JPRS ID: 9105 WORLDWIDE REPORT NARCOTICS AND DANGEROUS DRUGS

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• Document Number (FOIA) /ESDN (CREST): CIA-RDP82-00850R000200050042-8
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• Content Type: REPORTS

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21 FEBRURRY 1980 CFOUO 5r88) 1 OF 1
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JPRS L/8940 ~
21 Febrt~ary 1980
- U SS R Re ort
p ~
ECONOMIC AFFAIRS _
- CFOUO 5l80)
FBO$ FOREIGN BROADCAST INFORMATION SERVICE
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JPRS L/8940 _
_ 21 February 1980
USSR REPORT -
ECONOMIC AFFAIRS
,
(FOUO 5/80)
CONTENTS PAGE
Scientific-Technical Programs in National Economic Plans
(V. Disson; VOFROSY EKONOMIKI, Nov 79) 1 _
Overall Valuation and Utilization of Production Reserves
('Lh. Sidorova; VOPROSY EKONOMIKI, Nov 79) 11~
Enterprise Modernization Object of Efficient Capital Investment
(A. Yemel'yanov; VOPROSY EKONOMIKI, Dec 79) 21~
Improved Norms Will Stimulate Interest in Better-Quality Products
(A. Glichev, Ya. Kotlikov; VOPFcOSY EKONOMIKI, Dec 79) 37
' a - [III - USSR - 3 FOUO] -
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SCIENTIFIC-TECHNICAL PROGRAMS IN NATIONAL ECONOMIC PLANS
, Moscow VOPROSY EKaNOMIKI in Russian No ~~l,Nov 79 pp 23-32
[Article by V. Disson]
[Text] The implemen~ation of the main tnrusts of scientific-technical
progress is connected with the over,all solution of problems with regard
to supplying production pTocesses aL1d auxiliary operations with systems -
of machinery and equipment as well as the means of automation; the crea- -
tion of production lines on the basis of principally new technological
processes an~i equipment of large, standardized capacity; the expansion of
the products list and the improvement of the properties of construction
materials along with perfecting the means of processing them; the appli- -
cation of new methods of organization and administration; the protection -
of the natural environment, etc. Their solution depends on the creation
and assimilation in production of new technical items, materials, tech-
nology, and new methods which have embodied the results of scientific
research and technical developments, discoveries, and inventions.
Under these conditions therE is an increase in the value of the programmed-
targeted method, which permits us to concentrat` our efforts and material
means on attaining the outlined goals, guaranteeing overall quality in
solving the problems posed and continuity in carrying out the necessary
measures; speeding up the introduction of scientific research and devel-
opments into practical utilization. It makes it possible to disco~�er
and take into consideration the interrelationships between sectors, and
this i.s particularly important in solving the overall, intersectorial
problems of scientific-technical progress. The programs consist of
- planned, directive documents which are being worked out to solve compli-
cated problems requiring the promulgation of a complex of goal-oriented
m~asures, interrelated in resources, time periods, and in the large number
of participan~s. The place and purpose of the scientific-techni.cal
programs within the total s}stem of planning at all levels of administra-
tion has been determined by the decree adopted by the CPSU Central Com-
mittee and the USSR Council of Ministers, "On Improving Planning and
Strengthening the Inf luence of the Economic tlechanism on Increasing the
Effectiveness of Production and Work Quality."
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An organic component of planning is the overall program for scientific-
teclinical~progress, which is worked out for a period of 20 years and then
is refined and extended every S years. It represents an integrated con-
ception of the development of science, technology, and production in the
form of a system of interconnected forecasts. Preparation has been
completed on the program for scientific-technical progress for the period
extending to the year 2000. It establishes qualitative shifts in equip-
ment and technology with a socioeconomic evaluation, as well as priorities
in developing individual scientific thrusts; and it is recommended that
these be given top priority. Proceeding from the tasks of developing the
economy and the tasks of social progress, the most important scientific-
technical problems ~re defined, both the long-term ones and those which
wi11 yield results within comparitively brief time periods. The overall
program will constitute an initial document for developing the plan for
the USSR's principal economic and social development for 10 years.
On the nationwide level it has been recognized as feasible to work out the _
following: targeted, overall, scientific-technical, economic, and
social programs; programs for developing individual regions and terri-
torial complexes included within long-range plans; basic tasks in carrying
out scientific-technical programs included within the state's five-year
plans; programs for solving the most important scientific-technical
problems and the comprehensive utilization of natiural resources, which
are being worked out by the USSR State Committee for Science and Technalogy
and USSP. Gosstroy (in the fields of construction, building materials,
and construction and road machine building) jointly with the USSR Academy -
of Sciences. On the sectorial level within the five-year plans for raising
the technical level of the sectors, the USSR ministries and departments
and the Councils of Ministers of the Union republics must approve the -
programs for solving the sectorial scientific-technical problems and the
comprehensive utilization of natural resources. On the level of associa-
tions and enterprises within the five-year and yearly plans, tasks will be
approved with regard to fulfilling the nationwide and sectorial scientific-
technical programs. ~
In scientific-research, design, planning, and technological organizations, _
at testing (experimental) enterprises, in scientific-production and
production associations (enterprises) which have been converted to the
cost-accounting system, operations concerned with the creation, assimila-
tion, and introduction of new equipment will be carried out on the basis
of orderjob authorizations (agreements), comprising, in essence, local
programs. These must contain definitions of the end results of the -
operations (including the effect on the national economy), the participants,
and the time periods for carrying out the operations at all stages--from
scientific research to introducing the results into production, as well
as the necessary material resources, the amounts and sources of financing
and material incentives.
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~ Specific experience has been accumulated in working our. and implementing
scientific-technical programs of various types during the lOth Five-
Year Plan. Thus, within the state five-year plan for 1976--1980 there
was approval of the basic tasks of programs with rcegard to aolving 200
- extremely important scientific-technical problems; as a rule, these were
inter-aectorial in their nature.
The USSR Academy of Sciencea has worked out long-term progratna of compre-
- hensive reaearch with regard to aggregate problems in the fielde of the
natural and aocial aciencea. In order to i~lement such programs, coor-
dinated plans have been drawn up for ~oint operationa by the USSR Acade~ay
of Sciences and the appropriate ministriea and departments. The Siberian
Department of the USSR Acadeary of Sciences has worked out 24 ~esearch
progra~s on utilizing Siberia's natural riches; these comprise 3 component
part of the general scientific program known as "Sibir'~." In its plan
for the republic covering the years 1976--1980 the I.atvian SSR approved 11
territorial progra~s with regard to the most important problems and, in
particular, on warking out and implementing output quality control, on
mechanizing manual and physically heavy work, the protection of the natural
environment and the rational utilization of natural resources, as well as
the comprehensive utilization and reproduction of timber resources.
Territorial programs have also been a~orked out in a number of other union
republics. Certain ministries have formulated programs for solving indivi-
dual sectorial scientific-technical problems.
The decree of the CPSU Central Committee and the USSR Council of Ministers
concerning the improvement of plannii:g in long-range plans accords an
important position to targeted, comprehensive programs which must be
_ worked out with regard to key problems in the country's development. As
top-Priority programs for the iimmediate future, programs have been speci-
fied for economizing on fuel and metal, developing the zone of the BAM
(Baykal-Amur Mainline), reducing the use of manual la~bor, and increasing ~
the production of new consumer goods. The implementation of each of -
these programs is bringing about a need to promulgate a complex of scien-
tific studies in order to select the most effective ways and means of
attaining the goals set h~fore us, of carrying out measures for the
development, assimilation, and mass production of new types of output, of
furnishing the producti.on line with up-to-date technical means and
progressive technological processes. The above-mentioned scientific-
technical measures are components of the programs and should be approved
within them as subpr:,grams.
Obviously the number of targeted comprehensive programs, the list of
which has been entrusted to USSR Gosplan for approval, will be larger.
However, this list cannot be too broad, so that the principal of the high
priority of their resource allocation will not be lost. At the same~tine, ~
it does appear equitable to include on this list long-term, targeted
programs for guaranteeing a complex of ineasures to raise the technical-
economic level of production and output.
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Beginning with the lOth Five-Year ~lan tasks concerned with raising the
technical-economic level o.f production and output are being established
in the state plans. Prior to this in the plans for the development of
science and technology the chief place was occupied by planning not the
end goals (raising the technical level of production), but rather the
means of attaining these goals in the form of tasks for promulgating `
scientific zesearch and technical developments, as well as the assimila-
- tion of new output and new engineering processes. By using such measures
it was impossible to determine sufficiently the changes in the technical
level of the sectors of the national economy, the influence of scientific-
technical progress on improving production and increasing its efficiency,
as well as on economic results. Of course, at the stages of development
and assimilation society bears losses which are covered and guaranteed
by economic efficiency only when there is widescale utilization of new
equipment, and when it affects the improvement of technical-economic
indicators of the operation of sectors and enterprises.
The indicators of the technical-economic level of production and output
for every sector are established by proceeding from the tasks of its tech-
nical and economic development as defined by the principal thrusts of -
the country's economic and social development into the future and the five-
_ year period. The basic tasks approved for the lOth Five-Year Plan with
regard to raising the technical-economic level of production and output are
directed at the following:
--improving the qualitative structure of output (increasing the proportion
of progressive types of production as well as improving the total quali-
tative indicators of output);
--raising the level of the technical base in the sector (increasing the
output in units of large, standardized capacity, furnishing production
with sufficient and up-to-date equipment);
--permitting the use of progressive technological processes (growth in the
scope of using the most effective technological processes, which ensure
an increase in labor productivity, a reduction in the losses of raw
materials and other materials and their comprehensive utilization, improve-
ment in output quality, and protection of the natural environment);
--raising the level of production mechanization and automation (the wide-
spread use of systems and machine complexes in production and on this
basis--the mechanization and automation of the entire production cycle);
--the re~uction of material consumption by production. This is one of the
- most important conditions for increasing its efficiency.
Tfle incorporation of the meassres enumerated above into the five-year and
yearly plans has reinforced the centralized influence on raising the tech-
- nical-economic level of production, the expansion of the scope of
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production and the utilization of new machines, equipment, materials, and -
technological processes, Nevertheless, approximately 20 percent of the
tasks have not reached the levpl approved in the yearly plans. In particu-
lar, tasks have not been fulfilled with regard to the growth of output
of the progressive types of mineral fertilizers, plastics, syn.*.hetic
fibers and threads, as well as the incorporation of highly proJuctive
engineering equipment in the chemical industry. In the oil-refining and
petroctiemical industry there have been insufficient growth rates in the
production of radial-design tires, and the planned level of durability
for the tires of trucks and passenger cars has n~t been attained. Also
tailing to meet the assigned level of the most important indicators are
the blast-furnace, steel-smelting, and rolled-steel production lines (the
coefficient of utilizing the usable vo~ume of blast furnaces, the er.pendi-
ture of coke per ton of cast iron, the expenditure of steel ingots in
- producing rolled steel, and a number of other f actors) in ferrous metallurgy.
Tasks have not been fulfilled with regard to raising the level of inechaniza-
tion at lumber yards, and this is one of the principal reasons why the
lumber industry is lagging behind the planned assignments with regard to
labor productivity. The dry method of cement production in the building-
- materials industry is not being developed as it should.
An analysis of the Leasons for the non-fulfillment of the indicdtors of
the technical-economi~ level of production and output has revealed that
the planned measures wei; not sufficiently reinforced in the plan proce-
dure by tasks with respect the introduction of new capacities, ~he
guaranteeing of material and fi~;~ncial resources, and they were poorly
coordinated with the plans for capi~31 construction and with the produc-
tion of new equipment.
The development of long-term programs, the end-results of which constitute
the raising of the technical-economic level of production arid output, will
permit a more comprehensive and targeted definition and implementation of
the necessary measures for attai.ning the goals which have been set for us. _
In our opinion, these pr..ograms ought to establish tasks with regard to
working out and assimilating into production new types of equipment and
technological processes; they should also provide for expanding the scope
of production and the use of progressive te~hnical means and effective
methods of production which have already been assimilated or have begun to
be assimilated. At the same time it would be feasibl2 to include in the
programs measures with regard to bringing new equipment to the point uf
introduction, to developing production capacities, to building new and
modernizing existing production lines, arid to determining resources.
In programs concerned taith raising the level of inechanizing and automating
the most important production processes and, on this basis, with the growth
of productivity and the elimination of heavy manual labor, it is necessary
to provide for the creation and assimilation of new engineering types of
machinery which are in short supply within the system, as well as further
improving and expanding the production of equipment which has already
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- been assimilated. In programs cahose goal is to improve the technical-
economic indicators of production (for example, a reduction in materials
consumption and energy consumption, an increase in the overall utilization
of raw materials, other materials, etc.) it would be feasible to include
measures with regard to developing and assimilating n^w technological
processes and equipment, expanding the scope oi utilizing already-assimilated
progressive techno].ogy, improving technical means and increasing their
production. In programs concerned with improving the structure of
production output as well as with increasing the proportion of the
progressive types of output within the total volume of production and
improving the qualitative characteristics we should include the creation
of new types of output with improved parameters, along with expanding the
production of items and materials which are already being turned out at
a high technical-economic level.
Long-term programs can also be worked out to solve scientific-technical
problems which are linked to the introduction of the most important,
already completed research and developmen.ts, major inventions for the
purpose of iarge-scale utilization of the equipment and technology which
have been created on their basis. It would also be feasible to draw up
programs with regard to principally new directions, when the end goals
still cannot be expressed in the form of the industrial introduction of a
new item of equipment or technology. Measures of such programs eomprise
broad scientific research studies, experimental and test verifications,
with tt?e issuing, based on their results, of proposals and recommendations
in the form of plans, technical-economic grounds, and reports.
Targeted compreher.sive programs ought to be coordinated with appropriate
sections of the plan, as well as with material and financial resources.
In our opinion, this coordination should be carried out in the following
manner. In each of the long-term, targeted, scientific-technical progr.ams
two interconnected but essentially distinct thrusts are to be kept
separat2: 1) expansion of production and the use of created items of
new equipment and technology; 2) solution of scientific-technical problems
with regard to the creation of innovations.
The implementation of ineasures of long-term programs for increasing the
volumes and utilization of new technical means and technological processes
= can be solved by traditional methods of planning. In order to do this,
the appropriace sections of the state and sectorial plans for five-year
, and annual periods must include from the programs tasks with regard to
increasing the volumes of output pro~uced, the introduction of new capaci-
ties by means of building new or modernizing existing enterprises, the
allocation of resources, as well as the reflection in the plans of
economic, scientific-technical, and social results. Such measures can
be carried out primarily within the framework of the already farmed
specialization and cooperation, as well as by traditional mettiods of
planning.
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The solution of scientific-technical problems regarding the creation of
innovations and bringing them to the point of industrial assimilation
requires the promulgation of a comple:~ of ineasures at all stages of the
cycle "science--technology--production," rhe establishment of n~w ties
among organizations, enterprises, and sectors, as well as, in a nutnber of
instances, the creation of new organizations and enterprises. Each of
the stages of the above-mentioned cycle represents a sufficiently inde-
pendent sphere of activity with a well-formed mechanism of administration,
planning, and financing. Hence, during a transition from one stage to
another there arise difficulties, especially when the participants in the
operations are organizations and enterprises of various departments.
As experience has shown, these difficulties are overcome more successfully
if the operations are conducted on the basis of scientific-technical
, programs which are approved for a f ive-year period and which are called
upon to assure the necessary coordination of operations between various
participants and joint operations during the transition from one stage of
research and development to another. Such programs may be either a part
of long-term, scientific-techni.:al pr~grams, or they may be utilized to
carry out tasks which require ~olution within the given five-year period.
As compared to the long-term programs, they must be more directive in
. theiz� nature and, to a large extent, be detailed with regard tr~ measures
_ and participants. -
A new decree of the CPSU Central Committee and the USSR Council of Minis-
ters concerning the improvement of planning has provided for the working
out of programs to solve the most important scientific-technical problems
and problems of the comprehensive utilization of natural resources on the
nationwide and sectori.~l levels. The targeted thrust of these programs
nas underscored the end result--organizing the regular production of new
output and the intro~uction of progressive technology. They must take
into consideration the results of basic and applied scientific research
and ensure that they are brought to the point of practical implementation. -
The development of such programs on the nationwide level has been entrusted
' to tiie GKN'P (USSR State Committee for Science and Technology) and USSR
_ Goss*_roy in conjunction with the USSR Academy of Sciences. In order to -
accord multi-faceted consideration of the achievements of science and
_ technology in the plans of economic and social development, the programs
with regard to solving the most important scientific-technical problems
- and problems of the comprehensive utilization of r~atural resources must
be presented to USSR Gosplan, whereas the principal tasks of these programs
wi11 be confirmed in the state five-year plan.
In working out the programs with regard to solving the most i_mportant
sci_entific-technical problems and the problems o� the comprehensive utili-
zation of natural resources for the ensuing �ive-year plan it is necessary
~ to take into consideration the experience in drawing up and implementing
the similar programs which were approved for~ the years 1976--1980. In
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accordance with these programs a considerable amount of operations with
- regard to solving more than 200 scientific-technical problems are bein~
carried out in the lOth five-year plan. They are being utilized to create
and bring to the point of assimilation in the national economy an extremely
large power unit with a capacity of 1.2 million kW for the Kostro~skaya
GRES, a hydroelectric power unit with a ca~acity of 640,000 kW for the
Sayar.o-Shushenskaya GES, and a unit with a capacity of 60G,000 kW, equipped
w ith a fast-neutron reactor for the Beloyarskaya AES. Progressive tech-
n ological processes have b een used as the basis for creating and putting
into operation units of large, standardized capacities in the chemical,
petrochemical, and oil-refining industries, as well as in the building-
materials industry. In order to prcvide basis equipment and supplies on
a comprehensive for production and auxiliary proce~ses in various sectors
of the national economy (primarily for coal mines, ore-mining operarions,
lumbering, haisting and transport, warehousing, and a number of agricul-
tural operations), where a significant number oF workers are still employed
in heavy, manual labor, highly productxve means of inechanization and auto-
mation are being created and assimilated.
In all, the programs have planned to create approximately 2000 new types
of equipment for production purposes and consumer items, of which 60 per-
cent are intended for assimilation during the lOth Five-Year Plan. With
regard to the remaining projects a stockpile is r~eing created in order to
complete them during the nexfi five-year plan. The programs also provide
ior the development of about 1000 new technological processes, more than
900 types of economical materials, and about 700 automated control systems
of various types, the great majority of which will be brought to the
point of assimilation in production during this five-year plan. An impor-
tant thrust in the programs is the development and introduction of inethods
and means of environmental protection, including the prevention of the
pollution of water and air basins, the purification of industrial waste
waters, and the creation of new methods of monitoring the environment.
A number of programs are directed at developing research which is necessary
for the formation of a scientific-technical inventory for the future. In
particular, the programs for the lOth Five-I'ear Plan have provided for a
large volume of scientific studies dealing with the problems of utilizing
the principle of super-conductivity, the creation of an I~ID (magneto-
hydrodynamic) generator, new types of gas transportation, the development
of pneumatic container transport, the protection of inetal from corrosion,
and a number of other prob lems. Mozeover, many programs have outlined
individual tasks concerned with developing theoretical studies, working
out forecasts, and research on various processes and phenomena which are
_ necessary for the selection and the scientific groundwork for the optimum
ways of solving problems and determining the directions of further work.
Z t also seems equitable to include in future ~+rograms tasks c~ith regard
to the formation of an inventory concerned with the most important directions
f or the future development of science and techriology. At the same time, in
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_ our opinion, a number of programs, particularly those in the field of
construction, agriculture, etc., should not limit themselves to carrying
out only scientific resea~ch and plan operations. Provisions must be
made to bring their results to the point of practical utilization under
production conditions. In order to include tasks concerned with the indus-
trial assimilation of innovations within the programs of the llth Five-
Year Plan, we must, first of all, carefully ar.alyze how the programs of
the current five-year plan are being finished up and include the unfinished
_ projects in the new programs (provided, of course, that the work has not
- lost its timeliness). This will also facilitate a more equitable distri-
bution of finishing up developments over the years. At the present time ,
work on the majority of tasks is being finished up, as a rule, during the
last two years of the five-year plan.
The programs are drawn up for a five-year period; however, with regard to
tasks which are not being fully implemented it is necessary to indicate
the time periods for assimilating the innovations which arz being created.
In all the programs it would. also be feasible to determine the intended
volumes of production and utilization of the items of new equipment and
techno~.ogy which are being created for the new five-year plan and for the
following five years, when the scales will attain their optimum dimensions.
_ The economic efficiency of the inno�~ations must reckon on these volumes as
well as determining and evaluating measures for achieving the intended
vo~umes of production and utilization of innovation~.
One of the important trends in improving the development of programs is
incr.easing the comprehensive nature of the measures being provided in the
progr~ms. If, for example, the goal of a program is to develop and
a~similate a new technological process, then it is necessary to provide
for tasks with regard to the design and manufacture the required equipment,
means of automation, catalysts, etc. In creating new machinery we must
set up tasks to develop complete sets of items and materials. Unfortunate-
ly, in a number of programs for the lOth Five-Year Plan we have still not
overcome a bureaucratic approach, and this does not allow us to fully
utilize the advantages of the prugrammed-targeted method.
Ttie comprehensiveness of the programs will be assured if the basic mea--
sures with respect to each task of the program are provided f.or in a
specific sequence--from the scientific research to the assimilation of
the create,: ~_nnr~vation in the national economy. Each of a program's
measures must serve as a phase in the overall complex of the necessary
operations, and the result obtained from its implementation must be a
point of departure and mandatory for the promulgation of the ensuing
phases. Unfortunately, instances are encountered wherein such important
operations as designing and buildi:ig test and test-industrial installations,
as well as preparing production for assimilation remain outside the frame-
work of the program. Often scientific-research work, though conducted
in accordance with the program, coastitutes, so to speak, its own goal,
without indicating an end restilt and the measures to utilize this result.
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Tn order to ~~ut the program structures in good order and establish a
sequentiality in implementing the program tasks, use is made of standardized
phases for creating new items, materials, technological processes, and
automatic control systems. The standardized pllases, which have been
worked out by the GKNT, as applied to the existing COSTs (All-Union State
Standards), define what result must be achieved at the conclusion of each
- phase and in accordance with what sequence the acceptance of a finished
operation wi11 be carried out. Proceeding from the new requirEments, we
mt~st introduce refinements into the standardized phases in order that they
may provide to a greater degree measures not only with regard to ~reparing
new equipment to be installed in production but also with regard to pre- -
naring production facilities for the assimilation of new equipment, inclu-
ding the organization of regular production of the new output and the _
introduction of progressive technology.
Continui~y of planning throughout the entire cycle of "science-technology-
produc.tion" will be assured if the concluding phases of the programs with
respect to assimilating the items of new equipment, materials, technologi-
cal processes, and ASU (Automatic Control Systems) (which ~re being created
in the five-year plan being planned) will at the same time also be provided
~or in tY~e plans for assimilating new types of industrial output, and
the inrroduction of progressive technology and computers in the production
plans as well. Tasks with respect to increasing the scope of production
of new types of output and saturating various spheres of prod~sction with
r.hem, :a~ we11 as with expanding the application of progressive technologi- _
cal processes, should be included within the plan with regard to the prin-
cipal indicators of the technical-economic level of production and be a
component part of the plans of production and capital construction.
The chief condition f or the effectiveness of the programs is their coor- ~
dination with the tasks of the plans for prcduction, capital construction,
material-technical and financial guarantees. It has been established that
the tasks of the programs being worked out to solve the most important,
high-priority, scientif ic�-technical problems are subject to mandatory
inclusion in the state and sectorial plans as well as to the top-priority
guarantee of the necessary resources. However, the ministries have not
provided for a number of program tasks in the plans, and this has led to
a diGruption of the planned time periods or to their postponements. This
is primarily a matter of constructing test and test-industrial installations
for processing efficient technological processes, as well as preparing -
production to assimilate new equipment and technology,
. Frequently the measures of the programs and the time periods .�or ~ulf illing
ttiem are dependent upon whether or not tre appzopriate tasks are included
in otl~er sections of the plan. The non-allocation of the necessary
resources, at times without sufficient grounds, is reckoned to be the
objective cause f or adjusting the programs. It was principally for these
reasons that For three years of the lOth Five-Year Plan produc.tion did
~ -
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not assim~.late more than 15 percent of the items of new equipment which
had been planned for introduction and which had been created in accordance
with the programs; nor were about 40 percent o~ the test, test-industrial,
ancl chlef facilities and installations.
The la~; in construction and in the putting into operation of test and
clitel- Cacililles at wltich the processing and assimilatlon of new equip-
ment is carried out constitutes one of the causes of the slow introduction
of scientific-technical achievements in the national economy. This situa- _
tion is frequently explained by the insufficient allocation of funds to
the development and assimilation of new equipmF~nt. It is noted that these
tunds amount to only 25--30 percent, and sometimes even less, of all the ~
funds allocated to science, while more than 60 percent are earmarked for
applied research. However, calculations show that about 25 percent is
allocated to applied research, while more than 60 percent of the funds
allocated to science are earmarked for development. Thus, it is the
capital inves~ments in the implementation and assimilation of new equip-
ment which are insufficient rather than the funds allocated to technical
developments. Therefore, we must strengthen the plan's effect upon guaran-
teeing the program tasks.
In our opinion it would be feasible in the state plan with regard to intro-
ducing progressive technology to provide for the construction and putting
into operation of the most important test-industrial installations, and in
the plan for capital construction to set aside an individual line for the
volume of operations concerned with their construction.
It is also necessary to strengthen the role of the f inancial mechanism in
guaranteeing the fulfillment of the program tasks. Ths scientific-
technical programs specify the estimated cost of operations and the
financing ministries. A procedure has been established for the top-priority
financial guaranteeing of the operations which are being carried out in
accordance with the programs. In the state plan for financing scientific-
research operations outlays tor the r::ograms are earmarked by a separate
line. Nevertheless, the financial plans are approved for only one year,
while the financing of operations in accordance with the programs is
_ carried out From many sources. In a number of ministries and departments -
funds are earmarked not for the fulfillment of specific operations but
for the maintenance of scientific institutions. Possibilities are insuffi-
cient for the consumer to influence the quality and timeliness of fulfill-
ment of the scientific-research operations and technical developments,
since these operations are often financed by means of the performer's
, funds.
The decrPe of the CPSU Central Committee and the USSR Council of Ministers
on improving planning and the economic mechanism has specified a number of
measures for improving the financing of operations with new equipment.
In particular, it has been established that financial balance sheets and
plans will be worked out not only for one year, but for the entire five-year
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plan, and this will permit the improvement of the financial support of the
~ programs in which the estimated cost of the measures is indicated for the
fj�!e-year per.iod. In 1980 the transition carrying out operations with
regard to new equipment by means of order-job authorizations (agreements)
in which the dimensions and sources of financing all operations will be
indicated; i.e., those which are necessary to create an item of new equip-
- ment and putting it into production, for the entire period of fulfilling
them. Moreover, calcuations will be made not for the fulfillment of
' individual stages of the operations, but for the completely finished and
accepted work.
A~1 this will allow us, with the aid of the financial mechanism, t~ more
actively influence the execution of operations in accordance with programs
. which are assigned not in the form of a process, t~ut rather in the form
of end results. Of great importance for the financial support of all
phases of operations for working out and assimilating new equipment, as
- well as compensating for increased outlays during the first few years of
its operation, will be the creation of a unified fund for the development
of science and technology in all sectors of industry. This fund will have
to be formed from deductions from the plan profit in accordance with
fixed norms. It is no less important that the plan procedure will contain
provisions for reserves, including financial reserves, for scientific-
research operations. In order to implement the solutions intended by the
decree for improving the financial mechanism, we must work out within
extremely compressed time periods a number of normative documents dealing
with the practical application of these statutes. Moreover, maximum =
consideration must be accorded to the operatioflal experience of those
sectors where the indicated statutes have already been tried out.
The new machines, equipment, and technological processes being created
(within the programs) ought to correspond or surpass in their indicators
the best world and Soviet achievements. In order to include in the plans
only the most urgent research and development capable of sharply improving _
the technical-economic parameters of new equipment in production and use,
for each item to be included in the program a chart is worked out for the
technical level, and calculations of the economic effect are made. The
chart cites the basic technical and economic parameters of the innovation
being created in comparison with the best Soviet and foreign models, the
sphere of its intended use, patent status, and limit (maximum marginal)
price. However, these charts do not always cite reliable information
concerning the models selected for comparison, and they exhibit obsolete
data for comparison.
In the programs, therefore, it is necessary to outline measures with regard
to increasing the technical-economic characteristics of output, which in
accordance with the decree of the CPSU Central Committee and the USSR
Council of Ministers regarding the improvement of planning must be worked
out according to the results of evaluating the technical level of the
machinery and equipment being turned out, as well as that of other,
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production-type technology. The decree also provided for the promulgation
_ of an all-departmental e.xpert appraisal of the technical-economic indica-
tors of the particularly important types of the output being created and
the technological processes in the phase of the technical tasks and the
ead results. This will facilitate the raising of the level of developments
being carried out in accordance with the programs. To carry ou,` this
_ expert appraisal, we should obviously enlist commissions of schoiars
who have worked out a comprehensive program of scientific-technical progress
for the future. It would also be feasible to entrust to such commissions
the expert appraisal of a list of the most important scientific-technical
problems.
In order to concentrate our resources on solving the most important problems
on a nationwide level, it is necessary, in our opinion, to approve not 200
programs, but substantially less. They should include primarily programs
dealing with those problems whose solutions are based on the creation of
- principally new equipment and technology. The introduction of such inno-
vations into production ought to exert a determining influence on the
growth of labor productivity, a lowering of material consumption and
specific capital investments, as well as on the multifaceted increase of
the efficiency of social production and output quality. As a rule, this
is linked with the organization of new or the reorganization of existing
scier.tific and design institutions, along with the creation of up-to-date
production facilities and sometimes even sectors, the allocation of large-
scale financial and material resources, as well as the training of sci~n-
tific and highly skilled production personnel. Hence, it is precisely with
regard to such problems that we must work out programs and develop them at
the state level.
Problems of a narrowly sectorial importance, as provided for in the decree
of the CPSU Central Committee and the USSR Council of Ministers, will be
approved at the sectorial level or upon agreement among two or three
ministries. This has to do primarily with prob lems which are worked out
on a traditional basis and which do not plan significant qualitative
changes in the technical level and the technical-economic parameters of
- the equipment ar,d technology being created. With regard to problems which
do not go beyond the bounds of study and scientific research, and opera-
tions on which are limited to recommendations and reports, it would be
feasible to work out comprehensive plans for scientific research at the
- sectorial level, while in case coordination is necessary with a large number
of departments--at the GKNT level.
Improving the methcdology of drawing up scientific-technical programs,
working out problems connected with administering programs in the process
of implementing them, will facilitate the speeding up of scientific- ~
technical progress, along with the successful solution o~ economic and
social problems.
COPYRIGHT: Izdatel'stvo "Pravda," "Voprosy ekonomiki," 1979
2384
cso: 1s2o 13
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OVERALL VALUATION AND UTILIZATION OF PRODUCTION RESERVES
Moscow VOPROSY EKONOMIKI in Russian No 11,Nov 79 pp 33-40
[Article by Zh. Sidorova]
_ [Text] One of the most important principles of organizing labor payment
under socialism is furnishing a social valuation of the differences in -
the degree of utilization of production resour.ces in drawing up plans
and their reflection in the wage mechanism.
In the complex of ineasures dealing with the increase in production effi-
ciency outlined by the 25th CPSU Congress and the decree of the CPSU Cen-
tra_l Committee and the USSR Council of Ministers of 12 July 1979 "On
- Improving the Planning and Strengthening Influence of the Economic Mechanism _
on Increasing Production Eff iciency and Work Quality," an important pyace ' ~
is occupied by problems of working out plans which most fully take into
consideration the potential f or production growth. One of the ch:.ef con-
ditions for solving these problems is improving the system of material
incentives.
On the one hand, a plan task determines the goal and the conditions of
_ the labor process, the amount of output to be produced, the material and
labor outlays necessary for this, and so forth. On rhe othe;: hand, the
plan acts as a criterion for the social valuation of th~~ worlcers' labor
contribution.
The unity of these functions does not negate the possibility of their
contradictions, as expressed at times in a striving to lowar the plan,
disclosing reserves in the course of its fulfillment, and this leads to
a violation of stability and balance in the plan.=, while, at the same
time, it hardly has any effect on the sizes of wages. A solution of this
contradiction may be found, in the first place, in the presence of a
mechanism for evaluating the degree of the plan's stepped-up factor and,
in the second place, in considering in *he case of wages elements which
facilitate the working out of plan task~.
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Industry has already accumulated experience in evaluating and stimulating
stepped-t~p plans. However, the lack of a standardized, methods approach
to specif.ving a quantitative evaluation of the plans and the degree of
their well-groundedness has retarded ihe scope of introducing effective
forms of planning and stimulating the use of intensive factors of economic
- growth.
The most widespread aeceptance has been gained by the methods warked out
by the Ministry of Tractor and Agricultural Machine Building, the Ministry
of the Electronics Industry, as well as the principles for computing a ~
valuation which have been proposed by the Ukrainian Branch of the NIIPiN
(Scientific Research Institute for Planning and Norms) of the USSR Gosplan.
A detailed analysis of the methodological principles of the methods enu-
merated above has indicated a number of weak aspects, which do not permit _
an objective valuation of the degree by which the plans are stepped up.
Such insuff iciencies include the following: the limited conditionality of
the point-type valuation and the method of expert-appraisal evaluations
(employed by the Ministry of Tractor and Agricultural Machine Building as
well as the Ukrainian NIIPiN), inadequate characterization of the level of
utilizing reserves by the method of comparing the dynamics of the indica-
tors in relation to the base period (Ministry of the Electronics Industry), -
the limited nature of the methods based on one or two summarizing indica-
tors from the point of view of the one-sidedness of reflecting the degree
of utilizing reserves. A general deficiency of the methods under considera-
tion here is the lack of incentive levers for adopting stepped-up five-
year plans.
It seems to us that the utilization of this or that method and the selection
of indicators for evaluating the grounds of a plan ought to be preceded by
a multi-faceted analysis of production reserves based on an optimum set
of activity indicators of enterprises and associations. In order to carry
out such an analysis, we can utilize the methods of economic statistics.
A prerequisite of this is, in the first place, a comprehensive characteri-
zation of the plan itself, including the conditions, methods and factors
of production as expressed by a system of indicators and norms. Moreover,
many of them are in a complicated cause-and-ef~ect dependence. In order
to study and evaluate the connections among a large number of interrElated
pt~enomena, use is made of the methods of correlation and regression, and
these allow us to take into consideration in "pure" form not only each of
the factors to be analyzed but also their entire aggregate.
In th.e second place, a principle of evaluating the degree of a plan`s well-
groundedness is the comparability of the achieved level of the economic
indicators of a given enterprise with the norm, with the level of advanced
enterprises or the average-sectorial level. It is well known that the
equation of a set regression characterizes the change of an indicator
- being studied under various values of the factors, while the coefficients
of a regression indicate to what magnitude on an average the value of an
indicator being analyzed changes when it is changed to a value unit of
the given factor. Therefore, having placed in the equation of regression
the values of the indicators of enterprises which have attained high
results, we can calculate the reserves for enterprises which are higher
or lower than the average-sectorial level.
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However, an orientation onto the average-sectorial level does not lead to
~i levcliing out of tt~e given enterprise's individual cl~aracteristics, inas-
much as we assume a differentiation of the sectorial norms of deductions
made to the material-incentives fund, acting in the role of which are the
coefficients of regression, depending upon the specific indicators of the
entErprize.
In the third place, the formation of the material-incentives f und is
linked with the fund-forming indicatcrs, which in themselves do not
characterize the plan`s stepped-up quality. The methads of economic
statistics make it possible for us to thoroughly analyze the influence
of a significantly greater number of factors in comparison with a func-
tional scheme for the formation of this fund, and this allows us to make
a multi-faceted evaluation of the plan's stepped-up quality along with
the possibility for stimulating it. -
For these purposes we have undertaken an attempt to utilize one of the
methods of multi-dimensional statistics--the method of main components
(m. g. k.). With the aid of this method we can isolate individual groups
of interrelated factors designated as components which characterize the
- totality of content and represent various aspects of one and the same
ec~nomic phenomenon.
- At the present time many studies of the most important economic problems
are connected with the use of economic-statistical analysis. They include
the following: correlation-regression analysis of indicators of production
efficiency, including fund-forming indicators, modeling the dimensions of
incentive funds, optimization of the dimensions of these funds, etc.
The widespread use of regression analysis in the practice of economic
calculations is explained by the possibility of evaluatin.g the dependence
among the indicators being studied. However, the mechanism of the economic
links and the reciprocal influence of factors is complicated by the fact
that it makes difficult the promulgation of a profound and multi-faceted
analysis. Hence, there arises the need to select more improved characteris-
tics which would be able to adequately reflect the process being studied.
In our opinion, an effective means of solving this problem is the method
of main components, the mathematical apparatusl of which is often utilized
also when there is a small amount of statistical data, since it allows us
to obtain a good approximation in those instances when large errors are
permitted with the usual regression analysis.
As distinct from a correlation-regression analysis, the method of main
components is used to analyze the dependence of the resultative indicator
not upon each individual factor, but on the groups of interconnected effi-
- cienc}~ indicators; and this allows us to characterize the plan's well-
groundedness more profoundly.
~
1. See P. F. Andrukovich, "Some Characteristics of the Main-Component
Method," UCHEN. ZAPISKI PO STATISTIKE, Vol 26, Ed. T. V. Ryabushkin
et al. Izd. "Nauka," 1974.
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Among the distinctive traits of the main componeuts is their disposition
in a descending order with respect to size of dispersion, and they are all
interdependent. The first component, which poasesses the highest diaper- -
sion, reveals fundamental dependencies among the criteria being atudied,
while the remaining ones reveal partial dependenciea. With the aid of
m. g. k. control ia exerciaed over the process of the planned utilization
of productibn reserves. This is posaitale becauae of the method's follaw-
ing charac~eriatics: the main-component method allowa us to:campute the
comprehenaive indicator of the plan's atepped-up quality, which ie based
upon the value of the firat main component, which, to the greatest degree,
, characterizes the phenomenon being analyzed. The difference between the
comprehensive indicator of the plan's stepped-up q~iality and the effi- -
ciency indicators which are used in the analysis consists in the fact
that the latter, as a rule, are determined with regard to each individual
factor or by an aggregate of indicators without comparing their level
with the level of the corresponding data with regard to the main adminis- ~
trative board as a whole or its advanced enterprises. Consequently, in
computing them no use is made of the principle of comparability, which is
~ the basis of evaluating the plan`s stepped-up quality.
The main components can also characterize the complex of efficiency indi-
cators and individual aspects of production efficiency, for example, the
efficiency of using worker time, production capacity, etc. In this
instance, however, the appropriate main component is the indicator of
stepped-up quality with regard to any group of factors. This makes it
_ possible to discover reserves and increase the well-groundedness of the ~
plan not only with regard to the entire aggregate of production efficiency
factors but also with regard to its individual components. The compre-
hensive indicator of the stepped-up quality of the plan takes into con-
sideration the sum of the loads which characterize the contribution of
each eff iciency indicator.
The method's constituent parts are the graphic analysis, which discloses
the principle typological groups of objects of observation, and the con-
struction of the regression equations, which include not the individual
factors, but rather components which are independent of each other. In
order to solve the problem of evaluating the degree of the plan's well-
groundedness and its stimulation by the main-component method, a thorough
analysis was made of the indicators of 36 enterprises of Soyuzelektrokabel'
of the USSR Ministry of the Electrical Equipment Industry and 14 enter-
prises of Soy~.~Ltyazhstankoprom of the USSR Ministry af the Machine Tool -
~ and Tool Building Industry.
With regard t�o the Soyuzelektrokabel' enterprises factual data were taken
for the years 1971, 1975, and 1977. This made it possible to trace ten-
dencies in the changing level of indicators and their interrelationships
over a number of years. With regard to the Soyuztyazhstankoprom enter-
prises data for 1977 were thoroughly analyzed. The materials were
processed on the BESM-4M computer at the interdepartmental statistical
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methods laboratory at Moscow State University. Taken into consideration
here were factors and indicators which characterize the efficiency of
using workers' time and indivi~'::al types of production resources, the
total effectiveness of production, etc., amounting in all to 19 indi-
- cators.2 Fur the sake ~f argument (y) the material-incentives fund was
taken as a percentage of the wage fund of industrial production personnel. -
The preliminary grouping of factors with the aid of a logical and corre-
lation-regression analysis (a system of coefficients of paired correla-
tion and elasticity coefficients) led to the formation of the following _
sets of factors:
A group of indicators characterizing the use of workars' time
Intra-shif t idle times (in man hours)
Payment of entire-day stoppages (in thousands of rubles)
Payment for overtime work (in thousands of rubles)
Unauthorized absences from work (in man days)
Shift system coefficient
Losses from breakage (in thousands of rubles)
A group of indicators characterizing the individual aspects of the efficient
use of resources
Workers' labor productivity (in rubles)
Production output per ruble of wages (in rubles)
Capital return on investrnenti (in rubles)
Material yield (in rubles)
Turnover rate of operating funds (in days)
Capital intensiveness (in rubles)
A group of generalizing indicators which characterize production efficiency
Prof its per worker (in rubles)
Profitability (in percentages)
Outlays per ruble of commodity output (in kopecks)
Proportion of output in higher quality category (in percentages) -
_ Increase in gross output by means of growth in labor productivity (in per-
centages)
Ratio between labor productivity and average wages
Coefficient of use of production capacity
- For Soyuzelektrokabel', based on the data which we have, 12 (1971 and 1975)
and 7(1977) main components were obtained, and 7 main components for -
2. The set of indicators is a model. For the sectors we propose to
include indicators which reflect their specifics as well as indicators
which reflect the technical level of production.
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Soyuztyazhstanoprom. Serving as indicator~ of the degree of influence
on the part of individual factors on a com~ponent (V~j while the signs
associated with them (-i-, are influenctng the nature of the connection.
Moreover, the values of the main compone.nts are defined as the sums of
the products of the coefficients on the values of the corresponding vari-
ables (x t K ) :
V~ K - U~ X~n UJ.Z Xz i( -f- . i+ jJ~R, }~n. K. ~ 1)
A study of the structure of the main components, which have been subjected
to satisfactory description with regard to specific criteria, with regard
to the Soyuzelektrokal' enterprises has allowed the formation of some
homogeneous groups in accordance with the above-mentioned groups of indi-
catox~s of production eff iciency. Serving as a criterion for relegating
a main component to this or that group are the quantitative loads (U~~ )
of this or that indicator (x~,~ ) of a given enterprise.
As analysis has shown, the operational dynamics of Soyuzelektrokabel' for
1971, 1975, and 1977 led to a significant change in the composition of
the main components of enterprises which have corresponding indicators.
Let us trace this on the example of the Khabarovsk Cable Plant "Amur-kabel"'
imeni 50-letiiya SSSR.
Table 1
Change in the Technical-Economic Indicators of the Khabarovsk Cable Plant
Indicators 1971 1975 1977
_ I,abor productivity per worker (in rubles). 23,632 30,124 25,114.0 _
_ Profitability (in percentages) . . . . 11.6
Return on investment (in rubles) 2.34 2.42 1.41
Production output per ruble of wages
_ (in rubles) . . . . . . . . . . . . . . . 13.35 13.67 13.1
Material yield (in rubles) . . . . . . . . 1.58 1.57 1.36
Outlays per rubles of commcdity output
(in kopecks) . . . . . . . . . . . . . . . 81.16 95.40 91.18
Losses from breakage per worker
(in man days) . . . . . . . . . . . . . . . 10.3 1.34 2.2
Unauthorized absences per worker 0.267 0.726 0.860
Intrashift stoppages per worker
(in man hours) . . . . . . . . . . . . . . 2.35 3.70 3.83
Turnover rate of operating funds
(in days) . . . . . . . . . . . . . . . . 56.0 62.00 70.70
Proportion of higher quality output
(in percentages) . . . . . . . . . . . . 33.51
Coefficient of utilizing production
capacity (in percentages) . . . . . . . . 95.0 97.00 97.0
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The data in this table testify to the variation in the leve~ of indicators
_ from year to year. Thus, in 1975 on the average the operational indica-
- tors increased by means of groti~th in labor productivity, return on invest-
- ment, reduction from losses due to breakage, etc. In 1977 a certain
reduction is observed in the level of indicators being analyzed, and this
testifies to unutilized possibilities in fulfilling the plan for this
year in the given enterprise.
A similar analysis could be cited for each enterprise of the All-Union
production assoc3ation. Similar research is possible due to graphic
analysis, which is a constituent part of the method of main components.
Study of the distribution of enterpri~as with regard to the f irst main
component in dynamics indicates that the composition of the enterprises
belonging to groups with high and low stepped-up labor qualities change
from year to year. Thus, in 1971 the Khabarovsk Cable Plant's technical-
economic indicators were at the average-sectorial level. That year the
group with high indicators with regard to the stepped-up quality of labor
included the Kamskiy Cable Plant, "Moskabel'," "Tashkentkabel',"
"Sevkabel'," the "Sibkabel PO (Production Association), and the Semi-
palatinsk Cab le Plant, which in 1975 shifted to enterprises working at
the average-sectorial level. The "Kuybyshevkabel'," Irkutsk Cable Plar.~, -
and "Donbasskabel improved their work and moved into the higher group
with regard to the stepped-up quality of labor, even though they had
lower i.ndividual indicators in comparison with 1971. This is testified
to by an analysis of the main components reflecting partial dependencies.
The Khabarovsk Cab le Plant was in an analogous position also in 1975, a
fact which is borne out by the da�ta in Table l.
In 1977 signif icant shifts occurred in the distribution of enterprises.
Thus, the group of progressive enterprises was ~oined by "Kirgizkabel',"
"Ufimkabel'," Gruzkabel'," the Saranskiy Cable Plant, and "Turlanenkabel'."
The "Sevkabel' "Kuybyshevkabel' and "Sibkabel"' enterprises shif ted
into the group with a lower stepped-up quality. The Khabarovsk Cable
Plant was also among this group.
It should be noted that the comparison of work indicators for enterprises
is conducted with an average-sectorial level, which also varies; hence,
the movement of enterprises from group to group in dynamics is relative
in nature. Nevertheless, analysis has thoroughly illustrated the instabil-
ity of the technical-economic characteristics of production in fulfilling
the plan.
This underscores the need to utilize models of economic-statistical
analysis as well at the stage of compiling the five-year plan; this would
- enable us to b etter take into consideration the operating conditions of
enterprises and to provide better groundwork for the five-year plans.
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Analysis has shown alse that the distribution of enterprises with regard
to the first component is based not on any one of the indicators of produc-
tion efficiency but on th~ir aggregate to the extent in which they reflect
a difference in the stepped-up quality of labor. For example, the labor
productivity of the advanced-group enterprises in 1977 significantly
exceeded the lab or productivity of the remaining enterprises, while the
return on investment of the advanced enterprises was more than twice as
great as that of enterprises with law labor productivity. This is obvious
from Table 2. This same table also cites the value of the comprehensive
indicator of the stepped-up quality of labor on which the value of the
first main component is based:
K ~ , ~t
1~ 6~r,~ ~
~ -`-il ` x~~- ~ (2)
Y]here U~~ represents the loads of the indicators of the first component,
x,~,~ is the value of the derived criteria in K enterprise, and ~ is
the root-mean-square deviation of the criterion.
The values of the comprehensive indicator of the stepped-up quality of
- labor in advanced enterprises in 1977 were 17 percent higher, and in
the remaining industries they were 13 percent lower than the average level.
The valuation of the stepped-up quality in the form of a comprehensive
indicator of the stepped-up quality can be utilized in forming incentive
funds. In our computations we took not the plan data, but the factual
data; hence, we determined not the stepped-up quality of the plan, but the
stepped-up quality of labor in fulfilling that plan. However, the main-
component method does make it possib le likewise to thoroughly analyze the
level of the plan (f ive-year and one-year) indicators in comparison with
the average-sectorial or normative level and the level of advanced enter-
prises, having thereby determined the plan's stepped-up quality. This
allows us to use the method described above in forming incentive funds
at the stage of drawing up the five-year plan, and this is particularly
important now, when the party and the government have outlined measures
to improve the entire plan operation for guaranteeing a balanced growth
of the country's economy. In this connection it has been recognized as
necessary to ensure the further development of cost accounting in produc-
ti.on associations and in enterprises, based on the tasks of the f ive-year
plan. In order to develop the economic initiative of labor groups and
expand the rights of production associations and enterprises in the llth
Five-Year Plan, provisions are being made to switch over to the formation
of material-incentive funds during the five-year plan in accordance with
stable norms, depending basically on the growth of labor productivity
and the increase of production output in a higher qualitative category.
As a rule, the growth of the fund-forming indicators is higher among
those enterprises wh~ch have a lower level of utilizing production
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resources in the base year of the five-year plan. Hence, the dimensions
of the material-incentive fund among them will also increase more rapidly
than among those enterprises which have exhausted their possibilities
for the growth of indicators. In order to avoid the appearance of un-
grounded variations in the dimensions of incentives, it is necessary to
differentiate among derived dimensions of the material-incentive funds,
depending upon the degree of the utilization of production reserves.
_ The practical application of the main-component method snlves, to a con-
siderab le extent, the prob lem of taking into consideration the stepped-
up quality of the plan in the dimensions of the derived means of the
incentive funds. Moreover, enterprises are stimulated or affected, f or
th e most part, among those for which the value of the comprehensive
indicator of the stepped-up quality deviates greatly from the average-
sectorial level. In our example these are groups of enterprises with
high and low labor efficiency (Table 2).
Table 2
Comparison of average-group values of criteria with general averages for
= enterprises with high and low labor stepped-up qualities (1977)
Average for group
Indicators Average for of enterprises
entire aggre-
gate of enter- Group with Group with
prises low labor high labor
stepped-up stepped-up
quality quality
Labor productivity of worker
(in rub les) . . . . . . . . . . 24,014.0 20,093 30,357
Profitability (in percentage). 17.4 17.0 28.9
Yield on investment (in rub les). 2.69 2.04 4.41
Production output per rub le of
wages (in rubles). . . . . . . . . Z3.3 11.4 17.2
rfa terial yield (in rubles) 1.36 1.28 1.42
Losses from breakage per worker
(in rubles) . . . . . . . . . . . . 4.47 9.51 6.0
- Unauthorized absences per worker
(in man days). . . . . . . . . . . . .47 .S .41
Intra-shift stoppages per worker
(in man hours) . . . . . . . . . . . 3.35 3.5 3.29
Turnover of operating capital
(in days) . . . . . . . . . . . . . 43.8 48.7 38.8
Proportion of higher quality
output (in percentages). . . . . . . 33.2 33.5 40.9
Comprehensive indicator of stepped-
up quality (in percentages). 100 80.0 11.7.0
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For ~nterprises of the aecond group~ among which the comprehensive indica-
tor of the stepped-up quality is equal to 117 percent the derived dimen-
sion of the material-incentive fund (FMP) has increased by 1.2 percent of
_ the wage fund (?00-~- ~1~~ For enterprises among which the value of
~ the comprehensive indica~or is equal to 80 percent, the dimensions of the
~ FMP have been reduced accordingly by 0.8 percent (100--
By analogy the corrected coefficients, deducted depending on the values of
the comprehensive indicator of the stepped-up value, can be applied to
correct the averages sizes of the bonuses which are established for the
= leading workers of the enterprises (associations) from the material-incen-
tive fund. Let us suppose that the leading workers of an enterprise (or
association) have established for them a bonus for fulfilling the planned
indicators averaging 25 percent of their salary on an average. In that '
case the bonus for leading workers of the second (highly efficient) group
of enterprises is set at an amour.* of 30 percent (25 ' 1.2) and for enter-
- prises = the first group at 20 perctnt (25 � 0.8).
Economic statistical models, which may alsc be used in computing the
" increased amount for each year of the five-year plan, may serve as the
basis for regulating the sizes of the incentives both in the process of
forming the plan as well as in carrying it out. Hence, the distribution
of enterprises into groups with a high, average, or low stepped-up quality
of labor may be utilized in summing up the results of socialist competi-
tions between enterprises and associations. The winner of a competition -
is that enterprise which has the greatest possible value with regard to
the appropriate component.
COPYRIGHT: Izdatel'stvo "Pravda," "Voprosy ekonomiki," 1979 _
2384
CSO: 1820
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ENTERPRISE MODERNIZATION OBJECT OF EFFICIENT CAPITAL INVESTMENT !
Moscow VOPROSY EKONOMIKI in Russian No 12, Dec 79 pp 114-123 ~
[Article by A. Yemel'yanov: "An Increase in the Efficiency of Capital
Investments;" as exemplified by the Ukranian SSR]
[Text] The CPSU Central Committee and USSR Council of Ministers decree "An
Improvement in Planning and an Intensification of the Impact of the Economic
Mechanism on an Increase in Production Efficiency and Work Quality" envisages
a complex of ineasures to improve capital construction and make rational use
of material, labor and financial resources. An examination of these problems
from a republic and economic region angle is of interest in this connection.
Academician T. Khachaturov`s article1 raised important questions of an
- increase in the efficiency of capital investments and an improvement in
capital construction. The accumulation fund is of decisive significance in
the Linancing of capital investments. This source's leading role in the
- formation of capital investments will also be retained over the long term.
But a trend has been observed recently toward a reduction in the proportion ~
of capital investments formed from national income and an increase from the
amortization fund. Thus in 1965 the structure of capital investments in the
republic was such: 79.7 percent from national income, 20.3 percent from the
amortization fund. In 1977 the figures were 62.4 percent and 37.6 percent
respectively.
1See T. Khachaturov, "Paths of an Increase in the Efficiency of
Capital Investments" (VOPROSY EKONOMIKI No 7, 1979).
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Table 1: Dynamica of the,Formation of Capital Investmenta Forned From
National Income (percentage; 1965 ~ 100) ~ .
Capital InvestmenCa 1970 1975 1977
b,xom national inccme 126 153.1 144.1
Per percenCage increase in natianal income 125.7 168.7 189.2
Per ruble of aational income 89�5 89'S 73'~
The figurea in the table ahow that the abaolute volutne of net capital invest-
menta formed from derived national income is increasing continuously in the
republic. This trend is interlinked with two others: first, there is a
continuous growth in the volume of capital investments per percentage increase _
in national income; second, the national income growth rate is outstripping the
rate of increase in the resources of net capital investments.
Table 2: Dynamics of the Formation of Capital Investments Formed From the
, Amortization Fund (percentage; 1965 = 100)
Capital Investments 1970 1975 1977
From the amortization fund 145.4 292.1 339.3
Per percentage increase in fixed capital 152.2 206.8 207.2
It can be seen from the table that the dynamics of the amorCization �und as a
source of the financing of capital investments in the republic have a tendency
toward absolute and relative growth. The same trend als~ characterizes both
components conditioning the size of the amortization fund--fixed capital and .
the amounts of its renewal. This tendency re~lects not only the dynamics of
the growth of fixed capital but also the policy of expanded reproduction aimed
at the accelerated replacement, modernization, reconstruction and renewal
of operating equipment, an improvement in its quality and so forth. At the
same time the growth of the amortization fund is accompanied by a reduction in
the level of its use for its direct purpose. ~
Table 3: Dynamics of the Indicators of the Use of the Amortization Fund
(percentage: 1965 = 100) _
- Indicators 1970 1975 1977
Use of the amortization fund to replace
fixed capital 107.5 88.7 84.9
Renewal of fixed capital out of action owing
to decay and wear per percentage growth of 248.7 198.8 184.1
the amortization fund
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It is also essential to emphasize that the relation of the coefficient of -
~ the loss of fixed production capital to the norm of depreciation allowances
for its renewal exhibits a steady tendency toward a decrease, particularly
in recent years. This tendency has strengthened in connection with the in-
crease in the norm of depreciation allowances, that is, the renewal process
is being effected at a slower pace than stipulated by the norms, and the
renovation fund is not being used for its direct purpose--an increase in
capital. Ir_ other words, the formation of fixed capital is occurring
' extensively.
In 1977 the volume of the loss of fixed capital in the repubic's niaterial
~roduction had increased by a factor of more than 2.6 compared with 1965,
and fixed capital had almost tripled in this time, in which connection the loss -
coefficient dropped from 2.8 to 2.5, and the use of amortization fund capital
for renewal from 52 percent to 34.4 percent.
_ In industry in 1977 the volume of the loss of fixed capital had approximately
doubled compared with 1965, whereas the fixed capital had increased by a
factor of 2.8, in which c~nnection the loss coefficient dropped from 2.3
_ percent to 1.5 percent, and the use of the amortization fund for renewal from
58.5 percent to 20.3 percent. The proportion of capital investments from the
amortization fund going to increase fixed production capital increased
accordingly. The surmounting of this tendency requires the adoption of
cardinal measures on the redistribution of all forms of resources in order that
the amortization fund may be utilized in full and for its direct purpose. _
The increase in capital investments in the republic (gross capital investments)
per person employed in material production testifies to the rapid rate of
labor's "capital provision," which considerably exceeds the growth rate in the
- number of those employed. Thus capital investments per person employed in
material production had increased 71.4 percent in 1977 compared with 1965,
which is particularly important under the conditions of the increasing
shortage of labor resources.
The basis of current investment policy is an impravement in the use and an
increase in the efficiency of capital investments. The problem of the
efficiency of invested capital here essentially consists of a choice af
directions of capital investment insuring the biggest national economic
result with regard for the current and long-term tasks of economic develop-
ment and also of the implementation of a complex of ineasures to accelerate
the materialization of capital investments in fixed capital. Proceeding from
this, an increase in the efficiency of capital investments represents a
complex of structural and organizational measures connected both with their
distribution between sectors and regions, new construction, modernization,
reconstruction, retooling and so forth and also with an improvement in the
use of the allocated capital investments thanks to an improvement in the
organization of work, material backup, a reduction in the volume of incomplete
construction, the linkage of the amounts of capital investment with the
capacities of the construction base and others.
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The rational use of capital investments largely depends on the sectorial
atructure of their distribution, which is determined by the development of
the sectora, the level of accumulated production potential and the depree
of ita utilization. Over 75 percent of the republic's total capital invest- .
menta is directed into material production.
Table 4: Dynamics of State Capital Investments in Material Production
Sectors (percentage; 1965 = 100)
~ 1970 1975 1977
Material production, total-- 132.2 187 203.8
including:
industry 121.5 166 182.1
construction 161.6 235.9 288.6
agriculture 153.6 300.6 302
transport and communications 147 161.5 173.6
trade and public catering 156.2 142 155.7
It can be seen from the table that the preferential growth rates of capital
investment were in industry, construction and, particularly, in agriculture.
At the same time, despite an appreciable increase in the volume of capital
investments, a tendency has been observed in recent years toward a r~duction
in their growth rate, which is connected with the tasks of production
intensification thanks to an improvement in the use of accumulated potential.
The biggest growth of capital investments in agriculture and construction is `
explainpd by their industrialization and intensification on the basis of
accelerated satiation with fixed capital.
- The need for a systematic rise in the technical level of production and an
increase in the proportion of machinery and equipment in the composition of
fixed production cap3tai is incre^~.'.~~ r?~� ~^"�stment role of machine building.
According to V. Krasovskiy's figures, the significance of machine building
is materially conditioned by the fact that even at the present time the
_ proportion of machine-building products (equipment, with consideration of the
cost of its installation) has reached 50 percent of capital investment in
production.2
Industry has the biggest share in the structure of capital investments.
- Together with this, a tendency is being observed toward a growth in the
amount of the capital investments in construction and agriculture related to
a unit thereof in industry. Thus for each ruble of state capital investments
in industry in 1965 some R0.039 were invested in construction and R0.189 in
agriculture; in 1977 the figures were R0.062 and R0.313.
2See METODY I PRAKTIKA OPREDELENIYA EFFEKTIVNOSTI KAPITAI~~NYKH VLOZHENZY
I NOVOY TEKHNIKI, Issue 26, Izdatel'stvo Nauka, 1976, p 25.
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Together with the production volume growth rate the relative capital require- -
ments of an increase in the gross output of individual sectors is an important
factor of the formation of the sectorial structure of capital investments.
Table 5: Sectorial Structure of State Capital Investments and Factors of
its Formation in the Ninth Five-Year Plan (percentage)
Capital Investments
Capital Invest-
ment Structure including -
For Production For Discharging .
' Volume Growth Relative Capital
Requirements
Material Production--
total 100 86.7 13.3
_ including:
industrv 61.8 91.9 8.1
construction 3.7 78.4 21.6 ~
agriculture 18.5 55 45
transport and
communications 11.2 107.3 -7.3
trade and public
catering 2.5 125.6 -25.6 _
The increase in the total national economic relative capital requirement of~
output occurred, as can be seen from the figures of the above table, as a
result of the incre�se in the relative capital requirement of output in
industry, construct.ton and agriculture, the proportion of which constitutes
84 percent of total capital investments in the republic's material production.
In the Ninth Five-Year Plan the relative capital requirement increased mainly
in agriculture and construction. More than 9 percent of total capital
inve;~tments for production purposes went on discharging this capital
requirement.
Agriculture is the biggest consumer of capital investments after industry. It
was in this sector that the biggest proportion cf capital investments
(45 percent) was used to cover the increase in output's relative capital -
requirement. The further development of the material-technical base of
plant-growing and livestock raising, agricultural production's mass transition
to an industrial footing and the rapid rate of the replacement of manual labor _
with machine labor, which isbeing accompanied by the increasing preferential _
growth of labor's capital-worker ratio compared with its productivity, should
primarily be mentioned as being among the objective factors of the growth of
the relative capital requirement of agricultural output.
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Among the industrial sectors the most appreciable increase in the relative
capital requiretaent has been in the republic's ferrous metallurgy and food
industry, where the construction of new highly mechanized facilities fitted
out with costly equipment has been undertaken on a large acale.
A reduction in output's relative capital requirement has been observed in
~ certain other sectors of the economy, particularly in transport and communica-
tions and trade and public catering, which has been caused by a higher
production volume growth rate compared with the capital investment growth
rate.
T.n transportation this is connected not only with a reduction in the capital
investment growth rate but also with an increase in traffic and with a rise
in prices and tariffs. In trade and public catering the increasing preferential
production volume growth rate has been caused by an increase in the number of
those employed and a certain improvement in the quality of products and
services.
The increase in prices of the capacities being introduced is an important
factor of an increase in relative capital requirements. Thus in the republic's
industry capita~ investments per ruble of gross output increase grew to R1.11
in the Ninth Five-Year Plan compared with R1.02 in the Eighth Five-Year Plan
- or by 8.8 percent. The revision of prices for industrial products which was
carried out for the purpose of equalizing profitability levels and creating
normal conditions for the introduction of financial autonomy in all sectors also
contributed to this. The rise in prices is mainly connected with an increase
in the quality and operating properties of machinery and equipment, an improve-
ment in the work conditions of the attendants and the release of workers enga~ed
in heavy physical labor. The machinery and equipment are equipped with instru-
mentation and regulating mechanisms and automated systems for controlling
production processes. The increase in the outlays on environmental protection,
the complication of the extraction of minerals and so forth are also among -
the factors of a growth in relative capital requirements. The biggest increase
in proportional capital investments per unit of output increase can be
observed in the fuel industry, the construction materials industry and light
and food i.ndustry.
The acceleration of the pace of scientific-technical progress and the retooling
of sectors of the national economy, the extension of specialization, upon
which there is a manifold increase in general overhead, and an improvement in
- the quality and operating characteristics of machinery and equipment,
including the introduction of impoated equipment, are associated with additional
expernditure, an increase in prices and the increased cost of a unit of new
capacity. Thus in 1974 the Ministry of Tractor and Agricultural Machine
Bui.lding's "Khar'kov Tractor Plant imeni S. Ordzhonikidze" Production Associa-
tion began the industrial manufacture of the T-150 and T-150K series high-
speed high-powered tractors and their modifications designed to subsequently
replace the T-74 and DT-75M tractors. The 1.7-1.8-fold increase in engine
capacity made possible a 1.5-1.8-fold increase in labor productivity. At the
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same time the tractor's wholesale price increased by a factor of 2.4. The _
cost per unit of tractor capacity and, correspondingly, per unit of its
produc~ivity increased from R26/h.p. to R39/h.p. or by a factor of almoet 1.5.
The increase in the expenditure on environmental pr.otection and, primarily,
on protection of the atmosphere and water basins contributed to a considerable
= increase in the cost of new industrial projects. For this purpose the
maximum permissible concentrations of narmed waste have been tightened up
considerably in recent years. As a result the rate of growth of capital invest-
ments in environmental protection has outstripped the rate of growth of gross
capital investments, which points to an increase in the proportion of the
above-mentioned expenditure in capital construction as a whole and per unit -
of new capacity. In the Ninth Five-Year Plan alone capital investments
connected with environmental protection increased by a factor of 1.6 in the _
republic compared with the Eighth Five-Year Plan. We directed 1.8 times
more capital investments into the protection of the water basin (the construc-
tion of purification installations, return water supply systems and others)
in the past five-year plan than in the previous one.
In addition to the expenditure on envirnomental protection, the increase in
wages and the improvement in work conditions should also be put in the
category of social factors of an increase in the cost of new capacities.
The increase in wages, including the wage rates of construction workers, had
a marked influence on an increase in the cost of the new projects. For
`xample, thanks to regulation of wages in construction, the cost of projects
has increased approximately 6.5 percent in the last 10 years. On the republic's
kolkhozes remuneration in construction has doubled, which has led to a con-
siderable increase in the cost of the new facilities since approximately one-
third of the volume of construction and installation ~aorlc is performed by the
direct-labor method in the countryside.
There has recently been an increase in proportional capital investments
connected with the improvement in work conditions. New planning norms have
been introduced which provide for an increase in the area of production and
auxiliary premises per worker, the creation of recreation areas and an -
improvement in ventilation and heating in production premises. Thus because
of the change in the production planning norms in livestock raising the .
increase in the costs of new capacities in 1975 constituted more than 15 percent
compared with 1966. _
Expenditure on an improvement in physiological and public-sanitation work
conditions (the elimination of noise, vibration, dust content and so forth)
is increasing continuously. Appreciable capital invesCments are being
directed into the construction of preventive clinics and other work-safety
facilities. For example, additional capital investments on new facilities
to improve work conditions and safety in ferrous metallurgy have risen to
8-16 percent of total estimated costs.
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The selection of the directions of the investment of cavital in the reuroduction
of fixed cavital or the so-called revroduction structure of cavital inveat-
ments is of particular importance in the planned mana~ement of investment
processes. This process is conditioned on the one hand by the level of accumu-
lated economic potential and resource potential of the country and individual
regions and, on the other, it acts as a kind of regulator determining the
direcxion of the development of all social production.
Table 6: Dynamics of the Reproduction Structure of State Capital investments
in the Republic's Economy and its Sectors (percentage)
Proportion of Capital Investments in Reproduction
including
of which:
Total On the Qn the On ~ ~
Construction Development Modernization Retooling Expansion
of New of Operating
Facilities Facilities
Material
production
- 1972 100 100 100 100 100 100
1977 124.8 86.3 106.5 107.6 561.9 82.3
Industry
1972 100 100 100 100 100 100
1977 122.5 79.7 109.1 80.4 646 95.9
Agriculture
1972 100 100 100 100 100 100
1977 145.6 103.5 98.8 278.3 147.4 72.7
Construction
1972 100 100 100 100 100 100
1977 117.6 82 107.2 200 537.6 56.9
Transport
and
Communications
1972 100 100 100 100 100 100
1977 108.7 92.3 104.9 633.5 281.9 38.6
Trade and
Public Catering
1972 100 100 100 100 100 . 100
1977 76.7 83 121.7 62.1 553.2 130.3.
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An analysis shaws that a reduction has been observed in the republic in recent
years in the proportion and absolute values of capital investments directed
into new construction and the expansion of production facilities. The
retooling of sectors of the national economy is being undertaken at the
quic:kest rate. This process has proceeded particularly intensively in
industry and construction. It is chiefly the modernization of operating
facilities which is being undertaken in agriculture. In the period 1972-1977
proportional expenditure on the modernization of enterprises in agriculture
increased by a factor of more than 27.
A distinguishing feature of the lOth Five-Year Plan is the fact that, despite
the overall growth in capital investments, there is a reduction in the propor-
tion thereof directed both into new construction and also the expansion of
operating facilities. At the same time there is an increase in the propor-
- tion of capital expenditure on the modernization and retooling of operating
enterprises. The reproduction process in the republic is characterized by
an increase in the proportion of capital investments going on the replacement
of fixed capital. and, correspondingly, by a reduction in the proportion going
on an increase thereof.
An important evaluation indicator ~f the efficiency of structural improvements
is the dynamics of the materialization of capital investments in fixed capital
(commissioni_ng of fixed capital per ruble of capital investment for production _
~urposes). Capital investments participate indirectly, via materialized
fixed capital, in the creation of the end product and national income. For
this reason the dynamics of the materialization of capital could be put in
the category oF basic indicators of the efficiency of capital iflvestments.
In connection with the fact that the materialization process proceeds with a
certain time lag it is advisable to examine it by five-year plan (some errors
in Che calculations caused by the fact that some of the capital investments
allocated in the previous five-year plan will be materialized in subsequent
periods are within the permissible limits and do not distort the trend of the -
process).
Table 7: Dynamics of the Growth of Fixed Capital Per Unit of Capital Invest-
ment for Production (percentage)
1966-1970 1971-1975
Material production--
- total 100 102.5
including:
industry 100 100.3
agriculture 100 104.3
construction 100 96.7
transport and communications 100 101.6
trade and public catering 100 103
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In material production as a whole each ruble of capital investment secured
2.5 percent more ^,ommissioned fixed capital in the Ninth Five-Year Plan than
in the Eighth. The difference in the efficiency indicators for individual
sectors was caused by the specific peculiarities of their development and
directiox~s of the reproduction process. Proceeding from this, it follows
that the following are important factors of an increase in the efficiency
of capital investments: the increasing preferential growth rate of the
less capital-intensive processes of the replacement of equipment, the
retooling and modernization of operating enterprises, a reduction in
incomplete construction, a deceleration in the rate of growth and proportion
of new construction and others.
An improvement in planning-estimates documentation and a reduction in the
est~.mated costs of productlon could contribute to a considerable Extent to an
improvement in the use of capital investments and an increase in the growth
of fixed capital per unit of capital investment.
As Academician T. Khachaturov observed, "One of construction's biggest short-
comings is a considerable increase in costs over initial estimates--sometimes _
by a factor of 1.5-2 and even more. The rise in construction costs can only
partially be explained by objective reasons--the price rises for materials
and equipment and increased wages. More often the overstepping of estimat~d
construction costs is a result of sub3ective, entirely removable factors."
The increase in the estimated costs is connected in many cases with short~omings
of the construction process. The planning of a number of pro~ects is not
engendered by nationa[1 economic and production necessity, and there is also
unfinished work on the part of the planning organizations both in the
determination of estimated costs and in the choice of planning decisions.
Factors evolving beyond the sphere of construction production exert great
influence on the increase in construction costs: the increase in estimated
costs as a result.of the implementation of ineasures for nature protection and
an improvement in social wark conditions amounts to an average 2-3 percent
each five-year period, for example. Estimated costs also rise for other
_ reasons. Thus owing to a revision of planning decisions, the estimated costs _
of a number of construction projects for production increased 45-50 percent
in the first 2 years of the lOth Five-Year Plan. The planning organizations'
mistakes and the refinements to the cost blueprints of construction and
installation work led to the estimated costs of a number of production projects
increasing by more than 25 percent. These factors increased estimated costs
by approximately 6 percent in the republic as a whole.
An improvement in the reproduction structure of capital investments is an
important factor of an increase in their efficiencq. The reproduction structure
3See VOPROSY EKONOMIKI No 7, 1979, p 129.
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exerts a considerable influence on the amount of incomplete construction
for, given the various methods of reproduction of fixed capital, the time
taken to introduce it and, consequently, the amount of incomplete construction
also vary. The reproduction structure which has taken shape is essentially
the decisive factor of the formation of the technological structure of the
capital investments of subsequent periods.
The main direction of an improvement in the structure and an increase in the
efficiency of capital investments is a reduction in the proportion thereof
in incomplete construction. ITnfortunately, the pace of this process is
extremely slow, and there is a considerable proportion of capital investments
- in incomplete construction for each ruble thereof materialized in capital.
For this reason the new decree envisages.the elaboration of ineasures aimed
' at accelerating the commissioning of nroduction capacities and facilities
at construction proj ects on whicti work has already begun and a sharp
reduction in the number of new construction projects in order to bring the
amount of incomplete construction down to the set norms within the next few
years.
Table 8: Correlation of State Capital Investments in Incomplete Construction
and in the Commissioning of Fixed Capital (percentage)
1966-1970 1971-1975
:~aterial production--
total 93 74.6
including: '
industry 134.6 113.5
agriculture 77.6 53.6
construction 67.3 64.8
transport and communications 59 51.9
trade and public catering 61 54.6
_ An important task of the national economy. is to insure that the volume of
the introduction of fixed capital exceed the growth in the amount of capital
i.nvestments. To this end the republic plans by 1980 to have reduced
incomplete construction to 65 percent of the annual amoint of capital invest-
ments compared with 75.1 percent at the end of the Nin.th Five-Year Plan.
According to our calculations, an additional R13 billion of fixed capital will
have been procured as a result of the acceleration of construction and the
concentration of capital investments at the projects nearing completion.
The main condition of a decrease in the amount of incomplete construction is
a reduction in the duration of the construction. An analysis shows that the
time taken to introduce a unit of production capacity during the modernization
and expansion of operating facilities is appreciably less than during new
construction; by a factor of almost 1.5 in ferrous metallurgy and machine
building, for example.
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As Academician T. Khachaturov observed, "Settlement of the question of the
modernization and retooling of operating production facilities is of para-
mount aignificance. The experience of many years has shown the indisputable
advantages of modernization compared with new construction.i4 Thus as the
result of the modernization of eight blast furnacea (in the Eighth and Ninth
five-year plans) at the republic'G metallurgical plants an increase in the
production of pig iron was achieved in a shorter ~ime with 1.4 times less
capital investment (R31.6/ton) compared with the~norm for new construction
(R44/ton).
An important question of investment policy is substantiation of the optimum
correlation for this stage of the development of the economy between intensive
and extensive factors of expanded reproduction. Essentially this is a
problem of the correlation between the expansion of production and the
retooling and modernization of operating facilities. Its solution depends
on a whole number of factors connected with the level of dev~lopment of the
production forces and the availability of natural and labor resources. The
need for the reorientation of the republic's industrial production toward
" the predominaii~ly intensive path is caused by the high devleopment level
of the production forces and the emerging manpower shortage (the average
annual rate of increase in the numbers of industrial-production personnel in
the repuUlic's industry in the period ~971-1975 was 2.5 times less than in the
period 1950-1960).
The implementation of a wide-ranging program of an increase in the people's
material and cultural living standard demands an acceleration in the rate of
development of the nonproduction sphere and, correspondingly, a diversion of
labor resources from material production. In the period 1951-1975 the
number of persons employed in the nonproductinn sphere increased by a factor
of more than 2.7 in the republic, whereas it increased by a factor of 1.6 in
- material production in this period. Investments in the modernization of
production insuring its intensification by an increase in the use of accumu-
lated potential and available reserves are the most efficient under these
conditions.
- At present new capacities should be introduced chiefly in the sectors and
production facilities manufacturing new products. It is advisable to
introduce new capacitie~ in the traditional sectors of industry only for that
part of the planned increase in the manufacture of products which cannot be
procured through the retooling and modern~ization of operating enterprises.
This does not mean, of course, that the traditional sectors with a strong
production potential should renounce new construction entirely. In certain
- cases it is more efficient than the modernization of operating enterprises,
primarily in the solution of questions of an increase :Ln the quality of
manufactured products, particularly if this is connec'ced with the application
of new�production processes. The modernization of o'dd enterprises f itted out
with obsolescent equipment and techniques and premises which do not conform
4PRAVDA 29 August 1979.
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to the current demands made on labor safety and environmental protection,
safety equipment ar~d so forth is not always efficient.
The CPSU Central Committee and USSR Council of Ministers decree provides for
the correct determination of priorities in the development of sectors and
- economic regions to insure progressive changes in national economic propor-
tions and an increase in the efficiency of capital investments and all
social production. I believe that consideration of the above trends of
the formation and utilization of capital investments in the republic will
enable us in the immediate future to specify the direction of investment
policy.
COPYRIGHT: Izdatel'stvo "Pravda," "Voprosy ekonomiki," 1979
8850
CSO: 1820
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IMPROVED NORMS WILL STIMULATE INTEREST Ii~i BETTER-QUALITY PRODUCTS
Moscow VOPROSY EKONOMIRI in Russian No 12, Dec 79 pp 35-43
[Article by A. Glichev, Ya. Kotlikov: "Stimulating an Increase in
Product Quality"]
[Text] A further improvement in the stimulatian of an increase in product
quality presupposes primarily a comprehensive approach in the solution of
this problem. The implementation of individual, even highly efficient '
measures which are insufficiently interlinked does not, as practice shows, -
yield the necessary results. Despite the reinforcement of the arsenal of
means of economic influence on the interests of the producer-enterprises, -
an improvement in product quality does not pro~�ide the manufacturers with
tangible benefits and frequently ends in lower profitability compared with .
the profitability of long-assimilated produ~cts. ~
Together with the obvious successes in the production of higt~-quality
products which are on a par with the best foreign and domestic models in .
their technical-economic parameters and which, in a number of cases,
surpass them there are also shortcomings. Thus, according to the evaluations
of the State Committee for Standards, up to 15 percent of the products
subject to certification cannot be put either in the highest or first quality
category. Approximately 20 percent of the products recommended for the State
Sign of Quality are not manufactured at all. Checks carried out by the State
Inspectorate for the Quality of Goods and Trade at enterprises producing
consumer goods end in the products being relegated to lower grades in 60-65
percent of cases. The practice of violating standards has not bee~ eradicated
at many enterprises. Despite the annual increase in the manufacture of
products of the highest quality category, their proportion of total produc-
tion remains low in a number of sectors of indu~try. Thus in 1978 it
amounted to 7.1 percent in the USSR Ministry of Light Industry, 7.5 percent
in the USSR Ministry of Construction Materials and 5.7 percent in the Ministry
of Timber and Wood Processing Industry and 12.2 percent in industry as a whole. _
All this considerably reduces production efficiency and has a negative effect
on the rate and grQwth of national income and an increase in social labor =
productivity.
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An important direction of an improvement in the s~imulation of associations
and enterprisea for an increase in product quality is the selection of a
system of plan and evaluation indicatora of their activity which influence the
formation of the producers' economic interest in an improvemenC in the quality
of the parameters of the manufactured products. An analysis of the indicators
currently employed from the viewpoint of their impact on an increase in
production efficiency and product quali~y testifies that the individual
adjustments which have been made to the indicator of the volume of sold
output (separation of the volume of sold output of the highest quality category,
consideration of the volume sold on the basis of fulfilled economic contracts
and others) have not as yet cardinally changed the producers' attitude toward
the quality of the products they create.
Experiments have been conducted in a number of sectors of industry on the
elaboration and introduction of indicators characterizing siifficiently fully
association and enterprise activity in increasing production efficiency and
product quality. The planning of the production volume on the basis of net
- (normative) output has enjoyed considerable prevalence in a number of sectors.
Nee output is the most acceptable of the value indicators for characterizing
f inal results.
The extent to which the national economy's need for the manufactured product
has been satisfiad is taken into consideration at the time of evaluation of
_ ~he ac~i.viryo uf the production associations in the Miuistry of Tractv~~ and ~
Agricultural Machine Building. Indicaturs by means of which the normntive
magnitude r,f the requirements and the extent of their satisfaction in the volume,
structure and quality of the produced products are determined have been -
elaborated and introduced here, that is, the result obtained by the consumers
of this product is taken into account. The qual~tative satisfaction of the
requirements is determined according to the proportion of products of the
highest quality category in the total production volume. A system of
stimulation and, in particular, norms of the deductions into the economic ~
- incentive funds is t~eing developed in accordance with this.
,
An analysis of one further experiment--on the use of long-term economic norms
in the Ministry of Instrument Making, Automation Equipment and Control
Systems--has shown that the application of long-term econonic norms increases -
the interest of all linl~s of the sector in the fuller use of internal
resources, including an improvement in product quality. Thus the increase in
products in the highest quality category constituted 46 percent in 197i c~mpared
withthe previous year and 44.6 percent in 1978. From 1975 through 1978 the
proportion o� products.of the highest quality category rose from 9.7 percent
to 25.3 percent, that is, by a factor of more than 2.5.
Experiments have be::n conducted in a number of sectors of industry on working
up organiiational methods of product quality control and also on improving
economic stimulation of the creation of high-quality products. The colla-
- tion and critical analysis of all the experiments were the found~tion of a
further improvement in plan and evaluation indicators. This was reflected in
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the CPSU Central Committee and USSR Council of Ministers decree "An Improve-
ment in Planning and an Intensification of the Impact of the Economic
Mechaniam on an Increase in Production Efficiency and Work Quality." The
deciaiona adopted on these questiona are aimed at a strengthening of the
role of final production reaulta and an improvement in the quality of the
material wealth being produced. The txansition in industry to the establish-
ment in the five-year plans of the net (normative) output indicator in line
- with the correaponding sectors' preparation for this ia envisaged. The
application of this indicator will promote an increase in the manufacture of
more elaborate products of the new technology and high-quality products,
parCicularly in cases where their production is linked with an increase in
labor intensiveness. The indi~ator of the growth in the manufacture of
products of the highest quality category or another quality indicator
determined for a given sector will be approved for the ministries and
production associations (enterprises) in the five-year production plans.
The new indicators of an evaluation o� the activity of the production associations
- and enterprises will be supplemented with stable long-term economic norms,
- including norms of the wage furtd and the economic stimulation fund and of
profit distribution between the associations (enterprises) and the budget.
Consequently, the improvement in the system of indicators of an evaluation of
enterprise activity will be underpinned by the corresponding methods and forms
of economic stimulation, that is, it is a question of a restructuring of the
economic mechanism. This intricate process will require a great deal of
scientific-procedural and organizing work. It will be necessary, in particu-
lar, to formulate many legislative instruments and procedural documents.
"This work," as A. N. Kosygin observes, "is of a creative nature, and its
implementation is a very responsible business insofar as the full and
consistent realization of the principles of planning and the organization of
- financial autonomy contained in the decree wil~ depend on the quality of the
methods materials to a large extent."*
An analysis of the current economic mechanism from the viewpoint of its impact
on product quality shows that due coordination in the application of different ~
economic levers therein has not been achieved. This applies, in particular, -
to the formation and use of economic stimulation funds (FES) from the additions
to the prices ~f products carrying the State Sign of Quality. It is known that
up to 70 percent of the extra profit from temporary additions to wholesale
prices may go toward the formation of FES. It was assumed that this measure
would create the manufacturers' economic interest in the production of products
bearing the Sign of Quality. However, the additions to the prices are being
applied in limited manner. For example, in the electrical engineering industry,
where economic work is being performed actively and consistently on increas-
ing product quality, additions to the prices are applied in only 2 cases out
of 10. As a consequence the extra profit obtained from the manufacture of
*A. Kosygin, "An Important Stage of the Improvement in the Planned
Management of the Economy" (KOMM[TNIST No 12, 1979, p 28).
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products of the highest quality category, as also deductions into the FES,
is negligible. For industry as a whole the extra profit from sales
constituted 0.23 percent of total profit in 1975, 0.27 percent in 1976 and
0.3 percent in 1977.
Naturally, this amount of extra profit cannot play an appreciable part in -
the formation of FES, including a tnaterial incentive fund (FMP). This also
applies to those ministries in which the proportion of products bearing the
Sign of Quality is high. Thus in 1977 the proportion of these prodt~cts
amounted to 38.4 percent in ttie Ministry of Electrical Equipment Industry,
but the proportion of deductions into the FES amounted to only 3.62 percent
and only 3.63 percent into the FMP, and in the Ministry of Instrument Making,
, Automation Equipment and Control Systems the corresponding figures were
17.5 percent, 0.51 percent and 0.4 percent.
One of the reasons for the negligible sum of profit deducted into these funds
for an increase in the manufacture of products of the highest quality category ~
is connected with the small amount of the single norm for the deductions.
The deduction~ in accordance with the indicator of an increase (decrease) in
the manufacture of products of the highest quality category are made from
the overall sum of the FMP, which differs appreciably from ministry to
ministry. Thus in 1977 it amounted to R397.2 million in the Ministry of
Light Industry, R252 million in the Ministry of Ferrous Metallurgy, R50.5
mil.]_ion in the Mini.stry of Machine Building for Light and Food Industry and
H~useho?d Appliances and R44 million in the Ministry of construction, Road
and Municipal Machine Building. This means that, given the single norm for
deductions into the FMP for an increase in the manufacture of products of
the highest quality category, the actual sum of the additional deductions
thereinto will vary, despite an equal increase in the manufacture of products
- bearing the State Sign of Quality. The initial size of the FMP is of
decisive significance here.
But fulfillment of the plan for an increase in the proportion of products of
= the highest quality category by one and the same percentage demands different
efforts from the association and enterprise collectives. Furthermore, the
rate of increase in the manufacture of products of the highest quality
category will differ as a consequence of the specific features of each
sector, the scale of production and the material-technical base and aLso the
social need for products therefrom corresponding to the best world achieve-
ments. As a result, the need arises fvr the introduction of differentiated
norms of deductions into the ~'MP for different sectors of industrial
production.
- In addition, differentiated norms are also essential, in our view, for
enterprises of one and the same ministry for scales constructed foxm a single ~
norm for deductions into incentive funds do not take into account the enter- :
prises' different opportunities for increasing the proportion of products ~
bearing the State Sign of Quality. It is one thing to raise the proportion
of the manufacture of products of the highest quality category from 6 percent .
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to 10 percent, but it is quite a different matter to raise it from 80 percent
~ to 81 percent. The second case is far harder, as a rule, than the first. `
Dissimilar efforts are also required of the enterprise collectives for
bringing technically elaborate products (drills, generators, turbines and
others) and comparatively simpler products to the level of the highest quality
category. Therefore, to ineure that the norms of deductions into the
incentive funds become an effective economic lever of an increase in the
manufacture of products of the highest quality category it is advisable to
establish differentiated scales of the deductions which would take into _
consideration the particular features of the production of high-quality
products in different sectors and subsectors and also groups of enterprises.
The ministries formulat3.ng the norms of the formation of FES with regard for
the decisions ensuing from the decree on an improvement in planning should
evidently primarily gear efforts toward the elimination of the enumerated
shortcomings. It is planned to determine upgraded norms of the formation of
FES for the production'associations (enterprises) which considerably increase
the ~anufacture of new highly efficient industrial-engineering products and
new consumer goods. This should also be i~.aken into consideration at the time
of determination of the norms of deductions into the material stimulation fund.
The absence of stable norms of the distribution of profit between enterprises
and the budget is having a negative effect on enterprises' interest in an
improvement in product quality and in obtaining extra profit from this.
Consequently, extra profit is not playing an appreciable part in the forma-
tion of incentive funds. Thus in 1977 only 14 percent of the extra profit
was deducted into the FMP by all the enterprises and associations of the
Ministry of Electrical Equipment Industry. The remainder was transferred to
*he budget as surplus profit. In the same year the extra profit of the
- enterprises of the Ministry of Timber and Wood Processing Industry amounted
to R882,000, however, there were no deductions into the FMP at al}:., This
situation concerning the distribution of extra profit obtained for the
manufacture of products bearing the State Sign of Quality is explained by the
fact that the enterprises and associations have the possibility of forming
FES in accordance with current norms from other sources.
Importance is attached to the determination of substantiated norms of the
distribution of profit between the state budget and industrial enterprises,
as envisaged by the CPSU Central Committee and USSR Council of Ministers _
decree on an improven~ent in planning and the economic mechanism. This measure
will contribute to galvanizing the entire financial-credit mechanism and
stimulate the enterprise collec~ives to obtain extra profit, including extra
profit from the additions to the wholesale prices for products of the highest
quality category. The normative distribution of profit will also lead to the
point where there will be no formation of a surplus, which in recent years
constituted over 30 percent of tHe profit and weaken~d the action�czf the
economic me~hanism. The transition to a system of planned long-term norms
will strengthen the link between society'~ economic interests and its produc-
tion cells and contribute to the development of initiative and socialist
enterprise.
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Stimulation of product quality has not yet occupied a fitting place in the
system of encouragement of the workers. According to calculations we made
For 14 industrial ministries, the bonuses from the extra profit obtained
for products bearing the Sign of Quality amounted to 1.6 percent of the-total
sum paid out in bo~tuses per worker in 1976 and 1.7 percent in 1977. A reason
for this is that products which are insufficiently efficient f_orm a national
economic viewpoint are sometimes submitted for the conferment of the highest
quality category. '
This prevents us from applying the additions in sufficiently tangible amounts.
For the effect obtained by the national economy from consumption of a given
product serves as the grounds for determination of the amount of the addition.
Yet, as practice shows, in submitting products for acquisition of the State
Sign of Quality certain enterprises are guided not so much by economic as
by prestige considErations. Data on a reduction in the amounts of extra
profit per percentage increase in the proportion of products of the highest
quality category, in particular, testify to this. Thus in 1976 a 1-percent
increase in extra profit amounted to R1,361,000 in the Ministry of Ferrous ~
Metallurgy, R1,685,000 in the ministry of Heavy and Transport Machine Building
and R977,000 in the Ministry of Automotive Industry and in 1977 to R1,071,000,
R873,200 and R321,000 respectively. These figures show that insufficiently
efficient products are being submitted for certification in the highest quality
category. As a consequence the amount of the additions to the wholesale prices
and the extra profit derived from them are decreasing. Although the plan
quotas for the manufacture of products of the highest quality category are
� being fulfilled, the deductions into the FES from the extra profit are -
decreasing.
Far from all the newly assimilated products can be evaluated as being in the
highest quality category. The proportion of products of the highest quality
category is growing cox~stantly., but its absolute magnitude cannot be con-
sidered adequate. In 1978 this evaluation was given to only one-fifth of new
products in industry as a whole. Furthermor~, this practice contradicts All-
Union State Standard 15.001--73, according to which all products subject to
development, assimilation and orSanization for production must correspond to
a technical target, which contains demands for products of the highest quality
category. It specially emphasizes that the demands incorpo~ated in the -
technical target are based on the modern achievements of science and technology
and the need to insure the products' increasingly advanced technical level
and the use of progressive inventions. However, this requirement of the
all-union state standard is not being met. Yet the need for the developers'
unswerving observance of the requirements of state standards was stressed once
again in the CPSU Central Committee and USSR Council of Ministers decree on
an improvement in planning.
There seems in this connection to be an urgent need for the adoption o~ a number
- of organizational and economic measures aimed at an increase in the production
of new products of the highest quality category. It is essential that the
ministries' technical targets for the development of new products primarily
point to the requirement that the planned products reach a level higher than
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the best world analogues. Only in individual, economically substantiated
cases is it possible to determine demanda for products of the first quality
category. Steady and reliable information concerning the technical-economic
parameters of the best domestic and foreign models, including a forecast of
their developments trends, is essential for the realization of this proposal.
The system of stimulating the organizations developing the new products and
. their workers should be organized such that it sharply differentiates the
_ amounts of the incentive depending on the degree of innovation and efficiency
of the newly produced products. It is essential to give considerable
preference here to tfie creators of new products which significantly surpass
the best world analogues.
More than 12 years of the experience of certification have shown that the _
evaluation of the products submitted for conferment of the State Sign of
Quality must be strict and ob~ective. Instances of the certification
co~nissions conferring the highest quality category on products which are
far from being the most progressive from the technical and economic viewpoints
must be completely ruled out. This practice weakens the efficacy of certifi-
cation. Preference in conferment of the State Sign of Quality should be
given pioneering technology insuring our country's priority in scientific-
technical progress and also c~nsumer goods which shape new requirements and
directions in fashion. The~conferment of the State Sign of Quality on
equipment which differs in its efficiency little or not at all from its
analogues leads to the amount of the additions to the wholesale prices being
small, as a rule. For example, the amount of the additions on machine-
building products constitutes 3-4 percent of the wholesale price and no more
than 10 percent of the effect. Given this amount of the additions to the
wholesale prices, the sum of extra profit is a small quantity.
- The additions to the wholesale prices for products of the highest quality
category should depend to a great extent on the scale of the economic
effect. In this connection their magnitude of 0.5 of actual profitability -
compared with the norm should be raised appreciably. The decree on an
- improvement in planning envisages the addition to the wholesale price being
established on a scale of 0.5 to 1.25 of the profitability norm for this or
an analogous group of products, but no more than 70 percent of the effect.
The amount of the addition to the wholesale price for new highly efficient
products and for products which have been granted the State Sign of Quality
may be increased by a factor of 1.5 when the production of these products is
based on developments recognized in the established procedure as discoveries
or inventions. Additional incentives will thereby have been created for the
~nterprises to manufacture fundamentally new products, renew the scheduled list
and assortment, expand the production of products of new brands, models and
types and, correspondingly, to withdraw obsolete products from production.
It is also important to remove other restrictions in obtaining additions to _
the wholesale price for products of the highest quality category, including
restrictions brought about by organizational factors. At present to obtain
additions the manufacturer-enterprises must submit to the USSR State
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Committee for Prices an estimate of the economic effect corroborated by the
consumers. But this estimate is preliminarily submitted to the state
commission which has conferred the Sign of Quality on the product. Evidently,
the state commission's decision should be a document corroborating also the
estimate of the economic effect, on the basis of which the additions to the
wholesale prices and the manufacturer-enterprise's deductions ahould be
determined.
The efficiency of the stimulation of the production of high-quality products
largely depends on the state of standardization. Standards, as normative-
technical documents having the force of law, determine the demands made on the
technical level and quality of the raw material, goods, components and end
products and also on the organization of their production processes. In order
to play their part in the system of product quality control in full the
standards themselves must be progressive and their scientific-technical
level must be sufficiently high. Unfortunately, far from all standards
correspond to these requirements. The demands determined earlier in certain
� of them no longer correspond to the requirements of the national economy and
the population. The CPSU Central Committee and USSR Council of Ministers
decree determines for the USSR State Committee for Standards, in conjunction
with the ministries and departments, the tasks for reviewing outdated
standards for machinery and equipment and completing the elaboration of
comprehensive standardization programs for the most important consumer goods
in order r.o upgrade the demands made on product quality.
The coordination of prices and standards is of great importance. The estab-
' lishment of a close interconnection between them is also one of the directions
in an improvement in prices. The USSR State Committee for Standards and the
USSR State Committee for Prices have put into effect instructions on the
procedure of the coordinated elaboration, approval and actualization of the
specifications and prices for industrial-engineering machine-building products
_ and the products of the raw material sectors of heavy industry and light and
food industry. Similar instructions for cultural-social and household goods
will take effect as of 1980. The increased interconnection between standardiza-
tion and price-forming will contribute to a lowering of wholesale prices per
unit of efficiency of the new machinery, equipment and instruments and goods
and products; an increase in the economic substantiation of the development
of the new product at all stages of its creation; the fuller reflection in the
standards and the specifications of the technical-economic parameters of
products characterizing the efficiency of the new types of product; a
reduction in the time taken to assimilate new products; and the establishment
of unified times of the introduction and expiry of standards, specifications
and prices.
The "Information Chart of the Economic Efficiency and the Prices of New
Products" is being introduced as an obligatory appendix to the standards and
specifications. It fixes the ceiling price, theoretical prime cost (price)
and the economic effect. This essentially means the reflection in a single
document of the specifications fo r~the development of new products and the
economic results of its introduction and aZso increased supervision of the
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economic subetantiation of the adopted deciaions. Insofar as the information
chart is an inalienable part of the standards and specifications, the standards
and specifications are not accepted for atate regiatration without an
information chart. Thia means that the series manufacture of a product whose
economic expediency hae not been proved will not be suthorized. The instructiona _
have only ~uat begun to be introduced. The experience of their application
will ehow the patha of their further improvement. ,
An intrinaic aspect of the interconnection of ataadarde and pricea is their
technical-economic unity. A standard which reflec.:s a product's quality in
full affords an opportunity for determining the correct correlations of
pricea and expenditure and thereby creates all the essential conditions for
better satisfaction of the public's growing requirements. Quality indicators
exert a big influence on the formation of expenditure on the production of a
_ product and also expenditure connected with its consump~ion, which is particu-
larly important for consumer durables.
There is a definite dependence between expenditure and the parsmeters compre- ~
hensively characterizing the product which are built in to the standards. Such
a dependence may be established, for example, between expenditure and the
level of standardization, the indicators of the reliability and working life
of household machinery and instruments and others. In this connection high
demands are made of the standards both from the viewpoint of their coverage
of all consumer properties and quality indicators and from the standpoints ,
of their quantitative expression. However, at present the ma~ority of
_ standards still lacks many quality indicators essential for determining econom-
ically substantiated prices. This is explained, in particular, by the fact
that for many types of equipment and consumer goods there is no clearly
defined, stable schedule of quality indicators.
In conjunction with the ministries and departments the State Committee for
Standards is currently formulating special standards for a schedule of quality
indicators and also the methods of their evaluation. Such standards have
already been formulated and put inta effect for fabrics and garments. An
improvement in the structure of standards will create, in our view, conditions
for a determination of the dependence of expenditure, prices and the quality
level. At the same time this will contribute to the more extensive applica-
tion of the most progressive methods of the determination of prices, particu-
larly normative-parametrical methods.
The producers' increased interest in the creation of high-quality products can
- only have the necessary effect in combination with a system of material
responsibility. Definite forms of enterprise responsibility for the manufac- ~
ture of substandard products and the violation of stand~rds have evo3ved in
economic practice. However, as experience shows, they do not fully correspond
to present-day conditions and tasks and are insufficientlq underpinned by a
system of economic sanctions. The amounts of the sanctions are negligible, as
a rule, they fail to take account of the damage that has been done, they are
insufficiently reflected in the economic results of the enterprises' work and
the specific culprits do not bear due responsibility.
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The lack of stable norms of the distribution of pxofit between the enter-
prises and the budge~t is also reflected here. The payment of the fines for
~ supplies of poor-quality products and a violation of standards is made from
the profit surplus and does not influence the amount of the enterprises'
profit, including the FES and FMP. For example, the USSR Ministry of
Electrical Equipment Industry's Ardatofakiy Illumination Engineering Plant
regularly receives invoice re~ects for having supplied substandard products.
In 1976 the State Committee for Standards authorities excluded products worth
R356,000 and profit of R81,000 from the accounting figures on plan fulfillment
because of the manu�acture of lamps which violated the requirements of the
standards. But the amount of the FES was reduced by only R3,000, and of the
FMP by R2,000. ~
The transition to the normative distribution of profit between the associations
(enterprises) and the budget in accordance with the decree on an improvement
in planning will increase material responsibility for the quality of supplied
products. The decree also provides for additional measures in respect of
enterprises manufacturing products of the second quality category. It is
planned to apply to these products discounts from the wholesale price of the
order of 50 percent of the sum of profit which the enterprises derive fr~m
sales thereof. The same discount from the wholesale price will be established
for products which are not certified in time. If an enterprise continues to
manufacture products of the second category after the deadline for its with-
drawal from production, the discount from the wholesale price will be increased
to the full total of the profit. Currently the amount of the discount does
not exceed 10 percent. ~
The rights of the State Committee for Standards as a monitoring authority
- are being extended to increase material responsibility for th~e manufacture
of low-quality products. It will be able ta reduce the deductions into the
FES from the sale of products which have forfeited the Sign of Quality.
This rule covers all indust~rial-engineering products and consumer goods.
Stricter sanctions will be applied for the nonobservance of contractual
obligations and late supplies to the consumer of products of the necessary
assortment and quality.
Compensation for losses owing to shoddy work is particularly important. Those
guilty of shoddy work (manufacturer-enterprises and individual workers)
compensate, as a rule, only a negligible portion of the losses. An analysis
of the materials of 14 industrial ministries showed that manufacturer-enter-
prise and worker compensation of shoddy work in 1977 constituted 9.25 percent
and 4.66 of total losses from defective work respectively. The enterprises
should compensate all losses from defective work for which they are to blame.
Such an approach should be recorded in the Regulations on Supplies of
i:ndustrial-Engineering Products and tihe Regulations on Supplies of Consumer
Goods. ~
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The enterprises' increased responsibility for the quality of the products they -
produce demands the liquidation of the practice of "reciprocal amnesty." The
imposition of fines for supplies of poor-quality products should be an
obligatory element in economic relations between producers and consumers.
Such measures are envisaged in the decree on an improvement in planning and
the economic mechanism. If one enterpris~ fails to press sanctions against
another enterprise, the state authorities should recover from it and from the
workers who are the direct culprits a fine of sufficiently tangible amount.
As far as personal responsibility is concerned, there is an underestimation
here of the role of material responsibility as a factor of the inculcation
of a conscientious attitude toward lablr.
The questions that have been dealt with do not exhaust the entire complex of
problems of an improvement in the stimulation of an increase in product
quality, but their solution will contribute to the successful implementation
of the party and government measures in the sphere of stimulation of the
creation and production of high-quality products. There is also great
significance in the creation of conditions increasing the efficiency of the
action of economic levers and incentives. These include, in our view, the
planned balance and dependability of economic relations, the renewal of fixed
capital, the creation of an infrastructure insuring full preservation of the
quality of the product produced, and improvementin metrological facilities,
the training of workers and engineering-technical personnel with the proper
c~ualifications and others.
COFYRIGHT: Izdatel'stvo "Pravda," "Voprosy ekonomiki," 1979
8850
CSO: 1820 END
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