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).

16: "Economic Incentives"

Under the socialist system which formerly existed in the Soviet Union, the system of material incentives to the personnel of an enterprise -- other than wages and salaries -- was based on fulfilment, or over-fulfiment, by the enterprise of the targets laid down in the central economic plan:

"Our present planning methods and practice proceed from the premise that the most reliable assessment of the work of enterprises upon which their financial rewards depend is fulfilment of the plan".

(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).

The abolition of centralised economic planning and the establishment of the profit motive as the regulator of social production clearly required the replacement of this system of material incentives to the personnel of an enterprise.

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:

"The higher the enterprise's profitability, the greater will be its share of the profits.... The larger the profits, the larger the bonus fund".

(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).

The "economic reform" brought this system of material incentives into operation:

"At present.. 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 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).

In the four years from 1966 to 1069, the average size of the material incentive funds of enterprises rose four times. (N.Y. Drogichinsky: "The Economic Reform in Action", in: "Soviet Economic Reform: Progress and Problems"; Moscow; 1972; p. 207).

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' ".

17: "Socialist Profit"

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:

"....socialist profit"

(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).

and claim that it is qualitatively different from profit in an orthodox capitalist country:

"Our profit has nothing in comon with capitalist profit".

(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).

It is necessary to examine this claim in some detail.

According to Marxism-Leninism, all value is created by human labour:

"A use-value, or useful article,.. has value only because human labour in the abstract has been embodied and materialised in it... Labour.. creates and forms the value of commodities... Human labour creates value".

(K. Marx: "Capital", Volume 1; London; 1974; p. 46, 53, 57).

Under any social system beyond that of primitive communism, a human being engaged in labour creates, in a particular period of labour, more value that is require for the subsistence of himself and his dependents in that period of time. This surplus produce -- in the sense of produce

"... beyond the indispensable needs of the direct producer",

(K. Marx: ibid., Volume 3; p. 795)

-- Marx calls

"... the surplus product"

(K. Marx: ibid., Volume 3; p. 795)

and the labour used to produce this surplus product

"...surplus labour";

(K. Marx: ibid., Volume 3; p. 790)

Contemporary Soviet economists endorse, up to this point, Marx's analysis:

"Primitive man ate or used up what he produced. As civilisation and technology progressed, labour began to create not only the equivalent of working people's means of subsistence but something more. This something more was the surplus product".

(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).

But Marx goes on to hold that, once society has advanced beyond the state of primitive communism, once surplus labour and the surplus product come into existence, then -- until social development has led to the creation of a socialist or communist society -- this surplus product is appropriated by an exploiting class which own s the means of production; that is, surplus labour becomes unpaid labour:

"This surplus above the indispensable requirements of life.. is unpaid surplus labour for the 'owner' of the means of production".

(K. Marx: ibid., Volume 3; p. 790).

Social systems based on exploitation differ essentially in the way in which the surplus product, the product of surplus labour, is extracted from the worker:

"The essential difference between the various economic forms of society -- between, for instance, a society based on slave-labour and one based on wage-labour -- lies only in the mode in which this surplus labour is in each case extracted from the actual producer, the labourer....

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).

In the case of capitalist commodity production, where "free" workers sell their labour power -- and only in this case -- Marx uses the term "surplus value" to denote the product of surplus labour:

"Surplus value presupposes capitalistic production".

(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).

In a broad and loose sense, Marx equates surplus value with profit:

"Profit... is the same as surplus value.... Surplus value and profit are actually the same thing and numerically equal".

(K. Marx: ibid.; Volume 3; p. 36, 48).

But using the term "profit" in the narrower and more scientific sense of the surplus income retained by the capitalist entrepreneur involved in production: Marx points out that the total surplus value obtained may be classified into various parts according to their distribution, to form:

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:

"Surplus value.. splits up into various parts. Its fragments fall to various categories of persons and take various forms, independent the one of the other, such as profit, interest, merchants' profit, rent, etc."

(K. Marx: ibid.; Volume 1; p. 529).

In a socialist society, such as that which formerly existed in the Soviet Union, the working people collectively own the means of production. They do not, therefore, produce surplus value which is appropriated by an exploiting class owning the means of production. In such a society, the working people assess, through the state planning organs which they control, the value of

"... the total social product".

(K. Marx: "Critique of the Gotha Programme", in: "Selected Works", Volume 2; London; 1943; p. 561).

and, through these same organs, decide on the social deductions they wish to make from it. These social deductions comprise:

"... cover for replacement of the means of production used up;

..... 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 balance of the total social product remaining after these social deductions constitutes the wage fund, representing that part of the total social product which the working people reeive directly and individually.

The social deductions, on the other hand, represent that part of the total social product which the working people receive socially:

"What the producer is deprived of in his capacity as a private individual benefits him directly or indirecly in his capacity as a member of society".

(K. Marx: ibid.; p. 562).

In a capitalist 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 the society concerned.

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:

"Profits are the monetary form of the surplus product, that is, the product which working people produce over and above their personal needs".

(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).

However, wishing to present contemporary Soviet society as "socialist" and aware that Marx held that in capitalist society the surplus product took the form of surplus value, these economists are at pains to deny that the surplus product in the contemporary Soviet Union constitutes surplus value:

"Under capitalism the surplus product appears as surplus value".

(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).

But, in fact, the definition given by contemporary soviet economists of "profit" in the Soviet Union since the "economic reform" --

"Profit is formed directly from the difference between the price and cost of production",

(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)

-- is virtually identical with that given by Marx for surplus value (i.e., for profit in the broad sense) in an orthodox capitalist society:

"Surplus value is the difference between the value of the product and the value of the elements consumed in the formation of that product".

(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).

Tacitly accepting that "socialist profit" does not differ from profit in orthodox capitalist countries in its economic content, contemporary Soviet economists fall back on the argument that there is nothing wrong with profit in orthodox capitalist countries in its economic content; what is wrong -- and what distinguishes it from "socialist profit" -- is, they say, its distribution:

"Under socialism profit.. is distributed in the interest of the people".

(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".

This argument will be examined in the next two sections.

18: The Distribution of "Socialist Profit"

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

"There are now three types of material incentive funds at the Soviet enterprises: a) a material incentive fund designated for bonuses to the personnel for results achieved, an annual bonus for the overall results of an enterprise's operations and for rendering assistance in case of need".

(V.M. Batyrev: "Commodity-Money Relations under Socialism", in: "The Soviet Planned Economy"; Moscow; 1974; p. 172)

This material incentive fund out of which "bonuses" are paid is drawn from the profits retained by the enterprise:

"A fund for the material stimulation of the personnel will be set up at each enterprise from the profits obtained by the enterprise".

(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).

and its size, and the size of the "bonuses" drawn from it, depend on the rate of profit made by an enterprise:

"The larger the profits, the larger the bonus fund."

(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).

But, if profit is in reality the motive and regulator of Soviet social production, the lion's share of these "bonuses" must go to those personnel of an enterprise whose economic decisions primarily determine the rate of profit made by the enterprise -- that is, to the personnel of the management:

"Every enterprise must form... an aggregate single bonus fund... The enterprises must pay monthly bonuses to its managerial personnel out ot this fund"

(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).

The size of the bonuses paid to managerial personnel is determined outside the enterprise, by the state:

"Bonuses to directors of enterprises, their assistants, chief engineers, heads of planning departments, chief bookkeepers and heads of technical control departments are approved by the chief executive of the higher agency".

(Y.L. Manevich: "Wages Systems", in: "The Soviet Planned Economy"; Moscow; 1974; p. 253).

the prime criterion for determining the size of the "bonuses" to managerial personnel being the rate of profit made by the enterprise:

"The fulfilment of profit plans...should be one of the criteria for granting bonuses to certain categories of managerial personnel".

(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).

The size of the "bonuses" paid to the workers of an enterprise is determined officially by the director -- in practice, by the foremen:

"Bonuses to directors of enterprises, their assistants, chief engineers, heads of planing departments, chief bookkeepers and heads of technical control departments are approved by the chief executive of the higher agency, and those given to all other employees by the director of the enterprise".

(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).

In contrast to the monthly "bonuses" paid to the managerial personnel, a significant part of those paid to workers (on average, 8.7%) constitutes social welfare payments to "workers in need". (N.Y. Drogichinsky: "The Economic Reform in Action", in: "Soviet Economic Reform: Progress and Problems"; Moscow; 1972; p. 194).

"Part of it (i.e., the material incentives fund -- WBB) is earmarked... for giving material assistance to workers in need".

(S. Kamenitser: ibid.; p. 127).

The largest part of the "bonuses" received by the workers out of the material incentive fund (on the average, 59.1%) is paid out -- if, of course, the enterprise has achieved its planned rate of profit -- at the end of the financial year. (N.Y. Drogichinsky: ibid.; p. 194).

"Part of it (i.e., the material incentive fund -- WBB).. is held back for paying wages for the 'thirteenth' month, if the enterprise's yearly results are good".

(S. Kamenitser: ibid.; p. 127).

The amount of "bonus" received by individual workers in a particular enterprise varies, extra premiums being paid to long-service workers in proportion to their estimated contribution to increasing the productivity of labour:

"Besides the bonuses, premiums will be paid to enterprise workers for the annual results of work; the size of this premium will depend on the length of service of the workers at a given enterprise. The rewarding of workers for continuous service will depend on their labour contribution to the development of production. This will produce a greater effect than the restoration of the former system of long-service premiums".

(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).

Of even greater social significance, however, is the difference in the size of the "bonuses" received by management personnel and those received by the workers of an enterprise.

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:

"At the majority of enterprises the material incentive fund has not yet become the basic source of bonuses for personnel, since there are more than 30 bonus schemes in operation simultaneously. Frequently the so-called special bonuses are considerably higher than the total bonuses that personnel receive... from the material incentive fund".

(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).

As has been shown, contemporary Soviet economists seek to distinguish "socialist profit" from profit in orthodox capitalist countries by the fact that the former

"... 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).

This "differentiation" is attained by the device of classifying the management personnel in Soviet industry -- the Soviet capitalists who obtain the lion's share of this "socialist profit" -- as "working people". This is a device of which contemporary Soviet sociologists are scathing when it is applied to orthodox capitalist countries:

"Most writers on 'human relations' are unwilling to admit the class division in American society. They divide all people connected with production into groups according to the functions they perform, for example, those dealing with finance, administration, etc., regardless of their class background. Roethlisberger and Dickson, for instance, maintain that 'the personnel could not be divided into an employer and an employee class', every person in the company from top to bottom was an employee'..."

(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).

In fact, the distribution of socialist profit" in the contemporary Soviet economy differs in no way from the distribution of profit in orthodox capitalist countries where "profit sharing" schemes are in force:

"In order to consolidate by material means the illusion created with the help of various psychological devices to the effect that there exists as 'social partnership' between workers and capitalists, many American corporations practice so-called 'workers sharing in profits'... In the 1960's a total of two million workers were in all forms of 'profit-sharing' in the United States...

'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).

The increasing differentiation in income level between different "strata" of the population is admitted by contemporary Soviet sociologists:

"Up until recently, the living standard was planned for two basic groups: for workers, employees and collective farmers. Today it is also necessary to calculate the rise in the standard of living for population groups with different income levels".

(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).

Some of the more daring Soviet sociologists even admit that only families "with a maximum per capita income" are able to obtain food and other commodities at a "rational level", and timidly ask if it might be "permissible" to discuss the "irrational consumption" of the upper "strata" of the population:

"At the present time, families with maximum per capita income are consuming certain types of food and non-food commodities at a level recommended by rational norms, or at an even higher level. There is no doubt.... that with a further rise in incomes, the consumption of such families will grow quantitatively and qualitatively in the next 15 years, and with respect to the number of goods and services will significantly exceed the rational norms.

In such a case can there be a discussion of 'irrational consumption'?

(N. Buzliakov: "Rational Long-range Income and Consumption Norms", in: "Planovoe khoziaistvo" (Planned Economy). No. 6, 1974, in; "Problems of Economics", Volume 17, No. 7; November 1974; p. 84).

19: "Divide and Rule"

An important aspect of the material incentives system introduced under the "economic reform" is its utilisation to play off one worker, and one group of workers, against another. In fact, contemporary Soviet economists admit that the decisive factor in the "efficiency" of the system is not the size of the bonuses paid, but the differentiation in their size between individual workers, which enables the management to play off one worker against another:

"The efficiency of any system of incentives largely depends on differentiation between the workers encouraged. Therefore, the decisive factor is not the absolute size of incentive funds but the relative size per worker".

(B. Gubin: "Raising the Efficiency of Socialist Economic Management"; Moscow; 1973; p. 79).

But this differentiation applies not only to bonus payments, but to wage-rates, which, at the discretion of management, are varied not only between different regions of the country, but between different departments of the same enterprise and -- in blatant contradiction of the principle of equal pay for equal work -- between male and female workers:

"The recent economic reform... enables industrial managers to differentiate labour remuneration rates according to the specific conditions of each individual shop, section or other production unit".

(P. Tabalov: "Switching Over to the New System", in: "Pravda" (Truth), October 27th., 1965, in: "The Soviet Economic Reform: Main Features and Aims"; Moscow; 1967; p. 119).

"Differentiating the rate of pay for labour by regions and types of labour (male, female and so on), it will be possible to influence in a planned manner the structure of utilising labour resources".

(A.G. Aganbegyan: "Territorial Planning and the Economic Reform", in: "Soviet Economic Reform:Progress and Problems"; Moscow; 1972; p. 99).

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