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I^NSLATIONS ON EASTERN EUROPE

ECONOMIC AND INDUSTRIAL AFFAIRS

No,, 1710

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TRANSLATIONS ON EASTERN EUROPE - ECONOMIC AND INDUSTRIAL

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30 December 1977

TRANSLATIONS ON EASTERN EUROPE

ECONOMIC AND INDUSTRIAL AFFAIRS

No. 1710

CONTENTS PAGE

EAST GERMANY

Number of Stores To Be Increased

(Gerhard Briksa; PRESSE-INFORMATIONEN, 11 Nov 77) 1

Greater Efforts Needed for Exports

(Karl-Heinz Arnold; BERLINER ZEITUNG, 12-13 Nov 77) 4

Question Raised on Need of Increased Efforts

(Fritz Oelze; VOLKSSTIMME, 9 Nov 77) 6

HUNGARY

Hungarian Enterprises in United States Discussed

(Richard Hirschler; VILAGGAZDASAG, 24 Nov 77) 9

Elimination of Hungarian-U.S. Trade Barriers Discussed

(Richard Hirschler; VILAGGAZDASAG, 25 Nov 77) 13

POLAND

Papers Disagree on Cause of Economic Problems

(Various sources, various dates) 17

Personal Faults Explanation of Difficulties, by Monika

Mrozowska

Inadequacy of Non-System Explanation, by Jack Maziarski

- a [III - EE - 64]
CONTENTS (Continued) Page

Auto Plant Director Diagnoses Low Quality Level

(Marian Karwas Interview; POLITYKA, 26 Nov 77) 22

Problems Cited in Expanding Corn Cultivation

(Jerzy Kucharz; ZYCIE GOSPODARCZE, 23 Oct 77) 27

ROMANIA

Future Economic Strategy for Developing Countries Outlined

(I. Barac; REVISTA ECONOMICA, 9 Sep 77) 32

Evidence of Increase in Personal Income Examined

(Dan Popescu; REVISTA ECONOMICA, 9 Sep 77) 38

Performance, Responsibilities of Transport Sector Reviewed

(Constantin Iancu; LUPTA CFR, 12 Nov 77) 44

Methods for Achieving 1978 Plan in Agricultural Sectors

(Ion Ceausescu; AGRICULTURA SOCIALISTA, 12 Nov 77) ... .. 47

Importance of Agricultural Investment Program Stressed

(Ion Stanciu; REVISTA ECONOMICA, 9 Sep 77) . 51

YUGOSLAVIA

Changes in Financial Position of Economic Enterprises

(Milo Jovanovic; FINANSIJE, Sep-Oct 77) 57

Regional Structure of Foreign Trade for 9-Month Period

(M. Zoric; PRIVREDNI PREGLED, 4 Nov 77) 72

Unforeseen Lag in Macedonian Foreign Trade Reported

(NOVA MAKEDONIJA, 17 Nov 77) 75

Capital Accumulation of Private Farms, 1961-1973

(Sveto Davidovic; EKONOMIKA PROIZVODNJE HRANE, Oct 77).. 77

- b -
EAST GERMANY

NUMBER OF STORES TO BE INCREASED

East Berlin PRESSE-INFORMATIONEN in German No 134, 11 Nov 77 p 2

[Article by Gerhard Briksa, minister for trade and supply]

[Text] In the current five-year plan, the finished goods inventories of

essential and nonessential foods and beverages will increase from 42.5 billion marks in 1975 to approximately 50 billion marks in 1980. In order

to use this increasing volume of commodities with the greatest supply effect,

it is necessary to improve resolutely the shopping conditions for the

customer.

To this end, a number of different ways are being pursued. Many small-.and

medium-sized sales outlets of socialist trade, as well as of the commission

and private retail trade, which account for a high proportion of the supply

of daily necessities, have been modernized, and this will continue in the

future as well. But this is not sufficient. Especially time-saving and

rational buying is made possible by the shopping centers that are being built

in particular as a component of the complex housing construction in new

residential areas, but increasingly also in old residential areas of cities.

During the last few years they developed more and more as the determining

supply institutions in large residential areas.

During 1971-1976 alone 430 shopping centers were newly constructed. Thus

their number more than doubled during this period, with especially efficient

shopping centers in an order of magnitude of between 400 and 1,500 square

meters of sales space being built. The sales space of the shopping centers

altogether has almost tripled during 1971-1976, it grew from 124,000 to

346,000 square meters.

At the present time, about one-fifth of the daily necessities are sold in

shopping centers. In the residential areas of the capital of Berlin, this

share already accounts for about 50 percent. Like in the entire republic,

the net of shopping centers in Berlin continues to expand. In 1980 the

capital will have at its disposition more than 143 shopping centers, in

which about 80 percent of the population can purchase their daily necessities.
Complex Offer of Merchandise

Characteristic for the development of the network of shopping centers is the

fact that rigorously standardized assortment and supply projects of the

so-called standard series Kaufhalle on the basis of the industrial metal

light construction process are being used. The 120 shopping centers in

this series that have already been opened in all areas of the republic make

clear the high effectiveness of this path. The four obligatory projects

and the central production of the building frame in the state enterprise (VEB)

Metal Light Construction Combine, Halle works, help to realize the planned

new construction projects without interruption. Moreover, the projects

offer favorable preconditions making it possible to organize the trade

activity in all locations effectively and with great advantage for the

supply. In addition, planning capacities are saved and construction times

are shortened.

The advantages for the customer consist, above all, in a supply of merchandise

that is complex and clearly arranged, as well as in improved shopping

conditions. The assortment of a shopping center includes up to 4,000 articles,

with which about 80 percent of the demand for daily necessities in the residential area can be met. From the perspective of the national economy, too,

the shopping centers demonstrate considerable advantages vis-a-vis the

traditional net of sales outlets. For e-ample, labor productivity is about

one-third higher, use of capacity is one-fourth higher. At the same time,

a 30 percent more rapid turnover of merchandise is realized.

The shopping centers also offer considerably better working conditions. Thus

the modern shopping centers have at their disposal good social facilities,

such as spacious lounges for breaks and separate changing and showering

rooms. A high degree of mechanization of intraplant transport reduces heavy

physical labor decisively. In the shopping centers the degree of mechanization is as high as 90 percent, while in the remaining sales outlets the

merchandise almost exclusively still has to be transported manually. This

is so important because mostly women work in the retail trade.

Use Diverse Forms

In socialist competition, many collectives are concentrating on the still

more intensive use of the advantageous conditions of these modern shopping

places to supply the population well. In the foreground of this effort is

the perfection of the cooperative relations with the wholesale trade and

the enterprises in agriculture and food production in order to secure a

stable and abundant supply of goods. The cooperative departments for meat

and sausage products, fruit and vegetables, as well as dairy products and

baked goods, created following the example of the Berlin shopping center

association, have proved themselves in the shopping centers. With the

direct participation of agricultural and food production enterprises,

now solutions of the organization, supply, direct purchase, merchandise

imover, the presentation of merchandise and cultural refinement of

..-liii , as well as the care of customers, are being created here. The

experiences of the Berlin shopping centers must be generalized without fail.
To shorten the waiting time at cash registers and service counters is also

important for the implementation of rational solutions with regard to the

sale of merchandise. This becomes possible through the qualification of

employees for several jobs, the installation of express cash registers,

as well as through better preparation of sales and a higher proportion of

pre-packaged self-service merchandise.

Naturally, shopping centers cannot be built everywhere; that does not make

sense from the perspective of the national economy, nor is it necessary.

For this reason the directive of the Ninth SED Party Congress reads: "The

efficiency of the existing trade net is to be increased through rationalization and reconstruction in conjunction with the meaningful association with

new housing construction, especially within the framework of the complex

housing construction program and through the use of local reserves." In

other words: Today and in the future as well, the small- and medium-sales

outlets will have to fulfill a large part of the supply tasks. With a sales

force frequency of two or three, they account today for more than threefourths of all supply achievements in regard to daily necessities. The

local state organs and the socialist trade enterprises, therefore, are

making an effort to improve step by step the efficiency and working conditions in the smaller stores through rationalization, small-scale mechanization, reconstruction and various measures of scientific work organization.

This is also true of many commission and private retail dealers, who received

advantageous conditions for the maintenance and modernization of their

businesses in the decree of the Council of Ministers of 12 February 1976 on

the advancement of private retail businesses, restaurants and handicraft

enterprises for service in the interest of the further improvement of the

supply of the population. All of this serves to attain permanent solutions

with regard to a richly-assorted and timely supply of consumer goods.

8970

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EAST GERMANY

GREATER EFFORTS NEEDED FOR EXPORTS

East Berlin BERLINER ZEITUNG in German 12-13 Nov 77 p 9

[Commentary by Dr Karl-Heinz Arnold]

[Text] This fourth quarter once again requires special efforts in order to

reach the export goals for the year as well as possible and not to begin at

zero in January. This concerns not only the production collectives. The

large circle of those who are responsible for merchandise valued in the

millions of valuta marks ranges from truck drivers and railroad employees to

those engaged in foreign trade and customs officials. This merchandise is

to be of high quality, reach the buyer on time and in perfect condition and

be as profitable for us as possible.

The special interest of the GDR in the development of foreign trade—Erich

Honecker has made reference to it in his Dresden speech—obligates millions

of workers who are directly or indirectly involved in it. Whether it be the

case that they increase the production of products that are in demand and

profitable, and say good-bye to goods that are difficult to dispose of on the

world markets, or be it the case, for example, that they make highly rational

use of raw material and material, thus easing our import balance.

Basically, every citizen of the republic has a special interest in a flourishing foreign trade, if only because our economy would not even exist without

the import of raw materials. However, since we had to expend almost 14 billion

valuta marks more after 1973 for them, it is clear that we can balance our

imports only if we increase our exports and make them more profitable. For

the revenues that can be obtained for finished products have increased substantially less than the prices of raw materials. However, the GDR exports

predominantly industrial products and imports mainly raw materials and semifinished products.

If one takes 1970 as the base year, the export prices of capitalist countries

by last year had increased to an index of 183 for industrial products and

311 for raw materials. But we must purchase raw materials as well as food

products and nonessential foods and beverages in nonsocialist countries,
needed varieties and quantities of oil, as also tropical fruit, coffee, cocoa,

nonferrous metals, cotton, rice and spices-merely to indicate the palette;

it so happens that the GDR is a country in which pepper does not grow.

Through the capitalist crisis we have also suffered export losses and now

as before we have problems with regard to selling investment goods in these

countries.

Corresponding to the world market development, raw material prices in CEMA

have also increased at a greater rate than the prices for finished products.

And we have to participate in the production of raw materials in socialist

countries with higher investments than during the preceding five-year_plan.

All such foreign trade debits, however, as Erich Honecker emphasized in

Dresden, we can balance only through a corresponding increase in national

income.

And this increase in newly-created values must be export effective.

Obsolete office technology and processing machines without sufficient electronics do not generate the necessary and possible export revenues, ^he

picture is quite different in the case of top products of our cable industry

or efficient plastics machines, cranes t^at are in demand, or interesting

chemical products. The task set by the fifth plenum, to compare our own

Production with the international state lof the art] without pulling punches

and to draw conclusions from this, is more valid now than ever.

The GDR's special interest in foreign trade does not.follow in principle from

the foreign trade debits that have come into being since 1973-1974. It is

considerably reinforced by them, and the debits require greater efforts for

Export and the most rational utilization of the imports. Basically however,

we need a further increasing foreign trade in order to increase-through

participation in the international division of labor via export and Importeur national income, not in the least in the form of the importation of the

latest technology. However, only those can purchase well who have sold well.

Thus the export power of the GDR in particular constitutes a considerable

factor in our social progress. All of us have an understandab e -tares

this; Erich Honecker pointed it out: The population, too, is to be supplied

more adequately with the good products that have successfully passed the

test of the world markets.

8970

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EAST GERMANY

QUESTION RAISED ON NEED OF INCREASED EXPORTS

Magdeburg VOLKSSTIMME in German 9 Nov 77 p 7

[Article by Fritz Oelze]

[Text] "Well, I don't understand it," a colleague told me recently during an

exchange of views with workers. "Here we are now building so many new,

efficient machines in the GDR, and I am still working with this piece of old

junk, but everything goes for export..."

Yes, a whole lot does in fact go for export. And, what is more, the share of

export is even increasing—a fact already proved statistically: for example,

foreign trade turnover in the GDR increased from 2.7 billion marks in the

founding year to almost 74.4 billion marks in 1975. During the current

five-year plan our foreign trade (and thus, of course, our export as well)

will increase twice as fast as production of industrial commodities. During

the first 6 months of 1977 alone, our foreign trade increased by 13 percent.

Our Return

Why is this so? Expressed briefly, it is because foreign trade is a question

of existence for us. We export because we are dependent on exports, because

only the receipts from export create for us the possibility of our extensive

imports. Among these are, above all, raw materials, which our industry

requires in growing measure. These are the hard economic realities. To

ignore them would mean to inflict injury upon ourselves.

Let us but realize the fact that last year of the total social product of

300 billion marks, material accounted for 220 billion marks. Material, the

overwhelming part of which had to be imported first. For example, we secure

up to 90 percent of our requirements of oil, iron ore and cotton from the

Soviet Union. Sixty percent of our aluminum and 45 percent of our nickel

comes from there. On the other hand, for this reason many of our export

crates are marked with the designation: "USSR." That is our return, among

other things, for the vital raw materials, without which we could not continue

production on modern or on older machines even for one day. This is why

Erich Honecker declared in his Dresden speech that our republic is among those

states which have a special interest in the development of world trade.
No Other Country in the World...

By the way, other industrial states, too—apart from the raw materials-rich

countries of the Soviet Union and the United States—face the same problem.

However, in the Soviet Union and the United States, too, foreign trade is

increasing more rapidly than production because there are other important

reasons for the expansion of foreign trade than the demand for raw materials

and energy.

The most important is the fact that under today's conditions of turbulent

scientific progress nobody can produce everything at a high level and at

favorable costs. No country in the world can produce top quality output

in all fields. The enormous expenditures for research and development alone,

as well as the necessity to produce in large numbers, prohibit this.

Expressed another way: The limitation of production to certain assortments

and products, in short the growing international division of labor, has become

a prime factor in raising the labor productivity in our economy as well.

But, of course, if the question is foreign trade, climate, too, plays a role:

tropical fruit and coffee, it happens, do not grow in northern latitudes.

Moreover, there are historically rooted peculiarities, e.g., a long tradition

of producing certain products and special kinds of knowledge and skills

connected with them.

Thus, whether we like it or not, we simply cannot do without exporting in

growing numbers machines, installations and also consumer products that we

would like to buy in the store ourselves. We do it in order to cover today's

and tomorrow's raw material needs, to import modern machines from other

countries, in order to be able to strengthen the productive capacity of the

economy in this way and to supply the population with a still wider assortment of high-quality consumer products. We are doing all of this in order

to be able to continue further our program of growth, stability and

prosperity with purpose and direction, as stipulated by the main objective.

For Example: Elmo Against Siemens

To sell more in the world market, however, means for example for the Elmo

plant to deal successfully with the competition of the Siemens concern every

day—which, by the way, the people from Wernigeroede are doing remarkably

well. This, however, can be done only with first-class products, for nobody

takes trash off our hands. The supply in the world market is large, and the

decision concerning whether our products are purchased are made by on one

else but the customer.
Of course, one can understand the impatience of the colleague mentioned

at the beginning, who also would like to work with the most up-to-date

machinery because it is more fun and also more productive. But we don't

solve his problem by restricting the vital export, but rather by working

better at every job. For it is characteristic of our economy, after all

that through intensification within the framework of our possibilities '

and while increasing export we also decisively push ahead with the

modernization of our own basic assets. The fact that within the past

5 years we have succeeded in replacing 40 percent of all machines and

equipment surely speaks for the powerful efforts of the GDR in precisely

8970

CSO; 2300
HUNGARY

HUNGARIAN ENTERPRISES IN UNITED STATES DISCUSSED

Budapest VILAGGAZDASAG in Hungarian 24 Nov 77 p 3

[Article by Richard Hirschler: "Successful Hungarian Enterprises on the

World's Largest Buyers Market"]

[Text] It is a strange dualism. While a large part of our enterprises

today view the business opportunities offered by the American market with

apathy (the high duties, let us add, often play a role in their alienation)

most of the 11 firms sharing 98 percent of the Hungarian export going to

the US feel at home in the US, are expanding their market contacts enthusiastically and are experimenting with new forms of cooperation. In the

near future several enterprises will be established in the US and, if we

cannot yet speak of a "Hungarian challenge," a Hungarian-American incandescent lamp factory, a plant assembling X-ray equipment and Hungarian

owned pharmaceutical sales form will begin operations. The limits on the

expansion of our canned hams are set only by the domestic swine stocks or

the meat processing capacities. The RABA factory in Gyor, whose name is

now known to the great vehicle industry concerns throughout America, has

won a "bridgehead position" for the Hungarian machine industry. And, let

us add, the expertise and reliability of the Hungarian National Bank have

won it real prestige in financial circles. I followed up these successes,

worthy of being followed, in New York and Chicago.

"In Budapest I always stay In the hotel named after me," jokingly remarked

George Geliert, president of the Atlanta firm whom I looked up at the New

York office of the enterprise in a nondescript skyscraper in the southern

part of Manhattan island. At the moment this enterprise is the most important purchaser of Hungarian goods; this year they are importing, for

more than 20 million dollars, canned hams, shoulders and bacon from

TERIMPEX [Foreign Trade Enterprise for Livestock and Crops], receiving

almost 40 percent of the Hungarian export going to the US.

Too Little Ham

"We could sell many more of them, five times the present amount."

"And the competition?" I interjected.
"Last year they sold on the American market, in addition to the 6,000 tons

of Hungarian export, 43,000 tons of Danish and 27,000 tons of Dutch pork

products while from the socialist countries Poland sold 41,000 tons, Yugoslavia 15,000 tons and Romania 5,000 tons. Poland, for example, spends

one million dollars per year to popularize Polish ham. But the largest

part of the Hungarian products reach the shops without a trade name as

'imported ham.' And yet the capacity of the market is very great; the

value of the pork products traded is slowly approaching one billion dollars.

American meat consumption is increasing by 10.5 percent per year.

"Placing the Hungarian goods, which are of outstanding quality, would cause

no problem in any case because the Dutch and the Danes are slowly drawing

out of the market, shifting their export to associated countries in the

Common Market. So it would be beneficial to place into operation as soon

as possible the Kaposvar meat combine in Hungary which, I am informed, will

send its entire 30 million dollars worth of export per year to the American

market."

"Why is the famous Hungarian salami missing from the Atlanta selection?"

was my next question.

"Unfortunately when they reconstructed the Szeged salami factory they

neglected to implement the strict American health requirements so we cannot buy from them," was the answer.

By the time I returned to Budapest I learned that after a long delay it now

appears that it has finally been decided which western firm will receive

the commission to build the Kaposvar meat plant. The winning firm must try

to see that the "dollar factory" begins production by the end of 1979. Each

year 400,000 hogs will travel through it, going to the US in the form of

canned hams, shoulders and bacon.

They also said at TERIMPEX that dry processed goods may appear in the US;

the Gyula Meat Combine will begin manufacture of sausage and salami next

year. According to their plans they would like to appear on the American

market with a cheap and quick ripening salami based on an American recipe.

If they succeed in getting a contract with Atlanta or some other American

firm then the export of the Hungarian foodstuffs industry could increase

by another 9-10 million dollars per year.

The Action Tungsram Is Getting Ready

What TERIMPEX has done with canned hams United Incandescent has done with

electric light bulbs; Hungarian light bulbs have found a solid market base

in the US, providing 6 million dollars in export income per year. So what

prompted our gigantic enterprise to establish a mixed enterprise in the US

under the name of Action Tungsram in which it will have 49 percent of the

shares and its American partner, Action Industries, will have 51 percent?

10
The president of the first Hungarian-American mixed enterprise, A.L. Merken,

justified the creation of the new firm as follows. (In East Brunswick, near

New York, a brand new factory hall is waiting for the automatic light bulb

manufacturing lines of United Incandescent on which, according to the plans,

Action Tungsram will begin production in April.)

"It is no accident that more and more foreign trade partners are trying to

organize local manufacture in the US. They can thus save the considerable

transportation costs and duties and can adapt to the needs of consumers

more flexibly. In our case we also reckoned with the fact that we would

like to expand the scale of products; we want to manufacture machines, but

not just lamp manufacturing lines. Unlike the incandescent bulbs these

products will be manufactured in small series so manufacture here is much

more rational, rather than organizing supply for American customers in the

Hungarian center of United Incandescent, which is of a respectable scale

even by international standards. Our site is within reach of major ports

and highways in the middle of a trade zone embracing almost 20 million.

"For the time being our joint enterprise will have a base capital of 7 million dollars. We will start production with 100 employees; the four member

directing council will have two Americans and two Hungarians. Finally, I

would like to emphasize that the expected diversification and expansion of

the activity of the joint enterprise is in harmony with the goal of having

United Incandescent expand its export to the United States too," the American businessman pointed out.

Founding an Enterprise—With the Aid of the Hungarian National Bank

Other Hungarian enterprises also are making preparations to found American

enterprises. Thus for MEDICOR [Medical X-Ray Equipment Enterprise] has not

really been able to get a footing in the US but now a mixed enterprise for

assembling and marketing X-ray equipment has been established. (See our

separate article on this page.)

MEDIMPEX [Foreign Trade Enterprise for Pharmaceutical Products], which has

appeared on the US market with its pharmaceutical products, has achieved

spectacular successes in a few years and now exports morphine and various

active ingredients for more than 4 million dollars. It has now put on the

agenda the creation of a pharmaceutical marketing enterprise which it will

own itself; this will facilitate a survey of market needs, preparation for

introducing products in America and the execution of various experimental

tests.

The Hungarian National Bank [MNB] is playing an active role in providing

a financial background for founding Hungarian enterprises and it has won

general recognition in the New York banking world. I had an opportunity to

convince myself of this when meeting with the leaders of a few mammoth

banks.

11
The Chemical Bank participated in that North American credit consortium

which extended 200 million dollars to the MNB this year. Representatives

of the bank spoke with appreciation of the MNB report published on the

occasion of receiving the credit. While giving a precise picture of the

chief trends of Hungarian economic development and of the expansion of

export capabilities the report provided information on monetary and foreign

exchange reserves, the amount of credit and the schedule of repayment. (At

the end of last year, the gold and foreign exchange reserves of the MNB

reached 1.5 billion dollars while in April of this year the Euro-loans

assumed from the west or the sum of debentures without interest came to

one billion. Repayment of much of this will be due between 1979 and 1982.

The memorandum covered these things among others.)

Concerning RABA in Chicago

Chicago is 1,600 kilometers from New York, 2 hours by air; here I was

received by Vice-President McMenamin at the headquarters of the International Harvester Corporation (IHC).

This mammoth concern, showing a turnover of 5.5 billion dollars per year

and manufacturing primarily agricultural machines, trucks and earth moving

machines, has established good cooperation with RABA. "RABA came to our

attention when we became share holders ia the Steiger firm, the first American partner of the Gyor enterprise. It happened that we needed a partner

to deliver under-carriages for our new types of trucks and the Gyor firm

submitted their proposals with breath-taking speed. We chose them and sold

our manufacturing license and we are expecting the first Hungarian deliveries in December of this year.

"Our production cooperation is becoming even more many-sided in that on the

basis of our licenses RABA will manufacture working machinery for their

large capacity tractors—disk plows and harrows. When we enter into cooperation with an enterprise of a socialist country we take into consideration

long range interests in addition to monetary economic considerations such

as investments savings; we want to build up lasting markets with the socialist countries. So development of US Eastern trade is an important pillar

of our business strategy," the vice president pointed out when he was

awarded a decoration of the Hungarian Chamber of Commerce on the occasion

of Hungarian Day in Chicago for his successful work in aiding economic

cooperation between the two countries.

Are other American concerns thinking along similar lines? If so, how can

we expand the circle of Hungarian enterprises doing business with the US?

In the third and final article of this series I will try to give an answer

on the basis of my conversations.

ö9- k

CSO: o00

12
HUNGARY

ELIMINATION OF HUNGARIAN-U.S. TRADE BARRIERS DISCUSSED

Budapest VILAGGAZDASAG in Hungarian 25 Nov 77 p 3

[Article by Richard Hirschler: "A Common Task: Eliminating Blank Spots in

Trade"]

[Text] "Next year we are counting on Hungarian export of 75 million dollars,

20 million more than this year," our trade counsel said self-confidently in

New York, and these figures include the diligent work of the tiny staff of

the New York and Washington office under his leadership. This spectacular

development could be even swifter if the blank spots could be eliminated.

Hungarian foreign trade could make contact with small and medium size enterprises in America, not only with the big cities of the East Coast but also

with other important regional markets, and bring into business activity—

similar to the Soviet Union and Poland—the honest emigration of their children in those areas where this appears more advantageous. According to

initial calculations the series of programs of the Hungarian Chamber of

Commerce represents serious progress in this sense.

"Is it not to be feared that some American enterprises turn from trade with

the east because they would be forced to make greater efforts on socialist

markets?" I asked the man best suited to answer, A. Reich, chief of the

east-west trade office of the Department of Commerce in Washington.

An Active Office

"According to the most recent statistics the socialist trade of the US will

decrease by the end of this year by 25 percent as compared to last year and

will not reach the 4 billion dollar level. (According to experts the decrease this year in deliveries of grain and fodder played the greatest role

in this and a significant increase in the export of agricultural products

can be expected against for next year.

13
"One cannot generalize. It is certainly a fact that several enterprises

trading 'from fashion' have dropped out and that trade has lost the sparkle

of the early 1970's. But interest continues to be lively and our office is

more active in the sixth year of its operation than ever before. We exist,

I and my 100 colleagues, primarily to aid American firms on the socialist^

market; we facilitate their work with market information and concrete business advice in addition to organizing business trips and exhibits. But we

see clearly that foreign trade goes both ways and the Washington center,

together with our 43 offices throughout the country, is ready to aid Hungarian

businessmen—buyers and sellers—in market organization, market research,^

trade technique and other questions," the American government official said.

In any case, the Hungarian enterprises need not feel that they are alone in

the US; our offices in New York and Washington, the American contacts of

the Hungarian Chamber of Commerce and the US division of the HungarianAmerican economic council are all ready to guide them in the jungle of American regulations.

The Legal Labyrinth

American businessmen also recognize that it is difficult to get a footing

in the market without a lawyer who is well acquainted with local regulations.

(Several experiences have shocked our enterprises; it was in vain to sign

in advance in long range contracts for the annual amount of Hungarian export

because the cooperating American partner simply would not take it, saying

that the market had narrowed and the products could not be sold. Since they

had done everything for the sales they denied their responsibility.

It is an American speciality; perhaps no where in the world is "product

liability" so wide-spread as in the US. For example, a party suffering from

a highway accident can sue an autobus factory and can demand payment for

damages from the manufacturer of a design considered faulty, which caused

the accident. It is not by chance that the insurance companies will assume

responsibility for a product only for a high fee, often reaching 25 percent

of the value of the item, which can cause many deals to fall through.

These few examples call attention to suitable caution and a basic knowledge

of external conditions but should not prompt a neglect of the American

market. "Many Hungarian enterprises simply are not aware that it is not

only the large international multi-nationals which are operating in the US,

that the smaller firms specializing in the manufacture of parts and accessories could be good cooperation partners," said Lajos Schmidt, one of the

leaders of the largest international law offices in the US, the firm of

Baker and McKenzie. He has sufficient experience in this area—he is a

member of the presidium of the Hungarian-American economic council—he knows

our enterprises and has taken a lion's share in organizing the Hungarian

Days too.

14
It is not only the smaller enterprises which represent blank spots for our

foreign trade in the US today, even geographically there are great areas

where—to put it somewhat pompously—the Hungarian presence is not yet

felt. Just one example: the annual export of the state of Illinois comes

to 9 billion dollars, together with nine other mid-western states in its

zone of attraction it accounts for 30 percent of the industrial production

of the US and its 56 million consumers control 27 percent of the disposable

income.

Undiscovered Regions

The state department for industrial affairs actively encourages the export

and import activity of Illinois' small and medium size enterprises; it

sends economic delegations abroad, organizes exhibits and offers financial

support for all this. Another of our countrymen away from home, Miklos

Pogany, participates directly in this work. So far he has had no contact

of any kind with Hungarian enterprises although, as he said, he would be

most happy to participate in building up Hungarian contacts for Illinois

firms. An invitation to the Hungarian Day in Chicago was already on his

desk and after his return a brief announcement by MTI gave the news that

the state of Illinois was sending an economic delegation to Hungary.

So the matter had a fortunate continuation but the question necessarily

arises: How many such undiscovered regional markets hide in the US? And

a second follows immediately after: How many such well intentioned, honest

former countrymen work in key areas of American business life who would be

glad to participate in the development of bilateral contacts if they had

an opportunity and if we sought the paths leading to them? (Naturally we

should not forget that in certain areas a first generation agent or representative could be a disadvantage too.)

To Know One Another

Of course, our American partners must overcome a number of prejudices too.

To speak of only one: The little film titled "What Makes Us Tick?" reporting on our economic and social achievements aroused universal recognition

among the many attending the Hungarian days.

One businessman in Chicago expressed his amazement: "We must learn from

you how to make such an effective 15 minute information film in which not

one word is spoken." The road to overcoming prejudices and unjustified

reservations leads through a closer binding of economic contacts.

Multilateral cooperation could also contribute to an elimination of bad

conditioning. This is a slow progress but there are increasing signs of

its certain development; there were gratifying developments even after my

return home. MOGURT [Foreign Trade Enterprise for Motor Vehicles] sent to

15
America the first model of the coachwork for the Ikarus hinged bus and buses

manufactured through Hungarian-American cooperation may soon appear on the

streets of large American cities.

The other news item was that all the detailed questions have been cleared

up and we are on the threshold of signing the most significant HungarianAmerican machine industry cooperation contract of all time, which will not

only considerably increase the value of our export but which will also

bring a real qualitative change in trade between the two countries.

Let me conclude the chronicle of my American conversations with the warning,

often heard in the US, that Hungarian enterprises can find a footing in

the American market only after careful preparation and by showing suitable

flexibility. The extra work, as the above examples show, will amply repay

the enterprises later, as it will the people's economy too. It should not

be forgotten that we need to struggle not only against the discriminative

duties; we must also strengthen our export positions in the most significant

economy of the world if we want to obtain from the United States more modern

technology and machines in addition to soy and other agricultural products.

8984

CSO: 2500

16
POLAND

PAPERS DISAGREE ON CAUSE OF ECONOMIC PROBLEMS

Personal Faults Explanation of Difficulties

Warsaw ZYCIE WARSZAWY in Polish 19-20 Nov 77 p 5

[Article by Monika Mrozowska: "I Don't Believe in Mechanisms"]

FTextl When I wake up at 5 in the morning I manage until somewhere around

6 to set down a plan of ambitious acts, a list of important things worth

undertaking, responsible subjects. Then I get up, my teeth chattering

with the cold, because the remodelling or replacement of something there

in the heating equipment is taking not the 2 days promised by the management in the written notice but 2 weeks now. Then I heat the water to bathe

in for the reasons given above, and later go after the milk, because the

lady who delivers the milk seems to have been given something more urgent

to do.

And so slowly I begin to be inclined to put off the great issues until

later and first of all to take up a couple of minor matters, another phone

call to the management to ask about the water and the heat and getting

the shop to tell me just what has been going on with my milk. Although

basically I can spare myself this, because even so the management entertains me with a laconic reminder about difficulties "in the area of the

pipes " and the woman in charge of the shop asks me if perhaps I have not

heard what informed people know, that there are employment problems. And

every citizen aware of the extent of the difficulties backs down an

respectfully submits to the force of the arguments used on the scale of

the national economy.

Now here I have a yen to say: Nix! The national economy does not have

anything to do with the irresponsibility of the house manager, who could

have told us right off that it would be cold for 2 weeks, instead of just

trying to avoid the issue. And employment policy has absolutely nothing

whatever to do with the unconcerned attitude of the shop manager, who

senses no responsibility for the woman who delivers the milk and did not

even put herself to the trouble of trying to interest her in fulfilling

her obligations.

17
If the cheese plant driver thinks the store managers should be delighted

that he came at all, because he really did not have to, and if he had not,

even then the world would not have fallen apart, then what has this to do

with the conditions in the raising of dairy livestock, the fodder situation

in our country, and wholesale prices? And in the line of housewives

waiting for cheese there will be a grave discussion about the serious

situation in the milk industry, which is suffering shortages of raw material for cheese production.

Let us not be taken in so easily, because it is simply untrue that without

lifting a hand, that any mistake can immediately be rectified by employing

mechanisms to make various areas of the economy work.

All right, it does happen that the whole mechanism is set in motion for

a small thing. I can understand that when the head of a chemicals factory

forces me to be happy with Antyk dish-washing liquid instead of Ludwik I still do not

know if it is better, although surely even at first glance it is more

expensive, perhaps this can be explained by some sort of mechanisms. Whether they are correct or not, I do not know, but surely simply in passing

I would not mention it to him. But if the taxi driver changes his mind

when we are half way there and throws me out of the car, and the drunken

porter in charge of the sleeping car does not wish to wake me up, what has

this got to do with the mechanism of the functioning of transport in Poland

or rolling stock problems?

One physician from the emergency department to whom apologies were made

for his having been called by mistake to an accident which turned out to

be trivial answered that after all his basic duty is to go to attend

patients, and another from the threshold gives his opinion of hysterical

people and various others who do not respect his difficult, responsible

calling. And we think long and hard before we phone the station manager

or heaven forbid write the newspaper, because they are ready right away to

point out how complicated the mechanism of the functioning of the public

health service is, how upset things are owing to the unsettled situation

with imports and on the investment front, and what with the classification

tables and so on, and all the while we are putting spokes in his wheels.

If the head of the local municipal transport changes the bus routes on the

residents of the area without asking them for their opinion -- and there

are ways of doing this, really -- what sort of special reasons are there

for justifying this situation?

There is a common swear word meaning extreme aggravation, one which we

cannot put in the newspaper but best fits the state of mind following

encounters like this. We could find dozens of completely obvious instances

of nonsense, instances of neglect no mechanism or system will put an end

to and which can immediately be pointed out without any danger of violating

the principles of respect for jurisdiction or' higher expert instruction.

18
The institutions of higher education practically stir up commercial subjects, but trade, which is aware of the cooperation problems of industry,

the situation on world markets, and the inadequacies of the network of

shops and their own difficult fate, produces a paper on economics in

response to just about every accusation. But if in a given shop the

clerk considers in a friendly way which color of blouse looks best on me

but in the one next door the. bored saleswoman stares at the ceiling instead and leaves me to solve the problem of what to do with 1,000 zlotys,

please do not treat me to a serious discussion of politics.

With just these dozens of the most stupid and annoying matters it is

easiest to lose one's wits and become buried, so that one does not have

enough breath or perspective left for the things of real concern which

merit special effort. You can always find dozens of responsible, thinking,

principled people ready to bring out the heavy guns, which is not at all

appropriate. And you can always find some large group of people ready in

any large matter to strike a small bargain, go for a ride like the proverbial

fly on the steer, and then wipe the sweat from their brow and jabber about

objective difficulties.

Of course, the economy, the whole state system in general, is too complicated an organism for building as a whole from separate parts not to be a

serious sir. of simplification. We need not convince one another that the

view of everything separately is an unforgivable error, proof of ignorance,

and the reason for failure to comprehend the various complexities and

twists and turns in our development. Except that these very examples,

which were discussed at the beginning: irresponsibility, indifference, and a

sense of immunity at various levels and in various areas, as revealed in

great disorder and universal inability to handle the simplest matters,

must be viewed separately. Really, they are not worth fitting into any

whole.

Generally speaking, in assessing the most varied phenomena of our life,

we have the tendency to oversimplify things. On the other hand, in the

most obviously simple matters, we make things excessively complicated,

we confuse things, we find contexts and implied meanings which just are

not there. Although perhaps this very complication of things is simplification, because it relieves us of the task of sensible reflection, of

pounding our fist on the table, of the most common execution of duties

and order, which by no means need the intervention of authorities at the

highest level, of high-ranking resolutions, or strategic decisions.

19
Inadequacy of Non-System Explanation

Warsaw POLITYKA in Polish No 48, 26 Nov 77 p 2

[Commentary by Jacek Maziarski: "Guilty Sorceresses"]

[Text] "We need not convince one another that the view of everything

separately is an unforgivable error, proof of ignorance, and the reason

for failure to comprehend the various complexities and twists and turns

in our development," writes Monika Mrozowska in the article "I Don't

Believe in Mechanisms" (ZYCIE WARSZAWY, 19-20 Nov). At this point the

careful reader has a right to believe that Mrozowska is making a fool of

him, because after all her entire text contradicts this statement. It is

a disarmingly frank proposal of a different view.

In Mrozowska's opinion the most diverse everyday irritations and failures

in our life, for example, lack of hot water, delayed milk deliveries, the

indifferent attitude of the emergency doctor, and so on, are simply the

result of ill will and defects in the character of the various employees

of the services sector. The author of "I Don't Believe in Mechanisms" does

not want to hear about employment probier^ in trade. For her there is no

relationship between the lack of staff and the delayed milk delivery.

"Let us not be taken in," she says with preacherlike enthusiasm. The

shortage of pipe does not justify the actions of the director of the housing administration. If he had had more good will, hot water would have

no doubt been gushing from the faucets.

In Mrozowska's view, the cause of the trouble is to be found in the dark

recesses of the human soul. If you shake somebody up, the evil will fly

out and from then on Mrozowska will be able to enjoy her milk in the morning.

The article "I Don't Believe in Mechanisms" is a curious attack on dialectical causal reasoning on reality. Mrozowska simply rejects socioeconomic

causal mechanisms and boils everything down to good or ill will. Therefore, if among the physicians in the emergency department there are instances of behavior which shows disregard for patients and work, we should

not bother with any sort of mechanisms or causes. Disgusted, Mrozowska

rejects as excuses any attempt to seek relationships or contexts. For

her the matter is simple: We need to improve the character of physicians

and not the emergency service.

Mrozowska senses that her theory may draw fire, so just in case she rebukes

potential attackers to make them less inclined to enter the discussion:

"You can always find dozens of responsible, thinking, principled people

ready to bring out the heavy guns, which is not at all appropriate. And

you can always find some large group of people ready in any large matter

to strike a small bargain, to go for a ride like the fly on the steer,

^ud then to wipe the sweat from their brow and jabber about objective

fficulties." Some of this is not too clear. Just what is this "large

20
matter" supposed to be. Has Mrozowska suddenly become the prophet of

some unknown idea?

There should be public opposition to bothering readers with such theories.

It is not even a question of the fact that Mrozowska simply rejects the

materialistic analysis of reality and replaces it with prattle about good

and ill will If she wants, she can even believe that the milk productivity

of cows depends on the actions of sorceresses. That is her business, but

telling people that basically everything is quite simple and that it is

enough to "bang your fist on the table" does not sound nice at all.

10790

CSO: 2600

21
POLAND

AUTÖ PLANT DIRECTOR DIAGNOSES LOW QUALITY LEVEL

Warsaw POLITYKA in Polish No 48, 26 Nov 77 p 5

[Interview with Eng Marian Karwas, technical director, auto plant, by

Witold Blachowicz: "Expensive Tolerance"]

[Text] [Question] My colleagues advised against an interview with you,

saying that I would be encountering dodges and hedges. Where they right?

[Answer] The question is too serious to be able to handle it with dodges

instead of looking for effective solution.,. We talk about this at production meetings, as producers, and privately, as car owners, but it seems

to me that a defect of the numerous discussions concerning the quality of

the products is the focusing of attention on the effects rather than on

the causes.

[Question] Then let's talk about causes.

[Answer] It seems to me that a major cause of the low quality is general

tolerance, mutual absolution for poor execution of some part of the unit

or another, equipment, or a whole series of products. Quite often the

thing starts back at the initial material production phase. Although the

metallurgical goods have all the necessary components, they are often

poorly produced and nonuniform on top of that. For example, forging.

The defect here is inaccuracy of shape, excessive differences in hardness,

and insufficient durability. This testifies to poor hot working. We

find poor quality in deep drawn sheet metal used for stainless steel strip

and brass strips, imitation leather materials, foils, and so on. The

castings are not much better. This causes problems in the plant which

processes such materials and partly finished products, and if it goes on

for an extended period, it develops among workers the conviction that

"...with this you can't make anything good anyway." In practice the final

producer, although he is sometimes at fault too (this applies mainly to

carelessness in installation) faces this alternative: let goods with imperfections slip through, or hold up production for some time and ruin the

plan. The matter is somewhat simpler if the producers of the goods are

in one ministry. Then intervention is more effective. Otherwise, there

22
is no effective possibility for intervention, and the problems are multiplied. But it is particularly bad when we are dealing with a single

monopolistic supplier.

[Question] V7hy is it that using the same components, the same raw material,

you can make a good product one time and "junk" the next?

[Answer] Among some people there prevails the view that state-owned

means that it does not belong to anyone. For some people socialism is

associated mainly with the right to work and the right to social or health

care, and far less with the need for honest reliable work. Carelessness

and failure to adhere to technical and technological norms are creating

increasingly greater losses, because as the years go by the means of production are being modernized. Other causes include the lack of imagination, inadequate familiarity with the production profile, and the belief

that "somehow it will all work out." The effect of this is the still

excessive "unfinished industry," that is, of those plants which have certain basic shortages of machinery and scientific-technical equipment.

In such situations the good intentions of both the engineering and technical personnel and of pure production employees fail to produce results,

because in technology, especially modern technology, there are no miracles,

because if, for example, the production process requires 15 different

pieces of ^luipment, a factor which is determined by the technology, then

the process cannot be run on 12 pieces of equipment, even given the personnel's best of intentions, and overtime will not do anything either.

Of course, I am assuming the whole time that the technology has been well

developed and that there are no mistakes in the "engineering art." It

must finally be remembered that appropriate warehouse support, transport,

and so on also influence production quality, because it is hard to expect

high quality in the final product, if the partly-finished products are

stored outside or in makeshift warehouses, in addition to being transported

by improper vehicles.

[Question] Going back to the beginning, what about investment decisions?

[Answer] Unfortunately, at this stage we are making a number of errors.

At present, for example, priority is being given to so-called modernization investments. This concept has many virtues, but too often it is

treated mechanically.

For example, in contrast to some countries which have appropriately

specialized, flexible industrial construction (that is, halls suitable

for changing the production assets or appropriate industrial installations,

and so on, in them), we basically do not have any such installations. We

must add to this the fact that such steps in our country are usually taken

in an active plant, which as an added factor cannot possible have a positive effect.

23
[Question] Here you touched on questions of the technical preparation of

production and such work organization that will eliminate errors even with

a weak staff. The thing is all the more important in that industry is

feeling a shortage of labor.

[Answer] Theoretically automation is the main thing to rescue us, but in

our industry, given the limited production scale and series repetition,

reduced raw materials base, and so on, full automation is not possible,

because it is too expensive. This is also why a great deal will continue

to depend on man directly and on the application of those mechanisms which

make poor work unprofitable. One of them, a basic one, should be the introduction of strict quality control at the moment parts and subassemblies

enter final production. It is better once we detect an error to hold up

production in the plant producing the given subassembly than later to upgrade the final product or withdraw it from the market.

In relation to direct producers, for example, we could introduce the principle that an employee is not paid for work poorly done, and at the same

time he could be charged for the wasted material. Many of our plants have

a rather modern set-up of machinery and very expensive equipment. The

production of poor-quality goods is a waste of not only this equipment

but to an equal extent, of initial materials, raw materials, and so-called

processing capacity.

[Question] We are always talking about producers, but quality is also

made up of construction ideas, properly set-up work stations, and so on.

This is then the domain of the scientific and technical support of the

industry, engineers, and production managers. To just what extent are

these very groups responsible for the quality problems of the automotive

industry.

[Answer] The judgment is not easy, because construction design is a

special sort of art. Nonetheless, my observations and experience show

that in most instances our designs are correct and usually assure good

quality, within the assumptions, but it does happen that the designer

relies on available material, appropriate assemblies and details offered

in the catalogues by our producers, and sometimes these latter later do

not guarantee their materials or details in terms of either quality or

quantity. Hence, we are often forced, despite the target assumptions, to

import such elements. It is essential to generally tighten up the requirements, to discharge the obligations undertaken absolutely, and even to adopt more severe penalties concerning not only directors but, above all,

employees. It also seems to me that a great deal remains to be done in

the area of monitoring the technical norms in effect, For example, we

must improve the quality of initial materials and partly-finished products.

[Question] Let us get back to personnel...

24
[Answer] A weakness of our engineering-design personnel is rather frequently on the one hand excessive fantasy and the desire to use super-new

solutions which require many imported elements and, on the other side,

the opposite phenomenon, so-called crippling adherence to norms. In the

interest of justice it must be added that rather frequently many of our

designs, successful and proven, in time become subject to various sorts

of alleged "upgrading and improvement" processes, whose authors are sometimes people without adequate preparation or sufficient knowledge. In

many of our plants matters related to rationalization and the introduction

of various sorts of piecemeal changes have taken a bad turn. Each of us

is an advocate of the continual improvement of .designs, technologies, and

various production operations. But this must take place with consideration

given to the whole product, its purpose, useful functions, social suitability, and so on, because in practice it sometimes turns out that savings in

a small sector later produce losses running into many millions, losses

which indeed are usually covered from another "paragraph," but losses nevertheless.

[Question] But how does all this fit in with car production? What sort

of matters most often keep you awake, and is there no danger that such a

situation may turn into chronic insomnia?

[Answer] The thing is operating on two planes. One concerns the future,

the other, current problems and related difficulties. I am most concerned

with matters concerning the new model and future new variations in our

automobile. New designs and new solutions, other methods of production,

the preparation of a machinery hall', the development of cooperating plants,

the desire to plan processes so that the influence of human error will be

as small as possible. These are only some of the matters which sometimes

really do keep me awake. On the other hand, in current production the

greatest worries are caused by subjects such as the following: low quality

of gaskets and subassemblies, the lack of uniformity in their quality,

initial materials which are not always of proper quality, and so on. The

increase in these difficulties comes in cycles. For example, we had problems with alternators, brake clamps, and starters, which previously had been

excellent. We. are doing everything to eliminate this. We are also giving

a great deal of attention to eliminating installation errors, combatting

carelessness, neglect, and thoughtlessness, because often a small inaccuracy

from the standpoint of a dozen and some thousand operations and installation steps, later causes big problems for servicing and for the car owner.

FSO is not a factory built now in open country for the Fiat 125P. We are

a plant which has been undergoing modernization for many years, and this

continues to interfere with the production process. I am not talking about

this to justify the problems we are facing, for after all there was no

other way to develop the plant, but so that we will be aware of the mechanism of this living organism represented by the car factory.

[Question] In your opinion what should be done to make these living

organisms function better and produce cars which people will be satisfied

with?

25
[Answer] The question concerns a matter which is very complex and difficult, especially since in our country often everybody is a physician, an

economist, and author of marvelous concepts, and so on, but with respect

to the issues in the technical realm, limiting it to a certain group of

goods, we can attempt to mention a few important matters. It seems to me

that it is very important to tighten up the quality criteria at the stage

of production preparation, including absolute assurance of materials and

subassemblies for the entire period of production, and later for the extension of the series of goods produced. Then we should tighten up the conditions for taking delivery of materials and provide for strict adherence

to these conditions back during the course of production of the material

and substantial limits on so-called deviations in the course of production.

The use of automation wherever economically possible, economically profitable,

and useful from the viewpoint of technological needs or improvement in work

conditions are the next important issue. Of no less significance is the

substantial improvement of the quality of tools produced, such as cutting

tools, and the development of the instrument support in the various plants.

[Question] So then what can we promise the FSO auto factory customers?

[Answer] These efforts will only bring about a clear improvement, if at

the same time we put an end to tolerating poor work, to the practice of

"getting out of" the blame, hiding behinc "objective difficulties," and

the lack of concern for the plant's good name. Unfortunately, the complete

solution to the problem of quality will not come except in keeping with

an increase in car production, when the consumer market will dictate the

conditions and not the producer's market, as in the past. Many of our

plants owe the good quality of their goods to the hard requirements set

by foreign customers. And here it has been proved that a lack of tolerance

bears good fruit.

10790

CSO: 2600

26
POLAND

PROBLEMS CITED IN EXPANDING CORN CULTIVATION

Warsaw ZYCIE GOSPODARCZE in Polish No 43, 23 Oct 77 p 6

[Article by Jerzy Kucharz: "Fifth Basic Grain"]

[Excerpts]

60 Quintals Per Hectare

Corn, if rationally and intensively cultivated, yields the highest crops

in terms of fodder units, second only to sugar beets. When correct

agricultural engineering procedure is followed, corn grain yields in excess

of 60 quintals per hectare already are not exceptional in our country.

In 1974, when modern comprehensive technology for grain-oriented cultivation

of corn was first applied in the state agricultural farms, average yield was

46.2 quintals to the hectare. At the same time in the state farms of the

Leszno province the yields exceeded 53 quintals per hectare, that is, they

were 19 quintals higher than the yield of 4 basic grains in that area. At

present, private farmers in the Leszno province also obtain an average 60

quintals of grain per hectare.

Poland's agriculture owes a great deal in this area to the scientists from

the Smolice station of the Institute for Plant Cultivation and Acclimitization [IHAR] who have been working for many years on growing high-yielding

corn hybrids. Their efforts were crowned by the introduction into agricultural practice of such varieties as IHAR-260 and IHAR-262. Beside the IHAR

station in Smolice, corn cultivation is the business of the plant growing

station directed by engineer Antoni Jakacki, located in Mikulice in the

Przemysl province, and ZHR [Plant Cultivation Facility] in Kobierzyce near

Wroclaw. Mr. Makacki conducted plant cultivation work in Kobierzyce in the

past and his present successor is agricultural engineer Zbigniew Kurczych.

The plant cultivation station in Kobierzyce, more precisely, corn growing

station, is a domestic potentate. It is here that Poland's only seed production plant is located, annually providing about 1,200 tons of corn seeds.

The Kobierzyce station has developed for the agriculture the Kb-310

27
forage-designated corn seeds, reproduced in cooperation with Hungary and

equaling Europe's best French varieties in quality, as well as the Kb-280

(a universal variety). Recently, the Kobierzyce growers submitted two new

varieties for registration, and they have six others in research stages.

However, the annual seed-production capacity at Kobierzyce is only 1,200-

1,300 tons, while our agriculture currently needs 24,000 tons and it will

need as much as 42,000 tons in 1980.

Demand for Seeds

Up until now corn planting in our country was based in practice on imported

seeds. The domestic production was unreliable since Poland is intersected

by the northern boundary of corn cultivation. However, in recent years, due

to the emergence of difficult climatic conditions for the European agriculture, our suppliers were unable to meet their obligations in full. A

majority of imported seeds is as a rule represented by late-maturity

varieties that give high yields of green mass only. Attempts to acclimatize

Yugoslav varieties in our country have been unsuccessful. Only the corn

seed imports from France, undertaken a fr- years ago, enabled us to break

out from the impasse in domestic production of corn seeds. Of course,

we have not given up the cooperation in seed production with the Soviet

Union, Hungary, and particularly Yugoslavia, where the area of corn reproduction increase every year. However, no less than 10 French varieties are

grown for grain at this time in Poland.

We will not exaggerate by stating that the French varieties imported to

Poland indeed had a decisive influence on the expansion of the acreage of

corn raised for grain. In 1974, the combined acreage under corn in Poland

was 389,000 hectares (including 315,000 hectares in the state farms), but

only about 5,000 hectares were planted with corn for grain. In 1975, 453,000

hectares were under corn, of which 14,000 hectares were designated for grain.

In total crop acreage corn represented 3.1 percent (15.7 percent in the

state farms, and a mere 0.5 percent in the private farms). Grain harvest increased from 11,000 tons in 1970 to 69,500 tons in 1975 (from 1.8 to 55,700

tons in the state farms), while the green mass rose from 5,700 to 17,600

tons.

The present domestic seed production covers a little more than 5 percent of

the demand. In order to increase this capacity independently of the growing

imports, a decision to build new seed facilities was adopted.

The Kobierzyce Traditions

Tiie new seed facilities will be successively established in the following

ocalities: Kobierzyce and Sroda Slaska, then Gostyn or Gola in the Leszno

,,-,,Vl. -e, and Lewin Brzeski or Gracze in the Opole province. Kobierzyce was

28
chosen ultimately because of climatic and soil conditions and its tradition

in growing seed corn. At present, its seed corn plantations occupy nearly

600 hectares, and about 160 hectares of cultivation plots are spread on the

land of nearly 200 private farmers (owing to manual harvesting). According

to the new guidelines, the Kobierzyce facility will have its support base in

the SHR [Pint Growing Station] Polwica, Kobierzyce, Sadkow, Magnice, ZZD

[Zootechnical Experimental Facility] Czechnica, with a combined total of

1,700 hectares. The facility in Sroda Slaska will similarly be supported by

the combined state farm in Chwalimierz, Rakoszyce, Udanin, and Kunice,

jointly 1,800 hectares under corn.

Corn growers started with the assumption that the share of corn in the crop

composition can amount to 10 percent or more. Their position was contested

by the representatives of the PPGR [State Enterprise of Agricultural Farms]

who claimed that seed-corn growing would conflict with forage-corn growing,

since in the designated areas the state farms' cattle stock exceeded 100 SD

[Expansion unknown] per 100 hectares. Moreover, pig-raising stations were

being expanded and the hog population was on the increase. Arguments were

advanced that seed-corn growing would result in reducing grain and oil plant

growing, and, ultimately, the need for importing fodder crops and protein

foods to these areas. Finally, it was claimed that seed-corn growing may

prove economically shaky for the farms because of the low prices and high

risk involved in growing corn for seeds, Which, if actually grown despite

all the objections, should at least be covered by the risk fund (applied

in the production of garden plants) with the price of seed raised considerably.

Conceding that the. last of these claims is to a certain degree justified, as

it was in fact taken into consideration in the governmental decisions, the

previous ones appear at least strange. Everybody, particularly the

practitioners of agriculture, agrees that corn allows us a great opportunity

in the period of accelerated livestock production. Yet this evident truth

is at times screened by old habits and fear of what the "new" can bring.

But this is only a part of the truth. In point of fact, expansion of corn

acreage including seed-corn is hampered by the scarcity of specialized equipment for planting to cultivation to harvesting to storage.

Grain Harvesting—By What Means?

Aside from forage harvesters and field chaff-cutters, available in amounts

that, though still insufficient, can in part meet the most urgent needs of

silage corn harvesting, we are particularly plagued by the lack of grain

harvesting equipment. This was vividly illustrated by last year's machine

harvesting of corn, with 360 [sic; probably 360,000] hectares harvested for

silage and only about 12,000 hectares for grain. It is true that under

these conditions our own Bizon tractors, equipped with a Hungarian device

29
for corn harvesting, proved to be invaluable, but their successful use is

largely dependent on "hitting" the correct moment of seed maturity.

Corn grain, generally containing 30 to 40 percent water, is crushed if excessively humid or bursts in combine threshers if too dry. At the same time,

the number of imported combines and pickers is no greater than several

hundred. In this situation there appears to be an urgent need for the Plock

designers to develop a special version of the combine for corn-grain harvesting. Drying presents even greater difficulties, since, as we mentioned

above, corn grain has substantial moisture content in Poland.

This year our state farms were somewhat better stocked with single-seed

drills for planting corn and sugar beets. Yet their number is still inadequate, which is a problem of considerable importance. In 1976 alone we

spent more than 54 million foreign exchange zlotys to purchase corn seeds

abroad, while their world prices continue to grow regularly. Comprehensive

use of single-seed drills, combined with proper agricultural engineering,

reduces seed consumption: by up to 30 kg per hectare, or nearly one-third

less compared with the current-standard, in grain-designated crops, and up

to 40 kg, or almost one-half, in silage-designated crops.

Until recently, the scantiness of machin. :y allotted for corn harvesting was

not as acutely felt as it is now. Despite the continual expansion of acreage, corn growing was only supplementary: to the traditional fodder base. However, in plans through 1980, corn plantings are to increase from 670,000

hectares in 1977 to 1,200,000 hectares in the target year, including 500,000

for grain crops. An acreage of this order poses definite requirements on

the technology, engineering, and organization, in which equipping the agricultural system with specialized equipment represents only a part of the problem.

For example, we are now importing more than 70 percent of the herbicides

allotted for corn cultivation. We do not domestically manufacture repellents for birds and boars, indispensable in the intensive cultivation of

this plant. Although in 1980 five new valuable hybrid varieties will be

provided by domestic growers and the country's seed production will increase

from the present 1,300 to 12,000 tons, with the reproduction of seeds in

collaboration with the CEMA countries simultaneously rising to 8,900 tons,

we will still have to import approximately 31,000 tons of seed, of course,

in top quality, high-yielding hybrids with a short vegetation period.

Implementation of the government's program of increased corn production

through 1980 involves no less than eight ministries and central-level offices. Additional investment was also allocated for the expansion of a

number of industrial plants: the Agricultural Machinery Factory in Kutno,

and the Agricultural Machinery Combined Plants in Poznan, linked with the

"corn program."

30
The accelerated implementation of the governmental program is manifested by

the signing of a contract with the Austrian company HEID for delivery and

assembly of the first two seed-corn preparing stations of 3,000 tons yearly

capacity each. The Polish partner, specifically the Wroclaw Plant-Growing

and Seed Production Enterprise, immediately set to ground breaking and construction work, using its own crews in Kobierzyce and Sroda Slaska. The

deadline for putting both stations into service with full technology and

production engineering has been jointly determined with the HEID company

for 15 October 1978.

At this time, we can already say that the implementation of the program

is going to accomplish a major permanent breakthrough in the Polish agriculture's crop composition. The term "fifth grain" has already started to

take on a realistic ring.

8795

CSO: 2600

31
ROMANIA

FUTURE ECONOMIC STRATEGY FOR DEVELOPING COUNTRIES OUTLINED

Bucharest REVISTA ECONOMICA in Romanian No 36, 9 Sep 77 pp 2^-25

/Article by I. Barac/

/fext7 In working out the International Strategy for the Third

Decade of the United Nations for Development (1981-1990) it is

natural to take into consideration the experience, results, and

deficiencies of prior strategies, the new world economic and

political-social, conditions, the conceptual evolutions in the economic policies of states, and the research and forecasting estimates

involved, z"l this in light of the needs for building up a new international order, capable of ensuring adequate living conditions

to all the inhabitants of our planet.

Consensus on Major Factors

Any attempt to outline the elements of the strategy for the next

decade of development is a task which is both easy and difficult. It is easy because we already have many points of support

and arguments in the formulation or definition of the various factors of the new strategy. In the last two years alone, important

documents were adopted within UNO's framework. They contain many

objectives for the economic and social development of developing

countries in the following years, even up to the year 2000. These

documents include: the Declaration and Program of Action on the

Establishment of a New International Economic Order (adopted by

the UN General Assembly in 197*0» the Declaration for a More Just

K.r;d Better World (adopted by the World Conference on Population in

1974), the Declaration on the Eradication of Hunger (adopted by the

World Food Conference in 197^)• the Declaration and Plan of Action

on Industrial Development and Cooperation (adopted at the Second

UNOID General Conference in 1975)» the Declaration of the World

Conference on the Utilization of the Work Force, Distribution of

Incomes, and Social Progress (adopted in 1976), the Guidelines

Outlined by the UN Conference on Human Settlements (in 1976), the

UNCTAD IV resolutions (in 1976), and so on.

32
On the other hand, this attempt to outline the objective for economic and social development for the 1981-1990 period and the avenues to achieving these objectives is a difficult task because of

the magnitude and intricacy of this global development program and

the unpredictable factors which might appear. We must take into con*

sideration the fact that the implementation of the next strategy^

and the achievement of the objectives actually depend on the attitudes of more than 100 states.

In examining the stands voiced by various states and groups of

states and the stands expressed within various international economic and political quarters, we may state that there already is a

broad consensus on three, major, and essential components of the

world strategy for development» in the first place, the national

development policies, in the second pla.ce, the expansion of cooperation and mutual aid among developing countries, and in the third

place, cooperation between the developed countries and the developing countries for the purpose of supporting the economic and

social development of the last-mentioned. In comparing this course

with the course which underlay the formulation of prior strategies,

for the first (1961-1970) and the second development decade (1971-2980)

respectively, we notice the tendency to placing a far greater emphasis on the national strategies and the economic cooperation among

developing countries which has asserted itself recently as a new

facet of international cooperation for development. Of course,

this new orientation does by no means diminish the role of cooperation between the developed countries and the developing countries

and the significance of the assistance which the first-mentioned

can and must offer to the lagging countries. However, in a way, this

orientation is the outcome of the debates and conclusions of economic meetings of recent years, which have forcefully pinpointed the

primary importance of the developing countries' own efforts to

achieve their economic and social development and the benefits of

the furtherance and diversification of economic and technical cooperation among developing countries.

Having made these specifications, we shall try to outline the major

factors which, in our opinion, should provide the basic framework

of the International Strategy for the Third Decade of Development

(objectives, projects, and measures on a national and international

scale).

National Development Policies

Why should national development strategies (policies) be part of

an international strategy? Of course, it is not a matter of internationally formulating national development plans and programs for

the developing countries. It is the right and duty of each of these

ruatries to choose its own path of development, to outline its

t,.a:s in the context involved, and to formulate specific national

33
plans for economic and social developments in accordance with the

interests and aspirations of its people. This, however, does not

mean that some suggestions and recommendations on the national

development policies cannot be incorporated into an international

strategy, with, naturally„ each developing country being free to

consider them, to some greater or smaller extent.

The incorporation of some recommendations on national development

policies into the international strategy for the next decade is

based on the similar concerns and interests of developing countries

and on the natural wish of these countries to creatively use the

experience gained in the economic and social development of states

on a world scale.

a. A Few Essential Arguments

In the report given this year to the Eighth Special Session of the

Council for Trade and Development, UNCTAD secretary general

Gamani Corea pointed out the needs for incorporating into the international strategy for development a first chapter on the national

policies involved, with emphasis on the essential ideas. In the

first place, it involves the fact that although between the

developing countries there is a wide diversity in terms of their

types and strategies for development, these coutries nevertheless

have many points in common. As a result of historical development,

most of them were colonies, and therefore their economic structure

was oriented so as to ment the economic needs of the colonial

powers and not the needs oi their peoples.

In the second place, economic dependence on the former metropoles

resulted in the genesis and preservation» in many developing

countries, of obsolete institutional structures which hamper the

occurrence of economic and social changes. This dependence has resulted in the delayed transformation of society in general and in

an economy only capable of meeting the elementary needs of the

people.

In the third place, because of the vulnerability of the development

process which is dependent on foreign economic exchanges, a vulnerability which has also made itself felt in recent years, many

developing countries have been encountering serious difficulties

in consequence of the crisis phenomena in world economy (the economic recession in developed capitalist countries, the price fluctuations on the world market, the changes which took place in economic and trade policies of Western countries, and so on).

In light of these factors and of the conceptual deficiencies of the

strategies used so far, in the developing countries there has been

a growing need for strategies which should permit their overall and

harmonious economic and social development, the strengthening of

34
their economic independence and security, and the reduction of

their economic dependence on the developed countries. For this

purpose, the developing countries must seek new avenues and forms

of development based primarily on national efforts, with foreign

assistance only supplementing the domestic resources.

b. Orientation Toward Reducing Dependence

In order to reduce their dependence on the developed countries,

the developing countries must use strategies which ensure the effective and full mobilization of their material and human resources, including the development of their national scientific-technical

potential. To this end, in many developing countries economic and

social institutional reforms are needed. Therefore, the Strategy

could provide for the decision of the countries involved to work

for the completion of agricultural reforms, for a better distribution of incomes, for the adoption of regulations which protect their independent economic development, and so on. These reforms must make it possible for the countries involved to fully

mobilize their resources and wisely and effectively use these resources so that they may achieve a radical transformation of the

economy of the country involved, the modernization of the structure of this economy, and the provision of benefits for all sections of the population»

Of course, a strategy for development based on greater economic

autonomy and lesser dependence on the developed countries does not

mean a tendency toward autarky» However, it is a matter of accomplishing specific radical changes in a number of countries, in the

economic structure and in the geographical orientation of trade

exchanges. The mobilization and effective redistribution of resources in favor of productive activities focusing on meeting the

domestic needs of developing countries, will, in the opinion of

UNCTAD experts, result in structural changes in production and

consumption and in the pattern of exports and imports of these

countries. Furthermore, their orientation toward a strategy of independent economic development will result in brisker exchanges of

goods and services between developing countries and this will help

to pinpoint their major prospects for mutual aid in doing away

with their condition of underdevelopment.

On a world scale, it is now being assessed that a strategy of independent development is indispensable for meeting the essential

needs of developing countries. The Program of Action adopted at the

World Conference on the utilization of the Work Force in 19?6 the

idea was accepted that the satisfaction of the individual's basic

needs (food, dwelling, health, and education) must be one of the

fundamental elements of national development policies. This pressing involves the considerable increase in the industrial and

agricultural-food output, the development of infrastructure and

nocial services, the democratization of education, and so on.

35
In light of these considerations, the chapter on the national development policies of the International Strategy for the Third

Decade of Development 1981-1990 should specify that each developing country should formulate, according to its specific economicsocial conditions, national strategies and plans which include

objectives for economic and social development and the methods f°r

achieving the objectives involved. These objectives will focus on

the increase in the country's productive forces, the diversification and modernization of the economic structure, harmonious,, w^Jl»

balonr-«-], and rapid growth of all the economic and social sectors,

and the growing satisfaction of the people's living requirements.

c. Rates for Reducing Lags

In regard to the rates required for the more rapid achievement of

the objectives, we feel that it might be necessary in all developing countries for the gross •-^tional product to increase in the

1981-1990 period on the average by 8 percent yearly (versus 6 percent planned for 1971-1980) and the per capita national product,

on the average by 6 percent yearly (versus 3*5 percent). If these

go air will be achieved, the Ir-ud of the developed countries

'-vprthe developing countries might be reduced from 13:1 now to

under 10:1 in 1990.

The attainment of the above-mentioned rates of increase in the

national product involves greater efforts of all developing countries

to increase their industrial output on the average by 10 percent

a year (versus 8 percent planned for the second decade of development) and their agricultural output by 6 percent (versus 4 percent

anticipated for the 1971-1980 period). If each developing country

increases its agricultural output on the average by 6 percent a

year, food security for all the people coud be ensured, respectively a minimum of 2,500 calories and 100 gr proteins a day. As for

the realism of this goal, we emphasize that according to international statistical figures, only about 45 percent of the agricultural lands in developing countries are utilized and in 19?4

the average per capita grain output was only 201 kg versus more

than 1,000 kg in the United States.

Moreover, the increase in industrial facilities and the modernization and diversification of industrial production would permit the

boosting of exports of manufactured and semi-finished goods by

more than 10 percent in many developing countries. In this manner,

the proportion of these products in the total exports of developing

countries could increase on the average by 2 percent every year of

the next decade. This would permit a more active involvement of

these countries in the international division of labor and in the

world economic flow.

36
Tn lieht of the importance of modem science and technology as facers ofdevelopment, the developing countries must pay speclal attention to developiAg their scientific-technical potential, rapidlv inducing the modern scientific and technological gams in

Production? adapting the new techniques to the specific conditions

in these Countries, upgrading the domestic technologies, advancing

thP technical and qualitative standard of all economic activity.#

In order £ increase the number and improve the training of specialised cSLes, the developing countries must take firm steps to eradicate illiteracy, develop all forms of education, organize it on

scientific basis and connect it closer and closer to the gams of

development, for the democratization and upgrading,of public educaUonfand for including all school-age children in one or another

form of education.

The achievement of the above-mentioned objectives primarily depends

on%he domesUc efforts of the developing countries. This involves

xLr o-D+inr for the financing of their economic and social programs. ?or In accumulation rale appreciably higher than the 20 perppnt anticipated for the Second Decade of Development (1971-1980;.

T^fmaintenance of this rate, however, could °^ P^*^^

nf^t 14.-6 percent for the national product. In this context, the

w' of the developed countries eve-the developing countries

instead of diminishing would increase .even

more

a"

1* "Jhi ^SSes

verse effects on the economic and social progress of the peoples

involved.

Tr stepping up their efforts to reduce the Lead of the world's

dp4lo??d rountrie? over them, the developing rountrier, also must

work to eliminate the excessive discrepancies in the distribution

o? incomes between the various strata of the population. According

to statistical figures provided by the World Bank, in most of the

developing countries, one-fifth - the richest - of the population

,yn!is itself of 55 percent of the national income, while the

poorest one-fifth receives less than 5 percent. Moreover, a recent

PAO survey shows that one-fifth of owners — the richest --of lands

have 50 or 60 percent of the arable lands. Hence, it is estimated

that 40 percent of the population in developing countries is very

little involved in the growth of the national economy and does not

receive the portion of this growth to which it would be entitled.

Therefore, the reduction of the lead of the developed countries

over the developing countries and the more equitable distribution

of the benefits of growth on a domestic scale, so that adequate

standards of living would be ensured to all the population of our

planet must basic objective of the Third Decade of Development

(1981-1990).

iVio

:S0: 27 C

37

-----------------
ROMANIA

EVIDENCE OF IKtEEASE IN PERSONAL INCOME EXAMINED

Bucharest R2VISTA ECONOMIC:A in Romanian Ko 3o8 9 Sep ?7 pp 6~?

/Article by Dan Popeseu/

/Text/' In the mining industry e a siner with a net base pay of

3,000 lei monthly after the first stage of ps,y increase receives

a plus of 750 lei„ that is a r..onthly pay of 3»75G lei«

In the Machine building IndustryE a foreman with a net monthly income of 2C860 lei after the first pay increase receives a plus of

506 leic fat is a monthly pay of 3 »366 lei«

In the ferrous metslinrgical and coking chemical industry the pay

increases in the first stagn range from 265 to 5®^ lei for skilled

workers and from 196 to ?80 for unskilled workers0

A twon employes vxth a net pay of 29ö20 lei8 with three children

to supports until 1 September received iiO lei in allowance for

the third child 0 In the new eonteictp he receives an allowance of

375 lei and when the full increase is applied he will receive an

allowance of k-ZrJ lei„ hence 265 andc respectively* 310 lei moret

Added to this increase is the rise in the pay which may go up to

522 lei» Consequently,; as a result of these factors alone his family budget increases hy about 800 lei a month»

Proceeding froa the direct link which exists between the greater

qualitative and quantitative growth of the economy and the growing

improvement of the iivinr conditions of working people and assessing the results of this five-year'plan„ our party and state leadership this year took measures to additionally increase the pay and

other incomes and the standard of living of the people« By its

important features and by its provisions which have begun to materialise (, the program adopted reflects the new and significant

scale of the party's constant concern to improve the material and

spiritual ^ell-heing of all the people0 to raise the level of civilisation of our societyE/ and to provide new conditions for the

fullest possible assertion of hunan individuality«,
We shall try below to examine a few aspects of these lofty goals

which once more highlight the vigor of the Romanian economic growth

and the warm humanism of the entire policy of building a multilaterally developed socialist society in our country» We shall

focus on a basic facet of the improvement of the people's standard

of livings a complex indicator which #ir®ctly or indirectly reflects all of Romania's economic-social development» namely the

increase in working people's incomes«

A significant factor of the projects undertaken by our party and

state for the improvement of the material and spiritual well-being

of the people under this five-year plan primarily involves the

superior basis which underlies the important increase in the working people's incomes. In order to illustrate the dimensions of

this basis we must point out that during the 1951-1975 period the

real pay increased by a factor of 4-.8 and the total real ineoses

of the population, by a factor of 6.4. The last 10 years of this

period were the major factor of this increase. The approach to

increasing the people's incomes by proceeding from this high level

fully attests the profoundly scientific party policy of economic

development» aiming at combining the present and future interests

of working people and spotlights thj value of the great structural

changes under way in our economy«

In regard to the rise in the working people's incomes under this

five-year plan, the comprehensive nature involved is outstanding»

All the categories of working people are thus entitled to the

pay increase. Moreover, provisions have been made, in relation to

every working person, for a significant increase — 33 percent —

in the average real incomes of the cooperativized peasantry and

for a 16 percent increase in the real incomes of the peasantry in

the noncooperativized areas. Furthermore, provisions have been

made for a significant increase in the state social insurance pensions — 23»3 percent, also for a 20 percent rise in the pensions

of cooperative farmers, and for the establishment of a pension

system for peasants in the noncooperativized areas. These projects

clearly reflect the constant concern of our party and state for

providing all the people, working people all over the country, with

higher incomes and thereby better material and spiritual standards

of living»

A^significant factor in this context of concerns for improving

the people's standard of living involves a greater rise in the pay,

in the direct incomes of working people, than anticipated original*

ly in the five-year plan (Table 1).

The change — in favor of direct incomes — of the relation between

these incomes and the incomes resulting from the social consumption

• !T..;;y does not diminish the role of social funds as an important

source of improving the material and spiritual standards of the

people» Against the background of the serious social phenomena

Vv.iieh ;y evailed in former Romania — illiteracy for about one

qi-rte. of the country's population, lack of adequate health care,

39
ravaging social disc-- ecay and so on whose„ eradication . ,„.__ meant „„...„ a_

sad Inheritance in Ida country* s progress along the road of the new

society ana in the conto:

.4..:,

c of the- requirements for raising human

standards u-v.k:;:- soe5a liea to a far higher level and of the needs

for the multilateral realiaatS.on of the human individuality» the

social, consumption fuutc have been significantly growing«, For instance s it is signif5.o?nt that coring the 1951-1975 period, the

per capita ? ^cial-ca' tare1, expenses went up by a factor of 11»

under this five-year plan IPs state expenditure for the social needs

of the people stance at Y,'.^6 Pillion iei„ about hhA percent more

than under the prior five-year plansTable 1. More Rapid Increace in Weaning People's Direct Incomes

Increase

1^80/1975

indicator

Five-Year Plan Current

Level Level

Average net nominal pay of personnel

Average real pa3^

Real income

for each working persor

of peasantry

29*5

18-22

20-29

38

30.2

30

Undoubtedly, in the context nf reaching these high levels for the

social consumption funds, the greater increase in the pay, in the

direct incomes of working people is fair and stimulating. In the

spirit of socialist ethics and equity it wore closely relates the

incomes oblcinec fron everyone's oxra activity to the importance and

characteristic of the worn donot to its degree of skill, and other

factors» hence upgrading everyone's efforts to improve one*s training

and perform v/ith utmost energy for the exemplary fulfillment

and overfulfilment of one's tasks«

tue significant overall increase in the pay

:-it of socialist ethics and equitye the rise

Against the backdrop of

and incomes, in the spi

in^the_pay of working people was formulated with the"focus on the

natural need for the wisest possible consideration of the pay in relation to work, to the direct involvement of each individual in the

development of the economyt Kencep provisions have been made for

the greater increase in the base pay of working people in the mining

sector, building-assembly, metallurgical, machine building, chemical,

textile, and leather industries and in the pay of workers in cement,

sugar,_and oil factories, in the pay of assemblers and operatives

°T" «SJ^Pras-n-fc on construction sites, in economic branches and sectors

with rougher joos, characterised by a significant involvement in the

progres ox tee economy. Moreoverf in light of the important role

of foremen in prodv, ',': on 'cnev hace been transferred to the category

40
of productive personnel, with the greater base pay involved.

As early as 1 July 197? large groups of working people began to receive higher pay in the first stage. For instance, as from 1 August

the pay of workers in the mining industry was increased — 20 percent, the highest percentage of rise in pay for the entire economy,

and the pay of workers in the machine building and metalworking

industries, 17.7 percent. Throughout the five-year plan in these

two sectors the total increase in pay will be 35 percent and 31 percent respectively. The beginning of this month saw the increase in

the pay of personnel in another important economic branch, ferrous

and coking chemical metallurgy. It practically was the doublii^ of the

average pay in this branch as a result of successive rises in the

last 12 years and under this five-year plan -there will be an 18.8 percent pay increase in the first stage and 33 percent for all the

five-year plan. According to estimates, about 3.5 million people

will receive the first pay increase by the end of this year and all

categories of working people will receive this increase by 1 September 1978. Moreover, we must emphasize that in addition to the

increase, the rise in the pay also involves the promotion of personnel to higher levels and grades, the granting of the seniority

increase, the extended use of the o"erall contract system, and so on.

These are accomplishments which musx provide new and important opportunities for mobilizing working people to fully implementing

the production plan, for each individual product, to turning

out extra outputs of great economic use, to continuously raising

the technical level of production, to improving output quality, to

more significantly raising labor productivity and cutting materials

expenditure and operating costs. Because the source of greater increases in the pay and incomes anticipated precisely involves extra

outputs, the planned reduction of investment expenditures, and the

sharper decrease in the material and financial efforts required for

obtaining the output. In his recent speech given in Brasov the party

secretary general stated: "We must not forget that the society which

we are building is accomplished only by work, by the concerted efforts of all working people, regardless of nationality, that it depends on the manner in which all our people will act to implement

the development program."

The concern for the young generation, for its growth and development

significant^ pervades the efforts of the party and state to improve

the standard of living of the people. The facilities provided to

pregnant women, the thousands of specialized health care units, the

hundreds of thousands of additional places in day nurseries and

kindergartens, the modern schooling system which is expanding increasingly, and the comprehensive cultural programs are telling

expressions of the party policy of furthering family well-being,

a healthy material and spiritual climate for the molding of the

young generation. As emphasized by Nicolae Ceausescu, the ensuring

41
of the raxs;in,? of T,.:l-V h physically and spiritually

, . ^ .

:;; r':f "tii© highly responsible

wort, ol cw^crr^vr.-.f,,' >•»?.-.:-,:y to ? - ^ -,r; the future of our socialist

nay.ion and it.-; progres.? irjorgh rrre,--r'3ors who are capable of

raising it to the high prrhr of eornrnisiVie"

A faoet_of thir content iv^lvAc-- the granting of the state allowance

ior chiic/rens vve auovv.:-^ for pot^ro of large families, and

.''o care for the youngest eigne! 1972 the state allowance

Le the granting system was

other alloreeoe^ r'reJ* fotixens of tile coi'r t<rn li

for children irerareer; ;-;:-

also upgraded.. Thn_P,o£rar ror j,,vereine; the Pay ancfother Incopies, tiäö Standsro of joving ox the pn-y.&tion under the 1976-1980

*xve~Year Pian pr-c--;.-?...- pv; ^ en;ro.f5oant ri??e in this allowance and in tne above-i,--ej en-p njloerarees and a new and major

improvement in the granting- meteen

For instance, the sine erlerne-ee for children will increase, on

tiae averagep j>0 perlen-; orler th- fire-year plan* Half of this increase will occur so fror 1 fnphv v.-. 1977 ana t}ie other half

curing i9?y* Toe^upgrading of th grertirg system is reflected in

ehe fact pa». ineaer t*o eierr-\t y/r:visions the number of the families wnich qualify for this nrrertant cash allowance from the

state will increase considerably (Table £).

Table 2. Change of Cor;, Inne- for Granting the State Allowance

for Cnxldrsn

The granting of the state

allowance for children 5.n

accordance with the prove

sions in force tn> to'

1 September 19?7'"

The granting of the state

allowance for ch.ilore?.-* in

accordance with the mrv

provisions

Ceilings of Wet Monthly Incomes

._-_-„___„ jin Lei)

U'9_t;o_2126 2126^2600 2601-3400

The allow- The allowance

ance was was received

received beginning

beginning with the

with the third child

second

child*

= i-u'.j categories of personnel receive

^axioereaoce beginning with the first

lie '•"'•'

1:} O f '1.1 OV, ane e

lO f:' "2 *

:

) f* r> '

<1 *~- v;. .;„ red.

b: g-tjninp

x:: V.j. it the

jT* ." r» \'{ ehiid

* With the exe'eptior o 1 n 1cremen

** Taken into consideratic

coses of 3-^00 lei in hi

not increased in tire f;

personnel who X. vS • : \%; j V

eo ranii-iiss ceiling of monthly ino.f personnel with the pay still

-go and of 4000 lei in the case of

increase in the first stage.

L?
The overall scale of the state efforts to support these provisions

is reflected in the 3 billion lei additionally appropriated annually

for this purpose, including more than two-thirds for the general

increase in the children allowance. These are superior conditions

provided by the state for the raising of the young generation,

which directly help to upgrade family well-being. In its turn,

the implementation of these provisions involves joint efforts to

fulfill and overfulfill the tasks on every job.

Our socialist economy is a planned one whose development is fully

substantiated, in the context of strict control and proper supply

in all sectors. This provides a fully material basis to implement

the provisions for the rapid increase in the pay and incomes of

working people. On the one hand, the increase in incomes is accompanied by the quantitative and qualitative rise in the output

of consumer goods and by the expansion and upgrading of services,

sectors in which tasks which are greater than those under the fiveyear plan are evident: from 4?.5 percent to 52.1 percent and from

68.6 percent to 75.3 percent respectively. In other words, on the

basis of these guidelines, both on an a priori basis and in the

course of the implementation of the plan, the solvable demand is

balanced with the volume and structure of goods and services supplied to the population. On the other hand, specific tasks of reducing operating costs are outlined.

In this manner the state ensures the maintenance at the determined

level — and even below this level — of the prices for consumer

goods. It is significant that last year, versus an increase of

1.6-2.3 percent in the price index, this index only went up 0.9 percent; during 20 months of this five-year plan the price increase

was almost 1 percent below the forecast for the period involved.

This balance, this stability in the country's development — characteristic features of this development and not circumstantial

effects — make it possible for working people to directly benefit

of the results of their work and tangibly and fully benefit by the

party policy of improving the standard of living. While in countries

of the capitalist system there is a strong slowdown of economic

growth, while inflation endemically accompanies recession, seriously reducing the purchasing power of the masses, and while in these

countries there is a high unemployment rate, the measures taken in

our country to rapidly increase the pay and incomes of all categories of working people, with tangible and comprehensive effects

in improving the standard of living, even more forcefully highlight the superiority of our socialist relations of production,

the durability of Romania's socialist development, and the country's

radiant present as a basis for brighter and brighter prospects.

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43
ROMANIA

PEKFORM/.rJCr:, ItHSprp"ir;.ulTIRS o? TLAHSFORT SECTOR REVIEWED

Bucharest LUi'TA CFh in FPranian 12 ftov 77 pp 1-2

^Article by Er.gr _ Conetant5.n lancip chairman of the Committee of

the Union of Trcco UiP.ono in Transportation and Telecommunications/

^Text/ The bre-tllngi^ gl-.-.lir <rrt;i inee" toy the 11th Party Congress

also involve greater and higly responsible tacks for transportation and telecoi*iau5i.ic?:.ti.ons trade- i^ions. In the light of these

tasks:., f the plenary session of ovx union recently examined the performance of trade union bodies and organisations in mobilizing

working people^in the tranrportatioxi and telecommunications sector to completing the plan assignments for this year and preparing

the conditions for the in; lenortation of the 1978 plan. This was

another opportunity for highlighting the accomplishments of our

trade union organisations u'.-ioh., under the leadership of the party

organizations, have managed to hotter organize the socialist emulation and urav^ the r>ase. ofp/crking p*~pie into promptly and proficient.! v ha-oaj.ing^ the intricate problems of the transportation

and telecommunications see tor» Central goals of trade union work

involve fully nesting the transportation needs in implementing the

service^p.'.an, increasing efficiency by raising labor productivity

ana ^ cutting Materials erpend:* tare and fuel and energy consumption,

continuously improving quality reflected primarily in traffic reliability and t^f^ty« and bot Jar utilizing the facilities. These

goals are inrertrirr-d vr.th fira efforts to carry out the measures

outiined^by the party for the continuous improvement of the stanaardof living ana for the satinfaction of the constantly growing:

social requtransnts of v'orhing people,,

ine iruitful en forts of Kost trade union bodies and organizations

is reflected in the fact that the chief indicators of the transportation and teleeoanaiications plan were successfully reached

for the ten Donths of this^year. Oar trade union bodies have made

eliorts__to upgrade tue socialist emulation coneomitantly with the

wor* coxieo-uivos6endorsing the additional tasks under the 1977 plan.

ib
The political work which they conducted helped to convey that the

supplemented plan is the coordinated plan which fully reflects our

actual potentialities in the transportation and telecommunications

sector and thus plays a greater role in the growth of the national

wealth. We must emphasize the implementation of the directives

given by the party as to reducing consumption levels. The socialist

emulation organized to this end resulted in saving thousands of

tons of fuel, metal, and other materials.

The work of the trade union organizations to raise the political

and cultural-educational level of personnel in the transportation

and telecommunications units was a major factor in the obtaining

of these results. A major role in this area was played by the committees of trade unions of the Brasov, Bucharest Switching Yard,

Bucharest Passenger Station, Timisoara, and Craiova terminals, the

railroad trade unions of Galati, Iasi, Ploiesti, Craiova, Sibiu,

Cluj-Napoca, and Timisoara, of the trade unions of the post and

telecommunications directorates of Maramures, Caras Severin, and

Neamt, of the automotive enterprises of Galati, Braila, Dimbovita,

and Constanta, of Constanta IEFM Navrom, Otopeni IUDP, Bucharest

IDP, Timisoara, and other units.

The good results obtained by most of the collectives in transportation and telecommunications units -- which are largely due to the

efforts made by trade unions--must not make us forget the deficiencies. Unhappily, we stll have units that did not reach all the

plan indicators, perform poorly in terms of quality, and do not

always meet the standards for efficiency. At the Craiova Regional

Railroad Unit the failure to complete the assignments in terms of

movement and static load on the axle of the freight car has resulted in great capacity loss. This also occurred at the Bucharest

Regional Railroad Unit in consequence of excessive idling time

of cars at loading and unloading. Poor results in the area of the

use of facilities were also noticed in the automotive sector.

Technical problems or absenteeism resulted in the cancellation

of many trips. Moreover, in railroad, automotive, and maritime

transportation, violations of traffic safety regulations occurred.

Of course, all these deficiencies also reflect shortcomings of some

trade union bodies.

In his speech at the Congress of Working People's Councils Nicolae

Ceausescu stated that the strengthening of the role of working

people's councils and of the general assemblies involved a better

performance of trade union bodies. The party secretary general

pointed outt These bodies must pay greater attention to the completion of the tasks they have been allotted in organizing the creative initiatives of working people, developing thriftiness, reinforcing order and discipline in production, and enhancing responsibility for the overall problems of the enterprise." Based

on these directives, our trade union organs must constantly

45
upgrade their style and methods of work and pay most attention to

production matters and, implicitly, to the education of working

people. Furthermore, the trade unions must be more involved with the

handling of social problems t. with the correct implementation of labor

laws, and with the improvement of the living and working conditions» in line with the overall policy of our party and state.

They must organize and be directly responsible for the performance

of mass worker supervision and the exercise of people's selfsupervision. The matter of order and discipline must be a permanent

item on the agenda of all trade union bodies.

According to the recent measures outlined at the foundation of the

National Council of Working People, the chairman of the trade union

becomes the vice chairman of the working people's council in the

unit involved» In this capacity he heads the general assembly, in

which all the collective is directly involved with economic management. Moreover, the general assembly will also discuss matters of

trade union activity and will elect the trade union organs. This

will eliminate the overlapping which previously occurred at various

meetings. Furthermore, the above-mentioned measure permits the trade

union bodies to devote more time to practical work at the production sites, which is closely tied in with the problems of production. This directly results in the greater responsibility of

our trad , union organs and to navi outstanding duties in all their

activity. During the short period before the year's end, conditions

must be carefully prepared so that the greater tasks of next year

may find all workers in t'.e transportation and telecommunications

sector^ on every jobP with full energies and creative elan, to meet

the current requirements of our socialist society.

11710

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46
ROMANIA

METHODS FOR ACHIEVING 1978 PLAN IN AGRICULTURAL SECTORS

Bucharest AGRICULTURA SOCIALISTA in Romanian 12 Nov 77 pp 1, 5

[Article by Professor Doctor Engineer Ion Ceausescu, Deputy Minister of

Agriculture and the Food Industry: "At the Base of Next Year's Production -

The Exemplary Fulfillment of the Objectives in the National Programs"]

[Text] In order to bring about the objectives outlined by the Directives

of the 11th Congress of the Romanian Conwinist Party regarding raising the

standard of living of the people, objectives brought about by newly created

resources and opportunities, the viticulturists and horticulturists have

special tasks in increasing the production of vegetables, fruits, grapes

and potatoes, improving their quality and diversifying their products.

Beginning with these tasks as recorded in the specific action programs and

keeping in mind the valuable directives issued on numerous occasions by the

party and state leadership, during the first years of this five year plan

the technical and material efforts were especially directed towards the

following main areas: increasing the production potential in all sectors

of horti-viticultural activities by organizing these sectors for intensive

farming and carrying out the projects on the basis of modern technology,

with the accent on mechanization; furthering the process of production concentration and specialization; and, putting the products to best use. The

achievements have certified the validity of the measures taken so far.

By analyzing the results obtained to date, important conclusions have been

reached for the coming years of the five year plan and especially for the

activities which must be carried out in order to fulfill the tasks of great

responsibility laid out for 1978.

Attention must first be given to the means of carrying out the plan indicators. In both the countries and the units, the indicators must express a

just correlation between production and the demands for development in order

to provide for the needs in all sectors of supplying the populace, the

processing industry and the products for export.

47
Beginning with the plan, the programs to be completed for specific time

periods - quarterly, monthly and every 10 days - must show all the actions

that will guarantee obtaining the levels of production outlined under conditions of maximum economic efficiency. This all assumes both a technical

approach based upon the latest achievements of scientific research and a

sustained concern for reducing the size of the manual labor force by increasing the amount of mechanization, as well as reducing the consumption

of energy, raw materials, other materials, and. in general, all production

expenses.

In the coming period, the priority task in horticulture will be the modernization of existing fruit and grape plantations and their development

through intensive farming. The analysis undertaken at a recent conference

in Buzau pointed out the fact that the measures outlined in the national

programs for 1979 and 1980 can be completed one or two years early. This

fact obligates each country and each unit to intensify its efforts to

create the conditions necessary to achieve the proposed goals. The actions

to be taken are known and their efficiency was confirmed by the units that

pioneered these practices. In viticulture, there will be an increase in

vines, an adaptation of existing means of support to new forms of management, an increase in the density of vines by planting fortified vines in

pots in Solariums, completion of projects designed to organize the land,

provision . f irrigation systems, and so forth. In the orchards, projects

employing modern technology will be carried out conscientiously and with

full understanding. All projects must be carried out on the basis of plans,

with well defined time limits that will ensure the fulfillment of objectives.

The efficiency of all the activities in the horticultural sector is closely

dependent upon the continued furthering of the process of production concentration and specialization. In recent times, a series of new measures

has been established whose application is absolutely necessary. Thus, in

vegetable growing, beginning with this autumn, actions must be taken within

the framework of the intercooperative councils to achieve a minimum vegetable production area of 200 hectares within a single farm area. In those

counties designated for growing vegetables, the size of these areas will

be over 500 hectares. These areas will be managed so as to allow the use

of technologies based upon integral mechanization and irrigation of long

furrows.

Likewise, conditions have been provided so that next year 200 hectares of

greenhouses and 330 hectares of Solariums will be constructed. It must be

kept in mind that each project will be so designed overall that it will

be possible to apply the same methods as the ones used in large units. At

the same time, the production achieved in the Solariums will be recorded

separately.

48
The. process of production concentration will also have to be furthered in

the growing of potatoes. For this purpose, next year, 93 standard farms

will grow potatoes for consumers on better than 11,000 hectares, making it

possible to completely apply higher technology, and seed potatoes will be

produced, in totality, in closed zones in Brasov, Covasna, Harghita and

Suceava counties.

In viticulture and fruit growing, concentration will be achieved by establishing new plantations only within large farms that will permit the

organization of at least one farm or the creation of a farm by combining

existing areas and groves. It will be necessary to take all measures to

ensure that the new plantations completely respect the established criteria

in this regard.

The concentration of vegetable, fruit and grape production must be achieved,

however, concurrently with a stricter specialization of units, both with

regards to the direction of production and to the destination of the products. In this manner, beginning next year, vegetable growing must be

organized into specialized farms for the production of vegetables that

arrive fresh for the consumers, farms for the production of vegetables to

be used in the processed food industry and farms for the production of

vegetables for export. This type of specialization will also be used in

potato production: specialized units will provide the necessary raw materials to starch and alcoholic beverage factories and other units will provide potatoes to be processed into flakes or potato chips for fresh

consumption or storage. In fruit growing and viticulture, specialization

will lead to the organization of units that will provide large and

homogeneous lots of fruits and grapes for diverse uses: fresh consumption,

canning over the winter, industrial processing, for export. All of these

factors, including those related to the correlation of the soils and types

of plants with the ecological conditions corresponding to the directions

of development outlined in the programs, must be part of the plans drawn

up for each plantation.

The realization of the production levels noted in the 1978 plan depends

also upon, even in this period, the manner in which a series of absolutely

necessary material conditions is ensured for the normal development of the

production process. Thus, a primary concern of all producers must be the

provision of seed stock. For vegetable growers, this means nursery transplants. According to the existing programs, they will be produced in

special complexes: early field crops and, to a great degree, all other

crops will be produced in totality in Solariums. From this point, the

special obligations are derived regarding respecting those technological

elements designed to provide valuable materials and, at the same time,

materials in balance with the demands of the producers. At the same time,

those units which provide their transplants to the local level will have

to use all available resources for this purpose and create their own necessary material base. In viticulture and fruit growing, we have special

49
programs for the production of seed stock in which quantities and variety

of seeds are specified for each unit. There is a need for the provisions

to be strictly respected so that, for its part, the planting program does

not suffer any delays.

A problem of higher technology which must be fully resolved in the coming

year and upon which, to a great degree, the efficiency of these activities

depends is one of increasing the level of mechanization for all crops. We

now have the equipment that will allow the mechanization of numerous

projects, for some crops this means the entire production process. Thus,

we can mechanize the entire pea and garden bean crop and the largest part

of potato growing and the crops of fruit growing and viticulture. Unfortunately, this equipment is not used at its maximum capacity across the

board. This attitude must be radically changed. Therefore, within the

framework of the intercooperative councils wherever it is possible it is

necessary to concentrate large areas, be they in vegetable growing, fruit

growing or viticulture, and move directly to the organization of certain

sections of specialized mechanization and establish work groups which

correspond to the equipment used in these sections.

The application of higher technology gives the desired results only to the

degree in which it is subjected to adequate organization. In this regard,

these efforts must be directed towards the development of intercooperative

economic associations. In addition to the 19 fruit growers and viticulturists associations created this year, whose activities must lead to

higher production levels, there is need to establish similar, new associations while strictly respecting the interests of the component units and

harmoniously combining these interests with general ones.

At the current level of development of horticultural production, progress

is determined, most of all, by the direct and prompt intervention of

scientific research. In vegetable, fruit and grape production for the

coming year, the contributions of those who work in this field must be made

permanently and substantially. The tie has been created - the research

institutes and stations in agricultural work are integrated with the production units. It is necessary that this tie be consolidated and that the

best results of research, in soils, hybrids, crop technology and development and so forth, be rapidly transformed into current work at the production units with a direct effect upon the quantity and quality of production.

8724

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50
ROMANIA

IMPORTANCE OF AGRICULTURAL INVESTMENT PROGRAM STRESSED

Bucharest REVISTA ECONOMICA in Romanian No 36, 9 Sep 77 pp 10-11

/Article by Ion Stanciu, deputy minister of agriculture axlibod htiust^

/fext7. The decisions of the 11th Congress of the Romanian

Communist party also outlined special tasks for agricultural development, in the overall context of the harmonious, well-balanced,

and accelerated progress of the entire economy. These tasks mainly

involve boosting output in all agricultural subbranches and sectors for

better meeting the population's growing needs for food products

and the greater needs of raw materials for the food and light industries. The achievement of these goals involves the concomitant

increase in labor productivity ana efficiency in all agricultural

production.

The measures to complete the tasks allotted the agricultural sector

were incorporated into programs for the various crops, species, and

categories of animals. They were scientifically substantiated and

provide for comprehensive projects for: evolving biological material

with a high production potential; upgrading the production techniques

in light of the new conditions created as a result of mechanization,

chemicalization, and irrigation programs» developing and modernizing

the material base; and achieving the optimal connection between production, incomes, and expenditure.

Prominent among the measures for expansion and more intensive cultivation in agriculture are the investment projects for the realization of the production facilities needed to complete the tasks

allotted agriculture in the 1976-1980 period and in light of the

next five-year plans.

Priority Guidelines Under This Five-Year Plan

Investments totally valued at more than 100 billion lei from state

funds and from the own funds of socialist agricultural units were

earmarked for the expansion of the material base of agriculture

under this five-year plan. The distribution of the total volume of

investments to the various priority sectors corresponds to the

present and future needs of agricultural development (Table 1).

51
Table 1. Structure of Investment Programs in Agriculture During the

1976-1980 Period

Billion Lei &

30.1 29.7

29.8 29.4

3.5 3.5

6.1 6.0

I8.7 18.5

6.5 6.4

6.6 6.5

Total investments 101.3 100

including:

Land improvement projects

Mechanization

Nurseries and hothouses

Expansion of vineyards and orchards

Zootechnological development

Storage units for agricultural products

Other investment projects

In line with the directives of the party and state leadership, the

implementation of this comprehensive program must focus on the use

of simple structural approaches which involve low materials consumption and minimum financial efforts for each facility to be

completed, in the context of utilizing modern production technologies based on latest scientific gains. In this area we must take

into consideration future trends because the units involved in the

investmer/; projects which are completed under this five-year plan

have a life of between 25 and 50 years and some even more.

In order to meet these requirements, in the area of irrigation systems the proportion of irrigated areas involving ditches has been

increased. This procedure results in important savings in terms

of manpower. In the case of existing sprinkler irrigation systems

which are provided with facilities for shifting the pipes, an optimal connection was achieved with territorial systematization,

in order to wisely utilize all the lands, in light of the level of

mechanization and greater productivity of the tractors and machines

which the agricultural sectors will continue to receive in the

future.

In fruit-growing, the new plantations — involving more intensive

and superintensive cultivation — and the completion of the program for the modernization of existing orchards have resulted in

the establishment of an optimal proportion between species and

strains, which will permit the boosting of the output of valuable

fruit for use as fresh fruit and for industrial purposes. Moreover,

in the case of existing plantations, higher densities will be

achieved, as an essential factor of high output, concurrently with

ensuring the conditions for the mechanization of operations. Similar

projects are under way in vine-growing.

52
In the zootechnological sector, the completion of new animal

raising and fattening facilities involves the use of the best experience gained so far in the specialized units of state and cooperative agriculture. In the sheds which will be completed in the

future, the specific microclimatic conditions (temperature, light,

moisture, air purity), required by the normal biological development of each species and category of animals, are ensured by a minimum consumption of electric and thermal energy, with use being made

of environmental resources. Moreover, approaches have been examined

and endorsed which involve giving up liquid fuel and natural gas

as sources of themal energy and their being replaced by solid fuel*

Furthermore, there will be a wider use of electrical heating but

in the context of lower total consumption of electric energy, by

limiting this consumption only to the shed areas and the categories

of animals which strictly require it.

The studies which are now being conducted to determine electric

energy consumption in ensuring the source of heat — both in terms

of value and quantity of resources used — and the impact in the

subsequent use of zootechnological shelters will permit accurate

orientation in this field.

Results, Tasks

In 1976, the investment plan in agriculture was fulfilled and overfulfilled. This involved the completion of irrigation systems

over 236,000 ha, damming and drainage on 170,000 ha, animal husbandry units with a capacity of 51,700 places for.milch cows,

k7,800 places for cattle, and 47.000 places for hogs for fattening,

grain storage units, and factories for combined fodder. Efforts

were stepped up for the implementation of the investment program

in the second year of the five-year plan, for both the projects

continued from previous years and many new projects.

The results obtained in the first half of this year, in light of

the conditions created and the material base ensured, highlight

the existence of important unjustified reserves within the framework of the agricultural sector and of the economic sectors which

are involved in the completion of the investment projects in this

branch, in the first place in construction and assembly for the

continued investment projects. For a number of major new projects

work did not begin on schedule, and among the facilities which were

planned to be finished in the first half of the year, some have not

been completed. The backlog on some construction sites necessitates

firm steps which should guarantee the elimination of lags and the

full implementation of the investment program* in terms of value

and especially in terms of fulfillment of the physical plan, with

the scheduled completion of the facilities planned for the entire

1977-1980 period.

53
The scale of this program and the significance of the investment

projects which must be completed in the period by the end of the

five-year plan strongly require greater concerted efforts of customers , designers, and construction units to adequately complete

all the units in the area of irrigation, horticulture, and animal

husbandry. For instance, in the area of irrigation systems, the

program provides for the construction of hothouses on 1,000 ha,

which will improve the supply of a wide range of very early vegetables to all localities. In fruit-growing, new plantations

must be established. In the area of developing animal husbandry

and boosting livestock output, a large amount of investment projects: in both state and cooperativized agriculture must be completed. These projects include many animal husbandry complexes

capable of providing conditions for a more intensive fattening of

all the junior cattle and sheep herds, the obtaining of an output

of 400,000 tons of poultry, and modern industrial complexes for

about 8 million hogs. Moreover, the existing sheds will be modernized in accordance with the up-to-date requirements for all species.

Better Organization, Smoother Work

The completion of these investment projects is fully feasible.

In the case of irrigation systems, the remaining area to be irrigated un.-^sr this five-year plan is included in major systems

which were begun or will be commenced this year. The hothouses

and the animal husbandry complexes will be built on the basis of

standard or reusable projects in which technological and structural

improvements resulting from the experience gained in recent years

have been incorporated. The other major investment projects for

the 1977-1980 period involve similar factors.

The decisive factor of the implementation of the investment programs in agriculture involves the organization and smooth development of construction and assembly of machines and installations

which will guarantee the finishing and completion of each project

within the originally specified time or even ahead of schedule.

In recent years, construction-assembly and other similar projects

in our branch have been completed by specialized units of agriculture, by units of the Ministry of Industrial Construction, of

county people's councils, of other ministries, and also on the

basis of self-management of the user agricultural units (Table 2).

In light of the magnitude and intricacy of construction problems

on the major construction sites in Romania, which have focused the

efforts of the specialized units of the Ministry of Industrial Construction, and the large amount of dwellings which must be built

by the trusts and enterprises under the people's councils, it is

necessary to essentially revise the organization and progress of

investment projects in agriculture. By firmly applying the directives

54
of party secretary general Nicolae Ceausescu on the greater role

and responsibility of customer units in completing constructionassembly projects, measures will be taken so that the involvement

of the units of the Ministry of industrial Construction and other

specialized units in completing major and highly technical projects

should conincide with the significantly intensified work of the

construction enterprises under the Ministry of Agriculture and Food

Industry, which should complete a greater amount of its own investment projects. In the sector of cooperativized agriculture, the

intercooperative councils will play a decisive role in completing

investment projects. They must organize teams, or, as the case may

be, specialized units, including members of the agric'ul- #

tural production cooperatives which make up the council, which will

help to complete their own projects.

The volume of agricultural investment programs to be completed

under this five-year plan, their great diversity — from irrigation,

damming, and drainage systems up to industrial animal husbandry

complexes, nurseries for the production of vegetables and seedlings,

vineyards and orchards, grain storage units, and so on — and their

sites all over the country require overall and expeditious measures

which will ensure solutions to all problems posed by practical situations.

In line with a major guideline from the party and state leadership,

the efforts of research and designing experts have focused on preparing the documentations and determining the locations for each

individual project. This will permit to begin construction on schedule or ahead of the schedule under the five-year plan. On the

basis of the experience gained so far, the production technologies

for all the branches, subbranches, and sectors of activity in

agriculture and the structural approaches connected with these

technologies have been upgraded and finalized. The technological

and structural approach to the problems posed by investment programs in agriculture has provided the necessary conditions for the

inauguration, this year, of standard or reusable projects for most

of the facilities planned in the plant and animal sectors. The

local units will only ensure the adaptation to the specific land.

This will result in significant savings in terms of time, manpower,

and financial assets.

The consistent implementation of all the above-mentioned measures,

the better organization of guidance and supervision in completing

the investment program, specifically and for each individual project, will provide all the conditions for better fulfillment of

the agricultural investment plan during the 1977-1980 period.

55
Table 2. Distribution of Agricultural Investment Projects to the

Various Construction Bodies %

1976 Plan

From agriFrom cultural

state units*

funds funds

1977 Plan

From agriFrom cultural

state units'

funds funds

Total volume of investment

program

includingi

Construction by the Ministry

of Agriculture and Food

Industry

Through specialized units

under user's management

Construction by other ministries and central or local

organs:

Through units of the Ministry oi Industrial Construction

Through units of people's

councils

Through units of other

ministries

100

58.1

38.5

19.6

41.9

26.8

9.7

5A

100

76.1

36.3

39.8

23.9

100 100

57*5 69.8

40.7 33.5

16.8 36.3

42.5 30.2

3.4 27.1 5.3

9.1 10.3 23.3

1.4 5.1 1.6

11710

CSO: 2700

56
YUGOSLAVIA

CHANGES IN FINANCIAL POSITION OF ECONOMIC ENTERPRISES

Belgrade FINANSIJE in Serbo-Croatian No 9-10, Sep-Oct 77 PP J+79-^92

[Article by Milo Jovanovic]

[Text] The financial position of organizations of associated labor in the

economy is determined by a number of factors whose direction and intensity

of effect may vary greatly from period to period. In the most general terms

the most important factors in the economy's financial position lie in the

efficiency of its business operation, in the manner in which the social

product :s distributed, in the manner in which they use their own resources,

and finally, in the composition of their property and the pattern of investment from year to year.

1. The Economy's Efficiency in Business Operation

The economy's efficiency in business operation may be expressed in several

ways, but the economy's global economic efficiency and global profitability

can be taken as representative indicators.

Global business efficiency, taken in the most general terms, can be expressed on the basis of the composition of the gross social product and a

determination of the relative share of its individual elements. We might

say in this respect that over the last 10 years there has been a tendency

for the business efficiency of the economy to deteriorate. Over that period the share of material costs has been rising, and the share of national

income in the makeup of the gross social product has been decreasing.

There is no doubt that business efficiency (see the following table) has

been deteriorating and that the deterioration has been more appreciable in

the latter years of the period under study. It is worth mentioning in this

context that the figures are not altogether comparable because gross income

and net income were determined in different ways and because of the possibility that certain expenditures were moved from one cost category to another.

57
A similar datum as to the drop in "business efficiency is also obtained by

determining global profitability, when it is expressed as the ratio of net

income to average assets used. The most important characteristic of profitability calculated in this way has been in its highly uneven movement

from year to year. A high rate of profitability was recorded in 1965 {hk.k

percent) and in 1971 (1*3-9 percent)* whereas considerably more moderate

rates of profitability were recorded in the latter years of the period under study: 30.7 percent in 1973, 32.9 percent in 1975 and only 29.8 percent

in 1976. It is worth mentioning that the rate of global profitability calculated in this way was lower in 1976 than at any time in the last 10 years.

However, we should emphasize that when the rate of profitability is established in this manner there are a number of factors of an institutional nature which could substantially alter the rate of profitability in one direction or the other. In this period capital assets were reassessed, and in

certain years this brought about a nominal increase in the average assets

used although essentially nothing is changed with respect to the actual productive capability of the assets. On the other hand, there have been

changes in computation of gross income and net income, i.e., the transition

was made from receipts to billed sales and back again, which greatly affects

net income, moving it upward or downward in particular years. For that reason we need to take the figures in the following table with a certain reserve, but we can still state that the global rate of profitability has been

dropping.

Breakdown of the Gross Social Product of the Socialized Sector of the Economy, share in percentage

Year

1967

1968

1969

1970

1971

1972

1973

191k

1975

Gross Social Material National

Product Depr sciation Costs Income

100.0 5.2 51.9 1*2.9

100.0 5.3 50.9 1*3.8

100.0 5-2 51.1* 1*3.3

100.0 5.0 51.8 1*3.2

100.0 k.9 52.0 1*3.1

100.0 5.U 52.5 1*2.1

100.0 5-2 55-3 39.5

100.0 5-2 57.3 37.5

100.0 k.k 59.^ 36.2

0 5.1 53.6 1*1.3

Source: SGJ [Statistical Yearbook of Yugoslavia] for the relevant years.

2. Division of Income

Division of income into the part which goes to society and to the part which

goes to the economy is an essential component in the economy's financial position, and at the same time it is one of the most significant factors in

raising the economy's capacity for reproduction. We can say in this context

that over the last 10 years there have been frequent institutional changes

58
affecting division of income among users. However, in spite of clear ideological commitments set forth in the Resolution of the 10th LCY Congress,

actual division has not been in conformity with those commitments. That

is, that resolution of the League of Communists pointed to the need for a

full-fledged commitment on the part of all self-managed, public and government entities to alter the present proportions in the disposition of income

to the advantage of self-managed associated labor, that is, the producers,

and to enact relevant arrangements in the socioeconomic system in the fields

of the earning of income, the distribution of income, self-management planning, the credit and monetary system, etc. The degree of success in the

distribution of income, which represents capital formation, should be one

of the socially recognized criteria for the earning and division of income,

on the basis of labor, and then it should be a factor to stimulate the

pooling of labor and income. However, as we have mentioned, development of

this kind has not come about in the basic division of income into the part

for society and the part for the economy.

Division of Income, share in percentage

1967 1968 1969 1970 1971

Economy 65.8 65.2 65.1 65-9 69.2

Society 3^-2 3^.8 3^.9 3U.1 30.8

Total 100.0 100.0 100.0 100.0 100.0

1972 1973 1971* 1975 1976

Economy 68.0 67.5 68.5 65-9 62.8

Society 32.0 32.5 31-5 3^.1 37.2

Total 100.0 100.0 100.0 100.0 100.0

Source: Year-end statements of organizations of associated labor in the

economy for the relevant years.

The period of the last 10 years can be divided into three subperiods from

the standpoint of the division of income between society and the economy.

The first k years, the 1967-1970 period, had approximately the same proportion in division of the net product. In that period an average of 65.5

percent of the total net product went to organizations of associated labor

in the economy. In the following k years, the 1971-197*+ period, there was

an improvement in division of the net product to the advantage of organizations of associated labor. In that period an average of 68.3 percent of

the total net product went to organizations of associated labor in the

economy, and only 31.7 percent went to society. In that period the share

of the economy in the net product was almost 3 percentage points higher

than in the previous years. Finally, in the last 2 years of this period

there was a significant deterioration in the division of the net product to

the economy's disadvantage. The division of the net product into the part

59
for society and the part for the economy was less favorable not only than

in the previous period (l 971-197*0, hut was also less favorable for organizations of associated labor than the division recorded in the initial years

of this period. In 1975 and 1976 the economy's average share in the net

product was 6^.3 percent of the total net product, or a full k percentage

points less than in the previous period. Consequently, the proportion recorded in 1976 was by far the least favorable, and the division in that

year is seriously tending to deteriorate the economy's financial position.

In endeavors to identify the forms whereby society drains off income and to

establish the size of the amount drained by the particular instruments, we

can state the following:

i. Contributions paid on personal incomes have had the highest average

share in that part of income which goes to society. Their average share in

the part of income which goes to society has been 35-8 percent. This share

has gradually been decreasing. In the first year of the period under study

this share was larger, ranging upward of 40.0 percent, and in 1969 it was

even as high as kk.k percent. In recent years this share has been dropping,

and it was lowest in 1975, when it was only 35-5 percent. It is worth mentioning that during this period there have been changes not only in the

rates instituted for the particular instruments, but also in the handling

of the individual instruments, which, of course, has affected the size of

the deduction based on these contributions. For example, in 1967 the contribution for housing construction ceased to be a contribution to society

and became a fund of organizations of associated labor in the economy, and

these contributions were diminished by that amount, and the funds of the

economy increased.

ii. The turnover tax, whose average share in the total deductions has been

28.0 percent, has been the second most important deduction from income.

This burden has been decreasing in relative terms in recent years by comparison to previous years. The smallest share of the turnover tax in total

income going to society was in 1976, when it amounted to only 22.8 percent

of the total. In certain previous years, say in 1972 and 1973, the turnover tax had a share exceeding 30.0 percent of society's total share of income.

iii. The third most important form of collection by society has been interest paid on credit. This has been the basis on which society collected an

average in excess of ik.k percent of its total share. We should mention

that the share of interest on credit in total income going to society has

been higher in recent years than in previous years. The share of these receipts was higher in 1976, when this instrument accounted for l6.2 percent

of society's total share, whereas, for instance, in the initial year of this

period (.1967) interest on credit accounted for only 11.8 percent of total

income set aside for society. In this period total credit extended to the

economy has increased about sixfold.

60
iv. The other forms (.instruments) whereby society drains off income of the

economy have had a smaller share in this part of income. For example, the

share of the interest on the business fund was 2.7 percent before it was

abolished; the share of insurance premiums has been 4.5 percent; the share

of certain legal obligations has been 3-3 percent; and other obligations

(based on the contribution for personnel, education costs, contributions

for use of municipal land, etc.) have amounted to less than 9-0 percent of

society's total share in income.

v. We should particularly mention that in the last 2 years (1975 and 1976)

a high share of income was drained on the basis of contributions to selfmanaged special-interest communities. The annual share of these forms of

collection in total obligations has in both years exceeded 10.0 percent of

total obligations paid from income.

3. Distribution of the Net Income Which Goes to the Economy

Distribution of the net income going to the economy into the part that goes

for personal incomes and the part that goes to funds has been rather uneven

from year to year.

In some years this distribution was dependent upon institutional changes

which had the effect of increasing transfers to funds. For example, since

1971 inst "?ad of paying interest on the business fund the economy has been

subscribing to the compulsory loan to the Federal Fund for Credit Financing

the Economic Development of the Economically Underdeveloped Republics and

Provinces. These resources a^e recorded as resources of the business fund,

which has been increasing their share in the total assets of the economy,

but in essence, at least until their repayment begins, the economy has not

itself had these resources at its disposition.

The predominant part of the resources going to the economy is set aside for

personal incomes—an average of 69.1 percent of the economy's total share.

The share going to the business fund has been l6.6 percent of the economy's

total resources, and its lowest share was in 1976—only 13.1 percent. An

average of 3.5 percent has been set aside for the reserve fund, and 5-6

percent for the community consumption fund.

h. The Structure of the Cash Surplus

The size and distribution by sectors of the total cash surplus is an essential factor in the financial position of organizations of associated labor

in the economy. Cash surplus in the sector of organizations of associated

labor in the economy represents the difference between receipts for goods

sold and services rendered, on the one hand, and outlays for operating expenses (not including depreciation), for contributions and taxes, as well

as for personal incomes on the other. Cash surplus in other sectors represents the difference between cash receipts and outlays for expenditures.

In essence the cash surplus represents a saving. The economy's financial

position is determined, then, not only by total savings, the savings of all

61
sectors, "but also "by the distribution of this saving among sectors. In

this connection we should mention that the efforts of all economic entities

must he aimed at achieving larger financial results at minimum operating

cost, contributions and legal obligations and with an appropriate size of

personal incomes. However, institutional measures, that is, economic policy measures, can have the effect of augmenting the size of the cash surplus and it can affect even more its distribution among sectors. By stimulating an increase in the volume of production through application of the

basic economic principles of economic activity—productivity, economic efficiency and profitability—a larger cash surplus is achieved. On the

other hand, application of relevant economic policy measures can directly

augment the cash surplus in the economic sector, and this will contribute

directly to an improvement of its financial strength.

Research conducted in this field has indicated that the distribution of

the cash surplus by sectors is out of line with the goals of economic policy.

Distribution of Cash Surplus by Sectors, share in percentage, amounts in

billions

Other Other

Sectors Sectors

in So- Popu- in So- PopuYear Economy ciety lation Total Economy ciety lation Total

1967 18.7 9-7 9-3 37.7 1+9.5 25.8 21+.7 100.0

1968 20.0 9-8 10.0 39.8 50.3 2k. 6 25.1 100.0

1969 23.0 8.0 ll+.l 1+5.1 50.9 17.8 31.3 100.0

1970 29.J+ 13.9 15.7 59.0 1+9.7 23.7 26.6 100.0

1971 35-8 8.9 21+.7 69.U 51.6 12.3 35.7 100.0

1972 1+0.2 13.9 29.lt 82.5 1+8.7 15.7 35.6 100.0

1973 58.0 15.2 38.6 111.8 51.9 13.6 31+.5 100.0

197^ 99.0 15.1 1+6.0 161.9 61.7 9-9 28.1+ 100.0

1975 100.0 3U.lt 63.8 199.1 50.7 17.2 32.1 100.0

1976 117.2 1+9.3 80.0 21+6.5 1+7-5

0 51.1+

20.0

17.2

32.5

31.1+

100.0

100.0

Source : BILTEN NAR0DNE BANKE JUG0SLAVIJE , No 3, 1976, and Wo 3, 1977.

According to the figures given in the table above, the average share of the

cash surplus of organizations of associated labor in the economy has over

the last 10 years been approximately half of the total cash surplus achieved

in that period. The share of the cash surplus of other sectors in society

has averaged about 17.0 percent, while the average share of the personal

sector, or the population, has exceeded 30.0 percent of the total cash surplus. In this connection we should point out the following characteristics

in distribution of the cash surplus by sectors:

62
i. The share of organizations of associated labor in the economy has been

the most steady of any sector from year to year. Its share departed extremely from the average only in 197^, when the economy's share in the

cash surplus was 10 index points higher than the 10-year average, while in

relative terms its lowest share was recorded in 1976, when it was k index

points below the 10-year average.

ii. The share of other sectors in society has gradually been decreasing in

recent years relative to previous years, and this has been the consequence

of the diminished resources of funds for credit financing of capital investments.

iii. The share of the cash surplus of individuals was smaller in the initial years than in the latter years of this period.

It is precisely this trend in the distribution of cash surplus by sectors

that makes it inappropriate to our real needs. In our context the vehicle

of economic development is the socialized sector of the economy, and that

sector bears full responsibility for achieving the goals that have been set

in economic policy. We should say that there is a growing gap between the

obligations of the socialized sector of the economy with respect to future

economic growth, on the one hand, and the cash surplus which is left to

that sector on the other. The increase in the share of the cash surplus of

the personal sector alerts us to at least two circumstances:

a) enhancement of the financial strength of the personal sector; and

'b) the related need to strengthen the financial structure (instruments,

flows and organization) so that these resources are returned in the fastest,

most efficacious and purposive way into the cash flows of the socialized

sector of the economy.

The cash surplus of organizations of associated labor in the economy does

not in our context represent a homogeneous mass of liquid assets which can

be used entirely for investments. The cash surplus of organizations of associated labor in the economy consists of a number of funds, some of which

are earmarked for particular purposes so that their resources can be used

only for those purposes. Aside from the resources of the business fund and

depreciation, which can be used entirely for investments, there are also

the resources of reserve funds, resources of the fund for housing construction, resources of the community consumption funds, resources of the fund

for credit financing of underdeveloped regions, etc. Thus the cash surplus

in the sector of organizations of associated labor is not only out of line

with the goals of economic policy in its size, but in its structure it is

fragmented and nonhomogeneous, so that the financial strength of those organizations is also weakened because of that factor.

63
5. The Rate of Capital Formation of Organizations of Associated. Labor in

the Economy

The rate of capital formation of organizations of associated labor in the

economy has varied as a function of the cash surplus in that sector. Computed as the ratio of the cash surplus to gross income, the rate of capital

formation has ranged from its highest of 8.6 percent in 1971+ to its lowest

of 5-7 percent in 1972. In the last 2 years the rate of capital formation

in the economy has been dropping, and in 1976 it was at the lowest level

since 1972 (see the following table).

Rate of Capital Accumulation, amounts in billions

Year

1967

1968

1969

1970

1971

1972

1973

197^

1975

1976

Source:

Gross Cash Rate of CapiIncome Surplus tal Formation

262.2 18.7 7.1

272.5 20.1 l.h

32U.8 23.0 7.1

1+03.7 29.1+ 7.3

531.5 35.8 .6.7

711.3 1+0.2 5.7

865.O 58.0 6.7

1,156.6 99.0 8.6

l,53l+.0 100.9 6,6

1,826.7 117.2 6.1+

"Godisnji izvestaj NB Jugoslavia e za 1971+" [Annual Report of the

Yugoslav National Bank for 1971+]; BILTEN NB JUGOSLAVIJE, No 3,

1976, and No 3, 1977-

6. Financial Investments of Nonfinancial Sectors

The economy's financial position can also be determined by the volume and

structure of financial investments which it has made over a particular interval of time. A more precise indicator of its position in the economy as

a whole (all sectors) can be determined if we analyze the dimensions of its

financial investments in total financial investments of nonfinancial sectors. (Nonfinancial sectors, according to the methodology of the Yugoslav

National Bank, consist of organizations of associated labor in the economy,

the Federation, other sociopolitical communities, other organizations, and

individuals.) The economy's share in total financial investments determines its position and its financial strength relative to other nonfinancial sectors. An analysis of the structure of financial investments of nonfinancial sectors reveals a very uneven pattern of changes which have taken

place over the last 10 years.

64
Financial Investments of Nonfinancial Sectors, breakdown in percentage,

amounts in billions

Other Other

Sectors Sectors

in So- Popu- in So- PopuYear Economy ciety lation Total Economy ciety lation Total

1967 15.5 3.3 3.3 22.1 70.2 lit. 9 ill. 9 100.0

1968 23.7 3.1* h.9 32.0 7J+.0 10.6 15A 100.0

1969 36. U k.6 6.7 V7.7 76.3 9-6 lU.l 100.0

1970 33.8 7.6 9-5 50.9 66.3 15.0 18.7 100.0

1971 . 1*9-7 ll+.O lk.l 78.1+ 63.5 17.7 18.8 100.0

1972 20.2 9-7 ik.l kk.6 1*5.3 21.8 32.9 100.0

1973 39.0 13.8 19.9 72.7 53.6 19.0 27-^ 100.0

197^ 102.6 17.3 26.8 1U6.7 69-9 11.8 18.3 100.0

1975 67.O 17. h 35-7 120.1 55.8 25.5 29.7 100.0

1976 31.6 33.3 H8.8 113.7 27.8

0 60.2

29.2

17.5

1*3.0

22.3

100.0

100.0

Source : Cash flow computations of the Ym50slav National Bank.

There is no doubt that economic policy measures have considerably affected

the size if financial investments in the various sectors, especially in the

sector of organizations of associated labor in the economy. That is, in

certain years the predominant form of investment was direct credit to purchasers, and in certain years the volume of these credits had predominant

significance among the investments of the economy. That is why measures

were taken to regulate payments between users of socialized assets. The

effect of these measures was manifested in a reduction of credit granted

to purchasers for goods that were sold. The most pronounced effect of

these measures can be seen in the figures for 1972, when the economy's

share in total financial investments of nonfinancial sectors was less than

half of total financial investments in that year. Still more pronounced

effects of those measures can be seen in 1976, when the share of the economy's financial investments in total financial investments of nonfinancial

sectors was less than one-third. We must therefore point out that this

average of about three-fifths of total financial investments, which has

been the share of the sector of the economy over the last 10 years, gives

a definite glimpse of the financial strength of organizations of associated

labor in the economy. This statement is all the more accurate if we know

the character and characteristics of investments in the form of direct

credit (on goods sold), which by their nature represented more coercion

than a free investment of financial resources in a particular types of investment. Moreover, this type of investment was in certain cases not only

not liquid, but was even debatable and dubious, so that one can say that

the extension of credit to purchasers in the volume achieved in certain

years essentially represents the most important factor in illiquidity and

in the diminished quality of the economy's economic operation.

65
7. Total Investments of Organizations of Associated Labor in the Economy

Total investments of organizations of associated labor in the economy have

been strongly influenced by the change in financial investments. In years

when there was an increase in mutual granting of credit, there was an increased share of financial investments, and the share of real investments

diminished.

Real investments (investments in fixed assets and inventories) have been

steadily growing at a higher or lower annual.growth rate, while the volume

of financial investments has varied as a function of changes of investments

in the form of direct credit (see the following table).

Total Investments and Changes by Years, breakdown in percentage, amounts in

billions

Real Financial Real Financial

Invest- Invest- Invest- InvestYear Total ments ments Total ments ments

1967 kh.l 29.2 15.5 100.0 65.3 31+.7

1968 52.2 28.5 23.7 100.0 5I+.6 1+5.1+

1969 68.0 31.6 36.1+ 100.0 1+6.1+ 53.6

1970 79.1 1+5.3 33.8 100.0 57-3 1+2.7

1971 103.8 5U.1 1*9-7 100.0 52.1 . 1+7.9

1972 74.8 5U.6 20.2 100.0 72.9 27.1

1973 108.1 69.2 38.9 100.0 61+.0 36.0

197^ 228.1+ 125.9 102.5 100.0 55.1 1+1+.9

1975 195.2 1U8.5 1+6.7 100.0 76.1 23.9

1976 235.5 157.9 77-6 100.0

0 100.0

67.0

61.9

33.0

39.0

Source: Cash flow computations of the Yugoslav National Bank.

8. Financial Investments of Organizations of Associated Labor in the Economy

The most significant characteristic of the financial investments of organizations of associated labor in the economy has been the very uneven changes

from year to year and the change in the structure of those investments.

Investments in the form of direct credit have been an essential factor in

those developments, but in the last 2 years the change in the structure and

volume of investments has also been significantly affected by investments

in the form of money and other less liquid forms. As we have already mentioned, investments in the form of direct credit have been determining the

structure of total financial investments of nonfinancial sectors, on the

one hand, and the position of organizations of associated labor in those investments on the other. The size of the influence of investments in direct

credit can be seen more clearly in an analysis of total investments and of

their structure in the sector of organizations of associated labor in the

66
economy. In most of the years included this form of investment has had

predominant importance in the structure of investments by the entire economy, and in certain years, 1971 for example, direct credit represented more

than four-fifths of total financial investments of the economy. However,

in certain years when measures were applied to diminish mutual credit financing, there was an appreciable reduction of those investments. For example, in 1972 direct credit represented only 13.0 percent of annual investments. A still more extreme example in this respect was recorded in

1976, when thanks to measures contained in the Law to Guarantee Mutual Payments Between Users of Socialized Assets and the Law on Determination and

Computation of Gross Income and Net Income in Basic Organizations of Associated Labor there was such a reduction of investments in direct credit that

at the end of 1976 their level was even k^-9 billion dinars below the level

of the previous year.

By and large the period in question can be divided into two parts: the

first part covers the period from 1968 to 1971, whose typical features were

low liquidity, a small growth of investments in the form of money and other

less liquid forms, and a high growth of investments in the form of direct

credit. The second part covers the period from 1972 to 1976, which is distinguished by a substantial growth of investments in the form of money and

other liquid forms and a reduction of investments in the form of direct

credit to purchasers. In this period there was a quite substantial increase of investments in the form of credit to other sectors. Changes in

the volume of investments and the distribution among financial instruments

within the sector of organizations of associated labor in the economy were

the consequence of a number of institutional measures, as follows:

i. the growth of credit expansion had the direct effect of increasing the

money supply and the economy's liquidity. In that period there was confirmation of patterns noted previously: at a higher rate of monetary

growth—at a higher growth rate of the money supply—the economy's liquid

assets grow faster than the average growth of the money supply. And vice

versa! At a more moderate growth of the money supply, or when it stays at

the same level, the economy's liquid assets diminish faster than the reduction in other sectors. The experiences in 1976 have confirmed these patterns once again;

ii. the reduction of investments in the form of direct credit to purchasers

was the direct consequence of the measures we have mentioned to ensure payments, which defined more strictly than previously the conditions for settlement of due obligations, and also of measures concerning determination

of gross income and net income, which defined more restrictively than previously the conditions for determination of these categories; and also, the

rise of liquidity tended to reduce the mutual extension of credit;

iii. the growth of investments in the form of credit to other sectors is

a direct consequence of abolishing the interest on the business fund and of

transforming it into a compulsory loan of the economy to the Federal Fund

for Credit Financing of the Economic Development of the Economically Underdeveloped Republics and Provinces.

67
If the economy's financial position is evaluated on the basis of its financial investments, then we must examine not only the volume of investments,

but also their structure. After all, honoring what we previously said about

the characteristics of direct credit, larger financial investments resulting

from investment in the form of direct credit has not represented an improvement of the financial position of organizations of associated labor in the

economy. The reverse is actually true! Experience has shown that increased

investment in the form of direct credit actually has meant a deterioration

of the economy's financial position for the simple reason that this form of

financial investment was the most important factor in the economy's illiquidity in those years. On the other hand, investments in 1976 represent an

extreme both in size and also structure (see the following table). These

changes have been the result of controversial changes in investments in the

form of direct credit, which decreased appreciably from the previous year,

and the high level of monetary expansion, which tended to produce a high

growth of all forms of monetary resources. The net effect of these changes

is that the net growth of total investments was smaller than in any year we

have examined. When total investments are taken as 100, investments in the

form of money stood at an index level higher than 150, but investments in

the form of direct credit stood at almost - 150 relative to total investments. These extreme changes with respect to the volume of particular forms

of investment have made it impossible to examine long-term trends and patterns with respect to investments by particular financial forms.

Financial Investments of the Economy by Years and by Forms, amounts in billions

Year

1968

1969

1970

1971

1972

1973

1971*

1975

1976

Other Credit

Liquid Illiquid for Sales

Money Assets Deposits of Goods

2.3 2.k 2.8 lU.7

0.3 3.2 2.6 23.8

0.8 2.k k.3 2k. 7

0.3 1.2 0.6 1+1.6

7.7 2.3 0.3 2.6

9.9 5-2 - 0.1+ 13.8

6.8 2.7 5-2 76.6

19.5 2.7 8.0 20.3

51.5 3.8 15.9 - ^5.9

Breakdown in Percentage

1968

1969

1970

1971

1972

1973

197^

9.7 10.1 11.8 62.0

0.8 8.8 7.1 65.1+

2.0 7.1 12.7 73.6

0.6 2.k 1.2 83.7

38.3 11.1* 1.5 12.9

25. k 13.1+ - 1.0 35.5

6.6 2.6 5.1 71*.7

68
Table (continued)

Year

1975

1976

Year

1968

1969

1970

1971

1972

1973

197^

1975

1976

Other Credit

Liquid Illiquid for Sales

Money Assets Deposits of Goods

29.1 k.O 11.5 30.7

162.5 12.0 50.2 - 1U+.8

Credit Foreign

to Other Exchange Not DisSectors Deposits tributed Total

0.2 0.9 O.k 23.7

0.1 - 0.2 7-2 36.1+

0.3 0.6 0.7 33.8

2.5 2.9 0.6 1+9-7

5.0 1.3 0.9 20.1

5.1 k.O 1.3 38.9

6.3 1.6 3.3 102.5

8.3 5.6 2.6 67.O

9-6 2.7 - 5-9 31.7

0.8 3.8 1.8 100.0

0.2 - 0.5 19.8 100.0

0.9 1.7 2.0 100.0

5.0 5.8 1.3 100.0

2U.9 6.5 It.5 100.0

13.1 10.3 3.3 100.0

6.1 1.6 3.3 100.0

12.lt 8.It 3.9 100.0

30.3 8.5 - 18.7 100.0

Breakdown in Percentage

1968

1969

1970

1971

1972

1973

197lt.

1975

1976

Source: Cash flow computations of the Yugoslav National Bank.

9. Developments in 1977

Economic developments in 1977 afford the basis for optimistic forecasts with

respect to improvement of the financial position of organizations of associated labor in the economy. The high level of industrial production (in

the January-August period production was up ll.lt percent over the same period of last year), the rise in the global productivity of labor in the industrial sector (about 7-0 percent), the record harvest in agriculture, on

the one hand, and the ever higher level of organization of associated labor

and ever greater enforcement of the Law on Associated Labor on the other are

opening up a broad space and opportunity for improvement of the economy's

financial position during this year. At present we do not have complete

figures which might make it possible to evaluate the direction in which total financial investments of nonfinancial sectors are moving and the degree

69
to which organizations of associated labor in the economy are represented

in those investments. Specifically what we lack are data on investments in

the form of direct credit to purchasers, and, as we have already mentioned,

these investments have in certain years been an essential component in the

economy's financial position.

However, on the basis of the half-year figures on other financial investments by sectors we can judge that these movements have not been in line

with the results achieved in the domain of production. That is, the figures show that again in 1977 there was a continuation of the previous trend

toward enhancement of the financial strength of other sectors to a greater

degree than enhancement of the financial strength of organizations of associated labor in the economy.

Financial Resources by Sectors, amounts in billions of dinars

Other SoOther ciopolitEcon- Organi- Feder- ical Com- PopuYear omy zations ation munities lation Total

31 December 1976 182.6 .59-1 k.l 19-7 183.7 449-2

31 June 1977 185.1 65.8 k.l 24.1 202.5 1*81.6

Index: 1976 = 100.0 101.4 111.3 100.0 122.3 110.2 107.2

Growth relative to

December 1976 2.5 6.7 — k.k 18.8 32. 4

Source: STATISTICKI BILTEN SDK, No 6, 1977-

There is no doubt that the personal sector has had dominant significance in

enhancement of its financial strength. Almost three-fifths of the growth

of investments in 1977 pertain to the personal sector. The share of organizations of associated labor in the growth of investments did not represent even 10.0 percent in 1977- Changes in the status of financial resources, or changes in the financial position of the individual sectors,

are pointed up more markedly if we compare changes in financial investments by form in the economic sector and the personal sector, which between

them account for more than four-fifths of total financial investments.

Financial Investments of the Economy and of Individuals, amounts in billions

of dinars

Cash on hand or in banks

Deposits requiring period

of notice before withdrawal

Deposits for specified

period of time

The Economy

31 Dec 76 30 Jun 77

99.0 99-2

28.4 27.6

34.9 36.8

Population

31 Dec 76 30 Jun 77

51.3 54.9

9-7 12.8

70
Table (continued)

Foreign exchange deposits

Personal savings accounts

Total

The Economy Population

31 Dec 76 30 Jun 77 31 Dec 76 30 Jun 77

20.3 21.5 52.1 56.8

70.6 78.0

182.6 185.1 183.7 202.5

Source: STATISTICKI BILTEN SDK, Wo 6, 1977-

Taken as a whole, the financial position of organizations of associated

labor in the economy has been changing both from the standpoint of the

share of this sector's financial resources in total financial investments

and also from the standpoint of the relative importance of financial instruments. Viewed from the standpoint of total financial resources which

the economy has at its disposition, we can say that its financial position

has been deteriorating. We are led to this conclusion by figures on the

efficiency of the economy's business operation from year to year and also

figures on division of income into the part for society and the part for

the economy. As shown, in recent years more money has been drained from

the economy than is appropriate from the standpoint of society's economic

and political goals. On the other hand, we can say that the structure of

the economy's financial investments has improved thanks to the effect of

economic policy measures, especially in 1976. The improved structure of

financial investments was manifested in a considerable reduction of investments in the form of credit extended to purchasers, and investments in

the form of money and other liquid forms increased. Thus the augmented

volume of financial investments did actually represent a growth of the

economy's financial strength.

However, developments in the first half of 1977, if these trends are taken

as a representative indicator of the economy's financial position in that

year, indicate that there has been a markedly high growth of financial resources in the personal sector and in sectors referred to as "other sociopolitical communities" and "other organizations." In these sectors the

growth of financial savings has been much larger than in the economic sector. That is why a particular effort must be made so that the economy's

financial strength grows in keeping with the production results it is

achieving this year.

70i+5

CSO: 2800

71
YUGOSLAVIA

REGIONAL STRUCTURE OF FOREIGN TRADE FOR 9-MONTH PERIOD

Belgrade PRIVREDNI PREGLED in Serbo-Croatian 4 Nov 77 p 5

[Article by M. Zoric: "On the Foreign-Trade Exchange During the First Nine

Months—Regionally: Not Satisfying, But Not Disturbing"]

[Text] In certain respects 1976 represents an unusual year in Yugoslav

foreign-trade exchange. Exports have increased markedly while imports have

declined. For purposes of comparison with 1977 let us take the data on the

first 9 months of 1976. In this period last year exports had increased

21.8 percent while imports had declined 3.6 percent, thus the deficit of

48.3 billion dinars in the corresponding months of 1975 decreasing to

29.1 billion dinars.

In addition to this, an increase in exports was registered by all developed

countries, the highest being in the most developed ones—the United States

and those in the European Economic Community —while imports were reduced

precisely from these countries, which to a certain extent mitigated the

excessive difference in the balance with them. Imports were larger only

from East European socialist countries (the sphere of CEMA), and to some

degree from Asia, Oceania and Central America.

This year, however, movements are quite different. The increase in exports

has slowed markedly (6.4 percent during the first 9 months) with a simultaneous

and highly significant increase in imports (35.5 percent) and the foreign

trade deficit. The deficit has increased from 29.1 billion to 57.1 billion

dinars, so that it is slightly lower than the value of total exports. The

situation is even more unfavorable since this deterioration occurred mainly

in trade with Europe—with all three integral areas as well as with the

United States and Japan—in short, with all industrially developed countries.

In the period under consideration almost 90 percent of the deficit falls on

these countries, and 54 percent on the European Economic Community [EEC].

During the first 9 months the trade deficit in this area is almost twice as

high as our exports to these countries. The situation is similar with

respect to the European Free Trade Area [EFTA], the United States and

particularly Japan.

72
Let us mention that only one-fifth of the imports from Great Britain is

covered by exports. In trade with more important partners with market

economies a rate of coverage of more than 50 percent has been realized only

with Italy (62.5 percent).

In relation to countries which are members of CEMA the coverage rate is

highest only in trade with the Soviet Union and Poland (90 and 92 percent

respectively) and it is below 50 percent only with Hungary (46.5 percent).

Thus, of the three European economic groupings (EEC, EFTA and CEMA) we do

not have a favorable balance with any of the member countries, while with

regard to the remaining European countries our assets are lower toward

Greece (283 million dinars) and Malta (28 million dinars).

With Africa—Almost One Billion Dinars of Assets

A minor surplus has been realized in exchange with a number of countries in

Asia, the highest being that with India (435 million dinars). However, the

liabilities toward Iraq have remained at the same level as last year and

in the first 9 months of this year they amount to 4.2 billion dinars.

While in the first 9 months of last year the trade balance with Africa was

almost even—the liabilities amounting merely to approximately 200 million

dinars—th's year considerable surplus has been realized in the exchange

with Egypt and Liberia, and somewhat lower toward several other countries,

with the surplus from trade with Africa amounting to 988 million dinars.

There is a favorable balance of trade in South America only with Colombia

and Venezuela, while liabilities are highest toward Brazil. In Central

America there is a favorable balance of trade with Cuba and Panama.

The uneven movement of foreign trade this and last year led, of course, to

smaller or greater changes in the participation of individual regions,

i.e., states, in the total of Yugoslav imports and exports as well as to

different growth rates of imports and exports in relation to 1976.

Lagging Partners

However, in comparing the fluctuations in foreign trade flows during this

and last year it should perhaps be taken into account that these flows

have occurred under somewhat unusual economic circumstances.

Namely, subsequent to the overcoming of the recession, the revitalization

of economic activities in industrially developed countries, our principal

trade partners, was turbulent and preceded the strengthening of the economy

in our country. Hence, the phenomenon that in 1976 we even registered a

73
Yugoslav Exports and Imports During the First Nine Months of 1976 and 1977,

Coverage Rates of Imports With Exports in the Same Period

(in millions of dinars)

8

1976. 1977. (1) Slope pokrtfa u %

(2)J;iiuar-scptcmbar(2)Janu;ir--scptcmbar 1976/9 1977/9

(3) Izvoz (4)Uvoz (3)l/.voz (4)Uvoz

(5)Svet

F.vropa

.AV.7.

8)It:i!;ja

9)S!{ Nemaäka

"10KITA

llAustrija

I2SKV

13SSSR

140sty!a livropa

TpJjpan

I&SAD

(17Kai;aJa

;Cl;ca::ija

Zem!jc u razvoju

(20A1"

r

'ka

QlAzija

(j/ZSrctliija Amerika

(231'v'n;1 Amerika

60,563 89.656 64,433 121,505 67^

45386 68,239 46,886 90,927 66^ 51,5

16J18 3-1,552 17,621 47,733 47,2 36,9

7,472 9,041 8,434 12,942 82,6 65,2

5,199 14,887 4.976 19,532 35,6 25,5

2,319 6,608 2,715 S.040 35,1 33,8

1,260 3,196 1,179 3,417 39,4 34,5

25,492 25,941 25,009 33,589 98,2 74,4

14,914 12,435 14,501 16,011 119,9 90,6

1,157 1,138 1,541 1,515 110,4 101,7

136 1,137 225 2,485 12 9

4,888 4,802 3,479 7,289 101,8 47.7

229 294 209 767 77,9 27,2

142 782 132 1,619 18,1 8.1

9,782 14,402 13,502 18,418 67,9 73,3

3,134 3,332 5,201 4,203 94 123.7

5,798 8,144 6,445 9,641 71,2 66,8

250 888 1.2"'« 663 28.1 192

600 2,038 583 3.911 29,4 14.9

Key:

1. Coverage rates in % 13. USSR

2. January--September 14. Europe (remainder)

3. Exports 15. Japan

4. Imports 16. USA

5. World 17. Canada

6. Europe 18. Oceania

7. EEC 19. Developing countries

8. Italy 20. Africa

9. Federal Republic of Germany 21. Asia

10. EFTA 22. Central America

11. Austria 23. South America

12. CEMA

decline in imports and a significant increase of exports to the areas of

the EEC, EFTA, the United States and Japan. Activity in these countries

was particularly strong in the initial months of last year. However, already

in the beginning of the second half of last year in the majority of these

countries a certain retardation could be perceived which continues this year

as well—while economic activity in Yugoslavia is developing.

Our partners are decreasing their imports in general, including those from

Yugoslavia, while, conversely, we are purchasing investment equipment, raw

materials, and semi-finished products abroad, markedly increasing the import

of agricultural products as well. Therefore, in comparing this year's trade

movements with those of last year, this factor should perhaps also be taken

into acount.

8989

CSO: 2800 74
YUGOSLAVIA

UNFORESEEN LAG IN MACEDONIAN FOREIGN TRADE REPORTED

Skopje NOVA MAKEDONIJA in Macedonian 17 Nov 77 p 13

[Article: "The 9-Month Commodity Exchange Between the Socialist Republic

of Macedonia and Foreign Countries: Unforeseen Lag"]

[Text] According to official reports of the Economic Chamber of Macedonia

(the Secretariat for Foreign Economic Relations), the 9-month results of

trade with foreign countries are much lower than planned in the Resolution

on the Realization of the Social Plan of the Socialist Republic of Macedonia

for the period 1976 to 1978. That is, although it was planned that in 1977

exports would grow at a rate of 10 percent, up tO 30 September of this year

inclusively, exports have declined 15 percent, while imports increased

38 percent. Difficulties in exports are felt in the industry and tobacco.

By the end of the year, howevei, these problems could be alleviated, i.e.,

it should be possible to register higher export and lower import rates.

Thus, it is expected that tobacco exports will reach the level of last year—

somewhat enlarged in physical volume. It is also expected that arrangements

for the export of buses and other products, which have already been concluded

and agreed upon, will be realized by the end of the year.

According to the data of the chamber, with the exception of the electric,

construction materials, wood and paper industries, whose share in the export

structure is insignificant, the remaining branches of industry register

failures in exports. These are nonferrous metallurgy, textiles, tobacco,

leather and shoes, chemicals and metal.

Under these conditions the chamber points to certain aspects which led to

these difficulties in the placement of imports and exports. The difficulties

are manifested mostly in unfavorable prices on foreign markets, i.e., under

conditions of strong competition in the placement of industrial products on

foreign markets. Further, there was insufficient diversity among industrial

products intended for export. It was pointed out that foreign trade is still

dominated by classic trade relations which are always influenced by changes

in supply and demand on world markets and the consequences of price and

factor changes. There is still a certain incompleteness in policies regarding measures for stimulating the export of individual products. We also

encounter organizational and other problems present in foreign-trade operations.

75
In addition to the difficulties on the foreign side, increase in domestic

consumption, because of lower prices relative to exports, resulted in a

reorientation in supply—domestic markets grew at the expense of exports.

Whether imports will increase or decline certainly depends primarily on the

stability of our production intended for placement outside the country, freed

from fear of the prices on the market or the degree of competition. It

further depends on the export mechanism, and the stimulation and awareness

that we should export more in order to open doors for the import of goods.

Such stimulation of exports will certainly provide even more significant

areas for the Macedonian economy abroad and for the achievement of even

greater results. The need to provide more space for branches whose goal is

a long-term linkage of the domestic economy with foreign partners is pointed

out.

As far as the increase of imports is concerned, it was the latter which

aggravated our trade balance. This was certainly influenced by price increases

in imported goods as well, which fluctuated around 14 percent, and by the

dependence of our production on the import of modern equipment and technology

from the developed countries in the West, thus neglecting the import of equipment from CEMA where our OZT (Organizations of Associated Labor) are freed

from tying imports to exports.

In assessing the results of the commodity exchange between the Socialist

Republic of Macedonia and foreign countries in the period January to

September 1977, it was established that everything which occurred on the

world market should also be taken into account. Economic disturbances are

still present in world trade. All developed countries apply restrictive

policies, while envisioning their chances for expansion through exports.

The resolution of this situation, however, is foreseen in the implementation

of systemic laws in the sphere of economic relations with foreign countries.

8989

CSO: 2800

76
YUGOSLAVIA

CAPITAL ACCUMULATION OF PRIVATE FARMS, 1961-1973

Belgrade EKONOMIKA PROIZVODNJE HRANE in Serbo-Croatian No 10, Oct 77

PP 37-^7

[Article by Sveto Davidovic, M.A., Federal Secretariat for Finance]

[Text] Introduction

The rate of capital accumulation in private farming represents the farm's

ability to commence expanded reproduction in the new production cycle. It

depends c^x the volume of production and product quality, as well as on the

distribution that takes place in society.

In some cases production on the private farm may be capable of capital formation in and of itself, yet expanded reproduction cannot be undertaken.

This happens in the case when the system of distribution is such that the

capability for capital accumulation is taken away from the private farm,

which in effect passes the capability for capital formation to other entities in society. This is a very important factor from the standpoint of

generation of capital in society, since what it means is that a portion of

the capital formed on the private farm is taken away and transferred to the

socialized sector. If the division in society is such that the private

sector is burdened with charges (taxes, surtaxes, contributions, duty, and

so on), then most of the capital generated by the production process will

leave the private farms, and a small portion will remain for actual capital

formation.

The private farm's surplus value, which is the result of production in agriculture (cropping, animal husbandry, market gardening, fruit growing,

etc.), represents a portion of the national income of private farms which

has not yet been distributed among various entities on the basis of legal

regulations or other obligations burdening the private farm. In distribution of the national income of private farms, then, the surplus value also

contains what they set aside for the community.

The private farm's capital formation represents a part of the surplus value

with which it can carry out expanded reproduction. Expanded reproduction

77
on the private farm means investment in new technical advances in agriculture and investments which are necessary to a new increase of production.

That is why private farmers want their capital formation to be as large as

possible, and at the same time they strive for a larger surplus value, and

they want the portion of the surplus value which goes to society to be as

small as possible.

Private farms in Yugoslavia ought to have as high a rate of capital formation as possible, but not so as to strengthen the private sector, but so that

the economy will develop toward increased agricultural output, higher productivity and higher yields per hectare or head of livestock and so that domestic production will fully meet the need for agricultural products. A

higher rate of capital formation would make it possible for private farms

to strengthen the economics of their operation and become an equal partner

in collaboration with socialized farms. When this kind of linkage is made

on the basis of production, capital formation even on the private farm is

not altogether and exclusively private, but also incorporates elements of

social accumulation. For the sake of maximum capital formation, it is in

the interest of our socialist community to make it possible for the private

farm to collaborate with the socialized sector.

In capitalist society the private farmer wants to produce those farm products which generate the most capital. Private farmers in the advanced capitalist countries are just as interested in capital formation in their agricultural production as are the other sectors and industries of the economy.

Private farmers would not otherwise invest their capital in agriculture.

But even under capitalism a portion of the capital generated goes to the

state for government expenditures, while most remains with the private

landholder or producer.

In administrative socialism, once private farming has been done away with,

the redistribution of capital formation and net income between the enterprise and the state is effected by tax policy and other instruments of economic policy. This formation of capital is managed by government agencies,

which make a redistribution among the sectors and industries of the economy.

In our country, since most of the land has remained in the hands of private

farmers, the major portion of accumulation was set aside for development of

the socialized sector, heavy industry first of all, in the initial period

of socioeconomic development. However, when industry had developed to a

certain level, the portion of accumulation which had been going to its development was left with the private farm to increase its capital formation.

This is the case only when prices of industrial and farm products are rising

in proportion to one another. However, if the "price scissors" operates to

the detriment of agriculture, then industry continues to develop in part

thanks to agriculture. In a time when the "price scissors" is operating,

this distribution of the social product takes place through the policy governing the prices of farm products to the advantage of industry and other

economic sectors. This indicates that rising prices of farm products are

among the factors that have a large impact on the farm's capacity to generate capital.

78
The Yugoslav Private Farm's Ability to Generate Capital in Agricultural

Production

The level of capital formation on the private farm depends primarily on results achieved in agricultural production and on distribution of that farm's

income. The larger the yields on the farm, the more income will grow, which,

assuming normal distribution, that farm will be left a larger amount for

formation of capital. Aside from higher yields on the private farm and the

distribution of that farm's income, capital formation can also be increased

by a rise in the prices of farm products, which have been rising steadily

since 1965. This constant upward movement of the prices of farm products

has been advantageous to those farms using their own supplies and raw materials and has increased their capacity for capital formation.

There are several parameters determining the level of capital formation on

the private farm, namely:

i. the level of gross output,

ii. the level of the private farm's social product,

iii. the level of the national income of the private agricultural sector,

iv. the level of expenditures for personal consumption,

v. the level of expenditures for the public community and other charges.

The value of the private farm's gross product includes the calculated production of field crops, animal husbandry, fruit growing, viticulture, domestic processing of farm products, and also incidental activities performed on farms such as handicrafts, hauling, the gathering of medicinal

herbs, hunting and fishing, and so on. The value of a farm's gross output

does not include income which the members of that farm earn by working in

industry, transportation, trade and hostelry nor in other economic sectors

and industries.

The private farm's net income is established on the basis of the value of

total agricultural production. The value of total agricultural production

is obtained by multiplying the amounts produced by the appropriate prices.

These are the prices at which private farms sell their products.

Producer prices always pertain to a product produced in the year for which

the computation is being made. But the time to which the price taken in

the computation applies varies from product to product in the case of agriculture. Thus market prices from January to December are used in computing

the prices at which livestock and products of animal husbandry are sold.

Average prices in market gardening and fruit growing are taken for the period which represents the particular product's season, from its appearance

on the market to the end of the season. Average grain prices are figured

from the period of the harvest to the end of April in the following year.

79
Average prices at which products are sold are also taken for all other farm

products. The average producer's price is multiplied by the yields obtained (the area reaped is multiplied by the average yield of the crop),

and one obtains the value of the gross harvest.

The value of the gross product includes the social product and the private

farm's material costs. Price rises and yields have a great impact on the

size of the gross product. Since in Yugoslavia the purchase price of a majority of farm products are fixed, agriculture as a whole has been in a

poorer position than economic sectors whose prices were formed on the market. The price policy which has been conducted has had an effect on agriculture's development, especially in the private sector.

The rate of growth of the social product depends on the results achieved,

on the movement of prices and on the level of costs. The private farm's

social products rose 31 percent between 1961 and 1973, while the growth of

the social product of the entire economy was 115 percent (1966 prices =

100). The growth of the social product of the private sector of agriculture

was small, primarily because of unfavorable price relations between products which private producers sell on the market and products which they

must purchase.

The price is a very important factor in increasing the value of production,

above all because primary distribution ^mong participants in production

takes place by virtue of the price. The prices of farm products, which in

most cases are prescribed by the public community in the form of guaranteed

prices, have had a great deal to do with this growth rate of the social

product of the private agricultural sector. It can be said that the price

disparity between agriculture and other economic sectors and industries was

especially manifested between i960 and 196*1.

The prices of farm products increased thanks to the measures of the economic

and social reform in 1965» and the disparity disappeared temporarily. These

measures had the aim of augmenting net income in agriculture. However, the

price disparity became worse in 1967- "The price disparity to agriculture's

detriment was 18 index points between 1964 and 1970.nl

The result is that the private farmer's social product has not shown a constant upward growth trend, but has followed a very uneven line of movement.

The national income of the private agricultural sector represents that portion of the social product which is obtained by subtracting material costs

and amortization from the social product. This income is distributed to

net personal incomes, funds for the public community and other charges, and

capital formation.

The private farmer's personal consumption is a part of the aggregate of

production, the social product and the national income, and the level of

personal consumption depends on the private farm's economic and cultural

level and also on the necessary volume of consumption on that farm.

80
The level of collections by the public community and self-managed specialinterest communities rendering public and other services depends on various

criteria, but the most important is the kind of tax policy which our country is conducting.

Capital formation is the remainder of income that is left after all the expenditures we have enumerated.2

Accumulation is smaller than the surplus

value by the amount of obligations to the social community and other payments based.on obligations to self-managed special-interest communities.

Over the period under consideration the surplus value of the average private farm has shown an upward trend, though the rate has not always been

the same from year to year. Capital formation depends on the level of the

private sector's national income and also on the amount of personal income

which that sector sets aside for its 'own needs. Larger income also brings

about an increase in the amount set aside for personal consumption, though

these increases are not of the same magnitude, nor in fact is their a definite rule confirming that the size of the growth of income affects the size

of expenditures for personal consumption. Precisely for that reason in the

period between 196l and 1973 no growth of income was recorded which would

have brought about an adequate growth of capital formation on the private

farm.

The table below shows the dynamics and growth of the national income and

surplus value between 1961 and 1973:

Table 1. Rate of Growth of the National Income and the Surplus Product on

Private Farms (1966 prices = 100)

Year

196l

1962

1963

196U

1965

1966

1967

1968

1969

1970

1971

1972

1973

Nat ional Income Total Surplus Value

Index of Index of

Annual Annual

Amount Growth Amount Growth

16,19^ 100 3,883 100

15,95^ 99 3,81+5 133

17,139 107 l+,27^ 111

17,777 IOU i+,201 98

16,118 91 3,167 82

19,013 118 3,96h 125

18,807 99 3,703 93

17,972 96 2,703 100

19,885 111 3,596 133

18,835 95 2,-jkk 76

19,6U7 IOU 3,666 134

19,296 98 2,589 71

21,223 110 3,906 151

We can conclude from the table that the income of private farmers has been

growing faster than the surplus value. Whereas the national income grew 31

81
percent "between 196l and 1973, the surplus value grew O.56 percent. The

reason why the surplus value grew less than income should be sought in the

larger amount set aside for personal incomes of private farmers. These expenditures are the result of the faster development of the productive

forces and of production relations in rural areas. Only after paying part

of the surplus product to meet the needs of the community and other selfmanaged special-interest communities is the private farmer left a portion

for capital formation.

It is from accumulated capital that funds are spent for expanded reproduction on the private farm. The rate of growth of production and the size of

new investments on the private farm depend on the size of those funds. Figures on capital formation are examined from the standpoint of only that income on the farm which was earned by production from the land and production taking place on the farm.

Table 2. Capital Formation of Private Farms:

Farm (1966 prices = IOO)

Total, Per Hectare and Per

Total Capital ]Forma- Capital Formation Capital Formation Df Privat s Farms, Per Hectare, tion Per Farm,6

Year in millions of dinars in iinars in dinars

196l 2,128 232.06 811.28

1962 1,752 191.89 667.91*

1963 2,095 232.52 798.70

196h 2,265 251+.12 863.52

1965 1,575 178.17 6OOA6

1966 2,156 21+5.81+ 821.96

1967 1,1*85 169.71 566.91

1968 Ui+T 51.25 170.kl

1969 1,1*65 168.00 563.03

1970 788 90.95 302.73

1971 1,867 2l6.06 717.25

1972 960 111.10 368.81

1973 2,^97 288.97 959-28

It is evident from this table that the level of capital formation per farm

and per hectare has been rather low.7Various factors have affected this

movement of the rate of capital formation: the level of development of the

productive forces on farms, low productivity in agricultural production,

price policy governing farm products, etc.

In the period between 1961 and 1973 price policy was quite a significant

factor in the private farm's capital formation. A comparison of the retail

price index of industrial products and of farm products shows how much

lower the prices of farm products were than the prices of industrial products.

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The growth trend of capital formation has an upward line over a long period

of time, with minor fluctuations in certain years. This growth of capital

formation is mainly the result of the improved productive capability of private farms and the use of modern farming practices in cultivating the land.

In the period since enactment of the measures of the economic reform, the

smallest formation of capital was in 1968, a year characterized "by a drop

in agricultural production and in farm income. In 1968 the portion of income set aside for the public community was larger than the amount set

aside in 1967. After that year, which was especially unfavorable, there

came a period in agricultural production when capital formation on private

farms increased.

83
The graph given below shows the trend of capital formation and of taxes and

other legal obligations:

Trend of Capital Formation and of Taxes

and Other Legal Obligations Taken Together on Private Farms Between 1965

and 1973

200.

48o.

A7o.

4«oJ

46b

V*o.

«o

42©.

MO.

Aoo

40.

49«S *««« H>«7 «968 i«*9 497o 'W *97« 4975

Taxes and other legal obligations,

total

Rate of capital- formation on private farms

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We see from the graph that the taxes paid "by private farmers have been

showing a declining trend, while capital formation on the private farm has

been showing a growth trend.' The growth of capital formation of private

farmers shows fluctuations in that the size of growth varied, and in 1968

there was a pronounced drop in the rate of capital formation. Taxes and

other legal obligations of private farms show a tendency to decline, though

their amounts have varied over this period. The fluctuations from year to

year in the rate of the private farm's capital formation have resulted from

a drop in production, the low rise in the prices of agricultural products

and difficulties in selling the products of animal husbandry on the Common

Market. When the situation in agriculture was corrected, in 1971» the rate

of capital formation again increased, reaching its highest point in 1973-

Capital formation varies from region to region in Yugosalvia, and everything depends on the national income earned in the particular region. The

level of capital formation in a given region depends on the level of development of the productive forces and on their applicability to development

of agriculture on private farms and on the size of the price rise of farm

products. A growth of the capital generated, which is accompanied by increased investments in the farm, is an instrument for bringing about faster

transformation of agriculture in rural areas. In the coming period capital

formation could be larger if there is a rise in labor productivity in agriculture. This can be achieved by reduction of production costs and through

the use of modern equipment in production. In addition to these factors,

the rate of capital formation is also raised by a rise in prices, which is

directly reflected as a rise in the rate of capital formation on the private

farm.

The private farm's capital formation is also affected by the price relation

between farm products and industrial products. The smaller the gap between

them, the more capital is generated in agriculture, and vice versa.

The possibility of generating capital on a private farm depends first of all

on the results achieved in agricultural production. Larger yields on the

farm will create the possibility for a higher capacity to generate capital.

Prospects for the Rate of Capital Formation on the Private Farm

The prospects for the rate of capital formation on private farms are based

on larger agricultural production. It depends on achieving higher yields

per hectare or per head of livestock. A higher rate of capital formation

on the private farm can be achieved if farmers pool their labor with organizations of associated labor.

The rate of capital formation also tends to rise under the influence of

other factors which promote faster development and growth of agricultural

production. And then taxation of the private farm on the basis of cadaster

income affords an opportunity for the private farm's ability to generate

capital to grow considerably when production increases. Moreover, in the

coming period better conditions must be created for a rise in labor productivity, above all because of the role which agriculture has as an economic

85
sector in our country's economic development and in order to establish better relations between supply and demand for agricultural products.

These better prospects for the rate of capital formation on the private farm

can be realistic only if there are additional funds in agricultural production on the private farm and if stable conditions are created for the sale

of farm products.

The public community, with its economic policy measures, has a particular

impact on the growth of production of private farms, and thereby on their

rate of capital formation as well. These measures must stimulate the development of agriculture as an economic sector, and within that sector they

must stimulate the development of private farms. The measures taken by the

public community to achieve larger capital formation on the private farm

are provided for as follows in the Social Compact on Long-Range Policy Concerning Agricultural Development:

i. earmarked investment of funds on private farms;

ii. exemption from the tax on fees for services of interest collected on

loans made to finance capital investment projects on private farms, as well

as a lower rate of interest;

iii. the entry of private farmers into association as an opportunity for

increasing their ability to generate capital;

iv. faster establishment of links and associations of private farms in a

context of self-management.

These measures which the public community9envisages represents an elaboration and application in specific terms of .the social compacts in the field

of agriculture.

In addition to these measures, the following should also be taken in order

to increase capital formation on the private farm:

i. tax policy should stimulate the development of agricultural production

on private farms,

ii. investment in the farm should be encouraged, and the amount invested

should be recognized in connection with the payment of taxes,

iii. tax policy should stimulate the private farmer's cooperation with the

socialized sector,

iv. a rise in productivity, which should come along with proportional capital investments, thus making it possible to achieve larger production,

v. larger agricultural production by virtue of social stabilization on the

market for agricultural products thanks to guaranteed purchasers and guaranteed prices for farm products.

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All these measures need to be taken, since the prospects of the economy,

and thereby of agriculture as well, lie in higher productivity and still

greater commitments of money to activate the large natural potential. The

prospects for production on the private farm which will generate more capital lie in the broadest possible cooperation with the large agricultural

complexes and in a linkage between them that covers the spheres of production, exchange, distribution and trade. Only farms of this kind have an

opportunity to generate sizable capital. Farms which remain outside this

process, whether because their natural and other conditions do not allow

them, or because of the farmer's desire, cannot expect a higher rate of

capital formation.

The prospects for capital formation also lie in utilizing the comparative

advantages of the various regions in our agriculture. Utilization of these

factors would make it possible for private farms to increase their income

and to alter the unfavorable agrarian structure. All of this can be

achieved on the.assumption of better cooperation with socialized farms and

production specialization. Utilization of comparative advantages would be

conducive to the division of labor in agriculture and higher productivity

on the farm. There is a justification for utilizing these factors in increasing the capacity of the private farm to generate capital only if the

particular region has a clear long-range development plan. It.is therefore

necessary to alter the system of tax policy and set it up so that it differentiates among regions.

The system of tax policy should be changed by virtue of laws and other enactments of sociopolitical communities. That is, there must be a change in

the attitude toward private farmers who engage in cooperation or who become

associated with organizations of associated labor. If objective conditions

exist for development of agriculture in a particular region of a republic

or autonomous province or still smaller region, then legislation should incorporate incentives which will motivate the private farmer to increase his

production and improve his cultivation of the land.

For the sake of larger production and a higher rate of capital formation,

as well as to achieve better supply of the market with certain scarce products, legislation should provide that all those farmers who plant a particular crop or raise a particular type of livestock will to some extent be exempt from payment of taxes as a function of the number of hectares planted,

the number of head of livestock raised, and so on.

A study should also be made of the possibility of exempting from taxation

implements the farmer uses exclusively for production on his own farm, since

this would be an incentive for larger production.

Conclusion

The private farm's capital formation has shown a tendency to increase,

though there were sizable fluctuations in 1968 and 1970. The growth of income on the farm is the basis for a further rise in the rate of capital

formation of the private sector of agriculture.

87
The measures of the 1965 economic reform gave out of steam rather quickly,

since they were not carried through to the end, and that is one of the reasons why a drop in agricultural production and the rate of capital formation was recorded in 1967 an^- 1968.

Direct taxes and other legal obligations have an impact on the rate of capital formation, since a part of the surplus value is deducted to meet them,

while the remainder represents capital formation. However, price policy

also has a direct impact on the rate of capital formation. A rise in the

price of agricultural products brings about a corresponding increase in the

surplus value, and the level of capital formation on the private farm depends in turn on bhis.

Increased imports of agricultural products have had a definite impact toward raising the rate of capital formation on private farms. The importation of farm products, whose prices have been rising steadily on the world

market, has caused unrest and instability on the market and has been detrimental to equilibrium in our balance of payments. If the size of imports

is to be reduced, productivity will have to be raised on private farms,

prices will have to be corrected, and there will have to be changes in the

assortment of farm products. To a considerable degree this would tend to

reduce the trade deficit, and the farm nroducts market would become much

more stable.

Aside from prices, the conduct of a realistic tax policy and the use of

modern equipment, a higher rate of capital formation on private farms will

be especially promoted by the organization of private farmers on a selfmanagement basis. The low level of organization and lack of linkages among

agricultural producers on a self-management basis in the spheres of production, processing and trade have made for instability on the farm products

market. These shortcomings will undoubtedly be corrected as the aim of the

Law on Associated Labor is achieved.

FOOTNOTES

1. "Ekonomika poljoprivrede sa zadrugarstvom" [The Economics of Agriculture, Including the Cooperative System], Prof Dr Mihajlo Vuckovic and

Docent Dr Mihajlo Radic, Privredni pregled, Belgrade, 1973, p 103.

2. This amount of national income which we refer to as capital formation

also contains certain other obligations which must be paid. These include the following expenditures: cash payments for medical care exceeding ik days, children's education, insurance, and so on.

3. "Privredni bilans Jugoslaviae" [Economic Balance of Yugoslavia] for

1962-1965, 1966-1971 and 197^, published by the Federal Bureau of Statistics, Belgrade.

88
k. This methodology used in computing income and capital formation, which

consists of including in this income only the value of products produced on that farm, gives an incomplete picture of the-farm's—household's—actual ability to generate capital. There are very few farms

living exclusively from agricultural production; rather members of the

household are employed in other economic sectors.

5. Source: "Statisticki godisnjak, 1972" [Statistical Yearbook, 1972],

p 130, Table 107-2.

6. The number of farms is taken from the 196l Census for the years 196I1969 and from the 1969 Census for the years I969-I97I.

7- The low level of capital formation per farm and per hectare results

from the figures taken, which can show the direction of movement, but

derived figures are by no means exact.

8. The value of taxes and other legal obligations and of capital generated

are expressed in 1966 prices = 100.

9. Socialist republics and socialist autonomous provinces.

70U5

CSO: 2800 - END

89