16: "Economic Incentives"
(E.G. Liberman: "Planning Production and Standards of Long-term Operation", in: "Voprosy ekonomiki" (Problems of Economics), No. 8, 1962, in: M.E. Sharpe (Ed.): Planning and Incentives in the USSR", Volume 1; New York; 1966; p. 76).
"The system of material incentives for the personnel (is) mainly based on reward for over-fulfilment of the plan".
(A.N. Kosygin: "On Improving Industrial Management, Perfecting Planning, and Enhancing Economc incentives in Industrial Production", in: M.E. Sharpe (Ed.): op. cit., Volume 2; p. 26).
Accordingly, in the propaganda campaign which preceded the "economic reform", the demand was put forward for its replacement by a new system in which these material incentives would be based on the rate of profit made by the enterprise and drawn from that profit:
(E.G. Liberman: "Cost Accounting and Material Encouragement of Industrial Personnel", in: "Voprosy ekonomiki" (Problems of Economics), No. 6, 1955, in: M.E. Sharpe (Ed.): op. cit., Volume 1; p. 12, 13).
"The main thing here is that all the types of bonuses come out of profits".
(E.G. Liberman: ""Planning Production and Standards of Long-term Operation", in: "Voprosy ekonomiki" (Problems of Economics), No. 8, 1962, in: M.E. Sharpe (Ed.): op. cit., Volume 1; p. 71).
"It is proposed to establish a single fund for all types of material incentive and to make it dependent upon profit (in percent of the production assets)".
(E.G. Liberman: "Plan, Profits and Bonuses", in: "Pravda" (Truth), September 9th., 1962, in: M.E. Sharpe (Ed.): op. cit., Volume 1; p. 86).
"The enterprise must possess a fund for material incentive, the size of which must depend upon the actual level of profitability".
(V.S. Nemchinov: "The Plan Target and Material Incentive", in: "Pravda" (Truth), September 21st., 1962, in: M.E. Sharpe (Ed.): op. cit, Volume 1; p. 111).
It is necessary to change this system in order to give the personnel a greater material interest. It is necessary to introduce a system under which the enterprise's opportunities for increasing remuneration of its workers and employees would be determined, above all, by... increased profits and greater profitability of production...
The enterprises must have at their disposal -- in addition to the wage fund -- their own source for rewarding personnel for individual achievements and high overall results of enterprise operations. This source must be a part of the profit obtained by the enterprise".
(A.N. Kosygin: ibid.; p. 25-6).
"Under the new conditions, the stimulating role of profit rises considerably... The material incentive funds and the fund for the development of production will be created from profits. The funds must be considerably larger than the previously existing enterprise fund... The greater the profit obtained by the enterprise, the higher will be the allotments to the incentive funds and the fund for the development of production".
(V. Garbuzov: "Finances and Economic Stimuli", in: "Ekonomicheskaya gazeta" (Economic Gazette), No. 41, 1965, in: M.E. Sharpe (Ed.): op. cit., Volume 2; p. 49, 50).
The method of distribution of these
economic incentives among the personnel of each enterprise will be discussed
in Section 18: "The Distribution of 'Socialist Profit' ".
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As has been shown, in the Soviet economy since the "economic reform" profit is the motive and regulator of social production.
Seeking to present this society as "socialist", however, contemporary Soviet economists describe this profit as:
(E.G. Liberman : "The Plan, Direct Ties and Profitability", in "Pravda" (Truth), November 21st., 1965, in: M.E. Sharpe (Ed.): "Planning, Profit and Incentives in the USSR", Volume 2; New York; 1966; p. 179).
(E.G. Liberman: "Plan: Profits: Bonuses", in: "Pravda" (Truth), September 9th., 1962, in: M.E. Sharpe (Ed.): op. cit., Volume 1; p. 83).
"Under socialism profit differs fundamentally in socio-economic content and role from profit under capitalism".
(Editorial: "Economic Policy and Work for Communism", in; "Pravda" (Truth), January 14th., 1966, in: "The Soviet Economic Reform; Main Features and Aims", Moscow; 1967; p. 11).
According to Marxism-Leninism, all value is created by human labour:
(K. Marx: "Capital", Volume 1; London; 1974; p. 46, 53, 57).
(K. Marx: ibid., Volume 3; p. 795)
(K. Marx: ibid., Volume 3; p. 795)
(K. Marx: ibid., Volume 3; p. 790)
(E.G. Liberman: "Are We Flirting with Capitalism? Profits and 'Profits'", in: "Soviet Life", July 1965, in: M.E. Sharpe (Ed.): op. cit., Volume 1; p. 304).
(K. Marx: ibid., Volume 3; p. 790).
Whenever a part of society possesses the monopoly of the means of production, the labourer, free of not free, must add to the working-time necessary for his own maintenance an extra working-time in order to produce the means of subsistence for the owners of the means of production, whether this proprietor be the Athenian khalos khagathos, Etruscan theocrat, civis Romanus, Norman baron, American slave-owner, Wallachian Boyard, modern landlord or capitalist".
(K. Marx: ibid., Volume 1; p. 209, 226).
(K.Marx: ibid., Volume 1; p. 667).
"The product of this surplus labour assumes the form of surplus value when the owner of the means of production finds the free labourer -- free from social fetters and free from possessions of his own – as an object of exploitation and exploits him for the purpose of the production of commodities".
(F. Engels: "Herr Eugen Duhrung's Revolution in Science"; Moscow; 1959; p. 287).
(K. Marx: ibid.; Volume 3; p. 36, 48).
1) the rent received by the landlords;
2) the interest received by the financiers;
3) the profit and wages received respectively by capitalists and workers involved in non-productive activity such as distribution; and
4) the profit retained by the entrepreneur capitalist involved in production:
(K. Marx: ibid.; Volume 1; p. 529).
(K. Marx: "Critique of the Gotha Programme", in: "Selected Works", Volume 2; London; 1943; p. 561).
..... additional portion for expansion of production;
..... reserve or insurance fund to provide against misadventures, disturbances through natural events, etc.;..
..... the general costs of administration not belonging to production;
...... that which is destined for the communal satisfaction of needs, such as schools, health services, etc.;
...... funds for those unable to work, etc.".
(K. Marx: ibid.; p. 562).
The social deductions, on the other hand, represent that part of the total social product which the working people receive socially:
(K. Marx: ibid.; p. 562).
In contemporary Soviet society, as has been shown in the section entitled "The Value of Labour Power", the wage fund is equal to the total monetary value of the subsistence of the working class at the level of civilisation pertaining in society. Furthermore, as has been shown in the section entitled "Ownership of the Means of Production", the principal means of production are no longer owned collectively by the working people, but are effectively owned by a new class of Soviet capitalists, to whom, as has been shown in the section entitled "The Sale of Labour Power", the workers are compelled to sell their labour power.
Clearly, therefore, the surplus product produced by the working people in contemporary Soviet society is, in Marxist-Leninist terminology, surplus value or, in the broad and loose sense, profit. The latter, in fact, is admitted by some contemporary Soviet economists:
(E.G. Liberman: ibid.; p. 304).
"The value of the product of surplus labour.... is expressed in profit".
(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. 237).
"Profit under socialism is a form of surplus product".
(Editorial: "Economic Policy and Work for Communism", in: "Pravda" (Truth), January 14th., 1966, in: "The Soviet Economic Reform: Main Features and Aims"; Moscow; 1967; p. 11).
(D.A. Allakhverdyan: "National Income and Income Distribution in the USSR", in: "The Soviet Planned Economy"; Moscow; 1974; p. 92).
"Under socialism the value of the surplus product in its socio-economic character does not constitute surplus value because it does not express relations of exploitation".
(B. Rakitsky: "Bourgeois Interpretation of the Soviet Economic Reform", in: "Voprosy ekonomiki" (Problems of Ecnomics). No. 10, 1965, in: "The Soviet Economic Reform: Main Features and Aims"; Moscow; 1967; p. 134).
(L. Gatovsky: "The Role of Profit in a Socialist Economy", in: "Kommunist" (Communist), No. 18, 1962, in: M.E. Sharpe (Ed.): op. cit., Volume 1; p. 98)
(K. Marx: "Capital", Volume 1; London; 1974; p. 201).
"Surplus value is the excess value of a commodity over and above its cost price".
(K. Marx: ibid., Volume 3; p. 34).
(L. Gatovsky: ibid.; p. 91).
"The evil of capitalism lies not in the drive for profit, but in its distribution".
(V. Belkin & I. Berman: "The Independence of the Enterprise and Economic Stimuli", in: "Izvestia" (News), December 4th, 1964, in: Me. Sharpe (Ed.): op. cit., Volume 1; p. 227).
"In our country... all the profit goes for the benefit of society".
(E.G. Liberman: ibid.; p. 237)
"Capitalist profit is... a form of capitalist exploitation....
In contrast to this, profit under socialism... accrues to the working people".
(Editorial: "Economic Policy and Work for Communism", in: "Pravda" (Truth), January 14th., 1966, in: "The Soviet Economic Reform: Main Features and Aims"; Moscow; 1967; p. 11).
"Under socialism, the surplus product belongs to those who create it -- to the working people, and it is utilised in their interest".
The establishment of profit as the motive and regulator of Soviet social production required, as has been said, that the proportion of an enterprise’s profit should be significantly increased and that this retained profit should be used to provide economic incentives, dependent on the size of the profit made, to the personnel of the enterprise responsible for making it.
Under the "economic reform", therefore, every enterprise was required to set up a "material incentive fund" to provide "bonuses" for such personne:l
(V.M. Batyrev: "Commodity-Money Relations under Socialism", in: "The Soviet Planned Economy"; Moscow; 1974; p. 172)
(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.): "Planning, Profit and Incentives in the USSR", Volume 2; New York; 1966; p. 26).
(E.G. Liberman: "Cost Accounting and Material Encouragement of Industrial Personnel", in: "Voprosy ekonomiki" (Problems of Economics), No. 6, 1955, in: M.E. Sharpe (Ed.): op. cit., Volume 1; p. 13).
"The greater the profitability... the greater will be the bonus....
It is proposed to establish a single fund for all types of material incentive and to make it dependent upon profit (in percent of the production assests)".
(E.G. Liberman: "Plan: Profits: Bonuses", in: "Pravda" (Truth), September 9th., 1962, in; M.E. Sharpe (Ed.): op. cit., Volume 1; p. 80, 86).
"It is advisable to gradually extend the practice of using profit as a source of funds for material stimulation and as an index for the payment of bonuses".
(L. Gatovsky: "The Role of Profit in a Socialist Economy", in: "Kommunist" (Communist), No. 18, 1962, in: M.E. Sharpe (Ed.): op. cit., Volume 1; p. 104).
"Economic stimuli.. already exist in the form of bonuses. Therefore, bonuses and other incentives should be strictly dependent on the size of the profit derived".
(V. Belkin & I. Berman: "The Independence of the Enterprise and Economic Stimuli", in: "Izvestia" (News), December 4th., 1964, in; M.E. Sharpe (Ed.): op. cit., Volume 1; p. 227).
"The achievements of the enterprise in increasing profits and the profitability of production do not have any direct effect on the earnings of the staff of the enterprise. It is necessary to change this system in order to.. introduce a system under which the enterprise's opportunities for increasing the remuneration of its workers and employees would be determined, above all, by... increased profits and greater profitability of production".
(A.N. Kosygin: ibid.; p. 25-6).
(E.G. Liberman: "Cost Accounting and Material Encouragement of Industrial Personnel", in: "Voprosy ekonomiki" (Problems of Economics), No. 6, 1955, in: M.E. Sharpe (Ed.): op. cit., Volume 1; p. 17).
"We must raise the role and responsibility of the heads of enterprises... for the fulfilment of profit plans."
(G. Kosiachenko: "Important Condition for Improvement of Planning", in: "Voprosy ekonomiki" (Problems of Economics), No. 11, 1962, in: M.E. Sharpe (Ed.): op. cit., Volume 1; p. 157).
(Y.L. Manevich: "Wages Systems", in: "The Soviet Planned Economy"; Moscow; 1974; p. 253).
(G. Kosiachenko: ibid.: p. 157)
"The main indicators for awarding bonuses to managerial workers at enterprises are fulfilment of the plan for sales and an increase in profitability".
(S. Kamenitser: "The Experience of Industrial Management in the Soviet Union"; Moscow; 1973; p. 134).
(Y.L. Manevich: ibid.; p. 253).
"The united incentive fund of the enterprise.. should be large enough to handle all forms of material incentive for the workers (through the foreman's fund)."
(E.G. Liberman: "Economic Levers for Fulfilling the Plan for Soviet Industry", in: "Kommunist" (Communist), No. 1, 1959, in: M.E. Sharpe (Ed.): op. cit., Volume 1; p. 54).
(S. Kamenitser: ibid.; p. 127).
(S. Kamenitser: ibid.; p. 127).
(A. Volkov: "A Mighty Stimulus for The Development of Production", in "Pravda" (Truth), November 14th., 1965, in: M.E. Sharpe (Ed.): op. cit., Volume 2; p. 169).
In 1970 the personnel engaged in industry was classified as follows:
Management personnel: 4%
Workers: 96%
(Z. Katz: "Patterns of Social Stratification in the USSR"; Cambridge (USA); 1972; p. 78).
Statistics for the distribution of the material incentive fund for industrial enterprises operating under the "reformed" system show that in 1966 management personnel received 49.3% of the fund in "bonuses", while workers received 50.7%.
(N.Y. Drogichinsky: ibid.; p. 194).
It follows that 1% of the personnel received 12.3% of the "bonuses" paid out of the material incentive fund if they were in management, and 0.5% if they were workers. Thus, on average each member of the management received almost twenty-five times the bonus received by each worker.
However, the material incentive fund is not the only source of the "bonuses" paid by an enterprise. In a majority of enterprises these constitute only a minority of the "bonuses" paid out:
(E. Manevich: "Ways of Improving the Utilisation of Manpower", in: "Voprosy ekonomiki" (Problems of Economics), No. 12, 1973, in: "Problems of Economics", Volume 17, No. 2; June 1974; p. 13).
"In a majority of enterprises there exists a multifarious network of specialised premiums... from which premiums higher than those from the MIF are often derived".
(F. Levtrinsky & G. Mantsurov: "Ekonomika Sovetskoy Ukrainy" (The Economy of Soviet Ukraine), No. 5, 1968; p. 47; in: G.R. Feiwel: "The Soviet Quest for Economic Efficiency"; New York; 1972; p. 387).
(Editorial "Economic Policy and Work for Communism", in; "Pravda" (Truth), January 14th., 1966, in: "The Soviet Economic Reform: Main Features and Aims"; Moscow; 1967; p. 11).
(F. Roethlisberger & W. Dickson: 'Management and the Worker'; Cambridge (USA); 1946; p. 542).
"Managers are playing an increasingly prominent role in the system of social production and their position is very different from that of other hired workers in corporations. Meanhwhile, the brains behind the 'human relations' approach attempt to equate managers with ordinary employees on the purely formal basis that they, like the others, are employed and paid a wage.
Advocates of the 'human relations' doctrine pass over in silence the fact that executives, unlike other employees, reap a sizeable share of the monopoly profits in the form of enormous salaries and bonuses".
(N. Bogomolova: "'Human Relations' Doctrine: Ideological Weapon of the Monopolies"; Moscow; 1973; p. 54, 55).
'Profit-sharing' by no means guarantees workers material advantages. Whatever guise it may take this technique is essentially a form of indirect wage, which serves to increase the worker's dependence on his employer. The worker does not know in advance how much he will receive. Furthermore the size of the supplement the workers are to receive is made dependent on the state of the market, which means that workers are deprived of such supplements at the very time when they need them most.
'Profit-sharing' is regarded by some companies as 'a basic means of preserving the capitalist system and combating the doctrines of communism'. Accompanied as it is by concentrated 'brain-washing' of the workers, it represents a threat to the labour movement in so far as it undermines class solidarity of the workers and impedes their organised struggle for higher wages, unified national rates and weakens their class consciousness".
(N. Bogomolova; ibid.; p. 96, 99).
(P.Krylov & M. Chistiakov: "Problems in Improving the Methods of National Economic Planning", in: "Planovoe khoziaistvo" (Planned Economy), No. 1, 1972, in: "Problems of Economics", Volume 15, No. 4; August 1972; p. 33).
"Analysis of trends in the development of the Soviet economy indicates a gradual change in the character of the differentiation of the population with respect to income level. Inevitably there is a rise in the share of those groups that have relatively high incomes. At the same time there is a reduction in the share of families for which a comparitively low savings norm is characteristic".
(T. Ivensen: "Problems in Forecasting the Monetary Savings of the Population", in: "Nauchnye doklady vysshei shkoly: Ekonomicheskie nauki" (Scientific Reports of Higher Schools: Economic Science), No. 11, 1973, in: "Problems of Economics", Volume 17, No. 2, June 1974; p. 66-7).
In such a case can there be a discussion of 'irrational consumption'?