JPRS ID: 10023 USSR REPORT ECONOMIC AFFAIRS

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• Collection: JPRS
• Document Number (FOIA) /ESDN (CREST): CIA-RDP82-00850R000400050073-2
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• Document Page Count: 24
• Document Creation Date: November 1, 2016
• Sequence Number: 73
• Content Type: REPORTS

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JPRS L/10023
30 September 1981
USSR Re ort
p
ECON~MIC AFFAIRS
(FOUO 15/81)
_ F~~$ FOREIGN BROADCAST INFORNIATION SERVICE
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JPRS L/10023
3G Sep tember 1981
USSR REPORT
ECONOMIC AFFAIRS
(FOUO 15/81)
CONTENTS
INVESTMENT, PRICES, BUDGET AND FINANCE
Production Integration for Investment Efficiency Urged
(Ye. Bersheda; VOPROSY EKONOMIKI, Jun 81) 1
Economic Impact of Price Mark-Ups Weighed
(V. Shalimov; VOPROSY EKONOMIKI, Jun 81) 10
- a - [III - USSR - 3 FOUO]
F(1R (1FFT('T A i T iCF f1NT .Y
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INVESTMENT, PRICES, BUDGET AND FINANCE
PRODUCTION INTEGRATION FOR INVESTMENT EFFICIENCY URGED
Moscow VOPROSY EKONOMIKI in Russian No 6, Jun 81 pp 33-40
/Article by Ye. Bersheda, Kiev: "Integration of Sectors and Industries in the In-
vestment Process"/
/Text/ The ~verall approa~h to the planning of interconnected sectors of the na-
tional econn~y envisaged i~ "Basic Directions in the Economic and Social Develop-
ment of the USSR for 1981-1985 and for the Period Until 1990" requires the study
of integration processes in the na tional economy. The integration of sectors and
industries having a general goal orientation toward the attainment of final nation-
al economic results leads to the creation of intersectorial formations.
At present the dependence of the results of capital construction on the economic
s~ctors connected with them inten s if ies, which necessitates an invEStigation of the
integration of sectors and industr ies in the investment process. Academician T.
Khachaturov includes the construc tion industry, industrial sectors providing c~n-
struction with materials and equipment, the timber and wood processing industry,
machine building and metalworking and ferrous metallurgy in the set of capital form-
ing sectors.l
In the course of industrialization of construction a number of technological func-
tions are separated from it and a ssigned to industrial sectors. Overall schemes
for the creation of f ixed capital are developed and realized in industry and pro-
- duction processes in industry and const~'uction gradually become a single intercon-
nected process. Industry and con struction are transformed from relatively inde-
pendent link~ to a system o� integrated industrial building production oriented
toward final results.
An analysis of intersectorial production relations of construction based on the
indicators of the USSR intersectorial report balance o~ production and distribution
_ ~f products in 1972 has shown tha t, of the sectors of material production included
in it, construction is the largest consumer of the output of machine building and
metalworking, of the construc tion materials industry and of the sectors~of the tim-
- ber, wood processing and cellulose-paper industry. The proportion of material
1. See T, Khachaturov, "Ways of Increasing the Efficiency of Capital Investments"
(VOPROSY EKONOMIKI, No 7, 1979, p 123).
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expenditures on the construction of machine building and metalworking enterprises,
whose output requires insta].lation and material expenditures of these sectors, com-
prises 41 percent. In the construction materials industry this indicator is 76 per-
cent and in the sectors o� the timber, wood processing and cellulose-paper indus-
try, 44 percen~. Construction is also a ma3or consumer of inetallurgical output.
Scientific and technical progress and the development of social division and cooper-
ation of labor lea3 to the appearance of new participants in the investment proc-
ess. Meanwhile, the lack of departmental and organizational coordination of enter-
prises producing f ixed capi.tal breaks down the single technological process and ham-

_ pers the coordination of the diverse needs of its participants. Enterprises produc-
ing structures for construction pro~ects or preparing materials not subject to ware-
house storage (concrete and solutions), transport organizations and other su~~divi-
sions servicing construction, despite their organizational independence, are Zimited
in their activity. Therefore, there is a need for a coordinated and operative regu-
latioti of the development of production of the participants in the investment
process.
The integration of sectors and industries led to the creation of several types of
industrial construct~on formations oriented toward the manufacture of final output
and specialized according to types of built pro~ects. In Soviet practice industrial
- construction enterprises and associations, as well as agrarian-industrial, exist in
the following forms: house building combines, plant building combines, rural con-
struction combines and production construction and installation associations and
trusts.
_ The appearance of organi~ations performi.tg work at all the stages of the investment
pro~ess and the transformation of interdepartmental into intradepartmental and, if
possible, into intraproduction relations (within the framework of a single enter-
- prise or association) make it possible to s4bordinate the activity of structural
subdivisions to the attainment of the final result--the c;ommissioning of fixed cap-
ital. Within the framework of industrial construction formati~ns it is possi:,le to
strive for a stabilization of production relations among their components and to at-
tain the greatest co~respondence between the produced output (fixed capital) and
consumers' interests. The consolidation of enterprises facilitates the solution of
the problpm of providing the creators of fixed capital with circulatir.g capital.
The transition to an evaluation of the activity of contractors on the basis of fin-
ished projects envisaged in the decree of the CPSU Central Committee and the USSR
Council of Ministers "On Improving Planning and Strengthening the Influence of the
Economic Mechanism on Increasing Production Efficiency and Work Quality" is ~he
new prerequisite for the organization af industrial construction formations. An
increase in the responsibility of contracting organizations for finished output
determines the need for the further development of existing forms of industrial
building production.
Industrial and building production was first combined during the organization of
a house building combine in Leningrad in 1959. In the country there are now more
than 200 combines, in which the production of structures, their dQlivery to con-
struction sites and the perforraance of construction and installation work have been
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- unified in a single technological complex. Often house building combines have
their own transport facilities, as well as planning and design offices developing
technical documents and working on an improvement in the structures of houses and
in the technology of their manufacture and installatidn. As a rule, house build-
ing combines acted as a subcontracting organization for the construction of the
above-ground part of the building. Below-gracie work and the engineering prepara-
tion of the building territory were carried out by the general contractor (general
construction organizat3on} or by specialized subdivisions on the basis of a con-
tract with it.
However, in a number of cases house building combines are engaged in the manufac-
ture of buildings as a whole, including the underground part, and are even general
contractors for the construction of housing tracts. For example, the house build-
ing combine in Vilnius has the status of a general contracting organization and
performs the entire set of operations from the development of a territory to the
provision of public services and amenities in it. The combine is on a single con-
struction balance, which c~ntributes to the development of a single technology of
manufacture and installation of the~structurss of dwelling houses. Such experience
was accumulated in the Ukrainian SSR, the Latvian SSR, Leningrad, Alma-Ata, Baku,
Gor'kiy, Tallinn and so forth. In this case general construction and specialized
organizations engaged in special construction work (performance of below-grade
work, laying of external utility lines and provision of public services and amen-
ities) perform the role of subcontractors.
House building combines performing the entire set of operations in the construc-
tion of pro~ects ready for operation are becoming more and more widespread. The
consolidation of formations (large-panel house construction associations) contrib-
utes ta this. For example, a large-panel house construction association including
all the house building comtsines in Moscow, main specialized organizations and
plants for the manufacture of structures and parts was established ir~ the Main Ad-
ministration for Housing and Civil Construction in the City of Moscow.
The formation of ehe new organizational structure in the Main Administration for
Housing and Civil Construction of the Kiev City Executive Committee is to be com-
pleted by 1985. Five associations and combines, including a large-panel house con-
struction association, a large-unit construction association, the Kiyevpromstroy
Combine, a frame construction combine and a scientific pr4duction association, in
which all the scientific, research and planning subdivisions of the Main Adminis-
~ tration for Housing and Civil Construction of the Kiev City Executive Committee
are concentrated, will become its basic subdivisions.
~ The advantages disclosed in the process of operation of house building combines
also affected the form of organization of the inves~ment process in industrial
construction. The establishment of a plant building combine in Brovary by the
Main Administration for Housing and Civil Constru~tion of the Kiev City Executive
Committee in 1964 was the first experiment. In the field of construction its ac-
tivity was limited to the construction of the above-ground part of one-story in-
dustrial buildings. An industrial pro~ect (shop) prepared for finishing and spe-
cial construction and installation work is the combine's output. The L'vov, Do-
netsk, Dnepropetrovsk, Zaporozh'ye and other plant building combines were formed
subsequently.
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Subsequently, however, combines began to function as ordinary suppliers and only
- partially, in the role of organizations assembling the structures, elements of
bui~t-in premises and industrial partitions manufactured by them and performing such
operations as the filling of openiiigs, roof installation and finishing of buildings.
The spread of plant building combines is hampered, because their legal status is
determined only by the departmental documents of ~anstruction ministries and their
activity is limited by general sta.ndards.
A number of authors have a negative attitude toward the organization of plant build-
ing combines. It is stated that they are unable to manufacture one-series indus-
trial buildings on a mass scale, assemble them in the region of location of com-
bines with the performance of all special and finishing operations and prepare them
for commissioning.l
- In our opinion, the advantages of plant building combines are disclosed as the deg-
ree of readiness of their output is increased. Such combines should build f ounda-
tions and perform finishing and other operations connected with the installation of
prefabricated structures. Industrial buildings fully prepared for the installation
of industrial equipment should become their final output.
At present construction and installation organizations experience considerable dif-
- ficulties connected with the fact that some work on the preparatian of shells of
industrial buildings for operation technologically should be performed in parallel
with the installation of structures. In practice, it has to be carried out after
the completion of work by the forces of plant building combines under hindered con-
ditions of finished frames of buildings, which hampers the delivery of materials,
use of inechanisms 3nd efficient work organization. The preparation of shells of
industrial buildings for operation should become primarily the duty of plant build-
ing combines. As a result, the readiness of building structures will increase.
For example, the Krasnoyarsk Experimental Plant Building Combine No 1 erects fin-
ished industrial buildings. The elements from which blocks are assembled do not
require additional, even welding, work. Buildings are erected by the screwing
method.
The formation of rural construction combines began in the last few years. A to-
tal of 35 rural construction and rural house ibuilding combines were formed in the
USSR Ministry of Rural Construction by 1980.2 These combines are industrial con-
struction organizations and perform the entire set of operations from the plant
manufacture of sets of structures of fully prefabricated buildings to the delivery
= of pro~ects to clients in f inished form. The USSR Ministry of Rural Construction
developed and approved "Temporary Instructicyns for the Organization and Activity of
Rural Construction Combines," according to which it is permitted to establish
1. See A. S. Podo1'nyy, "The Procedure of Planning the ,Activity of Construction
Ministries Must Be Changed" (EKONOMIKA STROITEL'STVA, No 11, 1978, pp 41-43).
2. See A. S. Miroshnichenko, "Rural Construction Combines: Experience and Prob-
lems" (EKONOMIKA STROITEL'STVA, No 7, 1980, p 32).
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combines of various types with due regard for specific local conditions. However,
in all case~ the following are unif ied in a single ~roduction cycle: industrial
manufacture of sets of structures and parts according to the established products
list; transportation and supply of full sets of structures and parts; performance
- of the entire set of construction and special operations on the above-ground part
of a building.
'~'he development of industrial construction integration in rural construction is
hampered by a number of difficuities, in particular the overwhelming ma~ority of
combines are not general contracting combines and their economic production activ-
- ity is recorded on two balances--industrial and construction. As a resulr, there
is a contradiction between the combine interested in the installation of lightened
structures anc~ the reinf orced concrete article plant, f or which cubic meters of re-
inforced concrete, not square meters of commissioned production premises, are
planned. At the same time, the structures and articles produced at the combine are
formulated as commodity output and are transferred to installation organizations
at wholesale prices, which makes it possible to increase profit artificially. Su-
perior organs plan for combines a list of structures and articles not only for
their own provision, but for that of general construction organizations as well.
All this hampers the unification of industrial and construction processes into a
single production cycle and many rural construction combines operate as ordinary
precast reinforced concrete plants.
It is necessary (as, for example, at the Gatchi~a Rural Construction Combine) to
evaluate the activity of combines according to commodity output with a single con-
struction balance. Under these conditions there is a direct interest in the f inal
results of work and in an increase in the plant readiness of sets of structures and f
parts produced by combines and reporting is reduced.
At the July (1978) Plenum of the CPSU Central Committee L. I. Brezhnev, discussing
the tasks of rural construction, noted the following: "It is a questian of the es-
tablishment of large rural construction combines designed for the output of sets
of light industrial structures of high plant readiness and the construction of pro-
duction buildings ready f or operation from them with a delivery to the client."
As of 1979 the Slutsk Rural Construction Combine embarked on bringing a number of
projects under construction in Minskaya Oblast up to ful~ construction readiness.
'~ne establishment of combines ensuring, like house~construction combines, the man-
ufacture and delivery of complete structures of buildings and installations to con-
- struction pro~ects is the next task. W'hen necessary, shops f or the production of
articles used for the development of specific types of pro~ects for the purpose of
ensuring their complete delivery to construction pro~ects should be built in di-
rect proximity to the construction combine. It is advisable to assign the appro-
priate planning and design offices to combines. These offices will attach the
standard plans for the projects being established.
The existing procedure of mutual relations between the client and the contractor
in the approval of planning estimates, planning of capital investments, approval
of title lists and planning and financing of design work needs to be changed. In
- addition to this, it is necessary to work out provisions for the organization of
the work of associations and of their subcontracting organizations taking into
consideration the mutual financial interest in shortening the period and lowering
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the cost of construction. T'he development of construction combines occurs in the
direction of expansion of their functions in the investment process. With such
work organization combines are transformed into construction firms, from whi!ch a
finished building or a set of buildings can be ordered. The further Expansivn o~
the functions of construction combines should be carried out in stages with due
regard for their specif ic nature, characteristics of functioning and degree of de-
velopment of cooperation among the participants in the in~estment process.
The production construction and installation associations and trusts establish~ed
in a number of the country's regions (Kaliningradskaya Oblast of the RSFSR, Ak-
tyubinskaya Oblast in the Kazakh SSR and so forth), which itsclude subdivisians of
several sectors of the investment complex and are the result r~f development -of or-
ganizational forms of interaction of industry and constructia~, pertain ta ~xist-
ing industrial construction formations.
According to the decree dated 12 July 1979 of the CPSU Central Committee and the
, USSR Council of Ministers, production conetruction ar~d installation associations
and in individual cases trusts should become the basic cost accounting links in
building production. Construction and installatia,n associations and trustG can
include, as production un~ts, general construction and specialize~d cox~struction and
installation administrations and organizations, construction indus~try enterprises,
administratians of inechanization, subdivisions for material and t~echn.ical supply
and so forth equated with them.
The question of the structure of construction and installation associations is de-
batable. For example, there is no untty of views on the need to incl~ade planning
subdivisions in the structure of associations. Meanwhile, 3oint worl~ of planning
and construction subdivisions in the structure of one organization brings good re-
sults. The experience in the establish~ent of planning and cons~ructioRa associa-
tions in residential housing, reclamation and rural construction ~ttests to this.
For example, the following were formed in the Main Administrat~on ~or Housing and
Civil ConStruc~tion in the City of Moscow: the planning and co~struction associa-
_ tion No 1 for the construction of the experim~ntal region of Chertanovd; the plan-
ning and construction association No 2 for the ~onstruction of schools and child-
ren's institutions. A planning and construction assoclatian for the construction
of pro~ects for agricultural purposes was established at the base of the Mosobl-
stroy-24 Trust. The organizational unificat3.on of plan~ers and builders makes it
possible to improve the quality of plans, to shorten tkte time of thei~ development
and to improve the relationships among clients, ~contr~ctors and planners. Planning
organizations are able to concentrate efforts on the solutian of such important
problems as ensuring in plans ,.dvanced technolrogy for the manufacture an~i installa-
tion~of structures, raising the technical leve~. of planned solutions .and so forth.
The mutual interest of planners and builders i~ the results of labor intensifies
and additional prerequisites for an increa~e in the responsibility of capital pro-
du~ers for f inished output ~r~t only at tha i~omenr of delivery to the client, but
in the process of its operation as well, app~ear.
The structure of production constructian anrl installation associations (trusts)
can differ and in each specific case depends on the characteristics of the invest-
ment process in the region or on the deeelopment of a specific type ~of f ixed capi-
tal. Along with the elim3nation of the lack of departmental coordination of
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subdivisions of the investment complex operating on the same territory the forma-
tion of construction and installation associations and trusts will make it possi-
ble to concentrate in them a significant number of the functions now perf~rmed by
clients and to relieve client organizations from work not character~st~c of con-
sumers on providing construction with technical documents, materials, equipment and
so forth. ~nctions of conclusian of contracts for the performance of start-up and
ad~ustment work and technical supervision with the appropriate organizations should
he entrusted to the contractor--the construction and installation association
(trust).
'The combination of the activity in the manufacture and processing of building mate-
rials in a single production process is not something fundamentally new and at one
time was characteristic of early forms of canstruction organization. In the 1530's-
1940's construction and installation trusts, along with general construction trusts,
included specialized organizations. In contrast to modern trusts they had on their
balance brick, reinforced concrete and concrete plants, open-pit facilities, ma-
chine shops, saw milling and wood working capacities, various equipment and motor
transport. The presently established construction and installation associations
and trusts are called upon to combine economic independence in the solution of
many important problems of former trusts and the high level of technology and of
labor productivity and the low production costs of the outp~it of existing trusts.
In the organization of construction and installation associations a mechanical u-
nification of subdivisions should be avoided. It would be advisable to develop
methodological recommendations for the planning of the establishment and develop-
ment of construction and installation associations and the legal principles of
mutual relationships of different organizations forming part of them.
The determination of the types and sizes of established formations is an important
problem. It should be taken into consideration that the fullest satisfaction of
the needs of the national economy requires production units different in the struc-
ture, purpose and size and a gradual improvement in their organization.
A significant number of existing investment formations appeare~ as a result of an
organizational merging of existing specialized industrial enterprises and construc-
- tion and other enterprises technologically connected with them. As buildir.g pro-
duction is industrialized, another path--the establishment of integrated industrial
constructian formations, in which the capacities of industrial and construction sub-
divisions are established simultaneously--acquires ever greater importance. In such
formations it is possible r.o avoid the lack of coordination arising during the
merging of enterprises arld organizations. The technological, economic and organi-
~ zational integration of various stages in the production of the final product is
envisaged at the stage of planning and is ensured by the unified conditions of
management, community of the economic interests of producers of industrial and
building output and unity of management.
Industrial-construction integration gradually eliminates the administrative-econ-
omic limits of industry and construction and serves as the basis for the formation
of the investment complex. There is a need to expand the sphere of centralized
regulation of the investment process--to ensure a national economic, interdepart-
mental approach to the development of al~ sectors and industries included in this
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complex. Such an approach can be realized on the basis of joint planning, financ-
ing anu management of the development of the investment complex--elaboration
the organizational and economic mechanism of interaction of the group of ministries
responsible for the satisfaction of the need of tiie national economy for fixe~l
capital.
The national economic investment complex should at first become the object of plan-
ning and then the object of management as well. The problem of the need for the ~
"organization of a cnmplex of investment sectors including construction se,~tors, as
well as machine building," was first raised by V. Rrasovskiy.l As a reswlt, condi-
tions can be created for a systematic use of the object program method of ~ma~nage-
ment, solution of the pro~lem of combination of sectorial and territo~i~a.l plamniiig,
overcoming~of departmental and localistic barriers and elimination o~ dis~ipatlon
of capital investments for the further development of industrial const*cLCt~.on ~n-
tegration.
A unified ma.nagement of the investment complex of the country asld r~~ tl~~ Union re-
publics will contribute to an increase in the balance of sectorial plan:s at a11
the levels of management, optimization of intersectorial propoxt;ians, more eff i-
cient utilization of all the elements in the created investm~~cit potential and im-
provement in final national economic results.
A unif ied administration of the investment complex will make it possible to ex-
amine and analyze the effect of its development on the basis of a single crite-
rion--increase in the volume and improvement in the quality of final output with
a simultaneous increase in production efficiency. The mar~agement of the invest-
ment complex should be carried out on the basis of the elaboration and realiza-
tion of a single state plan for its development. Along with an improvement in
production relations and selection of their rational forms such a plan would be
a means of regulation of intersectorial relations. A single plan makes it possi-
ble to ensure deliveries of all types of material resources coordinated in time,
space and in the quantity, quality and assortment, to offer services to interact-
ing enterprises and to perform the necessary credit and other operations.
Interconnected overall programs f or the development of the country's national e-
conomic investment complex envisaging the optimum intersectorial proportions and
rates of development of every.sector on the basis of the tasks of maximization of
the f.'~nal national economic result could be worked out at individual stages of
econom;~ d=~elopment. Each such program can become the basis for the f~rmation of
the overall programs and subprograms specifying it and determining the development
of republic investm~:nt complexes, all-Union (republic) construction and installa-
tion associations and other organizational forms of industrial-construction inte-
gration. This will make it possible to ensure the continuity of investment cycl~s
" and ta more fully meet the r.~eds f or fixed capital.
In the course of organizational f ormulation of the national economic investment
complex it is possible to lean on the experience of socialist countries in the
area of industrial construction in tegration, as well as on the experienc~ in the
l. See "Investitsionnyye Problemy Narodnokhozyaystv~nnykh Kompleksov" /Investment
- Problems of National Economic Complexes/, Izdatel'stvo Nauka, 1975, p 3.
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establishment of multisectorial structures in the national economy of the USSR.
For example, the "Stroitel'stvo" National Complex was organized in Bulgaria in
1974. It. includes economic, sc{_r.tif ic research, planning and other organizations,
which on the basis of existing .rganizational, economic, technical and technolog-
ical relations should ensure the development of f ixed capital. The management of
the complex is entrusted to the Ministry of Building Materials. At the same time,
the ministry's decisions aad orders in the f ield of construction are also applied
to organizations subordinate to other departments.
Even under the conditions of market economy attempts are made to organize large-
scale business-like cooperation between manufacturers of building materials and
contracting c~nstruction organizations. For example, in the United States the or-
ganization of owners, which together with departments and aff iliates encompasses
150 plants--manufacturers of building materials--and the a~sociation of general
- contractors develop joint programs promoting the development of cooperstion for
the purpose of information exchange. It is assumed that, as a result of their im-
plementation, manufacturers of building materials will produce output and develop
technological processes necessary for meeting the needs of building production.
Additior_al possibilities for the transmission of new information on the manufac-
tured output and its use to contractors also appear.
At present it is still complicated to ~udge zhe specific bodies for the management
of the investment complex. It sh4uld be taken into consideration that enterprises
of Union, Union-republic and republic subordination are subject to unification.
_ Apparently, it should be primarily a matter of the first stage in the formation of
the i.nvestment complex. It is characterized by the strengthening and expansion of
the system of existir~g industrial construction formations and by the supplementa-
tion of the existing planning system with new forms and methods of preplan work
making it possible to single out in the plan the natiotial economic investment com-
_ plex and for the most important national economic pro~ects to take into considera-
ti~n in the capital investment plan the models of industrial construction forma-
tions including all the participants in the investment process.
COPYRIGHT: Izdatel'stvo "Pravda", "Voprasy ekonomiki", 1981
11,439
CSO: 1820/235
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INVESTMENT, PRICES, BUDGET AND FINANCE
ECONOMIC IMPACT OF PRICE MARK-UPS WEIGHED
Moscow VOPROSY IICONOMIKI in Russian No 6, Jun 81 pp 50-60
/Article by V. Shalimov: "Calculation of Econcmic Impact in Incentive Mark-ups"/
/Text/ The system of planned price formation is the most important component of
the economic mechanism of acceleration of scientific and technical progress. The
stimulating role of prices in the implementation of scientific and technical prog-
- ress lies primarily in the distribution of the national economic impact of new e-
quipment between the spheres of its production and use. A successful realization
of this stimulating function contributes to a prompt introduction of the achieve-
ments of science and technology into the national economy. "The introduction of
scientif ic discoverie3 and inventions," stresses the accountability report of the
CPSU Central Committee to the 26th party congress, "is now the decisive and most
acute area." In connection with this "Basic Directions in the Economic and Social
Development of the USSR for 1981-1985 and for the Period Until 1990" envisage in-
creasing the effect ot wholesale prices on an improvement in the quality of arti-
cles and on an acceleration of the mastering of highly eff icient, new and replace-
ment of obsolete equipment. A successful solution of this important problem is
connected to a signif icant measure with the further improvement and development of
the economic mechanism of incentive mark-ups and discounts.
The effect of the mechanism of incentive wholesale price mark-ups has a positive
effect on the processes of the mastering and productian of new equipment. However,
its role is weakezed by the fact that a suff iciently close dependence of mark-ups
on the economic impact has not been established. Therefore, an examination of the
ways of establishing such a dependence seems urgent.
~ A number of ineasures for an improvement and development of the system of incentive
mark-ups and discounts have already been implemented in accordance with the dec-
ree of the CPSU Central Committee and the USSR Council of Ministers "On Improving
Planning and Strengthening the Influence of the Economic Mechanism on Increasing
Production Eff iciency and Work Quality." For example, wholesale pr~ces with an in-
centive mark-up are established for highly efficient, new products corresponding
Co or surpassing in their technical and economic indicators the best models of
_ Soviet and world science and technology.l The economic impact obtained from the
production and use of such products is the basis for this. The distribution of
the ecanomic impact between producers and consumers of new equipment through the
establishment of incentive mark-ups represents a systematically organized and re-
gulated process, whose starting point is a specif ic ratio between the economic
impact and the price (more accurately, the lower price limit).
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The realization of this basic principle of great theoretical and practical import-
ance is.ensured by the fact that the specific efficiency of new equipment expressed
by the ratio of the economic impact and the wholesale price (3:1~~�~ is the in itial
condition for the differentiation of the amount of incentive mark-ups. This con-
nects the differentiation of incentive mark-ups with the indicator reflecting the
actual efficiency of development of new equipment. The use of the specific effi-
ciency (3:ll0~1 of new articles as such an indicator is more substantiated as com-
pared with the previously used ratio of the upper and lower price ceilings. This
amount of the incentive mark-up is made dependent on two restrictions, that is,
the norma.tive prof it and the economic impact. At the same time, it has not yet
been possible to establish the necessary direct dependence of incentive mark-ups
on the economic impact.
As an analysis of the use of the system of incentive mark-ups in sectors previously
transferred to cost accounting conditions of organization of work un new equipment
has shown, the f irst limitation (in the normative prof it) of the amount of the in-
centive mark-up for the overwhelming part of articles is several orders higher than
the second limitation (in the economic impact). For the most important groups of
electrical engineering articles at enterprises manufacturing new equipment in 1977-
1979 the ratio of the obtained incentive mark-ups to the normative prof it was with-
in 75 to 100 percent, that is, in practice, the level of incentive mark-ups corres-
ponded to the previously established ceiling (limitation)--100 percent of the nor-
mative profit. The proportion of incentive mark-ups in the distributed economic
impact averaged from 6 to 8 percent, which did not correspond to the established
limitation in the economic impact (50 gercent).
Therefore, the dual dependence of the incentive ~nark-up (on the amount of the nor-
ma.tive profit and the magnitude of the economic impact) is not ensured and it de-
pends only on one limitation--the norma'.ive profit. This is due to the following.
The efficiency of new equipment determined, as alrea.dy noted, on the basis of the
ratio of the economic impact and the wholesale price is used as the condition f or
the differentiation of stimulation of the production of new equipment and the
amount of the incentive wholesale price mark-up is made dependent on the normative
profit, which even indirectly is not connected with the results of use of this e-
quipment in the national economy.
In essence, the establishment of a direct dependence of the incentive mark-up on
the normative profit leads to the fact that, first, the amount of additional prof -
it obtained by the manufacturers of new equipment is completely not connected with
the magnitude of the economic impact ensured in the national economy and, second,
incentive mark-ups are unjustifiably sma11.2 It should be stressed that the in-
terconnection of the cost accounting effect (realized in this case in the form of
incentive mark-ups) and of the national economic impact is also disrupted.
Improvement in economic incentives for the production of new equipment sometimes
boils down to an increase in the amount of incentive mark-ups to two or three
standards of profitability. For example, an opinion is expressed that the "amount
of a mark-up should be doubled onl (our stress--V. Sh.) for the compensation f or
the average loss of profit during the renovation of output."3 Thus, an increase
in the incentive mark-up to two standards of profitability is considered minima.I
by the authors. L. Shevchenko believes that the "maximum permissible growth of
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profitability as compared with the sectorial standard for highly efficient equip-
ment... can be increased to three standards of pro�itability."4 At the same time,
- the authors propose that the amount of the incentive mark-up be established, as
before, in percent of the normative profit.5
- However, the proposed increase in the amount of incentive mark-ups depending on
the amount of the normative profit will hardly contribute to an acceleratian of
the production and expansion of the use of new equipment in the national economry.
The problem lies not so much in increasing the amount of additional prof it obtained
by manufacturers of new equipment as in establishing its real dependence on the
economic impact brought by this equipment. Thus, in fact, incentive mark-ups in
percent of the normative profit are increasing. In 10 years (from 1969 through
1979) the maximum amount of incentive mark-ups in percent of the normative prof it
doubled in accordance with the introduced methods, rising from 50 to 125 percent,
that is, it increased 2.5-fold. At the same time, in 1969-1971, when the amount
of mark-ups was limited to SO percent of the normative prof it, according to V. As-
taf'yev's evaluation, their proportion in the sconomic impact in electrical engin-
eering articles was 4 to 5 percent.6 During the subsequent period (1972-1979),
when the maximum amount of mark-ups was increased to 100 percent of the normative
profit, the share of this additional profit in the economic impact in the electric-
al engineering industry increased to 6 or 8 percent, that is, it was also appro-
ximately doubled.~ The subsequent change in the maximum limitatian of incentive
mark-ups in the normative profit from 100 to 125 percent introduced by the Instruc-
tions on the Procedure of Establishment of Incentive Mark-ups (1979) will lead to
an increase i:n the proportion of mark-ups in the economic impact only to approxi-
mately 10 to 12 percent.
However, as a result of such an increa.se in the amount of incentive mark-ups in
percent of the normative profit, there is an increase in the absolute amount of
additional profit obtained by manufacturers of new equipment, not an intensified
dependence of the amount of incentive mark-ups on the magnitude of the economic
impact of new equipment. A certain increase in incentive mark-ups in percent of
the normative prof it (for example, to two standards of profitability) is advisable
only for some, especially highly efficient, articles, for which the ratio of the
economic impact to the wholesale price is characterized by valu~s limiti.ng for the
appropriate groups of products. However, such an increase in the amount of incen-
tive mark-ups will become a real incentive for the expansion of the production of
new equipment only if their amount is determined directly in the shares (percent)
of the economic impact.
To substantiate the establishment of a direct dependence of the incentive mark-up
on the economic impact of new equipment, it is important to also examine the the-
oretical aspect of the problem. The establishment of a cause and effect relation-
ship of the incentive measure with the final results of the incentive process is
the basic condition f or the formation of ma.terial incentives under socialism. In
this case the share of the incentive mark-up in the wholesale price is the measure
of incentive for the enterprise manufacturing new equipment. An increase in the
number of use values is the ~inal result of the incentive process (the process of
production and use of new equipment). However, a direct comparison of use values
is impossible. Obviously, this process must occur indirectly.
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The recording, evaluation and comparison of the final results of the production
and use of new equipment are possible only on the basis of the national economic
- impact. Such a functional role of the national economic impact corresponds to F.
_ Engels' thesis that the movement of resources in the new society "ultimately, will
be determined by the weighing and comparison of the useful effects of various con-
- sumer goods with each other and with the amounts of labor necessary for their pro-
duction."8 The interpretation of the national economic impact as the final result
of scientific and technical progress has been substantiated in the economic lite-
rature recently. In our opinion, such an understanding of the f inal results of the
production and use of new equipment is ~ustif ied in theory and practice for the ap-
propriate stage in the examination of the "investigatioit-production" process at the
level of the enterprise manufacturing new equipment.
Specification of the proposals of many economists on the.need for the estabZish-
ment of a close connection between the amount of incentive mark-ups and the abso-
lute magnitude of the economic impact is an important task in the improvement in
the economic mechanism of incentive mark-ups.9 We made an attempt to represent
the dependence of the amount of incentive mark-ups on the magnitude of the econ-
omic impact on a methodological basis in the form of specif ic scales. The calcu-
lation of the scales of incentive mark-ups realizing the indicated dependence was
made for 12 key consolidated groups of electrical engineering products.
When constructing scales for the determination of the amount of incentive mark-ups
on the basis of the dependence on the economic impact of new equipmen ~ the used
ratio of the economic impact and of the wholesale price should be retained by the
condition (indicator) of differentiation of the amount of incen:~ive mark-ups in
percent of the economic impact. In connection with the proposed method of calcu-
lation of incentive mark-ups this ratio acquires especially great importance, be-
cause it becomes basic for tY:e construction of the appropriate scales of mark-ups
(see table 1).
- The results of calculations of the ratio of the economic impact and of wholesale
prices of electrical engineering products presented in table 1 make it possible
to determine a number of the necessary requirements for the construction of scales
of incentive mark-ups.
First, in 9 out of the 12 examined groups of electrical engineering products the
minimum values of the ratio of the economic impact and of the wholesale price com-
prise from 5 to 10 percent. Obviously, in accordance with the existing methods
incentive price mark-ups can be established only for articles with a specific ef-
ficiency (impact-price ratio) of no less than 15 percent. Thus, a single lower
limit of efficiency, whose excess should be stimulated, ought to be established
for all groups of products. When the ratio of the economic impact and of the
wholesale price is less than 15 percent, the problem of the establishment of an
incentive mark-up should be considered by price formation bodies in accordance
with a special procedure.
Second, analyzing the maximum values of the ratio of the economic impact and of
wholesale prices, it should be noted that they are differentiated considerably by
groups of articles. For example, for electrical welding equipment this indica-
tor exceeds the maximum specif ic efficiency of power transformers more than 16-
fold.
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Table 1. Initial Data for the Calculation of Scales for the Determination of the
Amount of Incentive Mark-ups for Key Groups of Electrical Engineering
Products (in
- Ratio of economic
impact to wholesale Normative prof-
price itability cal-
- Groups of Products culated in rela-
Minimal Maximum tion to produc-
value value tion costs
Power transformers 10 140 15 '
High-voltage equipment 10 160 22
Electric lamps 10 170 17
Electric small- and average-capacity
machines 10 240 16
Large electric machines and turbo- and
hydro-generators 10 260 20
Condensers 10 330 13
Low-voltage equipment 5 330 12
Electric lighting f ixtures 10 370 10
Cable articles 20 470 10
Electric insulating articles 10 500 10
Power converters 20 520 18
Electric welding equipment 30 2300 14
Third, the maximum values of the ratios of the economic impact and of wholesale
prices in nine groups of electrical engineering products are from 240 to 2,300
percent, which exceeds the corresponding maximum value of efficiency according to
the standard scale many times.
However, the Instructions nn the Procedure of Establishment of Incentive Mark-ups
stipulate that the USSR State Co~nittee on Prices can introduce changes in the
standard scale for individual groups of products with due regard for the specific
nature of sectors.l~ In our opinion, an ob~ectively determined differentiation
of the scales of incentive mark-ups for groups of products depending on the maxi-
mum values of the ratio of the economic impact and of the wholesale price would
be a concrete realization of this important provision. For example, an analysis
of i.nitial data has shown (table 1) that for the examined 12 key groups of elec-
trical engineering products it is advisable to develop 10 differentiated scales
of incentive mark-ups (that is, for electric lighting fixtures and cable and elec-
tric insulating articles, taking into consideration the close values of specific
efficiency and normative profitability, the use of a single scale is proposed).
The stated methodological requirements on the canstruction of scales of incentive
- mark-ups are of a general nature and determine the unified approach to the stimu-
lation of the output of new products for production and technical purposes through
the mechanism of incentive mark-ups. On their basis we constructed a model scale
~ of incentive wholesale�price mark-ups for power transformers, in accordance with
which the amount of the incentive mark-up in percent of the absolute sum of the
economic impact is differentiated depending on the ratio of the economic impact
and of the wholesale price within 15 to 140 percent divided into nine intervals
(see table 2).
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Table 2. Scale of Incentive Wholesale Price Mark-ups for Power Transformers
Amount of incentive mark-up in rela-
tion to economic impact (in
Ratio of economic impact Upon attainment of Reduction per
and of wholesale price the lower limit of po3nt within
uoo x,a,, in efficiency interval the inter~val
- (n~,) (K~,)
15-35 70.0 1.68
36-50 47.1 0.94
51-65 35.8 0.55
66-80 29.64 0.37
81-95 25.76 0.27
96-110 23.1 0.21
111-125 21.15 0.17
126-140 19.66 0.14
over 140 7-8 � 2* - ~
* But no higher than tc~o standards of profitability
The amount of incentive wholesale price mark-ups for highly efficient, new equip-
ment in relation to the economic impact, that is, the share of mark-ups in the im-
pact, decreases uniformly. For example, the amount of incentive mark-ups in per-
cent of the economic impact (n,~) is reduced from 70 to 18.2 percent. At the same
- time, the amount of incentive mark-ups in relatian to the normatYve profit in-
crea.ses from 98 to 200 percent. Thus, the amount of the normative profit retains
only an indirect limiting effect through the mechanism of calculation of the
scales themselves.
In the proposed scale the amount of incentive wholesale price mark-ups for highly
efficient, new products was made closely dependent only on the absolute magnitude
of the economic impact obtained from the production and use of equipment in the
national economy. Proceeding from this it is possible to recommend a formula for
the determination of the amount of the incentive wholesale price mark-up on the
basis of a differentiated scale:
- 3 � (n., - ~C ~ K;) ~1 ~
Hn = 1~
where H n is the incentive wholesale price mark-up (in rubles);
~ ~ is the economic impact of a new article (in rubles);
n,~ is the incentive mark-up in relation to the economic impact upon attain-
- . ment of the lower limit of the corresponding interval of efficiency ac-
cording to the scale (in
~C is the difference between the actual ratio of the economic impact and
of the wholesale price (C~) for a new article and the low~r limit of
the corresponding interval of efficiency (CM), that is, ~C=Ctp-CH;
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Kti is the percent of reduction ir. the incentive mark-up per point of excess of the
lower limit of the interval of efficiency according to the scale.
We shall present an actual example of the calculation of the incentive wholesale
_ price mark-up f or highly eff icient, new equipment. 'I'he annual economic impact
~ from the production and use of the ZMTSZM-100 new power transformer is 454 ru-
bles. 1fie wholesale price (1(00) is 950 rubles. The specific efficiency of the
new article (3 : L(,,,, X l00) is 47.8 percent (454 :950X100) . According to the scale
(see table 2.) this value pertains to the second interval of the ratio of the econ-
omic impact and of the price (from 36 to SO percent) and the incentive mark-up in
percent of the economic impact, upon attainment of the lower limit of this inter-
val (n,~), will be 47.1 percent. The difference between the actual r.atio of the
economic impact and of the wholesale price for the new power transformer and the
lower limit of the second interval of eff iciency (c1C) according to the scale is
11.8 percent (Cq,-CH-47.8-36.0). The percent of reduction in the incentive mark-up
per point of excess of the lower limit of the second interval (K,~) according to
- the scale (table 2) is 0.94.
The incentive wholesale price mark-up for the new power transformer (H ) according
to f ormula (1) will be:
454 � (47.1-11.8�0.94) = 163.44 rubles
ioo
Thus, the amount of the incentive mark-up in percent of the absolute magnitude of
the economic impact is 36.0 percent (47.1-11.8-0.94 or 163.44:454X100). The ratio
of the incentive mark-up to the normative profit envisaged in the price of the new
- power transformer is 131.8 percent (163.44:123.9X100).
Sometimes, along with recognition of the theuretical legitimacy of establishment
of the dependence of the amount of profit taken into account in the prices of new
equipment on the magnitude of the national economic impact, practical objections
against such a method of calculation of incentive mark-ups are raised. In parti-
cular, it is stated that it would be incorrect to remove one of the limitations in
the system of distribution of the economic impact between the manufacturer and con-
sumer, leaving one criterion--the total sum of the impact. Usually, this is moti-
vated by the possible rise in the general level of profitability to tens and hund- ~
reds of percent in some cases and by the loss of control over the price level.
Such a position seems only partially substantiated. As illustrated by the pro-
posed scale and formula of incentive mark-ups, the use of the economic impact as
the only indicator, depending on which the amount of additional profit assigned to
.
the enterprise manufacturing new equipment is calculated, in practice, is possible
f or the overwhelming ma3ority of new articles. With regard to some, especially
highly efficient,.articles, for which the ratio of the economic impact and of the
wholesale price exceeds the maximum values envisaged by the scales, in fact, a di-
~ rect limiting effect of the normative prof it is needed. For example, if the spe-
- cif ic efficiency of the new power transformer exceeds 140 percent, the maximum
amount of the incentive wholesale price mark-up f or such highly efficient articles
is directly limited to 200 pe.rcent of the normative profit (to two standards of
- profitability). At the same time, it should be stressed that in this case as well
the normative prof it does not determine the amount of the mark-up9 but only serves
as its upper limit for some, especially highly efficient, articles.
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For the stimulation of the production of new equipment, along with the determina-
tion of the amount of incentive mark-ups and the establishment of their close con-
nection with the economic impact, the planning, recording and control of additional
profit are of great importance. This is due to the fact that at present incentive
mark-ups have a marked and constantly increasing effect on the most important indi-
cators of the production activity of enterprises manufacturing new equipment.
Improvement in the economic mechanism in the area of price formation is directed
primarily toward the strengthening of the role of incentive r~ark-ups in the re-
sults of the production and economic activity of enterprises manufaccuring new.e-
quipment and toward a significant expansion of the sphere of effect of incentive
mark-ups for highly eff icient, new products, that is, toward the use of stimulating
mark-ups in all industrial sectors. In connection with this the increasing mass
of incentive mark-ups will have a significant effect not on the results of work of
individual industrial sectors, in which the corresponding economic experiments
were conducted, but on the structure and proportions of development of the entire
national economy.
However, at present the sum of incentive mark-ups is not taken into consideration
in plans and the evaluation of their fulfillment is made with due regard for ad-
ditional prof it. Obviously, such a procedure of evaluation of plan fulf illment
has a significant stimulating effect on enterprises manufacturing new equipment
and it is advisable to preserve it, but only f or this purpose. With regard to the
system of planning, recording and control of the additional profit obtained from
the production of new equipment, some studies rightly point to the need to change
such a procedure. In particular, A. Sslyukov notes the following: "It seems ad-
visable to abolish the procedure in which the evaluation of f ulf illment of the plan
for the sale and prof it of industrial products is made without taking mark-ups into
consideration."11
Many arguments in favor of such a position can be adduced. For example, the func-
tioning of the signif icant and constantly increasing mass of incentive mark-ups,
essentially, outside the sphere of planned effect and control has many negative
consequences. First of all, such a procedure brings about an incomplete reflec-
tion in the plan of the value indicators of the production volume (which ~s com-
plicated under the conditions of application of indicators of net output) and
distorts the actual sectorial and intersectorial planned proportions and the plan
structure. The lack of planned control of the mass of incentive mark-ups has a
negative effect on the use of incentive funds for new equipment in the part formed
from this additional prof it, because at present there is no possibility of planning
and approving them. For the same reason there is a signif icant decrease in the
effectiveness of one-time bonuses f or the development, mastering and mass output
of especially important and highly eff icient types of equipment and machinery, as
well as of bonuses for the development and mastering of fundamentally new tech-
nological processes, which should be pai.d from the capital of the single fund for
the development of science and technology formed from the part of incentive mark-
ups.
All this points to the need for the planning at enterprises manufacturing new e-
quipment of incentive wholesale price mark-ups for highly efficient, new products.
Incentive mark-ups can be planned within the existing forms of statistical report-
ing (with the introduction of some improvements). However, it would be efficient
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to introduce a special form for the reflection of the totality of qualitative indi-
cators, to which a new important role is assigned in accordance with the decree on
the improvement in the economic mechanism. This special form, along with incentive
pric2 ,~,a~k-ups for highly efficient, ~iew products and products with the state Badge
of Quality, should also reflect other mark-ups and additional payments (f or example,
for export, for additional supply, for higher technical and economic parameters and
so forth).
The inclusion of incentive mark-ups in the sphere of planned effect and control,
along with a full and ob~ective reflection in the plan ot measure~ f or scientif ic
aiid 2:echnical progress, will have an additional stimulating effect on enterprises
manufacturing new equipment. This measure will make it possible to plan the amount
of deductions from mark-ups into economic incentive funds and into the single fund
for the development of science and technology (for the payment of ane-time bonuses),
which will make the formation of the mentioned incentive sources more substantiated
and guaranteed. To retain the existing incentives in the evaluation of fulfill-
ment of planned assignments, they can be corrected by the actual amount of the ob-
tained mark-ups.
For an efficient effect on an accelerated mastering and production of new equipment
_ the system of incentive mark-ups should be reinforced with economic levers directed
toward the withdrawal of the high profit obtained by manufacturing enterprises from
the sale of obsolete products. The 26th CPSU Congress paid much attention to an
improvement in the quality of output and to a cessation of the production of obso-
lete articles. N. A. Tikhonov's report stressed that for a prompt removal of ob-
solete equipment from production it is necessary to introduce more effective sanc-
_ tions for the output of obsolete models. Thus, the congress pointed out the in-
sufficient efficiency of the measures for the remoral of inefficient equipment
from production.
Wholesale price discounts for obsolete articles should be used as the basic econ-
omic levers affecting a prompt removal of such products from production. However,
an.analysis of the functioning in sectors of systems of wholesale price discounts
for obsolete equipment shows that, in practice, the worked out provisions on econ-
omic levers directed toward the withdrawal of the high profit obtained from the
sale of~these pruducts are not applied. For example, in the Ministry of Electrical
Engineering Indu~try during the analyzed period (1972-1979) discounts were not ap-
plied at all in 4 years (1975 and 1977-1979) and totaled from 2,000 to 121,000 ru-
bles during other years. The discounts paid to the state budget are incommensura-
ble with the obtained incentive mark-ups. They comprise from 0.006 to 0.51 per-
cent of the latter. A similar situation is also characteristic of other indus-
trial ministries; for example, the Ministry af Heavy and Transport Machine Build-
ing and the Ministry of Power Machine Building. Thus, in the indicated ministries
in 1974-1979 wholesale price discounts for obsolete products, in essence, were not
applied. In connection with this the conclusion that, in practice, the production
of articles in the second-quality category is not punished is fully substantiated.
In 1972-1979 wholesale price discounts for obsolete products could be established
= only upon the expiration of the period of removal of such products from productian.
This was the basic reason for the fact that, in practice, the discount system "did
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not work." Ministries and departments establish groundlessly long periods of re-
moval of obsolete equipment from production, which often are revised toward an in-
~ crease. The output of obsol~te products and their sale at high prices without dis-
c~tints for many years is of ten ~ustif ied by the necessity to meet the needs of en-
terprises, lack of articles replacing those removed from production, lack of pre-
paration of production for the output of new articles and so forth. As a result,
not only obsolete products are produce:i for a long time, but the output of highly
efficient, new equipment is delayed.
The dec~ee on improvement in the economic mechanism introduced a two-stage discount
system, which has a number of advantages as compared with the variants experiment-
ally applied in a number of industrial sectors (Ministry of Electrical Engineering
Industry and Power Machine Building, Ministry of Heavy and ZYansport Machine Build-
ing, Ministry of Tractor and Agricultural Machine Building and so forth). The main
advantage of this system lies in the fact that wholesale price discounts at the
rate of 50 percent of the obtained profit should be applied immediately from the
time of certification of an article in the second-quality category. The normative
period necessary either for an improvement in this article, making it possible to
transfer it i.nto a higher quality category, or for a completion of the preparation
o� the production of the new article replacing the obsolete article should be es-
tablished f or the manufacturing enterprise from that moment. Af ter the end of this
period, in case of continuation of the output of the obsolete article, 311 the prof-
it actually obtained by the manufacturing enterprise should be withdrawn into the
budget without fail.
Such a procedure of establishment of wholesale price discounts for obsolete equip~-
ment seems quite substantiated and more eff icient as compared with the previously
used procedure. However, at present f or an efficient functioning of such a dis-
count system it is necessary to further improve and develop it. In particular, in
accordance with the Instructions on the Procedure of Establishment of Incentive
Mark-ups and Discounts wholesale price discounts are not applied to spare parts
and sets produced for products removed from production.12
In our opinion, such a def inition of products exempt from the application of whole-
sale price discounts is too general. As the practical experience of the Ministry
of the Electrical ~ngineering Industry has shown in 1980,
this makes it possible, as before, not to apply wholesale price discounts to almost
all obsolete equipment. Therefora, a more accurate and specific definition of
products f or whose output economic sanctions (wholesale price discounts) are in-
tr^duced is needed. This is especially urgent for the machine building sectors
- whose products are assigned as accessories to other national economic sectors.
Therefore, it is advisable to introduce nondepartmental control of the inclusion
of articles in the list of products in the second-quality category exempt from
the applicatian of wholesale price discounts. Such a nondepartmental expert ex-
amination will make it possible to ob~ectiveZy dete~mine the need for a temporar~
production of a strictly determined range of obsolete equipment as spare parts.
The procedure of recording price discounts f or obsolete equipment determined by
the cost accounting system of organization of urork on new equipment also needs
to be improved. At present the sums of wholesale price discounts are not taken
into account in the plan, but the evaluation of its fulf illment is made with due
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_ regard for them. This motivates manufacturing enterprises to remove obsolete e-
quipment from production. However, for a planned effect of discounts and a strict-
er control of their application by manufacturing enterprises, obviously, it is ad-
visable to plan in absolute terms the sum of profit obtained as a result of the
production of obsolete equipment and subject to transfer to the state budget. The
possibility of planning and controlling the correct establishment of discounts is
determined by the fact that they are applied to all the products in the second-
quality category envisaged in the corresponding plans.
- The stated proposals for an improvement in the economic mechanism of incentive
mark-ups, on the one hand, are directed toward the establishment of a close con-
nection of the stimulation of the production of new equipment with the final ria-
tional economic results of scientific and technical progress and with the real e-
= conomic impact obtained in the national econom,r and, on the otaer, presuppose the
_ intensification of the interconnection of the results of introduction of scientif-
ic and technological achievements with the general system of planning, recording
and control. Such an impr.ovement in the system of ~conomic incentives for scien-
tific and technical progress will contribute to a successful solution of the prob-
_ lem of increase in the scale of development of products in the superior category
- and of the mastering and introduction of highly efficient, new equipment into pro-
duction set in "Basic Directions in the Economic and Social Development of the USSR
for 1981-1985 and for the Period Until 1990."
FOOTNOTES
1. See "Instructions on the Procedure of Establishment of Incentive Wholesale
Price Ma.rk-ups for Highly Eff icient, New Equipment for Production and Techni-
cal Purposes and of Wholesale Price Discounts for Products in the Secand-Qual-
ity Category, as well as for Products Not Certif ied During_the Established Pe-
riod" ("Sovershenstvovaniye Khozyaystvennogo Mekhanizma" /Improvement in the
Economic Mechanism/, Collection of Documents, Izdatel'stvo Pravda, 1980, p 177).
2. According to the evaluations of A. Glichev and Ya. Kotlikov, the amount of
mark-ups for machine building products comprises 3 to 4 percent of the whole-
sale price and no more than 10 percent of the economic impact (see A. Glichev
and Ya. Kotlikov, "Incentives for an Increase in the Quality of Products,"
VOPROSY EKONOMIKI, No 12, 1979, p 40).
3. V. Ye. Astaf'yev, L. Ya. Povolotskiy and V. P. Khaykin, "Ekonomichesk~ Mekha-
nizm Uskoreniya Nauchno-Tekhnicheskogo Progressa (Opyt i Problemy)" /Economic
Mechanism of Acceleration of Scientif ic and Technical Progress (Experience and
Problems)/, Izdatel'stvo Ekonomika, 1977, p 167.
4. L. I. Shevchenko, "Tsena i Stimulirovaniye Proizvodstva i Primeneniya Novoy
Tekhniki" /The Price and Stimulation of the Production and Use of New Equip-
ment/, Kiev, 1976, p 92.
5. See V. Ye. Astaf`yev, L. Ya. Povolotskiy and V. P. Khaykin, "Ekonomicheskiy
Mekhanizm Uskoreniya Nauchno-Tekhnicheskogo Progressa (Opyt i Problemy)," p
199; L. I. Shevchenko, "Tsena i Stimulirovaniye Proizvodstva i Primeneniya
Novoy Tekhniki," p 93.
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6. See "Planirovaniye i Stimulirovaniye Nauchno-Tekhniches~:~~o Progressa" /Plan-
ning and Sttmulation of Scientific and Technical Progress/, Izdatel'stvo E!co-
nomika, 1972, p 229.
- 7. The procedure of establish;nent of incentive mark-ups set forth in the 1974
method began to be in effect in the electrical engineering industry in 1972.
8. K. Marx and F. bngels, "Soch." /Works7, Vol 20, p 321.
9. See "Sovershenstvovaniye Planirovaniya i Ekonomicheskogo Stimulirovaniya Nauch-
no-Tekhnicheskogo Progressa" /Improvement in the Planning and Economic Stimu-
lation of Scientific and Technical Progress7, Izdatel'stvo Moskovskogo Univer-
siteta, 1977, p 133; "Nauchno-Tekhnicheskiy Progress i Ekonomika Sotsializma"
/Scientific and Technical Progress and the Economy of Socialism/, Izdatel's~vo
Ekonomika, 1979, p 47; V. P. Kochikyan, V. I. Koshkin and Ya. G. ~ubinetskiy,
"Kompleksnaya Sistema $timulirovaniya Tekhnicheskogo Progressa" /Overall Sys-
tem of Stimulation of Technical Progress/, Izdatel'stvo Mysl', 1980, p 85.
10. See "Sovershenstvovaniye Khozyaystvennogo Mekhanizma," p 178.
11. A. T. Salyukov, "Vliyani3?e Finansovogo Mekhanizma na Povysheniye Kachestva
Produktsii" /Effect of the Financial Mechanism an an Increase in~the Quality
of Output/, Izdatel'stvo Finansy, 1980, p 86.
12. See "Sovershenstvovaniye Khozyaystvennogo Mekhanizma," p 178.
COPYRIGHT: Izdatel'stvo "Pravda", "Voprosy ekonomiki", 1981
11,439
CSO: 1820/233 END
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