Economic Efficiency of Socialist Production

one of the most important indicators of socialist economic development; the ratio of the useful result (effect) to the expenditures —determined for the national economy, branches of the economy, and individual factories—required to achieve that result. Several indexes of the economic efficiency of socialist production may be determined by comparing types of expenditures for the production of output or for the provision of material services with the useful effect. Such indexes are helpful in the quantitative and qualitative analysis of the economy as a whole or of its various subdivisions and are used in the planning and day-to–day management of economic activity.

Indexes of economic efficiency are conventionally divided into three groups. The first comprises general indexes of economic efficiency, the most important of which is the growth of the social productivity of labor. This growth may be expressed quantitatively in the growth of output and in absolute savings of living and embodied labor, measured in terms of value and in physical terms. The results of production are most completely represented in the final social product and national income (net output) (seeTOTAL SOCIAL PRODUCT). Overall profitability is also considered a general index.

The second group of indexes consists of the basic indexes of economic efficiency in the use of such production resources as living labor, fixed production assets, expenditures of materials, and capital investments. These indexes, which are computed on the basis of national income (net output), include the productivity of living labor (labor input), capital-output ratio (capital productivity), consumption of materials (materials-output ratio), and return on capital investments (capital intensity).

The third group of indexes comprises technological-economic indexes of efficiency in the use of resources. These indexes are used in the analysis and planning of several aspects of the production process and in the calculation of factors of production growth at enterprises, branches of industry, and in agriculture, construction, trade, and transportation. The third group of indexes includes individual output; coefficients of the use of the means of labor and of the capacity of machinery units; expenditures of raw materials, supplies, fuel, and energy per unit of output; and payoff period, discounted expenditures, and capital investments per unit of output.

Depending on the method of calculation used, indexes of the productivity of labor play various roles in the system of indexes of the economic efficiency of socialist production. Growth in the productivity of living labor, when measured as the ratio of the final results of production and the total expenditures of living and embodied labor, is a general index of economic efficiency (and therefore belongs in the first group), since it most completely reflects the results of the interactions between material (physical) and subjective (social) elements of the productive forces. Individual output, or the productivity of living labor, measured as the ratio of the results of production and expenditures only of living labor, is an important instrument for analyzing and planning economic efficiency in the use of labor resources (and therefore belongs in the second group). For this reason, both indexes are used simultaneously in national economic planning.

None of the indexes listed above, considered separately, sufficiently takes into account expenditures, effect, or both taken together. As a rule, the rates and directions of change reflected by these indexes fail to coincide, and it is therefore virtually impossible to use them to make clear-cut economic decisions. A steady growth in national income and the productivity of social labor, for example, suggests an increase in economic efficiency of production, but a drop in capital-output ratio and profitability indicates that production is becoming less efficient. The application of such generally accepted indexes of relative economic efficiency, as minimum discounted expenditures is limited by the nature of the indexes being compared.

Although it is necessary to select a criterion of economic efficiency and to develop an appropriate general indicator, many theoretical complexities are involved; Soviet economic science has therefore devised a variety of approaches to solve these problems. One of the most common viewpoints maintains that the criterion of the economic efficiency of socialist production is the amount of work time saved, or saving of the expenditure of aggregate (living and embodied) labor per unit of output (seeECONOMY OF TIME, LAW OF).

The level of social productivity of labor (A) coincides with the national economic efficiency of production (£) and is, at the same time, a general index of efficiency: E = A = R/(L_l + L_e)where R represents the final results of production (output volume expressed in physical terms) and L_l, + L_e represents expenditures of aggregate (living and embodied) labor, using a single unit of measure. The expression of the final results in terms of, for example, the total gross social product, the final social product, or national income (net output) constitutes a modification of the index.

Of practical interest is the general index of efficiency in the use of resources, calculated as the ratio of national income in fixed prices to production assets and to expenditures not just of labor consumed but of all labor involved in production. Many economists regard a growth in profits, an increase in net profit or profitability, or a rise in the level of the people’s well-being as a criterion of efficiency.

In a developed socialist society, the social development of society and increased social efficiency ultimately take precedence over efficiency of production. The most general criterion of social efficiency is the improvement of the living standard of the population and the comprehensive development of the individual. The standard of living can be expressed through a system of indexes that includes growth in real incomes and the per capita consumption of staple foods. It is not always possible, however, to take direct account of or to quantify many social changes, especially in the intellectual life of the individual or in social relations; in such cases, indirect methods must be used. The effect of changes in working and living conditions, for example, can be evaluated by looking at the life expectancy of the population and at reductions in infant mortality, industrial accidents, and occupational diseases.

The CPSU has developed an economic strategy that emphasizes increasing the economic efficiency of socialist production and seeks to develop intensively all branches of the national economy and to intensify all production processes. By the early 1970’s, extensive factors—the hiring of additional manpower and the expansion of production capacities through the construction of new enterprises—had essentially been exhausted in the USSR; it consequently became necessary to make more efficient use of the nation’s great industrial and technological potential in order to increase the production of national income and the final social product.

“The present and future development of the nation requires all-around intensification of production, acceleration of scientific and technological progress, and growth in the productivity in labor, all of which are crucial factors in increasing the efficiency of production and raising the standard of living of the population. First and foremost, the return on every unit of material, labor, and financial resources must be increased, and production assets must be used efficiently” (Materialy XXV s”ezda KPSS, 1977, p. 126).

The party’s economic strategy places particular emphasis on accelerating the growth of the social productivity of labor. During the ninth five-year plan alone (1971–75), the productivity of labor in the national economy increased by 23 percent; this figure is roughly equivalent to a saving of 20 million man-years. An increase in the productivity of labor accounted for 84 percent of the growth of production in industry, 78 percent of the increase in construction, and the entire increase in agriculture.

When the role of economic controls in the planning and management of the national economy was increased, enterprises (associations) were more strongly motivated to use production resources more efficiently and to increase profitability. Approximately 500 billion rubles in profits were obtained in the ninth five-year plan, an increase by a factor of 1.5 over the eighth five-year plan. The implementation of the economic policy of the CPSU, which is aimed at intensifying social production, involves improvements in economic management and the scientific elucidation of pressing problems relating to increased economic efficiency of socialist production. (See alsoOPTIMALITY CRITERION, INTENSIFICATION OF PRODUCTION, ECONOMIC EFFICIENCY OF CAPITAL INVESTMENTS, and ECONOMIC EFFICIENCY OF NEW TECHNOLOGY.)