JPRS ID: 9731 USSR REPORT CONSUMER GOODS AND DOMESTIC TRADE

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• Content Type: REPORTS

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JPRS L/9731 ~
1~ May 1981 ~
USSR Re ort
p
_ CONSUMER GOODS AND DOMESTIC TRADE
CFOUO 2/81)
,
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JPRS L/9731
13 May 1981
USSR REPORT _
CONSUMER GOODS AND DOMESTIC TRADE
(FOUO 2/81) -
CONTEN7S
~ CONSUMER GOODS PRODUCTION AND DISTRIBUTION
Consumer Demand Seen as Element of Product Quality
(Ya. Orlov; VUPROSY EKONOMIKI, Jan 81) 1 _
- CONSUPiPTION TRENDS AND POLICIES -
Problems of Consumer Su~ply, Demand Reviewed
(V. Mayer; VOPROSY EKONOMIKI, Feb 81) 14
l
- a - [III - USSR - 38b FOUO]
r. i.n nr~rn~ . r ~ ror. nwrr a~ '
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CONSUMER GOODS PRODUCTION AND DISTRIBUTION _
CQPiSUMER DErIAND SEEN AS ~LEMENT OF PRODUCT QUALITY
Moscow VOPROSY EKONOMIK7 in Russian No 1, Jan 81 pp 45-55
[Article by Ya. Orlov: "Quality of Consumer Goods"] '
[Text] Incre~aing the prosperity of the ~eople necessitates that substantial
changes be made in the production of consumer goods, namely increasing their quan-
til:y, improving their quality and expandin, their assortment. It was observed at
tlie October (1980) Plenum of the CPSU Central Commirtee that this is important to
economic development, to intensif ication of work incentives and ta stren;;thening
the ci_rculation of money. The rapid upsurge of industries in Group B is a task of
~rimary economic and political importance.
, In the final analysis the consu~�~~ judges the quality and quantity of goods not
~ from the absolute figures on the country's output or the per capita output of goods
,(though in and of them;aelves these indicators are unportant), but by wha~. he sees
and can buy in the store. The ~udgment of rustomers must be the principal crite-
rion governing the operation of industries whose enterprises are manufactiiring
_ bo~ds for the public.
Trade is the link.that ties together the production industries manufacturing goods
for mass consumption. In ~hat sector the products of those industries either win
recognition or are re~ected by the customer. In short, it is in the sphere of dis-
tribution of commodities that the smooth functioning of the economic mechanism is
verif ied, and consequently the national economic eff iciency of social production as
a whole is determined in this sector to a considerable extent.
At the October (1980) Plenum of the CPSU Central Committee L. Brezhnev said that _
there was a need to improve the syC_em for planning and financing production indus-.
tries manufacturing consumer goods by making them strictly dependent on trade, on
the consumer.
The decree of the CPSU Central Committee and USSR Council of Ministers entitled "On -
Improving Planning and Strengthening the Influence of the Economic Mechanism on In-
creasing Production Efficiency and Work Quality" notes the need to enhance the role -
o~E physicaZ indicators in the national economic plan and the plans of associations _
~ and er.terp~ises so that the production of goods in physical terms is one of the ~
principal indicators of enterpiise performance. The increase in the absolute vol-
ume of production and also in per capita output of particular products should be
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regarded as tlie sole and sufficient measure `~y which fiilfillment of the plan is de-
termined. As the prosperity of the Soviet people rises, industry and agriculture
are faced with an ever more urgent demand that they produce high-quality goods
which fully satisfy the growing requirements of the consumer. Requirements with
respect to quality, comfort and convenience, and the newness of pro~'ucts are not
- being advsnced by a restricted group of consumers, but by practically the entire
pcpulation. In its most general form the task is to increase the degree of satis-
faction of th.: workers' personal needs.
It is not uncommon for the economic aspec*_s of use value still tc be left outside
- the territory of the economic disciplines and to receive insufficient study, and as
a result they are not always straightforward criteria for determining the objective
indicators of product quality, for evaluating the economic efficiency of increasing
reliability and durability, of a service life that takes into account obsolescence,
and so on. Clarity is lacking even in the very definition of the cate~;ory product
quality." Reference works and textbooks also give differing definitions of this
category. Some treat quality in terms of c.onformity to technical specifications,
others as suitability to purpose, and still others as meeting the present-day re-
quirements of technology ai:d everyday life, and so on. But such formulations do
� not express the essence of product quality as an economic categor~. They do not
reflect the dependence of product quality on expenditures of social labor in the
- process of production, sale and consumptiono This important as~ect of quality must
be reflected in its definition. ~
A constant change is taking place under the impact of the development of the pro-
ductive forces and the growth and change of the needs of society, and higher re-
- quirements are being advanced concerning the assortment and quality of products.
The law of rising requirements reflects the indissoluble dialectical relation be-
tween production and consumption. The operation of this law is fully manifested in
a mature and advanced socialist society. Rapid development of the productive
forces speeds up the growth of needs whose satisfaction is limited not by the so-
cial conditi~ns, but by the resources available, the scale of de:velopment of pro-
duction and the level of the productivity of social labor. The pur~ose of social
- production is expressed more fully not oniy in quantitative terms, but also quali-
tative terms, and the qualitative aspect becomes decisive in the context of an ad-
vanced 5ocial ist sociery.
The opera.tion of the law of rising neer~G makes it possible to draw a conclusion im-
portant to theory and practice to the effect that the quality of the product manu-
factured tias to be systematically increased ir; accordance with the requirements of
the consumer. For a number of commodity group:.~ it is advisable to maintain quality
at a particular level in this stage.
- The process whereby needs increase results from scientific-technical progress,
- whicti creates the material conditions for a constant rise in the quality of prod-
ucts produced and for the emergence of fundamentally new products, by the system-
atic rise in personal money income, and by improvement of the public's situation
with respect to cultural and consumer services and housing conditions.
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The extent to which consumer goods are being renewed (the relative share of new
products in the total volume of products produced) is at present one of the impor^
tant inJicators of industry's performance. It characterizes in large nart the ef-
fectiveness of th~ ~fforts of enterprises and of an industry as a whole, the social
- usefulness of the products produced and the economic purposiveness of th~ expendi-
~ tures of labor society incurs. There is a i~eed not merely to expand the assortment
and refresh it superficially, but to increase the output of goods which are really
new and which are characterized by new service features of stylish products which -
are in great demand with the public.
rrom the standpoint of society, it is not just the production of a sound product
- that is cheaper, but also its sale and consumption. Tha*_ is why the economic effi-
ciency of production means not only low outlays to manufacture the products, but
also the high quality, reliability and durability of the product. The quality of
goods is closely bound up with the public's consumption and the purposive in~ulca-
tion of need's, and therefore it has tremendous socioeconomic importance. It is be-
coming especially urgent to study the interrelationship among such economic cate-
gories as "the quality of the commodity," "social needs," "social use value," etc.
Work of this kind is needed to determine the socioeconomic efficiency of product
quality and to set forth criteria so that the technj.cal level and quality of prod- -
ucts can be optimized. -
The social aspect of increasing the quality of commodities is bound up with instill-
ing in every worker a high sense of responsibility to socialist society for the re- `
sults of his work. The economic aspect of improving quality presupposes solving _
the problem of substantiating the optimum level of the quality of commodities, ma-
terial motivation of manu~acturers producing hi~,~?-quality products, making them
more accountable for the production of low-quali*_y goods, and solving the problem
of improving pricing so it takes into account changes in the quality of products,
etc.
Improvement of the quality of commodities depends on many factors. While the plan--
ned price has an important impact on the assortment and quality of commodities,
' product quality is in turn one of the principal price-setting factor.~. (Taking
product quality into account in price setting comes down to setting prices which
~ ref lect to the fullest the level of socially necessary expenditures of labor, which
provide motivation for the production and consumption ~f high-quality goods; it is
through prices, standard levels of profitability, and the system ef price reduc-
tions and supplements that the stimulative function of the planned price, its im-
- �pact on the assortment and quality of commodities, is perf.ormed and effected.)
Product improvement is by its very nature a complex and multif.aceted task: politi- ~
~cal, economic and social, a task that is inseparably bound up with scientific-tech-
ni.cal progress. We are moreover referring not only to improving the attributes of
~products already produced, but also to organizing the production of fundamentally
new products so as to take into account scientific-technical advances. The decree
' of the CPSU Central Committee and USSR Council of Ministers on improving the eco-
nomic mechanism specifically provides for drafting comprehensive target programs--
�a program For incrcasing the production of new consumer goods and also for strength-
ening economic incentives, expansir~n of their production and improvement of qual-
~ ity--among the priority programs for the very near future. _
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The difference between the terms "quality" and "rejects" should be taken into ac-
count ~?_n analyzing the F~erformance of enterprises and in planning and material in-
centives. Not ~mcommonly the effort to improve product quality is restricted to
cbmbating rej ects. Quality control requir.es a strict system for recording rejects
and complaints. This makes it possible to identify shortccmings and oversights in
the technology and organization of production and in the products produced. The
principal way to obtain information of this kind is to study the market; this study
furnishes inf ormation about the kinds of goods the customer needs. These require-
~ ments are then incorporated into a technical assignment for production of a prod-
uct. The quality of a product is shaped during the design and production and is :
evaluated in the proeess of the product's sale and use. Underestimation of a prod-
uct's quality in any stage, not to mention a deterioration of quality, is quite
detrimEntal to the economy, and the lack of theoretical principles worked out sci-
entifically concerning the step-by-step shaping, maintenance and preservation of
product qual ity stands in the way of developing and introducing an nverall system
of product quality control in all stages of a product's design, creation and sale.
The principa 1 task of comprehensive product quality control thus comes down to as-
~ertaining, ensuring, preserving and maintaining the optimiim level of quality in.
all stages of social reproduction. To be specific, controlling the quality of
goods in th e trade sector makes it necessary to carry out interrelated measures
that have an itt~pact on production so that high-quality goods are produced which
meet customer demand and so the service characteristics of products are preserved
in the process of storage and distribution.
Esthetic characteristics of products are one of thei: principal quality components.
Many products produced by oi:r industry bear comparison with the best foreign exam-
ples in the ir soundness and strength. But quality also depends on the beauty of
_ shapes, finishing, compactness, weight, version, good color shades and combination,
attractive packaging, and so on. Many of our products fall short of the best for-
eign examples with respect to these parameters.
Among innovations that have been successful from the standpoint of industrial de-
sign we might mention the "Elektronika-001-stereo" tape deck, whose parameters are
equal to the best examples of foreign firms; the "Rekord-Ts-310" Class-III color
television set with a 51-cro screen (diagonal); sev~ral models of collapsible bicy-
cles; a dev ice bearing the emblem of the Svetlana association in Leningrad for syn-
chronizing slide projection and accompanying sound. The "ZIL" refrigerator, the
"Riga-110" tape recorder-phonograph combination of the Radiotekhnika production as-
sociation in Riga, etc.
At the same time not every enterprise or department has become aware of the need
for industrial design of products. For example, most new television sets which
have been developed are not innovations, but only an original outer covering for
- old products. Can a television set using a 10-year-old tube circuit be regarded as
a new development? Yet there are quite a few such developments--the "Vesna-312,"
the "Yantar'-308," and the "Rekord-312." An outdated design of a product does not
always make it possible to make provision for a high esthetic level, since the
larger dimensions and unfortunate location of the control assembly hamper the in-
dustrial d esigner in achieving tY:e necessary expressiveness. New product models
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should not only possess go~d technical characteristics, but they should also be
distinguished by a high esthetic level in order to meet the requirements of the
most exacting customers and to be competitive on the foreign market.
The social usefulness of any product, its service characteristics, must unfailingly
be analyzed all tlie way to the organization of production; other4~ise, as experience
shows, seriaus econoniic and social losses are inevitable. The task is not simply
to increase the output of consumer goods, but to develop and introduce the optimum
, assortment of goods which the Soviet buyer needs. The problem of shaping tne as-
~ sortment is so important that it imparts urgency to setting up an effective nation-
wide system fnr controlling the assortment and quality of consumer goods. Support
should be given to the recommendation that the State CommitS:ee for Science and
Technology, USSR Gosplan, the State Committee for Standards, and the USSR Ministry
of Trade, jointly with miiiistries and departments of pa~ticular sectors and indus-
tries, draft an intersector comPrehensive national economic program under the title
"Assortm~nt and Quality of Consumer rGOds." An interdepartmental commission spe-
cializing in the problems of improving the assortment and quality af goods should
be ser up in USSR Gosplan for the same purpose.
P1ans must be g iven a larger role in organizing the init.ial production and subse-
quent manufacture of goods and in increasing the production of products~'in the su-
perior-quality category. The comprehensive ~,rogram of scientific-tech~`ical prog-
ress and its socioeconomic consequences, which makes it possible to take the ad-
vances of science and technology mor~ fully int~ account in defining the prospects
of social development, is expecte~ to become an organic part of planning. ,
Specific mentio n needs to be made of the inseparable connection between a product's
= quality and the demand for it. This question has not been touched on so far, nor
have we mentione3 the need for a product to meet the most exacting demand of the
public. We will give examples. The i~ioscow garment pr~du ction association "Zhen-
skaya Moda" (tiJomen's Fashion) has been deprived of the right to place the t~uality
Emblem on its krimplen suit dresses because of the lack o.f orders from organiza-
tions in the trade sector.. Women's flat shoes with sponge r.ubl~er soles produced by
the Tula "Zarya" Footwear Factory are selling poorly, as ar.e suits for boys of
schoal age made by the Factory imeni Leninskiy Komsomol of the Ivanovo Garment Pro-
duction Association.
"No orders from organizations in the trade sectar," "not purchased at the republic
wholesale fair," "assortment not ordered by organizations in the trade sector...."
This is how the official notation is made that goods which have even been certified
to bear the state Qua7.ity Embl�am are not needed by the consumer. Such cases indi-
cate that high product quality cannot be guaranteed without taking into account de-
mand f c+r the products .
~Impraving product qualiCy necessitates an itriprov~ment of all aspects of the eco-
nomic mechani.~,r~. ~fforts have been made in re~ent years in that direction: certi-
~ fication with respect to quality categories was introuuced, ~aholesale price supple-
ments and reductions were established, and the relative share of output classif ied
in the superior-quality category is used as a planning indicator and a success in-
dicator. But the effectiveness of all these measures is still not great. The
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decree of the CPSU Central Committee and USSR Council of Alinisters on improvement -
of the economic mechanism has ordered a number of ineasures in order to increase
that effectiveness. The size of supplements to wholesale prices for goods awarded
the Quality Emblem is Ueing increased. These supplements w~11 be still larger for
products in the superior-quality category whose product ion is based on developmentis
recognized as discoveries or inventions. Penalties (wholesale price reductions)
have Ueen substantially increased on goods in the second-quality category: the
profit obtained from sales cf such products is reduced by 50 percent. The groce-
dure for distributian of additional profit has been improved: now as much as 70 ~
- percent of it will go to the enterprise's incentive fund, and the remainder is cred- -
ited to the unif ied fund for development of science and technology 4nd the state
budget.
The new procedure fo~- forming econamic incentive funds is openiug up additional op-
portunities for development of the initiative of working collectives and is expand-
ing tl~e rights of enterprises. In the near future they will be assigned zhe stable -
rates of econom ic incentive funds with a breakdown by years of the 5-year plan.
The basis for their formation will be the qualitative indicators of performance.
Thus orientation tocaard quality is becoming exceedingly important in the entire pro-
duction and econo~r~i.c activity of enterprises, min~~tries and departments. Moreover,
among the economic incentive funds a special place is being given to the material
incentive fund, which will be formed fr.om the profit obtained from higher labor pro-
ductivity and the output of products in the superior-quality category, considera-
_ tion also being given to fulfillment of the plan for deliveries in accordance with
~ contracts. The latter is particularly important. The orientation of enterprises
toward the end results of economic activity will on the one hand make it possible
to improve the efficiency of operation, and on the other to register more accu-
_ rately the demands of organizations in the *rade sector. At present the lack af
close interaction between the economic mechanis~ and quality control is giving rise
to a number of problems. For example, not uncommonly an enterprlse's additional
costs incurred in producing goods bearing the Quality Emblem are not fully compen-
sated by any means. And as a result it is mainly nonf inancial incentives that mo-
tivate enterprises to make an effort to increase the output of products bearing the
Quality Emblem.
The price mu~t correspond to the quality of the product. In this case what is nec-
essary and advantageous to society will be advantageous to the nroducer as well.
The principal criterion in evaluating the performance of an enterprise should be
wt~ether the product it produces meets the requirements of customers and also comes
up to the world technical level.
Material incentives related to high product quality must be perceptible to the
worker. Bonuses for high quality should be paid only when there have been no com-
plaints from consumers. ,
F,ccording to f igures of the State Committee for Stand ards, as of 1 September 1980 ~
the gavernmant Quality Emblem had been awarded to 84,917 product ~.tems of the in- _
dustrial sector manufactured by 9,357 enterprises, including 53,000 cor,sumer prod-
_ ucts. But in many industries in Group B the share of these products is still ex- -
tremely sma11. It is far from every ministry t~at takes the proper approach to
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evaluatio-~ of product quality: when certificates for awarding the state Quality
- Emblem to products are recorded, the State Committee for Standards has had to re-
turn about 20 percent of the material submitted by ministrie~, since the products
Lo be certified proved to be low grade when a check was made. Cases have occurred
when the Quality Emblem was awarded not to the principal ~roducts, but to second-
rate and third-rate products of low quality, when enterprises succeeded in having -
- the Quality Emblem awarded io their products, but then were in no hurry to put them
into series production or halted their production altogether. Strict and unavoid-
able penalties should obviously be imposed on such enterprises in cases like this.
Today the state Quality Emblem has been awarded to slightly more than 6,000 product
items i~, the catP.gories of durable consumer goods, housewares and household chemi-
cal products. At the same time we should note that since the beginning of the lOth
Five-Year Plan there has been a noticeable increase in the share of products not
assigned to a quality category, especially television sets and radios, washing ma-
chines and furniture, ~ropeds and synthetic detergents, and so on. It was in order
to correct tnese shortcominZ;s that the USSR Council of Ministers adopted the decree
entitled "On Further Enhancen:~nt of the Role of Certif ication of Industr~.al Prod-
ucts in Improving the Technical Level and Quality of Products" (1979). It envis-
- ages the task of making full use of certification for comprehensive obje~five as-
sessment of the technical level of products for the purpose o� further expansion of
the output of high-quality products and regular renewal of the products produced.
It stated that goods manufactured on a permanent basis by enterprises sha11 be sub-
= ject to certif ication according to a list drawn up by the manufacturing ministries
and cleared with the USSR State Committee for Standards and the USSR Ministry of
Trade. Another new thing is that the following are not subject to cartification:
foodstuffs, medical products, cosmetics and tailetries; jewelry made by the de-
signer or made mostly by hand; handcraft~d products, boolcs and works of art. The
quality of foodstuffs and their grading are determined by standards and technical
specifications. But this, of course, does not mean that the standards themselves
and the quality of the products do not need to be improved. It only means that food
and drugs should always be of high quality.
The draft oF the "rlain Lines of USSR Economic and Social Development in the Period
1981--1985 and up to the Year 1990," which the CPSU Centra"1 Committee prepared for
the 26th party congress, set this task: "Substantially improve the quality of all
types of products produced, expand and renew the a~sortment oI products in accor-
dance with the present requirements of economi.c development and scientif ic-techni-
cal progress, as we11 as the growing needs of the public. Steadily increase the
relative share of products in the superior--quality category in fihe total volume of
output."
The high demand for durable consumer goods and housewares and the degree to which
that demand has been met are indicative of the rising prosperity of the Soviet fam-
ily., At the present time individuals have more than 1 billion devices and appli-
ances of their own. Yet at times these appliances cause tr.oubles, take away from
our free time, and take away quite a bit of energy and money for repairs and cor-
~ rection of defects.
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riuch is already being done to improve the quality of soph~~ticated technical prod- ~
ucts being manufactured by industry. For instance, the country's first State Test-
ing Center for Electrical Household Appliances has now been set up for quality con-
trol in Kiev. Here appliances go through tests in "air-conditioned" chambers and
- on Cest stands that simulate their shipment, on vibrating tables, their reliability
and electrical safety features are checked, and checks are made of the "behavior"
- of the appliance as a whole and also of its individual assemblies and parts. More-
over, the check is run nct only on the experimental prototype and first production
series, but also, and this is especially important, the quality af the product of
series production is also determined. When the check is made, justified recommen-
dations are also issued concerning design, engineering and processing.
As a rule the customer prefers those household appliances whose manufacturer guaran-
tees that they will operare without defect for a specified period of time. But in
practice manufacturing plants often do not issue a guarantee that the product will
- operate without interr~iption, but only that it will be repaired at no cost within a
specified period.
It is stated in the_ papers accompanying any technicaliy sophisticated prod~~ct that
L-he m~nufacturing Pl.ant ~uarantees proper operation of the product for 1 year and
- sometimes even 2 years from the date of its purchase in the store. But the clari-
Pication L-hat follows essentially nullif ies this warranty. Should the product fail
(during thP warranty period) it is suggested that the owner take it to a shop to be
repaired. Is this a guarantee of "fault-free operation"?
, Many enterprises are making a constant effort to improve the quality of products
- they groduce. In recent years the service life of household appliances has in-
creased noticeably. WE?ereas in 196L the operation to f ailure of teYevisi^n sets
average 660 hours for a11 models, it now exceeds 1,900 hours. Sets manufactured by
the Elektron Asscciation in L'vov are still higher; their operating life to the
first failure has increased from 2,250 to 4,636 hours. Television sets coming off
the assembly lines of the Moscow Order of Labor Red Banner production association
Rubin are operating in soine 60 countries of the world. Notable changes have also
taken place i.n the quality of refrigerators. They have become more spacious, their
Finishing h,ss been improved, and their service life has increased. A number of en-
terprises have created appliances which are in high demand in foreign countries.
� At the same time our helpers in the household are often "ailing." Nor is it a ques-
tion oi random oversights, against which no series production can be ensured, but
of large-scale defects. In refrigerators, for example, the refrigeration units,
temperature regulators and heat relays oft~n fail. Other products have to be re-
paired more than once even during the warranty period. In the first :~alf of 1980
the State Market Inspectorate of the RSFSR Ministry of Trade checked the quality of
reErigerators ar 14 enterprises under 6 different government departments. In all,
356 refrigerators were checked. Of these SO were rejected. ?.t industrial enter-
prises 20.2 percent of the television sets checked were rejected. Economic penal-
ties have been pronounced against enterprises for manufacturing substandard telev~-
- sion sets: 5,882 television sets worth 2.6 million ruUles (in wholesale prices)
were ~aken away from reports on plan fulfillment and 23,700 rubles of profit were
confiscated and credited to the budget. At the Sarapul' Radio Plant imeni
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� Ordzhonikidze every one of the 30 "Ural~avto-2" radios and the 20 "Ural-114" radio-
phonograph were rejected because of manufacturing defects. Not uncommonly owners
of products covered by s warranty have to put up with a runaround and red tape and
unwillingness to meet obligations under the warranty. This is explained in large
part by the f act that_ the present warranty system relieves manufacturing enter- -
prises to a large extent of accountability for manufacturing a low-quality product.
_ At the same time repairs covered by a warranty only seem to be free to the consumer,
;~nce their cost is planned into the price of the product.
Something has already been done to change this situation for the better. A step
' Forward has been taken by introducing the standard contract for servicing and re-
pair under warranty of durable consumer goods and housewares, Uy establishing uni-
form prices for settlement of accounts between producers and repair services, by
- standardizing documents, and so on. But any enterprise manufacturing househo:!d ap-
- pliances car~ still spend "repair" money wastefully. The point is that the present
warranty system at times makes it possible to produce low-quality products, and the
warranty period actually becomes a legalized p_~cedure for correcting manufacturing
- defects.
This has beccme possible becausP enterprises plan expenditures for their repai?-
along with other indicat~rs. Plants del.ivering refrigerators, sewing machines,
television sets and other products covered by warranty to the distribution network
regard the money paid shops f~r repairs as costs of sales and distribution. Yet
the overwhelming majority of repairs of appliances really involves correction of _
_ mistakes made in the production process.
- Zn our view outlays for repairs covered by warranty should be planned only as an
exception on especially complicated durable consumer goods and housewares in the
period when they are being put intn production, and it should be based on the as-
signed standards for their raliability. Li_sts of such household appliances and
radio products and standard amounts of expenditures for repairs covered by warranty
should be set forth by ministries with cleutance from USSR Gosplan and ttie ~JSSR
State Committee for Standards. All expenditures exceeding the assigned allowances
for repairs covered by warranty should be charged to actual losses from rejects and
- should nct be taken into account in the planned production c~st of the marketed
- product.
The sphere of consumer s~rvices, including repair services, is develaping rapidly
and becoming a very large mechanized sector of the economy. It can be said that an
up-to-date sector of the economy employing more than 2.5 million persons has been "
created fram scratch. The decree of the CPSU Central Committee entitled "On the
Work of the RSFSR Ministr.y of Cc,nsumer Services for the Public To Improve Quality
in Filling Orders and To Improve Customer Service to the Workers" (1977).
- As a result of the steps which have been taken there has been a sharp drop in re-
- turns because of poor repair of refrigerators, ~eashing machines, electric razors,
timepieces and other goods, and complaints from customers because of low quality of
repairs and failure ta ma~;e repairs on time have dropped considerably. In a number
- of cities the practice is spreading of exchanging previously repaired timepieces
and electric razars for those brought in for repairs. Fast-service repair of tele- -
vision sets on the ~iay when the order comes in or on another day indicated by the =
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~ customer has become widespread in Kiev and certain oblast centers of tr?e Ukraine,
and p~eventive maintenance under the warranty has been introduced. Another proce-
dure that has made its appearance and has become popular with the public is that oF
servicing and repairing household appliances on a subscription basis, The subscrip-
tion system f or repairs is being introduced ever more ~aidely in rural localities ~s
wel1.
But we should note that there are still serious shortcomings in the organization of
repairs of h~~usehold appliances belonging to individuals. Orders of individuals
_ for repair.s are being filled at a low technical level, they are not always being
done compecently, and sometimes they take indefinitely long periods or' time. What
is more, the accounting and planning practice in these services is such that they
zre motivated to perform as iew repairs as possible, not as many as possible. This
practice is detrimental to the state and to consumers.
Consumer service facilities have a poor supply of equipmen~, instruments and tools,
~ and they constantly Pxperience a shortage of replacement parts. Even the list of
products which plants are required to deliver in accordance with plans and con-
tracLs are not zlways received by the shops.
As for the papers wliich accompany products covered by warranty, they reflect the
tr~le attitude uf the enterprise toward the product produced. These papers confirm
the accountability of many plants for the quality of products and for their unin-
terrupted op eration. Others write that they guarantee only the meeting of techni-
cal specifications or conformity to models, which means that they do not bear any
accountability at all for the reliability of the products. There are also other
ways of relieving themselves of acco>>ntability for their products. In a new radio-
phonograph manufactured by the Be~d Radio Plant, the recording head which it ob-
tains from a subcontractor is of low quality and operates no more than 3 or 4
- months. Instead of requiring the subcontractor to take steps to improve the reli-
ability of the recording head, the plant advises customers to purchase this part in
a store if it should fail. There would seem to ~be a need to draft uniform require-
ments a warranty on tectinically sophisticated products must meet so as to ensure
that tlie laws of socialist management are observed and in order to protect the cus-
tomer's rights.
Systems for planning production and financial activity and for stimulating workers
of repair enterpris?s are such that it is more advantageous to them L~ make repairs
for cash and less profitable to make repairs covered by warranty. Which in a num-
ber of cases explains why customers face an ordeal with equipment that has failed
' during the warranty period.
Lists of goods on which warranty periods have been established are drawn up by the
mini~try to which the particular group of products has been assigned and is subject
to clearance of the USSR State Committee for Standards. These periods are estab-
lished on all complicated technical products and also on such products as storage
batteries, battery chargers, footwear, fur coats, and so on. In recent years these
_ periods have been lengthened considerably on a number of goods because their qual-
ity has improved. i'or example, on refrigerators manufactured up to 1 July 1972 the
warranty period was 2 years, but ot~ those manufactured since 1 July 1972 it is 3
- years from the date of sale in the store.
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One of the acute problems in improving ttie quality and reliability of technically
sophisticated products is to conduct a uniform technical policy and to standardize
assemblies and parts. At the present time there are dozens of makes of appliances
of Che same kind on sale. Sflm~ 12 plants of Minpishchemash [Ministry of Machine-
building for Light and Food Industry and Household Appliances] and a number of _
other ministries are manufacturing 34 models of electric rszors, 23 plants under 3
ministries are manufacturing some 50 models of radios and radio--phonographs. En-
terprises of Minsk, for example, have brought out 11 model$ of refrigerators, and
those in Baku 7, many of which differ in their design. Washing machines use motors
af seven different makes, wringers in three different versions, different pumps and
frames, and faur different agitator shafts. Repair services have to keep mill~ons
- of parts in stock, tie up their assets and metal, organize a tremendous warehouse
- operation, and, most important, often they must refuse to repair the appliances of
- individuals since the need for replacement pa.rts and components is not being ade- -
quately satisfied. This applies to practical all durables: motor vehicles and mo- _
torcycles, radios and television sets, vacuum cleaners and washing machines, etc.
There are substantial opportunities in the trade sector for improving the quality
of technically sophisticated products. Personnel in the distribution sector need
- to check the operation of every product mora thoroughly so that defects are discov-
ered before it leaves the store, and. still better--at the enterprise and at work
stations.
There is also a need for changes in the practice of returning defective equipment
to the manufacturer. At the present time if defects are found after purchases of -
such goods as flat shoes, suits, and dre~ses, complaints can be filed with the
store. In the case of a defective television set, refrigerator, washing machine or _
other complicated piece of equipment, the repair shop is the only place one can go
to. This practice contradicts the Bases of USSR Civil Legislation, entitles the
~ustomer who finds defects in an article sold to him to demand that the store re- _
place '_t or correct the defects without charge or reimburse the cost of repair or
reduce the purchase price, or return his maney. Durable consumer goods, housewares `
and household ch~mical products should not be an exception to this rule. Moreover,
when purchases are returned to the store, the organization in the trade sector
should be entitled to exact a penalty on the manufacturer for delivering substand-
ard pruducts.
This is, of course, no simple matter. It prob~bly makes sense to begxn the imple-
mentatior. of this system as an experiment. In our view it would be quite feasible
to begin the experiment with a product like a timepiece, to work out a procedure
for its acceptance and exchange, and then gradually expand the experiment.
The new procedure for settlement which has been worked out on the basis of the de- -
cree on improvement of the economic mechanism enhances the accountability of sup-
pliers--industrial enterprises and wholesale depots--for fulf illment not only of
the plan, but also of the delivery contract. In future bank credit will be avail-
able to pay for only those goods which have been delivered in the assortment called
for in the contract. For that reason manufacturers are required to indicate in
their demands for payment that the goods were delivered in accordance with the or-
der (contract) of the enterprise in the trade sector. The exercise of strict moni-
toring will make it possible for organizations in the trade sector to prevent cases
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when suppliers are paid for products of low quality or qualities which were not or-
dered .
Th~ decree on improvement of the economic mechanism calls for reinforcement arid de-
velopment of the requir ement that it is not only the right of enterprises in the
trade sector, but in f act th~ir duty to the state to invoke penalties for violation
= of delivery obligations. Consistent enforcement of this legal standard ensures -
that the supplier canno t evade liability and helps to strengthen contract and cost- _
accounting discipline.
But actual cases indicate that many organizations and enterprises in the trade sec-
tor are still not always invoking the measures of finan~:.ial liabilit~ by collecting -
- forfeits, penalties, f i.nes and reimbursement for losses. There is no excuse for
personnel in the trad e sector not taking advantage of the right afforded them Co
remit payment after ac ceptance of the goods with respect to quality nor for indus- _
trial enterprises whi ch are regularly delivering goods which do not meet standards
and samples. The regu lation on deliveries provides that when a supplier xepeatedly
ships goods cahich do not meet the terms of the contract in quality and grade, the
customer has a right to pay their value only after ac~eptance with respect to qual-
ity with prior notice of this given to the supplier and the bank. This settlement
procedure can be intro duced by the cus tomer for a pPriod up to 6 months. Wherever
this right has been exercised, changes for the better have been forthcoming. In
Belorussia the Mogilev Garment Factory imeni Volodarskiy, the Gomel' "Komintern" -
, Garment Production As s ociation, etc,, were put on the system of payment after ac-
- ceptance with respect to quality. In the first half of 1980 alone 1.5 million ru-
bles were credited to the state budget from accounts of suppliers. The trade sec- .
tor refused to pay bil ls amounting to 2.1 million rubles on goods which did not
meet quality standard s and the agreed assortment. It is an effective measure to
give up the practice o f advancing payment for the manufacture of low-quality goods.
The draft of the '~Main Lines notes the need to improve economic relations _
= among industrial, agr icultural and trade enterprises and organizations, to enhance
the role of the business contract in drafting plans governing production and sales
of consumer goods. T ne sys~em for planning and f inancing production industries
manuFacturing consumer goods should be made dependent upon the trade sector, upon
the consumer.
The system of temporary prices has great importance. The USSR State Committee for
Prices has set temporary wholesale and retail prices that include supplements for =
improved quality of goods on fabrics, carpets and carpet produ~ts which are dis-
tinguished by the newness of their design and coloring and finishing, which meet
the requirements of f ashion and which have been classified as new goods of ~mproved
quality by the Interd epartmental Commission of VlAlegprom, These goods are~bPing
manufactured by a number of enterprises, combines and associations. '1'he size of
the supplement has ~ een differentiated as a function of the quality of the
prociuct.
At the same time dedu c tions from whole sale prices have recently been assigned to a
number of goods on the recommendation of the trade sector. The period of validity
of temporary prices ha s been revoked ahead of schedule on cer.tain new products
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- which do not enjoy sufficient demand of cusl:~.~mers. At present measures of this
~ kind are being taken in Belorussian SSR and RSFSR.
On Che representation of the RSFSR Ministry of Trade the USSR State Committee for
, P~ices revoked ahead of schedule the wholesale and retail prices of certain article
and models of particularly elegant shoes manufactured by the Kalinin Fo~twear As~o-
ciation, the Omsk Footwear Association, the Moscow Vostok Footwear Association and
the Stavropol' Kavkaz Footwear Association. The reason for this measure is that
the footwear being produced does not meet the higher requirements which have been
pl~ced on especially elegant footwear with respect to the quality of manufacture,
with respect to the styles of the lasts and heels, as well as because of departures -
from the approved samples. Revoking temporary prices results in withdraw~.l of out-
- dated models from production. The USSR State Committee for Prices has revoked
ahead of schedule the temporary prices, including supplements for improved quality,
on flat summer men's street shoes produced by the Volgograd Footwear Factory be-
cause of substantial departures from the approved samples. The total amount of the _
temporary supplements added to permanent prices obtained by the Volgograd Footwear
Factory from the manufacturer of this footwear is to be confiscated and credited as
a revenue of the state budget.
These cases where the trade sector has exerted vigorous pressure on the industrial
sector are still extremely rare. It is the outright responsibility of the trade
sector to exert far more vigorous influence on production and demand of industry
those goods which the consumer really needs.
The draft of the "Main Lines of USSR Economic and Social Development in the Period
1981-1985 and up to the Year 1990," which the CPSU Central Committee prepared for
- the 26th party congress notes: "Augmenting production and improving the quality of
goods for the population is to be regarded as a priority task of all industries, ~
~11 enterprises and organizations and a matter of particular concern of all party,
soviet and economic authorities,"
COPYRIGHT: Izdatel'stvo "Pravda," "Voprosy ekonomiki," 1981 -
7045
CSO: 1827/26
r
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CONSUMPTION TRENDS AND POLICIES -
~ ~
PROBLEr1S OF CONSUI~IER SUPPLY, DEMAND REVIEWED
Moscow VOPROSY EKONOMIKI in Russian No Feb 81 pp 54-63
[Article by V. Ttayer: "National Well-Being and Consumer Demand"]
[Text] The Draft of the CPSU Central Committee "Basic Directions in the Economic
and Social Development of the USSR for 1981-1985 and for the Period Up to 1990," in
being published for national discussion, generalizes the practice of communist con-
str uction in the USSR and embodies the strategy and tactics of the CPSU on the most
important questians of national economic and social development in terms of the
~ specific conditions of the 19$0's.
In the Draft of the CPSU Central Committee an important place is held by the ques- !
tions of social development and a rise in national prosperity. The real per capita ~
- income in 1981-1985 should increase by 16-18 percent, the wages of manual and white
collar workers by 13-16 percent, the income of kolkhoz members from the nationalized
sector of the kolkhozes by 20-22 percent, iahile the public consumption funds will
increase by 20 percent. Consumption of material goods and services will rise.
Over the 5 years, housing is to be built with an area of 530-540 million m2. Mea- ~
sures have been set to improve public health and the recreational conditions of the
Soviet people and to raise their educational and cultura]. level. A great deal is
to be done in the development of socialist culture and art in order to raise their
role in more f ully satisfying the diverse spiritual needs of the public.
"To consider as a most important task," the Draf t of the "Basic Directions" empha-
- sizes, "the fuller satisfying of the consumer demand of the population for diverse
goods and services." This thesis has been assigned one of the primary places among -
the specific targets of improving the material well-being of the people. It fol-
lows immediately after the indicator for the growth o� the real income of the popu-
lation which is the basic indicator characterizing the dynamics of the standard of -
living of the people.
The great attention given to consumer demand i.n the "Basic Directions" is explained -
- by the fact that at present the solvent demand o~ the public for goods and paid
services is not satisfied either in terms of the total volume or the assortment.
This can be seen f rom the data on co~nodity inventories and the dynamics and struc-
ture of rhe monetary savings of the public. Great attention was given to this
problem in the speech of L. I. Brezhnev at the November Plenum of the CPSU Central
Committee in 1979. At that time he pointed out the shortage of ineat and dairy ~
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products, the narrowing of the assortment of bakery and confectionery goods and
- interruptions in tfie trade of many simple nonfood items. He also spoke about this
in the speech at the Gctober (1980) Plenum of the CPSU Central Co~nittee. This _
~ problem was also raised at the Fourth Session of the USSR Supreme Soviet, Tenth
Sitting.
Unsatisf ied demand impedes a rise in the material well-being of the people, it -
causes a s~!rplus growth of savings, it leads to the unplanned redistribution of the _
public's income and has a bad influence on the socialist way of life. The di�f i-
cultieG arising over the incomplete satisfaction of demand with the disPosal of
monetary i_ncome earned by the population in social production lessen th~ incentives
for labor ancl thereby prevent the growth of social production and a rise in its
efficiency.
The diff iculties which we encounter in the area of covering the solvent demand of
the population are the result of not only mistakes by the planners and economic
managers but also the outcome of insufficient theoretical elaboration of a number
of aspects in th~~ complicated problem.
Soviet economists, in proceeding from the fundamental ideas of the founders of
Marxism-Lenznism, have shown that under the conditions of real socialism, when
commodity-monetary relationships still survive, and the process of the distribu- -
tion of consumer ;;o~ds is determined by the formation and disposal of monetary -
income, the basic ~nass of consumer demands operates in the form of so~~~ent demand.
The coveri.ng of demand is a necessary condition for satisfying needs, for the
J growth of material well-being and for a rise in the cultural level of the people.
The prompt and complete coverage of growing demand of the population is a specific
_ form of realizing the higher goal of socialist production and the requirements of _
the basic economic law of socialism. At the same time, up to now there has been no
clear answer to the question concerning the conditions for the balancing of the
public's solvent demand and its couunodity coverage. Nor is there sufficient clar-
ity on the question of the role of demand in carrying out the distribution princi-
ples inherent to socialism.
Soviet economic science, in basing itself on the works of t}ie founders of Marxism-
Leninism, has elaborated a ttieory of distribution under the conditions of socialist
production. Its essential traits are the provisions concerning the methods of dis-
tribution operating in the stage of socialism, distribution according to the quan-
tity and quality of labor, the inverse effect of the forms of distribution on pro-
duction which gives rise to labor incentives and on the predominant growth of the
public consumption funds as an important trend during the period of developed
_ socialism.
The works of Soviet scientists provide a full interpretation of the content of the
law of distribution according to the quantity and quality of labor and the forms
of its manifestation have been thoroughly studied. A concept has been elaborated
for the practical realization of the principle of distribution according to labor -
through a system of organizing the wages of employees in the state sector of the
- economy and through a system of wages in kolkhoz production.
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'Tl~ere still are numerous difficulties in the actual organization of wages for ~m-
ployees and kolkhoz members. At the same time, generally speaking we are clear _
(although here there are debated questians and not a cumplete unity of views) ~n the -
basic directions and ways for solving the problems in the area of further improving
the system of distribution according to labor. These directions and ways are aimed
at increasing the prosperity of the workers of socialist production and at strength-
ening the i~lterest in the results of ldbor. -
r
When it is a question of improv ing the system of distribution according to labor,
then the entire question is ord inarily reduced to the demands to improve the plan-
ning the organization of wages and earnings for the kolkhoz members. Here the i
economists have overlooked an important aspect in the actual implementation of the
socialist principle of distribution according to the quantity and quality of labor.
It is a question of what is the object of distribution according to labor, that is,
is it the monetary income or the immediate consumer goods which satisfy the person- -
al needs of the workers in socialist production and the members of their family?
~ study of wurks on the problems of distribution provides reason to assert that
their authors proceed from the adequacy of the processes of distribution for mone-
tary income and material goods. From the viewpoint of the authors of these works,
it goes without saying that if the system of wage rates and salaries has been cor-
rectly organized, if the rates for pensions, assistance and scholarships are inter-
related and correlated to the amounts of wages, if income planning on all manageri-
al levels is carried out successfully, and if the mechanism connecting the growth
J oz labor wages to the rise in production eff iciency operates with sufficient accu-
racy, then the distribution system operates normally, properly ensuring both the
satisfying of the demand of the corresponding population groups and also encourag-
' ing production.
However, here one is overlooking the important fact that the process of the distrib-
ution of material goods by the formation and distribution of monetary income is _
~usi: heginning. This is obvious if one examines the entire process of reproduc-
tion as a whole, without limiting oneself to its individual phases. In actuality,
- the completion of the phase of the production (creation) of social product and
national income is accompanied by the formation and primary distribution of income.
This is simultaneously the beginning of the phase of the distribution and redis- _
tribution of social product and national income. In this phase of the reproduction
process which overlaps with the phase of exchange, there is a redistribution of the
income of the population and this terminates by the disbursement of monetary in-
come and the formation of the end income of the public. The resul.t of this process
is the receipt of the corresponding material goods and paid services by the public,
and these will be used to satisfy the demands of the people for the final stage of
the reproduction process, consumption.
T}ius, the distribution process can be considered over only when the correspondin$ ~
con5umer goods reach the consumers. In principle, this question was treated in
this manner by K. Marx in his "Critique of the Gotha Program," where the notion of
distri_bution according to labor under socialism was f irst formulated: "He (the -
worker.--V.M.) receives from society a receipt that he has delivered a cextain
quanti~y of labor (minus his labor for the public funds) and by this receipt he re-
ceives from public supplies a quantity of consumer goods on which the same amount
of labor has been expended."1
1K. Marx and F. Engels, "Works," Vol 19, p 18.
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" In a socialist economy, not labor receipts but rather money is used. However this
circumstance cannat influence decisively the essence of the method of distribution
which consists in praviding the worker, in accord with his labor contribution, the
_ appropriate mass of real consumer goods capable of satisfying his needs. The pro- -
ducer, in exchange for money, should receive from society the mass of consumPr
goods which would correspond to his labor contribution. Only thzn can one speak
_ ahout the actual and consistent realization of the socialist principle of distribu- -
- tion according to labor. For this reason, under socialist conditions, with the ex-
istence of commodity-monetary relationships and when the process of distributing
consumer goods is mediated by the for.~nation, distribution and redistribution of _
mor.etary income, th2 consistent carrying out of the socialist principle of distri-
~ bution according to labur requires the implementation of a number of additional -
conditions. The main one is the full satisfying of the solvent demand of the pub-
lic for consumer goods sold as co~nodities. _
Demand, as is known, represents a historically determined form of the manifestation
of needs. The difference between demand and needs cannot help but occur with dis-
~ribution according to labor and carried out not only with the aid of money but
also with the aid of labor receipts. For this reason, ~he distribution procedure '
predicted by Marx, in its internal nature, proceeds from the existence of a dis-
erepancy between the volume and structure of social needs and the demand of the -
population, and hence, in the first place, provides for the formation of a public
~upply of consumer goods in an amount which would correspond to the amount of work-
- ing time stated in the labor receipts issued during the given year. Secondly, it
is assumed that the structure of this supply of stocks should be "guessed" in such
, a manner that the social supply of stocks not "pile up," while the members of
society at the same time would not go away from the public warehouses with empty
hands. Thus, the phenomenon of demand arises independently of commodity-monetary _
relationships but with the presence of the latter this is complicated and trans-
formed into a phenomenon of solvent demand.
. From what has been stated it follows that the consistent realization of socialist
distribution principles (distribution according to the quantity and quality of
' labor and the distribution of the fund of money for disabled persons) is possible
only with the f ull satisfying of the solvent demand of the population for consumer
goods and paid services. A disregarding of this condition and the nonobservance of
it inevitably will lead to underminin~ the socialist principles of distribution.
If one speaks about the economic and organizational conditions for the balancing of
the solvent demand of the pubZic and its commodity cover, then it must be pointed
out that in a spontaneously f unctioning market economy, the balancing of the supply -
and demand of the volume and structure of goods is achieved, as was pointed out by _
Marx in "Capital," by competition. Here the price mechanism plays an essential
role.
Under the conditions of a socialist econot.iy, consumer products are produced and
sold predominantly as goods. However, here, in contrast to a small market or capi-
talist eccnomy, the relationships of supply and demand are mediated by state plan- -
ning. The sphere of the production and sale of material, physical goods, in form-
ing their end supply on the consumer goods market, represents a very complex organ-
ism which includes enterprises and organizations from agriculture, industry, pro-
curement, wholesale and retail trade. ~tere paper money does not have intrinsic
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va].ue, but rather its purc:t~asing power is determined by the mass of goods put into
circulation at stable state prices which are set in a planned manner.
In such a situation, the relationship of solvent demand and supply and their bal-
~ncing will be determined, in the first place, by the volume and structure of Coh--
sumer goods production; secondly, Uy the level and mass of monetary income of the
- populat.ion; thirdly, by the level and structure of the state retail prices and
rates for service, and, finally, by the effectiveness of the system of selling and
bringing the consumer goods to the constuner. Under the conditions of public owner-
ship and the planned management of tha economy, all these factors related to the
talan~ing of supply and demand are controllable. It is merely a question of cor- ~
rectly orienting the process of controlling them and carrying this ou4 mo~t effec-
tively.
Production is the first among these f actors. This is caused, in the first place,
by the fact that production is the determining phase of the reproduction process,
and, secondly, by the fact that a socialist society needs not merely a balancing of
supply and demand but rather a l7alancing which, in being based on the continuous
growth of the economy, reflects and ensures a constant rise in the material we].1-
being of the people.
The basi.c reason that a gap forms between demand and its supply is that for a lo~zg
_ period of time the production of consumer goods has substantially lagged behind the
overall economic development rares and behind the quantitative and qualitative
growth of consumer needs. Rapid economic growth (in particular, the increase in
- the production in the means of production) has objectively led to high increase
rates in the income of the population and this has not always been backed up by a
corresponding rise in consumer goods. The production of traditional consumer goods
which up to now have made up the basic bulk of commodity turnover, that is, food-
stuffs, clothing and footwear, has not grown sufficiently quickly and, most impor-
tantly, instead of broaden:ing the range and assortment of products and improving
- quality, as has been demanded by the growth oK the population's income, in a num-
ber of instances there has been a decline in quality and a reduction in the assort-
ment of produced products. Not enough new coc~�nodities are produced, particularly
subsidiary ones.
t The production of cor~sw~er goods should fully satisfy the growing demand ror them
and correspond to the changes in demand. At the same time, producCion should not
Ulindlyfollow demand. In developing production, it is essential to proceed froni
the view that the dynamics and Gtructure of consumer goods production should be
oriented at achieving the indicators for rational consumption (a rational consumer
Uudget) over the long run. A normative approach to the formation of the structure
of consumption and coaunodity turnover in the long-range plans requires, in our view,
the use of ~conomic measures (for example, regular changes in prices for individual
~ connno~lities and services) for rationalizing the demand structure.
- The main thing in solving the demand problems is to increase production, improve
quality, expand and promptly renew the assortment of consumer goods on the required
scale.
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- The resources of a number of consumer goods, primarily food products, can be sub-
stantially increased in the next f ew years by improving the storage of the produced
agricultural products and eliminating the bottlenecks in the food and light indus-
tries. This is focused on in the Draft of the "Basic Directions" which envisages
an emphasi~ on proper storage of agricultural products anc~ bringing it in thP be~ ti
coumodity form to the consumer.
buring the years of the llth Five-Year Plan, the production of agricultural prod-
ucts should increase by an annual average of 12-14 percent, with the a~~erage annua 1
~roduction of ineat rising up to 17-17.5 million tons (in dressed weight), milk up
to 97-99 million tons and eggs to at least 72 billion units. The industrial pro-
duction of consumer goods will develop at a more rapid pace and over the 5 years
' increase by 27-29 percent, including by 23-26 percent in the foo3 industry and by
18-20 percent in light industry. The output of cultural, service and household
goods will rise by at least 1.4-fold. The "Basic Directions" set quotas for an in-
crease in the output of these commodities for the heavy industry sectors, for ex-
ample, by 1.7-1.9-fold for the radio industry, by 1.8-1.9-fold in the electranics
industry, by 1.4-1.6-fold in the chemical industry and so Forth.
- Over the long run there must be a f undamen~al reconstruction and converting to a
new technical base for the light, food, furniture, printing and other industrial
sectors which produce con~umer goods. For increasing the technical level of produc-
tion and hence product quality, it is advisable to concentrate the output of a pre-
- dominant share of. the cultural, service and household goods at specialized enter-
prises. Here it is essential to bring about an improvement i_n the quality of the
raw products, semifinished products and materials for the industry producing con-
sumer gcods, including such items as vegetables, frui.ts, cotton, flax, leather,
wool, dyes and accessories. It is essential to fully satisfy the demand of these
sectors for packing and crating materials (tin plate, paper, cardboard and plastics)
and specific types of raw materials (agar-agar, hops and so forth). The physical
plant of trade and the other sectors serving the public should be developed at a
rapid rate.
For achieving a balance of supply and demand iu the near fut~ure ancl a successive
rationalization of demand in the more distant future, it is essential now to begin
forming new major channels for the expenditures of the population. As the income
' of the population rises, the structure of its expenditures must Ue enriched and new
elements introduced into it, as f ollows from tYie law of increasing demand.
New expenditure channels are already provided by the extensive studies on the
- rational consumer budget of the population. These include a further increase in
the sale of cars and automotive accessories to the public. l:t is possible and ad-
visable to significantly increase the output and sa.Le of new types o~ cultural,
service and household goods to the public along with f.urniture, household chemical
products and printed products. The population has a Full opportunity to invest
most money into the construction of cooperative and individual housing, cooperativ e
garages and parlcing areas for means of transport. There are enormous prospects f or
developing orchard and garden societies for ehe employees, for tourist excursions
and travel. In the future these items can hold an important place in the expendi-
tures of the population. On the basis of concluding long-term agreements with the
developing c~untries, it is possible to greatly expanci tt~e imports of consumer
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~obds,whi~ch are not produced in our country or which canuot�be produced in suffi-
~c~:~ent!quantities (tea, coffee, cocoa beans, citrus fruits and bananas) but the con-
sumption of which lias become customary among the basic mass of the public.
; ,
A1i iruportant factor for covering demand is an improvement iii the organization,
planning snd management of consumer goods production and sales. At present, on a
;ie~ei~'of~the nation and the Union republics, there is in fact no unified manage-
- ment of the production of consumer goods and services for the public. Due to the
abserice of proper coordination, the assortment of the produced articles develops~,
�a.n essence, spontaneously. Nor do the existing forms of ties between trade and in-
''t3listry help to solve the demand problem. Even in those instances when production
~ is planned from the oiders of trade organizations (for example, in light industry)
ttl�~s procedure is virtually not observed. Industry, in essence, does not bear any
responsibility for the sale of its products. The industrial enterprises and asso-
~cia'tions frequently force on trade an assortment which is advantageous for them,
but even under these conditions the delivery contracts are systematically violated.
The trade workers prefer to carry out the commodity turnover plans by selling ex-
pensive an~' labor nonintenszve goods while avoiding in every possible way the hand-
ling of cheap and sales labor intensive goods such as greens, salt and nonalcoholic
beverages. The demand of the population has not yet been sufficiently studied, and
- de~and forecasts are little used in the work of trade and industry. They are actu-
ally not taken into account in planning. -
J For the balancing of ;upply and demand, it is essen~ial to ensure comprehensiveness
- in working out the production plans for consumer goods, the plans for the develop-
ment of the sectors of the constuner service sphere and the plans for the sale of
consumer goods in the USSR Gosplan and the Union republic gosplans. The head min- _
istries which are responsible for the organization of output, the technical policy
- and the satisfying of the demand of the population for individual goods should bet-
ter know the market and inf luence the process of their production. It is also es-
sential to f undamentally improve the planning of the structure and assortment of
consumer goods production and coummodity turnover in state and cooperative trade.
The time has come to set quotas for the structure of commodity turnover and for the
sales volumes of the major commodities in physical units in the national economic
plan and in the plans of the trade organizations and enterprises. We must also
introduce estimates (forecasts) of the public's demand as calculated indicator~ in
planning practices. This will make it possible to consistently realize the demand
of~the "Basic Directions" on improving ck,ork in studying consumer demand and more
fully considering the specific features of demand among various groups of the popu-
lation and regions of the country.
- Th~e food program which is being worked out upon a decision of the CPSU Central Com-
:mittee should help to satisfy the demand for food products. This program will be
;an organic component part of the llth Five-Year Plan and will provide an oppartun-
ity,~to ensure unified planning, proportional and balanced development of all sectors
in the agroindustrial complex.
The "Basic Directions" provide an improvement in the economic ties between the in- _
dustrial, agricultural and trade organizations as we11 as a greater role for an eco-
nomic contract in workin~ out the plans for the production and sales of consumer
goods. In this regard, we feel, the procedure of drawing up production plans on a
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basis of orders from trade organizations should be extended to all the sectors and
enterprises producing consumer goods. Here the f ulfillment�of the product sales
pians by the produ~tion enterprises must be made dependent upon the results of the
sales ~f the goods to the public. The need has arisen of widening the standardiza-
. tion of consumer goods with f uIl coordination of the standards for the raw prod-
ucts and materials with the standards for the finished products. It is also advis-
able that the sale to traci~~ organizations of consumer goods produced with devia-
_ tions from the requirements of the standards and technical conditions and their
_ sale to the population be carried ~ut only at reduced wholesale 3nd retail prices. -
In forming an assortment of goods corresponding to the demand of the public at the
_ retail trade enterprises, it is indispensable to increase the role of wholesale
trade and cre:ate a strong wholesale ].evel, including an Union-level opt [ whole-
sale admini~cration]. The "Basic Directions" have planned measures aimed at con-
centrating the co~nod~ty inventories predominantly in the wholesale trade system
and increasing the responsibility of the wholesale depots for the uninterrupted
supply of the necessary assortment of goods to the stores while the stores are to
be held responsible for a constanz supply of the set assortment of goods for sale.
The gradual saturating of demand requires a new approach to the marking down of ,
goods. The need has arisen of marking down unsalable goods in retail trade syst-e-
matically and on a significantly broader scale than at present. It is essential to
set rigid time standards for the period which a conmmodity can stay in the retail
- trade network, and after this the good is to be marked down with the difference
split between the trade organizations and industry.
There must be a substantial change in the practice of distributing material re-
~ sources which are used both for the needs of social production and for sale to the
pub lic. The problem is that in the drawing up of the national economic plans, the
requests from trade for building materials, production-end goods and fuel are sys-
tematically not satisfied. Moreover, as a rule, the clearly understated plans f or
the delivery of the given products are not fulfilled. This happens under condi-
tions when an extremely insignificant share of the total resources of these prod-
- ucts is consumed for the needs of the public, at times just 1-2 percent. In work,
ing out the material balances and the plans for the distribution of such products
as f uel, building mate~'ials and metal products, where the share of the public in
their consumption is a small amount, it is essential f irst of all to allocate re- _
sources for sale to the ~ublic in amounts which fully satisfy its demand. It is
also essential to establish a procedure whereby the industrial enterprises, in ful-
f illing the delivery plans and the economic contracts, dispatch the products going
int o market stocks f irst. . _
The growth of production and improving the planning of the production and sale of
consumer goods are factors which are on the supply side. However, in solving tne
problem of a balance between supply and demand, it is essential to fully consider
the factors which lie directly on the demand side. The income of the population _
is the first of these.
The ratio of supply and demand depends substantially upon the volume and dynamics
of the monetary income of the public. A rise in the mass of income increases the
volume of demand. A rise in the average income level involves a change in the _
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structure of demand and consumption. One of the reasons for the imbalance of de-
mand lies in the underestimation of this circumstance. In carrying out ever-
broader social programs =n the form of a direct increase in monetary income, often
proper attention is not given to the need for a real backing up of the greater in-
come with greater commodity resources and a corresponding change in the commddity
structure. As a result the monetary income of the workers systematically has out-
strippe~ the income in the volume af co~odity turnover and paid services. A1-
though a somewhat more rapid rise of income is a normal phenomenon, the actual
- measure of thi.s proportion has not developed as it should and the share of surplus _
- savings has continuously increased. This circ~unstance has not been taken into ac- -
count in planning.
ror ensuring a balance of supply and demand in the immed iate and more distant fu-
ture, it is essential to strictly correlate the growth of the monetary income of
the population with the possibilities of increasing the resources of material goods -
and services. Obviously it would be advisable to supplement the Draft of the
"Basic Directions" with a provision for the more rapid growth of the bulk of com-
modities in comparison with monetary income.
In this regard ~ne other addition seems essential. Centralized measures must be
carried out to increase the monetary payments to the pub li~ from the public con-
sumption f unds under the same condition as the wages and salaries are increased,
that is, "as the conditions are created and the resources acquired."
Certain measures must be adopted to improve income planning practices. Thus, in
compiling the plan balances for the monetary income and expenditures of the public,
one can no longer avoid the presence of surplus savings caused by unsatisf ied de- ,
mand. It is also essential to raise the role of the territorial balances of mone- _
tary income and expenditures of the population. Up to now commodity resources have ~
been distributed without proper consideration of the territorial income structure,
while the criterion for the distribution of these resources should be the balancing
of these resources with the total amount of income among the population with a con-
formity of the supply structure to the demand structure within each region, start-
ing with the administrative rayon and ending with the republic. For systematizing
monetary circulation and for strengthening the balancing of manetary income and
its commodity coverage, it would be advisable, in our view, in the immediate future
to carry out a number of ineasures to strengthen the redistribution processes,
A change in the structure of consumption and demand as income rises is an objective
process which maniFests the la~a of increasing demand. The overall trends in this
area consist in a more rapid rise in demand for nonfood products and services in -
comparison with food products; in a more rapid increase in the demand for the
nutritionally most valuable products such as meat, eggs, milk and fruits in compari-
son with other f ood products; in the rapid growth of demand for consumer durables,
particularly new commodities. This is seen, in particular, in the data on the
change in the commodity turnover structure in state and cooperative trade. From
1950 through 1978, a 4.1-fold rise in the real per capita income was accompanied '
by a decline in the proportional amount of food sales from 43.7 to 34.2 percent.
The propor.tional amount of nonfaod items rose from 41.6 to 47.8 percent, and here
the share of such traditional items as textiles, clothing and underwear, declined
by approximately 1.4-fold (with an increase in the sales volume of 4.8-fold). The
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share of cultural goods rose by 1.9-iold, knitwear by 2.3-fold and electric appli-
ances by 8.7-fold, with an increase in their sales volume of almost 58-fold.
Production should develop considering demand. But society does not always possess
suf~'icient resources for this. Demand can develop in a direction undesirable fnr
.a society, in coming into contradiction with the demands for the rationalization
of consiunption. In both instances, the complete balancing of the structure cf
supply and demand can be achieved only by a change in the pr~.ce ratios for individ-
ual commodities and co~odity groups.
It is an empirical pattern that if a price rises, then, with other conditions being
equal, the demand for the corresponding good usually declines and, conversely, de-
mand rises with a drop in prices. On this question Marx wrote: "If supply and de-
mand determine the market price, then, on the one hand, the market price, and in
subsequent analysis, the market value determines supply and demand. In terms of
demand this is'obvious as it changes in the opposite direction to prices. Demand
- rises when prices fall and vice versa. But the same is also applicable ta supply."Z _
Under capitalist conditions this property of prices makes them a spontaneous regu-
lator of supply and ~,emand, but under socialism, a potential instrument in the p:Lan-
_ ned co~.~~ ~i o= ae~�a: Income determines the structure of demand, but demand can-
not be contr olled by in;:~a~G. But by changing prices it is possible on a planned
basis to eff ect the structure of deman3, to regulate it and control it. Hence, in
particular, it follows that prices for individual goods and groups of goods cannot
- remain stable for a long period of time because they should consider the production
and sales conditions and the balance of supply and demand.
From what has been said, it follows that for ensuring a conformity of the supply
and demand s tructures, it is essential to make active use of the retail price mech-
anism by systematically altering the price ratios for individual goods (services)
and groups of goods (services) to take into account the changing production condi-
tions and f or maintaining a constant balance of the supply and demand structure.
The manipulating of prices should be carried out on a basis of a stable or declin-
ing average level of state retail prices. Naturally, in this instance a portion of
the consumption resources which would bring about a direct rise in monetary income
must be switched to ensuring a decline in the average price 1E~e1. ~
We feel that in order to successf ully solve the problems of balancing supply and ~
dernand, there must be a single systematizing of the state retail prices and rates
for services, since the current retail price system was formed 25 years ago. Over
_ this time th? conditions for the production and sales of consumer goods have funda-
mentally altered. The ratios established in the current price lists for the com-
modity groups and within the groups do not ref lect either the production conditions
or the present conditions for selling consumer goods. The price level must be
brought closzr to the socially necessary expenditures, and in addition the demand
structure must be brought into accord with the supply structure as determined by
the possibilities of production and imports. Furthermore, in our view, it is also
2K. Marx and F. Engels, "Works," Vol 25, Part 1, p 209.
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essential to alter the price formation procedure for consumer goods and make the
- price system more flexible and capable of responding to changes in deman~3. In
this re~ard there must be a substantial improvement in the methods for c~lculating
tihe retail price indexes and the rates for paid services.
The designated mea;~ures carried out as a unit will make it possible to successively _
solve the problAm of fully satisfying i.he solvent demand of the population and will
contribute to a strengthening of labor incentives and thereby to the successful
r.ealization of the tasks related to further developing the economy and increasing -
national prosperity.
COPYRIGHT: Izdatel'stvo "Pravda", "Vopros;~ ekonomiki", 1981
- 1027 2
CSO: 1Q27/33 END ~
!
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