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13: Managerial Salaries
The managerial
and higher technical personnel of
a Soviet industrial enterprise receive monthly salaries. The levels of
these are fixed by the state, and vary according to qualifications, the
size and position of the enterprise etc.:
"Individual monthly salaries
are set for executives, engineering and technical personnel... The state
fixes salary differentials depending on the importance of an economic sector,
enterprise or shop, on working conditions, the area in which an enterprise
is located, and so on. In addition, the amount of salary always depends
on the volumeof work at the enterprise etc., degree of responsibility and
complexity of the production process.
Specially well-qualified executives
or engineers employed in major sections of an enterprise, office or organisation
receive personal salaries not, as a rule, exceeding the normal salary by
more than half".
(Y.L. Manevich: "Wages Systems",
in: "The Soviet Planned Economy"; Moscow; 1974; p. 251-2).
In describing industry in orthodox
capitalist countries, Soviet sociologists draw attention to:
"... the' key position' of
the foreman in bringing ideological influence to bear on workers".
(N. Bogomolova: "Human Relations
Doctrine: Ideological Weapon of the Monopolies"; Moscow; 1973; p. 83).
In the Soviet Union also, however,
since the "economic reform", the role of the foreman in an industrial enterprise
has been raised
from that of (in Marx's words) "non-commissioned officer" to that of full
member of management, with appropriate
increase in his wage-level:
"Top administrative personnel..
include, first and foremost, the director, production shop chiefs and foremen".
(S. Kamenitser: "The Experience
of Industrial Management in the Soviet Union"; Moscow; 1975; p. 65).
"It has long been suggested that
the foreman be given more responsibility and higher wages.. Since the foreman
now contributes more to production, directors now have the right to raise
the wages of highly skilled foremen and technical personnel in order to
provide an additional incentive, this increase amounting to up to 30% of
their fixed salaries, to be paid out of the planned wages fund".
(A. Volkov; "Profit and Personal
Incentive", in: "Pravda" (Truth), November 14th., 1965, in; "The Soviet
Economic Reform: Main Features and Aims"; Moscow; 1967; p. 97).
On the shop floor the most highly skilled
grade of worker receives a wage twice that of the least skilled grade:
"At present one scale of rates
is in operation in every sector. Most enterprises have a scale which consists
of six grades with a ratio between the higher and lower of 1:2".
(Y.L. Manevich: ibid.; p. 242-3).
The monthly salaries of managerial
and technical personnel are naturally higher
than the wages of the average shop-floor worker:
"A foreman's salary in a top-category
section is 10-20% higher than the basic wage rate for a highly qualified
worker; the salary of a foreman in the lowest 3rd. group is 10-20% higher
than the basic wage rate for average-qualified workers in this section....
Shop superintendents in the higher group in all sectors are paid more than
twice as much as a foreman in the lowest group. The salary paid to an enterprise
manager (director) is never more than treble the salary of a foreman. The
chief engineer's salary is 85-100% that of the director".
(Y.L. Manevich: ibid.; p. 252).
On this basis, the salaries of managerial
and higher technical personnel bear the following relationship to the basic
wage rate of an average shop floor worker:
Average shop floor worker 1.5 units
Foreman 1.6 to 2.4 units
Shop superintendent (more than)
3.2 units
Chief engineer (up to) 4.1 to 7.2
units
Director (up to) 4.8 to 7.2 units
Specially well-qualified director
(up to) 7.2 to 10.8 units
That is, the
salary of an enterprise director is up to 7.2 times the basic wage of a
shop floor worker of average skill.
This wage/salary differential between
shop floor workers and management personnel forms, however, only a
minor part of the actual income differential between
these categories; the greater part of the latter, as will be demonstrated,
accrues from differentials in "bonus
payments".
14: "Price Control"
According to Marx,
of whom contemporary Soviet economists claim to be disciples, the value
of a commodity is determined by the
amount of socially necessary labour involved in its production:
"That which determines the
magnitude of the value of any article is the amount of labour socially
necessary ... for its production".
(K. Marx: "Capital", Volume 1; London;
1974; p. 47).
A market
is an area where prospective buyers and sellers of a commodity are in contact.
The price
of a commodity is the amount of money
for which its prospective vendor is willing to sell it in a particular
market at a particular time.
In a market where prospective buyers
and sellers of a commodity are in competition with one another, the price
of that commodity fluctuates around its value -- above or below it -- according
to the relation between supply of and effective demand for that commodity
in the market:
"Their (i.e., commodities'
-- WBB) value is the centre of gravity around which their prices fluctuate....
If supply equals demand.. commodities are sold at their market values....The
relation of demand and supply... explains the deviations of market prices
from market values".
(K. Marx: ibid., Volume 3; p. 178,
189, 190).
Contemporary Soviet propagandists claim
than Stalin "denied
the operation of the law of value in a socialist economy":
"It is well known that the
operation of the law of value in the socialist economy was generally denied
for a long time with the blessing of Stalin".
(L. Gatovsky: "The Role of Profit
in a Socialist Economy", in: "Kommunist" (Communist), No. 18, 1962, in:
M.E. Sharpe (Ed.): "Planning, Profit and Incentives in the USSR", Volume
1; New York: 1966; p. 95).
This claim is untrue.
Stalin is on record as saying:
"It is sometimes asked whether
the law of value exists and operates in our country, under the socialist
system.
Yes, it does exist and does operate.
Wherever commodities and commodity production exist, there the law of value
must also exist".
(J.V. Stalin: "Economic Problems
of Socialism in the USSR"; Moscow; 1952; p. 23).
What, in fact, these propagandists
mean by saying that Stalin "denied the operation of the law of value" under
socialism is that, during the period when a socialist society existed in
the Soviet Union, the price of a commodity was often
fixed by the state at a radically different level from its value:
"At that time the approach
to price itself was voluntaristic. Price was artificially divorced from
its objective basis -- value",
(L. Gatovsky: ibid.; p. 95).
or, in other words, the operation of
the law of value was strictly limited:
"The law of value exercises
its influence on production.....But.. the sphere of operation of the law
of value under our economic system is strictly limited and placed within
definite bounds".
(J.V. Stalin: ibid.; p. 23, 25).
Under the socialist system which formerly
existed in the Soviet Union, the prices of commodities were fixed
at all levels by the state.
In fixing the price of a commodity, its value
was taken into account,
but the actual price was determined in
accordance with the state's assessment of social requirements.
Thus, over a considerable period
the price of vodka
was fixed above
its value in order to discourage its consumption; on the other hand, the
price of clothing
was fixed below
its value in order to assist the working people to buy more clothes. As
a result of this price-fixing policy, enterprises in the vodka industry
made an above-average rate of profit,
while enterprises in the clothing industry made a below-average
rate of profit.
But since virtually all the profits of all industries accrued to the state
and not to the individual enterprises, this was of
book-keeping significance only.
As in the case of production assets,
the rate of profit made by an enterprise -- defined since the "economic
reform" as "the supreme criterion of the efficiency of an enterprise" --
could become a reality and function as the regulator of social production
only if this "voluntaristic" method of fixing prices was abolished
and prices were brought into line with
values.
In the propaganda campaign preceding
and associated with the "economic reform", therefore, the demand was put
forward that the prices of commodities should be brought as closely as
possible into line with their values,
i.e., with the amount of socially necessary
labour necessary for their production:
"Prices must, to a growing
extent, reflect the socially necessary outlay of labour".
("Programme of the Communist Party
of the Soviet Union"; Moscow; 1961; p. 83).
"Prices at which an enterprise
sells its output shoud be based on the socially necessary labour outlays".
(L. Gatovsky: ibid,; p. 91).
"Price must reflect the sum total
of the socially necessary input of labour into the manufacture of the product".
(L. Leontiev: "The Plan and Methods
of Economic Management", in "Pravda" (Truth), September 7th., 1964, in:
M.E. Sharpe (Ed.): op. cit., Volume 1; p. 211).
"Prices must increasingly reflect
socially necessary outlays of labour".
(A.N. Kosygin: "On Improving Industrial
Management, Perfecting Planning and Enhancing Economic Incentives in Industrial
Production", in: "Izvestia" (News), September 28th., 1965, in: M.E. Sharpe
(Ed.): op cit., Volume 2; p. 29).
"Prices must, to the greatest
possible degree, approximate the socially necessary outlays of labour".
(V. Garbuzov: "Finances and Economic
Stimuli", in: "Ekonomicheskaya gazeta" (Economic Gazette), No. 41, 1965,
in: M.E. Sharpe (Ed.): op. cit., Volume 2; p. 51).
"The strengthening of economic
methods of planning... call for the closest possible approximation of prices
to the socially necessary labour expenditures".
(N.K. Baibakov: "Tasks of Economic
planning in the New Conditions", in: "Pravda" (Truth), October 29th., 1965,
in: M.E. Sharpe (Ed.): op. cit., Volume 2; p. 100).
"Prices should come as close
as possible to the level of socially necessary outlays of labour"
(E.G. Liberman: "Profitability of
Socialist Enterprises", in: "Ekonomicheskaya gazeta" (Economic Gazette),
No. 51, 1965, in: M.E. Sharpe (Ed.): op. cit., Volume 2; p, 229).
The new State
Committee for Prices,
established under the "economic reform", was charged with elaborating a
new system of wholesale prices,
"...basing its decisions on
the need to bring prices as close as possible to levels of socially necessary
outlays of labour".
(A.N. Kosygin: ibid.; p. 30).
In other words, the price of a commodity
was to be based on the "equilibrium
price", the price which the commodity
would have in a competitive market under conditions where supply corresponded
to effective demand:
"The so-called 'equilibrium'
price principle... presupposes the establishment of prices at a level that
will guarantee the necessary corrrespondence between supply and demand...
The equilibrium price as an element in the market economy becomes a very
important and effective means of regulating the social production process...
The equilibrium price principle... is a concrete expression of the law
of supply and demand".
(A. Levin: "The Market in the System
of Socialist Reproduction: The Equilibrium Price Principle", in: "Nauchnye
doklady vysshei shkoly: Ekonomicheskie nauki" (Scientific Reports of Higher
Schools: Economic Science), No. 1, 1969, in: "Problems of Economics", Volume
12, No. 7, November 1969; p. 39-40).
In his analysis of a competitive capitalist
economy, Marx defined the price of production
of a commodity as its cost of production
plus average profit:
"The price of production of
a commodity is equal... to its cost price plus the average profit".
(K. Marx: op. cit., Volume 3; p.
157).
and established that the
price of production of a commodity tended to approximate to its value:
"In the case of capitals of
average, or approximately average composition the price of production is...
the same, or almost the same, as the value... All other capitals, of whatever
composition, tend towards this average under pressure of competition".
(K. Marx: op. cit., Volume 3; p.
174).
Thus, Marx held that the price of production
of a commodity tended to be merely a
converted form of its value:
"The tendency necessarily prevails
to make the prices of production merely converted forms of value".
(K. Marx: op. cit., Volume 3; p.
173-4).
Contemporary Soviet economists endorse
Marx's formulation on this question:
"In an economy of developing
commodity production, value is transformed into the price of production....
The latter is only a transformed form of value".
(V. Diachenko; "A Lever of Economic
Stimulation", in: "Ekonomicheskaya gazeta" (Economic Gazette), No. 45,
1965, in; M.E. Sharpe (Ed.): op. cit., Volume 2; p. 126).
"The price of production corresponds
to the socially necessary labour outlays, to the actual value of the product".
(L. Vaag: "According to a Single
Rate of Profit", in: ibid.; p. 144).
Hence, in the propaganda campaign preceding
and associated with the "economic reform", the demand that the prices of
commodities should be brought into line with their values was also put
forward in the form of the demand that these prices should be brought as
closely as possible into line with prices
of production:
"The author's (i.e., Liberman's
-- WBB) ideas lead to the conclusion that the methodological basis of
price formation in a planned socialist economy should be the price of production,
which is characteristic of the capitalist system of economy".
(A. Zverev: "Against Over-Simplification
in Solving Complex Problems", in: "Voprosy ekonomiki" (Problems of Economics),
No. 11, 1962, in; M.E. Sharpe (Ed.): op. cit., Volume 1; p. 148).
"Marx provided an analysis of
the commodity as a product of capitalist production, and he showed that
the price of such a commodity is determined not by value directly, but
by its modified form -- the price of production. An analysis of commodities
as products of socialist production leaves no doubt that their prices must
be fixed... by the 'price of production formula'".
(L. Leontiev: ibid.; p. 211-2).
"The system of price formation
should be based on prices of production".
The need to bring the price of commodities
into the closest possible equivalence with their values or prices of production
was the official reason for the general
"reform" of wholesale prices of industrial
products put into effect on July 1st., 1967. By this measure, wholesale
prices were raised
by an average of 8% in industry
as a whole, and
by an average of 15%
in heavy industry. (L. Maizenberg: "Improvements in the Wholesale Price
System", in: "Vorosy ekonomiki" (Prolems of Economics), No. 6, 1970, in:
"Problems of Economics", Volume 13, No. 10; February 1971; p. 46).
Some wholesale prices were raised
in this "reform" by large amounts
-- for example, that of coal
by 78%, (V. Sitnin: "Wholesale
Prices; Results and Tasks", in: "Ekonomicheskaya gazeta" (Economic Gazette),
No. 6, 1968, in: "Problems of Economics", Volume 11, No. 5; September 1968;
p. 27).
The wholesale price "reform" was
stated to have the aim
of creating conditions under which each normally functioning industrial
enterprise could function "profitably":
"The wholesale price reform...
was intended to create conditions for profitable work in all branches of
industry and each normally functioning enteprise".
(V. Sitnin: ibid.; p. 26).
Soviet economists declared the "reform"
to have been successful
in this aim:
"These basic aims of the
(wholesale price -- WBB) reform have been accomplished".
(V. Sitnin: ibid.; p. 26).
In fact, the wholesale price "reform"
raised the rate of industrial profit 5-7%
higher than had been officially envisaged:
"The planning of the new wholesale
prices put into effect on July 1, 1967 was based on the projection that
industry-wide profitability would be approximately 15%. In fact, however,
in 1968 if proved to be 20.1%, and in the case of enterprises operating
under the new system of planning and economic incentive it was 22.2%."
-
Sher; "Long-term Credit for Industry",
in: "Voprosy ekonomiki" (Problems of Economics), No. 6, 1970, in: "Problems
of conomics", Volume 13, No. 8; December 1970; p. 47).
Since the retail
prices of consumer goods were not
raised, however, enterprises engaged
in the retail distribution of industrial consumer goods
suffered -- and have continued to suffer -- a
fall in their rate of profit:
"In retail establishments average
profits (as a percentage of total sales) were.. in 1972, 1.88%".
(A.A. Be.lov: "Trade in the USSR",
in: "The Soviet Planned Economy"; Moscow, 1974; p. 197).
But the wholesale price "reform" was
only the first step
in the "economic reform" in relation to prices. The aim of bringing about
the social regulation of production by means of the market, through the
profit motive, required that prices
should fluctuate according to the varying relation between supply and effective
demand on the market.
Accordingly, in the propaganda campaign
preceding and associated with the "economic reform", the demand was also
put forward that prices should be "more
flexible":
"Price formation... should
be more flexible".
(I. Kasitsky: "The Main Question:
Criteria for Premiums and Indices Planned for Enterprises", in; "Voprosy
eknomiki" (Problems of Economics), No. 11, 1962, in: M.E. Sharpe (Ed.):
op. cit., Volume 1; p. 139).
"The need for flexible
and dynamic price formation is dictated
by a number of tasks".
(L. Leontiev: ibid.; p. 211).
"The stimulating role of profit
presupposes more flexible prices"
(G. Kosiachenko: "The Plan and Cost
Accounting", in: "Finansy SSSR" (USSR Finances), No. 12, 1964, in: M.E.
Sharpe (Ed.): op. cit., Volume 1; p. 245).
"A big role will be played.. by
more flexible planning of prices...Disregard for the law of demand and
supply exerts a negative effect on the economy"..
(L. Gatovsky: "Unity of Plan and
Cost Accounting", in; "Kommunist" (Communist), No. 15, 1965, in: M.E. Sharpe
(Ed.): op. cit., Volume 2; p. 89).
"In fixing prices in a planned
manner in a socialist economy, the changes in market conditions must be
taken into account. If, for instance, retail prices fail to reflect changes
in market conditions, they cannot serve as an instrument of a planned economic
policy".
(L. Konnik: "Planning and the Market",
in: "Voprosy ekonomiki" (Problems of Economics), No. 5, 1966, in: "Problems
of Economics", Volume 5, No. 8; December 1966; p. 27).
It was made clear, in fact, that the
demand for "more flexible" prices meant that prices
should be fixed by enterprises themselves in
accordance with their estimate of supply and effective demand on the market:
"It (i.e., the enterprise
-- WBB) should be given the right to fix the price with the agreement
of the customer".
(V. Belkin & I. Berman: "The
Independence of the Enterprise and Economic Stimuli", in: M.E. Sharpe (Ed):
op. cit., Volume 1; p. 229).
"Measures to increase the flexibility..
of price formation have also been adopted recently... According to these
methods, enterprises themselves change prices of their output...
Enhancement of the role of the
consumers in forming prices... will make it possible... further to extend
the rights of enterprises in price formation. This will make prices even
more flexible."
(P.G. Bunich: "Methods of Planning
and Stimulation", in: "Soviet Economic Reform: Progress and Problems";
Moscow; 1972; p. 43).
The difficulty of reconciling this
conception with the fiction that centralised economic planning, including
price control, was being "maintained", was solved by Soviet propagandists
by presenting the central "planning organs" as issuing "price
norms",
while leaving enterprises
to fix their own "concrete prices":
"It is essential to incorporate
extensively the normative method of establishing prices in the practice
of price formation. The essence of this method is the centralised confirmation
of base prices and their norms.. and the establishment of concrete prices
by enterprises or associations themselves".
(A. Komin: "Problems in the Methodology
and Practice of Planned Price Formation", in "Planvoe khoziaistvo" (Planned
Economy), No. 9, 1972, in: "Problems of Economics", Volume 16, No. 1; May
1973; p. 47).
Naturally, these "concrete prices"
often departed fundamentally
from the "price norms" issued by the central "planning organs":
"Experience in the elaboration
of the prospective development of the national economy until 1980, and
of five-year plans existing (at the time of the elaboration) prices, has
shown that subsequent price revisions fail to maintain the continuity of
long-range and current plans not only with respect to targets in terms
of value but also with regard to general value proportions".
(V. Kotov: "Prices: The Instrument
of National Economic Planning and the Basis of the Value Indices of the
Plan", in: "Planovoe khoziaistvo" (Planned Economy), No. 9, 1972, in: "Problems
of Economics", Volume 16, No. 1; May 1973; p. 68).
On this basis, Soviet economists admitted
that "centralised economic planning" -- even as a totalisation of the economic
plans of individual enterprises -- was virtually
impossible:
"As a result of the practice
of making partial changes in price -- a practice that has become established
in the last few years -- higher-echelon economic organs could not correctly
plan"
(I. Usatov: "The Elaboration of
Plans and the System of Prices", in: "Nauchnye doklady vysshei shkoly:
Ekonomicheskie nauki" (Scientific Reports of Higher Schools; Economic Science),
No. 8, 1972, in: "Problems of Economics", Volume 15, No. 11; March 1973;
p. 54).
"It is practically impossible
to compile a five-year plan while.. accounting for changes in wholesale
prices. At a time when the national economy has not mastered new wholesale
prices, it is extremely difficult to compile such a plan from the standpoint
of the potential of modern methodology".
(A. Komin: ibid.'; p. 48).
Soviet economists were therefore set
the task of forecasting indeterminate
price levels
-
Babynin & R. Belousov: "Forecasting
Wholesale Prices", in: "Voprosy ekonomiki"
(Problems of Economics), No. 4, 1971,
in: "Problems of Economics", Volume 14, No. 5; September 1971; p. 42-59).
and of predicting
rates of profit on the basis of indeterminate price trends:
(L. Veger: "Calculating Ecnoomic
Effectiveness under Conditions of Indeterminacy", in: "Voprosy ekonomiki"
(Problems of Economics), No. 2, 1972, in: "Problems of Economics", Volume
15, No. 4; August 1972; p. 41-62).
15: The Retention of Profit
by the Enterprise
In order that profit may function as
the regulator of social production under conditions where production is
planned by the enterprises themselves, each enterprise must retain sufficient
of the profit it makes to enable adequate
material incentives to be drawn from
it to be of significant economic interest to the personnel of the enterprise
responsible for making that profit.
A feature of the propaganda campaign
preceding and associated with the "economic reform" was, therefore, the
demand that the proportion of an enterprise's profit accruing to the state
should be significantly reduced
and the proportion retained by the enterprise significantly increased:
"It is necessary to considerably
increase the share of the total sum of profit which
remains at the disposal of the enterprises and
is used by them to expand and improve production, increase their assets,
replenish their circulating funds, and for bonuses and the social and cultural
needs of their personnel".
(L. Gatovsky: "The Role of Profit
in a Socialist Economy", in :"Kommunist" (Communist), No. 18, 1962, in:
M.E. Sharpe (Ed.): "Planning, Profit and Incentives in the USSR", Volume
1; New York; 1966; p. 103-4).
"That part of profit which remains
at the disposal of the enterprise's director for purposes of collective
and individual incentive.. must be increased"
(V. Shkatov: "What is Useful for
the Country is Profitable for Everyone", in: "Pravda" (Truth), September
1st., 1964, in: M.E. Sharpe (Ed.): op. cit., Volume 1; p. 203).
The "economic reform" did increase
significantly the proportion of an enterprise's profits retained by the
enterprise:
"It is necessary to leave to
the enterprises more of their profits".
(A.N. Kosygin: "On Improving Industrial
Management, Perfecting Planing and Enhancing Economic Incentives in Industrial
Production", in: "Izvestia" (News), September 28th., 1965, in: M.E. Sharpe
(Ed.): op. cit., Voume 2; p. 21).
The average proportion of an enterprise's
profit retained by the enterprise rose between 1966 and 1969 as
follows:
1966: 26%
1967: 29%
1968: 33%
1969: 40%
(N.Y. Drogichinsky: "The Economic
Reform in Action", in: "Soviet Economic Reform: Progress and Problems"",
Moscow; 1972; p. 207).
FOR NEXT CHAPTERS, STARTING
WITH: "16. ECONOMIC INCENTIVES" GO TO: Chapters 16 to 18
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