Unicorn
16th July 2008, 14:38
Under the new economic conditions profit and profitability have begun to play a much greater financial and economic role.
p
Profits are used by enterprises working according to. the new system to pay the charge for the use of their productive assets, interest on credits, “fixed payments”, to form incentive funds, clear credits received for capital investments, supplement their circulating assets, form a reserve fund for mutual financial assistance, and to pay the deductions to the budget.
p
Increases in wages and the improvement of amenities at enterprises are also geared to profit and its rate of growth.
p
The profit made by socialist state enterprises is the amount by which cash income exceeds cash expenditure. Thus, profit indicates the financial result of the enterprise’s economic activity.
p
It should be realised, however, that the above is only an external manifestation of profit, its formal expression used for accounting purposes. 95This external manifestation should be distinguished from the true or internal economic content
of profit which determines the important role it plays in the activity of socialist enterprises and economic branches.
p
The economic and social relations connected with the production of the surplus product or net income of society and the distribution of the latter constitute the economic content of profit in a socialist society.
p
In a socialist society the workers in the sphere of material production create the product used to satisfy the growing requirements of the workers themselves and of their families. This product is called the necessary product. The product created in excess of the necessary product is needed by society to expand production, to pay for the labour of workers in the service sector, to maintain the administration and the machinery of state, to pay for the defence of the country and for cultural development and other general state requirements. The product used to satisfy all the above needs is surplus as far as the production sphere is concerned, but it is necessary to society.
p
So long as commodity production and commodity-money relations prevail in socialist society both the necessary and the surplus product have use value and value. According to the laws governing commodity production and circulation the value of commodities is expressed in terms of money.
p
The value of the surplus product in its concrete monetary expression forms the net income of society.
p
In the Soviet economy the net income of society consists of the profits of enterprises and the various branches of production, the turnover tax, deductions for social insurance, interest on 96credits, money accumulations (the net income
of collective farms) and certain other forms of income. Hence, profit in a socialist society is part of the value of the surplus product expressed in money terms.
p
In the practice of state-owned socialist enterprises, profit is that part of the net income of society which is placed at their disposal and constitutes part of the value of the surplus product created over and above the amount received by workers as wages.
p
Profit is produced by the labour of the workers in production. It cannot be created other than through the production of commodities, that is, without the expenditure of labour.
p
In socialist society profit plays an important socio-economic role. It is a means of accumulation and distribution, and also a stimulus for the production of the most important part of society’s net income. As a means of accumulating the net income of society, profit serves the social interest —a growth of profit increases the income of society, multiplies the national wealth. This makes profit one of the main indices of the economic effectiveness of the performance of enterprises. The better an enterprise works, the more expediently it uses its material, labour and money resources, the more high-quality goods needed by society it produces, that is, the more effectively it operates, the greater are its profits and the more quickly the social wealth grows.
In the new economic conditions profit should be regarded not only as a means of multiplying the country’s wealth, but also as a form expressing the socialist relations connected with the distribution and utilisation of that wealth. These relations could and should serve as an economic lever for the optimum combination of the 97interests of society (the national economy) with the interests of each branch of the economy, each enterprise and each worker. The distributive
function of profit is linked with the fulfilment of these aims. In its turn, the distributive function of profit is closely linked with its stimulating function. The growing importance of profit in the Soviet economy and the dynamics and structure of the net social income (in the form of money accumulations) can be seen from the table below: [97•1
(in ’000 mln. rubles) Form of money accumulations 1940 1950 1960 1966 1969 Total accumulations . . . including: profit . . 3 3 27.1 5 2 65.2 25.2 89.4 44.1 121.7 72.7 turnover lax ...... 10.6 23.6 31.3 39.3 44.5 other . . . 8.7 6.0 4.5
p
Between 1940 and 1969 the yearly profit made by the Soviet economy increased almost 23-fold, while the turnover tax increased only fourfold. Beginning with 1966 sum total profits began to exceed the sum total turnover tax and accounted for almost 50 per cent of the economy’s money accumulations (including collective farms).
p
In 1969 profits were 70 per cent higher than the turnover tax and accounted for over 50 per cent of all money accumulations.
p
The economic reform attaches great importance to profit. This does not mean, however, as some 98bourgeois economists aver, that the Soviet economy has taken up capitalist methods of economic management and that profit has
become the sole aim of production. The statement made by the Mao Tse-tung group that “capitalism is being restored" in the Soviet Union is equally slanderous. Under capitalism profit is a transformed form of surplus value, the result of the exploitation of the working class and other working people by the capitalist class. In capitalist society all profits are appropriated by the capitalists. All this does not apply under socialism. Socialist profit differs fundamentally from capitalist profit. It is not the result of exploitation but of the efficient economic activity of enterprises. Profit expresses the new, socialist content of social relations, notably the relation between the product needed for the satisfaction of personal requirements and the product necessary to ensure extended reproduction on a social scale.
p
In socialist society profit does not go “into somebody else’s pocket" but is placed at the disposal of the working people. Lenin pointed out that “the surplus product goes not to a class of owners, but to all the working people, and only to them". [98•1
p
The profits made by enterprises reach the working people both directly—that is, as material incentives to the individual workers or the workers’ collective of the given enterprise out of the incentive fund, which is formed from part af the profit—and indirectly, that is, through the state budget and the system of the financial plans of enterprises for the extension of socialist production, the enlargement of social consumption funds, and for national requirements.
99
p
The measures taken under the economic reform have introduced fundamentally new features in the planning of profit and in the methods of its utilisation. They are aimed at raising the role of profit in developing production and in making production more effective. Thus, the economic reform has introduced the profitability index, the charge for the use of productive assets, the “fixed payments" to the budgets, the incentive funds formed at enterprises, and the new way of distributing profits.
Under the new system profitability has become one of the most important indices of an enterprise’s performance. It is directly connected with the planning and evaluation of the enterprise’s economic and financial performance and with the fixing of quotas for the transfer of part of the profit to material incentive funds.
Source:
Pereslegin, V. 1971, "Finance and Credit in the USSR". Progress Publishers.
http://www.leninist.biz/en/1971/FCU179/5.04-The.Profit.of.Enterprises
p
Profits are used by enterprises working according to. the new system to pay the charge for the use of their productive assets, interest on credits, “fixed payments”, to form incentive funds, clear credits received for capital investments, supplement their circulating assets, form a reserve fund for mutual financial assistance, and to pay the deductions to the budget.
p
Increases in wages and the improvement of amenities at enterprises are also geared to profit and its rate of growth.
p
The profit made by socialist state enterprises is the amount by which cash income exceeds cash expenditure. Thus, profit indicates the financial result of the enterprise’s economic activity.
p
It should be realised, however, that the above is only an external manifestation of profit, its formal expression used for accounting purposes. 95This external manifestation should be distinguished from the true or internal economic content
of profit which determines the important role it plays in the activity of socialist enterprises and economic branches.
p
The economic and social relations connected with the production of the surplus product or net income of society and the distribution of the latter constitute the economic content of profit in a socialist society.
p
In a socialist society the workers in the sphere of material production create the product used to satisfy the growing requirements of the workers themselves and of their families. This product is called the necessary product. The product created in excess of the necessary product is needed by society to expand production, to pay for the labour of workers in the service sector, to maintain the administration and the machinery of state, to pay for the defence of the country and for cultural development and other general state requirements. The product used to satisfy all the above needs is surplus as far as the production sphere is concerned, but it is necessary to society.
p
So long as commodity production and commodity-money relations prevail in socialist society both the necessary and the surplus product have use value and value. According to the laws governing commodity production and circulation the value of commodities is expressed in terms of money.
p
The value of the surplus product in its concrete monetary expression forms the net income of society.
p
In the Soviet economy the net income of society consists of the profits of enterprises and the various branches of production, the turnover tax, deductions for social insurance, interest on 96credits, money accumulations (the net income
of collective farms) and certain other forms of income. Hence, profit in a socialist society is part of the value of the surplus product expressed in money terms.
p
In the practice of state-owned socialist enterprises, profit is that part of the net income of society which is placed at their disposal and constitutes part of the value of the surplus product created over and above the amount received by workers as wages.
p
Profit is produced by the labour of the workers in production. It cannot be created other than through the production of commodities, that is, without the expenditure of labour.
p
In socialist society profit plays an important socio-economic role. It is a means of accumulation and distribution, and also a stimulus for the production of the most important part of society’s net income. As a means of accumulating the net income of society, profit serves the social interest —a growth of profit increases the income of society, multiplies the national wealth. This makes profit one of the main indices of the economic effectiveness of the performance of enterprises. The better an enterprise works, the more expediently it uses its material, labour and money resources, the more high-quality goods needed by society it produces, that is, the more effectively it operates, the greater are its profits and the more quickly the social wealth grows.
In the new economic conditions profit should be regarded not only as a means of multiplying the country’s wealth, but also as a form expressing the socialist relations connected with the distribution and utilisation of that wealth. These relations could and should serve as an economic lever for the optimum combination of the 97interests of society (the national economy) with the interests of each branch of the economy, each enterprise and each worker. The distributive
function of profit is linked with the fulfilment of these aims. In its turn, the distributive function of profit is closely linked with its stimulating function. The growing importance of profit in the Soviet economy and the dynamics and structure of the net social income (in the form of money accumulations) can be seen from the table below: [97•1
(in ’000 mln. rubles) Form of money accumulations 1940 1950 1960 1966 1969 Total accumulations . . . including: profit . . 3 3 27.1 5 2 65.2 25.2 89.4 44.1 121.7 72.7 turnover lax ...... 10.6 23.6 31.3 39.3 44.5 other . . . 8.7 6.0 4.5
p
Between 1940 and 1969 the yearly profit made by the Soviet economy increased almost 23-fold, while the turnover tax increased only fourfold. Beginning with 1966 sum total profits began to exceed the sum total turnover tax and accounted for almost 50 per cent of the economy’s money accumulations (including collective farms).
p
In 1969 profits were 70 per cent higher than the turnover tax and accounted for over 50 per cent of all money accumulations.
p
The economic reform attaches great importance to profit. This does not mean, however, as some 98bourgeois economists aver, that the Soviet economy has taken up capitalist methods of economic management and that profit has
become the sole aim of production. The statement made by the Mao Tse-tung group that “capitalism is being restored" in the Soviet Union is equally slanderous. Under capitalism profit is a transformed form of surplus value, the result of the exploitation of the working class and other working people by the capitalist class. In capitalist society all profits are appropriated by the capitalists. All this does not apply under socialism. Socialist profit differs fundamentally from capitalist profit. It is not the result of exploitation but of the efficient economic activity of enterprises. Profit expresses the new, socialist content of social relations, notably the relation between the product needed for the satisfaction of personal requirements and the product necessary to ensure extended reproduction on a social scale.
p
In socialist society profit does not go “into somebody else’s pocket" but is placed at the disposal of the working people. Lenin pointed out that “the surplus product goes not to a class of owners, but to all the working people, and only to them". [98•1
p
The profits made by enterprises reach the working people both directly—that is, as material incentives to the individual workers or the workers’ collective of the given enterprise out of the incentive fund, which is formed from part af the profit—and indirectly, that is, through the state budget and the system of the financial plans of enterprises for the extension of socialist production, the enlargement of social consumption funds, and for national requirements.
99
p
The measures taken under the economic reform have introduced fundamentally new features in the planning of profit and in the methods of its utilisation. They are aimed at raising the role of profit in developing production and in making production more effective. Thus, the economic reform has introduced the profitability index, the charge for the use of productive assets, the “fixed payments" to the budgets, the incentive funds formed at enterprises, and the new way of distributing profits.
Under the new system profitability has become one of the most important indices of an enterprise’s performance. It is directly connected with the planning and evaluation of the enterprise’s economic and financial performance and with the fixing of quotas for the transfer of part of the profit to material incentive funds.
Source:
Pereslegin, V. 1971, "Finance and Credit in the USSR". Progress Publishers.
http://www.leninist.biz/en/1971/FCU179/5.04-The.Profit.of.Enterprises