form. They are frequently combined with the
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modernization and renewal of the production and consequently, in many cases
they retain the elements of not only simple but also expanded reproduction.
Even in simple fixed capital reproduction based on cost, provision must be
made for expanded reproduction based on capacity or on production of output
of the same volume but improved quality.
These considerations may not always be applicable to the fixed capital of
the mining ~ectors of industry, where new fixed capital must be introduced
in order to maintain the existing production capacities and not to increasP
them. For example, in the coal industry, the transitory nature of the work- _
ing sites requires the introduction of fixed capital even when there is a
continuous extraction of coal. At the mines they work on mining operations
to achieve passage to the lower levels, lengthening of the raadways, intro- "
duction of additional airways, etc. Also, much of the ongoing work is sup-
plemented by new projects which do not, however, make for increased extrac-
tion. In cases like these the output-capital ratio indicator which is de-
rived in the usual way for all of the old and new capital will continuously
decline. .
The same situation also obtains in timber operations and in other sectors of
the extraction industry. The characteristic feature of the capital yield
calculations in these industries can be the use of, not the full cost, but a
residual one based on these mining operations, the aim being to reduce the -
recalcula'tion cf the operations and the lengthy time period required by those =
participating in production and working on extraction of all the reserves.
We have observed that in the extraction industries the calculation of reaidu-
a~ cost is facilitated when, as in the coal industry, for example, amortiza-
tion of output is carried out at a tonnage rate in relation to the amount of
the yearly extrac~ion. Also, the greater the number of years thia production
has been in operation and the greater the volume of extraction it has gener-
_ ated, the less its residual cost.
In the computation of the indicators of yield on capital there may be cases
where a considerable proportion of the new capital is earmarked, not for the
increase of output production, but for reduction of labor intensiveness,
curtailment of the input of manual labor, enhancement of the labor safety
techniques, and solution of important social problems at the enterprises.
It is necessary to determine the impact of these factors on the dynamics of
the yield on capital and also to take into account the social effect being
generated. A possible decline of the yield on capital under these circum-
_ stances should not be considered an impairment of the use of the fixed -
- capital.
Determination of the output-capital ratio in reproduction of fixed capital
should take into account the specific character of the various forms of re-
production; remodeling and technical retooling of the fixed capital cur-
- rently in operation and maintenance of its capacity as well as that of the
new construction. Present-day conditions require the focusing of a great
deal of attention on renovation.
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The Extent of the Load and the Renewal of Existing Capital
The distribution and full utilization of the productive capital constituXe
the most important requirement for stepping up the output-capital ratio.
_ Currently the moat inteneive load pertaina to the aectora of tranaport and
power engineering, which operate continuously and with extensive uae of the
railroads, the oil and gas pipe linea, the electrotransmission lines, and
the electric power station capacities. Al~though in comparison with the other
industries these sectors handle a large load~ they nevertheless conceal con-
siderable reserves. The industries which take on a greater degree of load
are those with a continuoue production process and multishift operation (the
metallurgical and chemical industry, some sectors of light industry, and
others). The pooreat use of fixed capital is in the investment complex _
aec.tors, where one- shift operation predominatea. The most difficult situ-
" ation ie the one in the agroinduatrial complex, which is characterized by
seasonal irregularity of operation and by forced idleness of the bulk of the
equipment in the wir.ter period. This group may include some types of trans-
port and induatry (river transport, peat mining, the aviation industry in
part, and others).
The diversity of kinds and types of output and methods of organization of
production dictated very diverse methoda of calculation of production
capacity and the use of this capacity. This hampers the uae of uniform in-
dicatore which are capable of providing an integral evaluation of the use
of the productive capital potential in the unified measuring inetrumenta.
The economic studies at one time suggeated comprehensive energy indicatora
basec;, not on the calculation of the operation of various machines and
technological units, but on the readinga on the devices recording the time
of operation of the electric motors which serve this equipment. Ya. Kvasha
, gave the most convincing 3ustification far this kind of inethodology.l4
This author correctly noted that there is a close relationship between the
changes in the production capscity and the capacity of the motors which
serve the working machines, apparatu~es, transport mechanisms, etc. For
study of the capital load he suggested the so-called capital capacity co-
efficient (the correlation between the fixed capital and the capacity of the _
- motors). He calculated the possible and actual coefficients of capital load
and he showed the existence of substantial potentialities for steppfng up the
use of the capital.
Such calculations were made comparatively recently at the Moscow plant imeni
Vladimir I1'ich.15 According to V. Radin, the operating time for electric
motors in our country has averaged 1,500 hours a year. According to Ya.
Kvasha's figurea, the number of hours of use of electric motors in the United
States was 2,660 back in 1962.16 The established capacity of the motors is
very great and it exceeds the capacity of our electric power stations. But
the inadequate load of the motors is a basic characteristic of the capital
load.
_ ~.2
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_ An important reason for the decline in output-capital ratio is found in the
s].ow rates of putting new enterprises into operation. The effect of losses
resulting from the starting up of pro~uction on the level of yield on capital
- for the vario~is sectors of industry is indicated b}~ the following data: for
electric power stations--2.4 percent, ateel--1.2 percent, cement--1.4 per-
cent, tractors--2.1 percen*_, turbines--2.6 percent, fertilizera--4 percent,
etc.
In industry a substantial potentiality for stepping up the yield on fixed
capital is punctusl and regular renewal of the production apparatus. Ac-
cumulation of obsolete and outworn capital in the industries inhibits improve-
Fqe;nt of the economic indicators, entails large-scale labor resources, and re-
_ quires exorbitant expenditures for repair, which i~ usually done on a low
technical level. At the s~e time, technical retooling of the capital on -
hand and improvement of the technology give quick and effective results.
Thus, in the building materials industry the introduction of a progressive -
method of heat treatment of polished glass has quadrupled the labor produc-
tivity, cut the cost of production in half, and increased the yield on capital
by 46 percent. Sizable results are being obtained from stamping by blasting
in electric beam welding and other modern innovations.
- Substantial potentialities have been un~overed in improvement of the use of
agricultural equipment, buildings. structures, and other fixed production _
capital. In a number of instancea there is evidence of an irresponeible at-
titude toward the operation and maintenance of the fixed production capital.
In agriculture increased yield on capital is primarily the result of a fuller
exploitation of the biological potential of the capacity of the agricultural
crops and the productivity of the animals. Thus, bringing the yield on the
sovkhozes and kolkhozes to the level obtained in the grade-testing sectors
would enable us to incr.ease the volume of farming output by not less than
30-35 percent. Increasing the production of mixed feed and eliminating the
deficiency of albumen in the animal rations will make it possible to increase
their productivity by a minimum of 25 percent.
The indicators for yield on capital must be reviewed in the plan for increas-
ing labor productivity in the capital-generating industries. The national
economy requires of the workers of the investment sectors that they produce =
output with minimum labor input per unit of usPful product and per unit of
capacity of the machines, units, technological lines, etc. At the sane time,
the workers of the construction industry are required to economize in costs
for the components of buildings and structt~res while taking measures for
reduction of the estimated cost. We must bear in mind that progressive and
economical means cf labor will promote further increase of labor productivity
and production efficiency in all the national economy sectors which are con-
cerned with renewal of capital. ~ -
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FOOTNOTES
1. L. I. Brezhnev~ "Problems of the Management of the Economics of a De-
veloped Socialiat Society." Politizdat, 1976~ p. 561.
2. Ibid, p. 293.
3. See~ for example, 0. Lange, "An Introduction to Econometrics."
- Izdatel'stvo Progress, 1964, pp 229-230; M. Karetskiy, "An Outline of _
the Growth of the Socialist Economic System." Izdatel'stvo Progress,
, ].970, PP 27-28.
- 4. See T. S. Khachaturov, "The Effectiveness of Capital Investments."
- Izdatel'stvo E~onomika, 1979, p. 210.
5. See Ye. A. Ivanov, "The Problems af~Reproduc~cion of Fixed Capital under
~ Intensification of the National Economy (Methods and Practice of Deter-
mining the Effectiveness of Capital Investments)" No. 28, 1977, pp 6-8.
6. See T. S. Khachaturov, "Ways of Increasing the Effectiveness of Capital -
Investments" (VOPROSY EKONOMIRI No. 7, 1979, p 124).
7. See Acadeanician A. Aganbegyan, "The Economic Problems of the Develop-
ment of Siberia" (EKONOMIKA I MATF~lATICHESKIYE METODY [Economics and
Mathematical Method~], Vol 15, No 5, 1979, pp �s43-844).
8. See P. A. Shiryayev and V. A. Shtanskiy, "The Effectiveness of Capital
Investments in Fer.rous Metallurgy." Izdatel'stvo Metallurgiya, 1977,
p 188.
9. See "The USSR National Economy in 1978." STATICHESKIY YEZHEGODNIK [The
Statistical Yearbook]. Izdatel'stvo Statistika, 1979, p 139.
10. Ibid, p 360.
11. See P. A. Shiryayev and V. A. Shtanakiy, "The Effectiveness of Capital
Iiivestments in Ferrous Metallurgy," pp 181-185.
12. See A. N. Kosygin "An Important Stage in Improvement of�Economic Plan-
_ ning Management" (KOMMiJNIST No. 12, 1979, p 24).
13. K. Marks and F. Engel's, "Works," Vol 23, p 401.
14. Ya. B. Kvasha. "Re~erve Capacities." Izdatel'stvo Nauka, 1971, p 101. =
15. See "The Potentialities of the Economics of Material Resources" (VOPROSY
EKONOMIKI No. 7, 1979, pp 54-55).
16. See Ya. B. Kvasha, "Reserve Capacities," p 137.
COPYRIGHT: Izdatel'stvo "Pravda", "Voprosy ekonomiki", 1980.
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