Profit and The Material Stimulation of High Production Indices

Abstract

Higher efficiency of production is one of the essential tasks in the building of communism. The question of enhancing the role of profit and converting it into the main criterion for assessing the activity of enterprises, replacing the cost of production index, has been raised in the course of the discussion in the press in recent years on ways and methods of improving the management of enterprises. Although in principle a saving on the cost of production, all other conditions being equal, is tantamount to a growth of profit, nevertheless, profit possesses certain advantages in stimulating the personnel of enterprises. First, it is closer to the end indices of their work; its magnitude depends not only on the outlays credited to the cost of production, but also on outlays covered directly from profits (losses on the retirement of fixed assets, the writing off of indebtedness, etc.). This is one of the reasons for the discrepancy between the fulfillment of cost of production and profit plans, the "secret" with respect to why enterprises cope more successfully with the targets for the reduction of production outlays than with accumulation assignments. Second, in contrast to the cost of production, profit is determined on the basis of the realized output, and not of all output. Thereby it is closer to consumption, to control over the social recognition of the product. That is why profit compels an enterprise to concern itself to a greater extent with renewal of assortment and improvement of quality.