USSR: Measures of Economic Growth and Development, 1950-80

Approved for Release: 2019/07/19 C05210421
Table 6 Billion Rubles
Subsidies on Agricultural Products Sold
to the Light and Food Industries
Year Light Industry Food Industry
1966 0.3 3.3
Table 7
Profits as a Percent of Productive
Fixed and Working Capital in 1972
19.3
10.2
26.0
Industry
Electric power
Oil extraction
1967 0.3 5.0 Oil refining 21.8
1968 0.3 7.3
1969 0.3 8.2
1970 1.7 13.0
Gas
Goal
Ferrous metals
46.0
6.3
16.0
1971 1.8 14.1 Chemicals 19.8
1972 2.0 15.2 Machinery 20.2
1973 0.6 15.8 Wood, pulp, and paper 17.7
1974 0.2 17.3 Construction materials 11.8
1975 0.5 19.0
Source: Vladimir G. Treml, Agricultural Subsidies in the Soviet
Union, US Department of Commerce, Washington, D.C., 1978, p. 9.
order to stimulate production and improve the quality
of the Soviet diet. At the same time, the government
has held retail prices constant. Therefore, it has had
to subsidize the light and food industries increasingly
to cover their higher costs.
The agricultural subsidy has grown rapidly and now
amounts to more than 20 billion rubles per year.
Selected data relating to the light and food industries
make it clear that the food industry receives most of
the subsidy (table 6). The price distortions resulting
from the combined effects of turnover taxes and
subsidies are most striking at a disaggregated level.
Turnover taxes were 30 and 56 percent of the gross
outputs of the sugar and other food branches in 1972,
while subsidies represented a negative 48 and 22
percent of the gross outputs of the meat and dairy
sectors. Thus the subsidies tend to reinforce rather
than offset price distortions caused by turnover taxes.
Variations in Profit Rates
Profits of a khozraschet enterprise~as noted earli-
er—are not intended to serve the same purpose as
profits in a Western business. Instead, they are a
mechanism to obtain sufficient funds for centralized
public expenditures, to provide material incentives to
27.0
24.5
5.5
59.3
12.7
12.2
31.5
13.9
Light industry
Food industry
Sugar
Meat
Transportation
River transport
Automobile transport
Communications
Source: Narkhoz I 975, pp. 728-29.
enterprise management, to measure performance of
enterprise management, and to exercise fiscal and
administrative control. _
After the management reforms of 1965, the role of
profits increased significantly. Reflecting this, total
profits increased rapidly, from 37 billion rubles in
1965 to 87 billion rubles in 1970. Profits, however, are
distributed quite unevenly among sectors, and the
profit rate on fixed and working capital varies enor-
mously (table 7). For this reason, profits do not appear
to be a reliable indicator of the contribution of capital
to production, a precondition for the use of established
prices as a measure of production potential.
Moreover, much of the service sector does not earn
profits because the enterprises are financed from the
state budget. The lack of any charge for the use of
capital stock in the service sphere undervalues the
resources used to produce those services.
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Approved for Release: 2019/07/19 C05210421