OES the enhanced role of | profit in planning Soviet economy, proposed recent- ly by Premier Kosygin and now adopted, mean a return to ca- pitalism or capitalist methods in the socialist USSR? The answer is an unqualified “no.” Kosygin stressed that the main aim of the economic re- form is to enable planning better to conform to the tasks of com- munist construction. But profit under socialism? What about this? First, profit is produced not only under capitalism. It’s also produced under socialism and al- ways has been. Profit is the difference be- tween the value added in pro- duction of commodities by work- ing people through their labor, and what they receive back in wages. Under capitalism this differ- ence — surplus value — is ap- propriated by private, capitalist owners of industry. This is ex- ploitation. Under socialism the difference (called surplus product) is ap- propriated, through the state, by the same people who produce it —the workers—who own indus- try in common. No exploitation here. This is the fundamental and all-important point. Socialism uses its profit in the interest of all the people, not for private gain. But surplus value under ca- pitalism does not become pro- fit until the surplus value is real- ized, that is, until commodities produced are actually sold. Similarly under socialism with _ surplus product. And this was the problem. Many goods were piling up in Soviet warehouses, unsold, due to below-standard quality. This pattern extended to production of basic industrial equipment, thus further lowering quality all along the line and _ hindering maximum economic develop- ment. The quality defects were re- lated to one of the main indexes used in planning the economy— volume of output (justified in earlier years, say Soviet econ- omists, but questioned now.) Using this index, goods were being produced and plans over- fulfilled. But quality suffered. In many ¢ases almost anything went as long as the target for the planned number of items ‘was reached and surpassed. Based on sales What to do? Kosygin propos- ed that instead of judging per- formance by volume of output, it be judged on the basis of _ goods actually sold—and profit mede thereby. The new profit role will mean that enterprises will have to pay more attention to quality. Other- wise their. goods-sold assign- ments will not be reached. Basic idea is to more closely relate * production to consumption. In the recent period, a number of consvmer - goods _ industries have been transferred to a. “direct ties” basis with retail _ outlets and the transfer of others is planned. Their production is based on and the’ return to capitalism’ myth By WILLIAM DEVINE Tribune Correspondent in Moscow orders from customers, which is dependent on how their products sell, which in turn is dependent on their quality. The essential principle will also apply to en- terprises supplying other indus- trial units. Results so far have been impressive. It is here that many Western observers see a return to the spontaneity of the market, char- acteristic of capitalism. Planned But Kosygin stated clearly that the Soviet Union has no in- . tention of giving up its great advantage over capitalism — | planned management of the economy. The centralized plan, however, is to be combined with broader rights of each enterprise. Which brings up the question of the individual enterprise, the second main focus of Kosygin’s planning proposals. Since here is where produc- tion is carried on, and where success or failure of the new system depends, Kosygin pro- posed the enterprises be given much more economic indepen- dence and many more rights, with the former heavy burden of plan indexes from the top drastically reduced. This burden has stifled initiative from be- low, cutting down efficiency. Now all enterprises will be free to make the best possible mutual deals between supplying and receiving units. They will be governed by inter-enterprise’ contracts, largely replacing for- mer top-level plan indexes. And each enterprise, and each worker, will be given incentives to increase the rate of profitabil- ity, the third area of Kosygin’s planning proposals. Out of profits each enterprise will be able to set up a produc- tion development fund, enabling replacement of obsolete equip- ment more adequately and quick- ly, thus increasing labor produc- tivity, ness. New capital investment ‘had been going almost exclu- sively to new enterprises at the expense of already .operating ones. Bonuses — during the year and on an annual basis — will now be paid to workers out of profits made. Kosygin said ma- terial incentives — mostly from the wages fund — had been “quite inadequate.” Workers’ funds In addition, out of its profits, each enterprise will establish a ‘fund to improve working condi- tions and finance social and cul- tural undertakings and housing. This will be over and above cen- tral resources allocated. In return the enterprise and its workers must improve effi- ciency and cost-accounting, Ko- quality and profitable- . THE NEW SOVIET ECONOMIC REFORM sygin’s fourth major point. This will include strict fulfillment of - inter-enterprise agreements. The amount of profits retained by an enterprise will be in di- - rect proportion to the effective- ness with which it uses fixed as- sets assigned to it, increase in volume of goods sold, improve- ment in quality of production and increased profitability. Enterprises will now make payments out of profits as pay- ments for assets assigned (for- merly there was no such obliga- tion). Long-term-credits will re- place free state grants for capi- tal investment and supplement- ary working capital. These meas- ures should encourage most pro- ductive uses of an enterprise’s resources, Bonuses will also be related to profits made, and will now be greater for plan fulfillment ra- - ther than overfulfillment. This is expected to encourage accept- ance of larger plans, since some enterprises had previously sought low plans ‘in order to more easily overfulfill them. An important point made by Kosygin was that wholesale This synthetic fibres plant, one of the most up-to-date in the Soviet Union, is in Kirovakan, Armenia. November 5, 1965—PACIFIC TRIBUNE" : ‘dustrial branches. prices should increasingly socially necessary labor. UP stantiated prices make ecil, calculations lose their d@ ability, an obvious drawb# rating profitably. Target date for the new! structure is 1967-68. But! prices, Kosygin assure country, must only go dow Taking all Kosygin’s prop in their interconnection, it®) clear the new use of thely index will best characteriy enterprise’s overall perfor Country-wide | Kosygin stressed the n consider all his propos? part of a unified whole. ?} is in this sense that his pM als for improved manage] of industry should also be'} The regional economic ‘ cils, formed in 1957, are "| dissolved. Some 28 All and Union-Republican mif are to be set up based of tralization of specific bra of industry. They are e% to begin functioning by ginning of next year. ~ The idea of the ecolp councils was to spur dé ment more completely on! gional scale, and thus spu!l) all-round country-wide de} ment. Kosygin noted this: had some positive effect} had also led to fragmental!”) industry, especially in ma A Essel streamlined, two-way col) cation within these bral from top to bottom ané | versa, had been lacking. Those directing the councils were not special these’ main branches. A! some cases regions turned inward and ignored ec0 commitments and interplaJ other regions. e Tonic The new system of mit will not be a simple re the pre-1957 situation, emphasized. New conditi®! which the ministries wil | include strengthened rig enterprises and a combi? of the territorial principl® new rights granted to unl publics. The economic reform less designed for any t “sick” economy than {0, that may have grown a bit gish through lack of aP balanced economic dié Kosygin and colleagues § have shaken well before and their tonic should P invigorating results. Mav street reaction I’ve samp! been very favorable. The central problem i Kosygin, is to increase vet! mic efficiency and get bé turns from capital inv® and fixed assets. ‘ He underlined the 1° workers at all levels collectively as the sure j antee of success and § that the new proposals aimed above’ everything raising the living stand@ the people. There isn’t a better arg for them.