THE PROBLEM OF VALUE, COST, AND PRICING OF PRODUCTS IN THE COAL INDUSTRY OF THE USSR

V. F. VASYUTIN

The Twentieth Congress of the CPSU provided for a reduction in the cost of industrial products over the sixth five-year plan by 17%, which will yield savings for the national economy of more than 10 billion rubles over the five-year period.

A reduction in the individual costs of producing industrial products will also lead to a reduction in socially necessary costs, i.e., to a reduction in the value of products. The cost and value of industrial products in the USSR are closely connected with a third economic category—the price of industrial products.

This interrelationship is taken into account in planning the cost of industrial products and in setting prices for them. The cost of products reflects, on the one hand, the general national-economic conditions under which the output of products takes place, and, on the other, the condition of the enterprise producing the given product.

The general national-economic conditions reflected in the cost of products include wholesale prices, transport tariffs, and the siting of enterprises across the territory of the country. The conditions that depend on enterprises and affect the magnitude of costs include the technical equipment of enterprises, mining-and-geological factors, and also the nature of the organization of production and labor.

Thus, the cost of products is the monetary expression of expenditures on the means of production consumed in manufacturing the products, wages paid to workers, services of other enterprises, expenses for the sale of products, and expenditures on the management and servicing of production.

The following types of cost are distinguished:

a) section or shop cost, including the expenditures of the section or shop on the production of products;

b) mine-wide cost, which fully includes the section and shop cost of products, as well as mine-wide expenses (maintenance of mine-wide administrative and technical personnel, office expenses, amortization of mine-wide buildings and structures);

c) full cost—which includes the entire mine-wide cost and expenses connected with the sale of products, maintenance of sales offices, administrative and economic expenses of trusts and combines. The full cost includes expenditures on prepara-

training of personnel through the course network and expenditures on the conduct of scientific research.

In addition, one should distinguish the individual cost of production, determined by the expenditures of a given enterprise, and the branch cost, which is established as the weighted average of the individual expenditures of enterprises in a given branch of industry. The weighted-average cost of production by branch approximates in magnitude the corresponding part of the socially necessary expenditures for the production of the product, i.e., its value.

The planned branch cost of production differs from value to the extent that it proves possible to bring planned indicators closer to the objective magnitudes determined by the action of economic laws.

For all the differences between the cost of production and its value, it should be borne in mind that value is the objective basis of cost, its base. This means that, by carrying out measures to reduce the cost of production, we thereby reduce its value, cutting not only individual but also socially necessary expenditures on the production of the product. For example: if, in the total mass of coal extracted, the share of open-pit mining increases, or if the ratios of output in the western and eastern regions change sharply in favor of the eastern regions, then the socially necessary expenditures made in the USSR as a whole for coal extraction will be significantly reduced.

The cost of production is part of its price, which includes, alongside cost, the monetary expressions of net income for society (profit). Net income is included in the price of the product in the form of the enterprise’s profit and the turnover tax. The lower limit for the price of a product should, as a rule, be its average branch cost. The price of a product may differ from its value. These differences or deviations constitute the problem of price policy, connected with the redistribution of society’s net income in accordance with the national-economic tasks posed at the various stages in the construction of the Soviet economy, as well as for the purpose of regulating demand for various goods.

During the years of the first five-year plans and subsequently, in order to accelerate the pace of industrialization, wholesale prices for means of production and for the output of heavy industry were set below their value, and in many cases significantly below cost.

Such, for example, was the situation with coal prices before January 1, 1949. At that time wholesale prices for coal were on average almost three and a half times lower than the cost of the entire mass of coal extracted. On January 1, 1949, coal prices were raised by 3.45 times.

The measures carried out by the government to raise wholesale prices for coal brought them closer to the actual socially necessary expenditures made in the coal industry. Therefore, a further improvement in pricing practice will place the enterprises of heavy industry, and in particular the coal industry, on a more realistic basis for cost-accounting activity.

Academician S. Strumilin, in his article “On the Question of Accounting for the Value of Production” [1,97], wrote: “The source of all our incomes is labor in the sphere of production. And in our conditions it is most natural precisely from where they are created to draw into the budget all state expenditures subject to further distribution. This will also make it possible to choose a more correct principle for determining the sums, sub—

subject to transfer to the state budget from each given branch of labor and for each enterprise separately.” In this case, price formation, too, must be based on the real costs of forming the cost price and value of output in the given branch of industry. Meanwhile, at present some socially necessary expenditures incurred in the extractive industries are not at all reflected in the cost price of the minerals extracted, although these expenditures are measured in billions of rubles. They include expenditures on geological prospecting, geophysical and drilling work, and housing construction.

For the increase in oil-and-gas areas alone, under the first version of the plan it was proposed to spend up to 15 billion rubles during the sixth five-year plan.

Since prices and pricing policy directly or indirectly influence the formation of the cost price of industrial output, all this has found a lively response in our economic literature. The discussion that took place on the problem of pricing industrial products, organized by the Institute of Economics of the Academy of Sciences of the USSR; the statements of a number of authors in the pages of journals and newspapers—Voprosy ekonomiki, Planovoe khoziaistvo, Promyshlenno-ekonomicheskaia gazeta—as well as a number of works that have appeared on this subject, did not show unanimity of views among all participants in the discussion of this question. In this connection, three main tendencies emerged.

1. The existing practice of price formation must be improved in such a way that prices for means of production are based to a greater extent on their value. The supporters of this theory are Academician S. Strumilin, Docent Bor, and others.

2. Another group of economists, headed by Prof. Turetskii, denies the necessity of a simultaneous review of the existing practice of price formation for the products of heavy industry, although in reality the existing system of price formation weakens the foundations of economic accountability, since it distorts the real structure of costs for the production of a unit of output.

3. A third group of economists, headed by Comrade Malyshev, proposed establishing prices for all goods (means of production and consumer goods) on the basis of cost price with the addition of a uniform amount of profit for all branches, determined with account taken of all production funds assigned to a given branch of industry.

From the theoretical point of view, here there is an assertion that contradicts K. Marx. In this case, both fixed assets and the labor of workers must provide profit, whereas in reality the sole creator of the surplus product is the labor of the workers.

The distribution of the surplus product among branches of industry in proportion to their production funds would in practice lead to a persistent deviation of prices for means of production upward, and for consumer goods downward, from value. As a result of this relation between payment for materialized and living labor, cost-price calculations for products would be distorted just as they are now, but at the expense of other elements.

As for price formation in the coal industry, it has its own specific conditions. First, coal prices are established without regard to transport costs, i.e., free-at-station of dispatch. Second, in view of the sharp differences in the level of the cost price of coal among individual basins and regions, prices for

coal are established by basins, and within a basin by grades, on the basis of the planned cost of coal in the given basin.

With this method of constructing prices, the average conditions of coal extraction are taken into account, and the socially necessary expenditures of labor time on fuel extraction are considered. Consequently, those mines that operate under unfavorable mining and geological conditions will be among the planned loss-making enterprises.

In this connection, it becomes necessary to redistribute accumulations within the basin through the use of differentiated settlement prices, so that mines with unfavorable mining and geological conditions do not incur losses, while mines operating under favorable mining and geological conditions would not have the possibility of obtaining excessive profitability.

One solution to this question is the establishment of special differentiated settlement prices for each mine separately. Such prices are established by the trust for mines on a quarterly basis. These prices enable state bodies to receive differential rent from richer coal deposits located in favorable mining and geological conditions or lying close to the surface, which makes it possible to mine them by the open-cut method.

Settlement prices also have certain shortcomings, since the loss-making or profitability of a mine does not always depend only on mining and geological conditions. As at any enterprise, organizational and economic factors dependent on the activity of the engineering and technical personnel and workers of the given enterprise have a major influence on the formation of the cost of production.

Finding the boundary that separates subjective from objective factors is the main difficulty in determining settlement prices for coal.

Conclusions

1. The establishment of wholesale prices for industrial products, taking into account all socially necessary costs, will have a positive effect on the cost-accounting activity of enterprises. The approximation of wholesale prices for heavy-industry products to their value should be carried out gradually, without reducing the inflow of funds to Gosbank.

2. The establishment of wholesale prices for coal close to socially necessary costs would lead to the cessation of mining deposits where coal extraction, at the given level of development of technique and production technology, would prove to be higher than the socially necessary costs per unit of output.

Literature

1. Academician S. Strumilin. On the question of accounting for the value of products, journal Voprosy ekonomiki, No. 12, 1956.

2. M. Sakov. On cost price as an economic category, journal Voprosy ekonomiki, No. 3, 1956.

3. L. Maizenberg. Questions of pricing in the USSR, journal Voprosy ekonomiki, No. 7, 1957.

4. A. Kulikov. The law of value and pricing in the USSR, journal Voprosy ekonomiki, No. 9, 1957.