THE NATIONAL ECONOMIC SIGNIFICANCE OF EQUIPMENT RENEWAL AND PRODUCTION IMPROVEMENT AT OPERATING ENTERPRISES

D. M. Kazakevich, A. P. Goryunov

(Presented by the scientific seminar of the Department of Political Economy of TPI)

The successful fulfillment of the majestic program for the extensive construction of communist society in our country, outlined by the historic decisions of the Twenty-First Congress of the CPSU, is unthinkable without a substantial improvement in the use of the internal reserves of socialist production.

The most important factor accelerating the development of socialist industry is the intensification of production at operating enterprises.

The intensification of production through the replacement of obsolete equipment, a high degree of mechanization and automation of labor, the carrying out of reconstruction and, in individual cases, the expansion of floor space in order to eliminate bottlenecks at operating enterprises makes it possible, with smaller expenditures and in the shortest possible time, to solve the task of rapidly increasing the output of products.

One of the initiators of comprehensive improvement of production and of a manyfold increase in output on existing floor space in the postwar period was the collective of the Moscow Instrument Plant. At this enterprise, within a short time and with minimal capital investments, a highly mechanized continuous-flow production system with a constant rhythm was organized, beginning with the blank-preparation shops and ending with the finished-goods warehouse.

As a result of comprehensive mechanization and automation, the introduction of advanced technology and through continuous-flow production, the plant increased its output fivefold; labor productivity rose 3.7 times; output per 1,000 rubles of fixed assets increased 4.1 times; output per 1 m² of production floor space grew 3.6 times; and the cost of comparable products decreased by 63.4%. The saving from the reduction in production cost, recalculated for the annual production program, amounted to 13.7 million rubles¹.

The method of comprehensive improvement of production, raising the productivity of social labor and increasing the output of products with existing resources was applied by the Tomsk Manometer—

...by a new plant which, during the years of the fourth and fifth five-year plans, increased gross output 8.6-fold on the existing small production area, little adapted for the plant (Table 1).

Table 1

Main performance indicators of the Tomsk Pressure-Gauge Plant during the years of the fourth and fifth five-year plans¹) (1945 = 100%)

The Svessa Pump Plant, in cooperation with the All-Union Scientific Research Institute of Hydraulic Machine Building, carried out work to increase manyfold the production of 46Г pumps on the existing production areas. As a result of an extensive set of measures to improve the design of the pumps, equipment and technology, and the organization of production and labor, the output of pumps increased 5-fold, the total labor input per pump was reduced from 400 to 180 hours, and the cost was cut by half. All the work was carried out from circulating funds, on the principle of annual self-repayment.

It is of some interest to compare the results achieved (Table 2) with the original project for expanding pump production by proportionally increasing production areas, the quantity of equipment, and the number of workers, while retaining the former pump design, technology, and organization of production.

Table 2

The high effectiveness of intensifying production—replacing obsolete equipment, introducing advanced technology and organization of production, and increasing output manyfold by reducing production costs—has been demonstrated by the experience of many enterprises.

¹) Based on plant materials. The calculation was made on the basis of comparable prices.

It must be acknowledged, however, that this method was by no means used by all enterprises. Many enterprises followed a simpler path and increased the scale of production mainly by building new production areas, acquiring additional equipment, and increasing the number of workers; that is, instead of making maximum use of all internal production reserves, they embarked on the path of extensive development of production.

Insufficient attention to the problems of improving and intensifying production is evidenced by the change in the age composition of equipment in our industry.

During the prewar five-year-plan years, the machine-building industry of the USSR was equipped with the newest technology. In 1940, in the USSR, 75% of the entire stock of metal-cutting machine tools consisted of machines less than 10 years old¹).

Subsequently, the age composition of equipment deteriorated. One of the reasons for this was, first, the sharp reduction in the output of metal-cutting machine tools during the war years, due to the relocation of a large part of machine-tool plants to the eastern regions of the country.

Table 3

Output of metal-cutting machine tools by machine-tool plants of the USSR
(as % of 1940)²)

Second, the deterioration in the age composition of the machine-tool stock is explained by the slow growth of production of metal-cutting machine tools in comparison with the rate of development of our industry in the postwar period. Thus, with the total output of gross industrial production in the USSR in 1955 having increased 3.2 times over the 1940 level, the output of metal-cutting machine tools during this period increased only 2 times³).

Finally, a cause of the deterioration in the age composition of equipment is the insufficient attention paid by economists, enterprise managers, and planning bodies to the issues of improving and intensifying production at operating enterprises by replacing obsolete equipment with new, more advanced equipment.

Table 4 shows the age composition of metal-cutting equipment in several branches of machine building as of March 1, 1955⁴).

For enterprises of the Tomsk economic administrative region, the age composition of equipment is characterized by the following data (Table 5).

The materials of Tables 4 and 5 indicate that, in the machine-tool stock both for industry as a whole and in individual branches,

¹) I. I. Changli. Ways of Improving the Use of Fixed Assets in the Industry of the USSR. Publishing House of the Academy of Sciences of the USSR, 1954, p. 27.

²) Calculated from materials of the former Ministry of the Machine-Tool and Tool Industry.

³) See Industry of the USSR. Statistical Collection, Gosstatizdat, Moscow, 1957, pp. 11, 207.

⁴) Calculated from equipment census data of the former machine-building ministries. Data for industry as a whole are taken from the materials of the All-Russian Conference of Machine-Tool Builders in Moscow in 1958.

Table 4

(in percent)

Table 5¹)

(in percent)

in machine building the share of over-age equipment that must be replaced in the coming years is very large. This problem is especially acute in machine-tool building, where the overwhelming majority of machine tools (71.5% in 1955) have been in use for more than 10 years, and which itself is the basis for the technical re-equipment of all industry.

Alongside the replacement of obsolete equipment, serious attention must be paid to improving the qualitative composition of the machine-tool stock. At many enterprises the share of machine tools of progressive groups and of automatic equipment in the total machine-tool stock is still too low. Specialized equipment is insufficiently used.

As of August 1, 1958, at enterprises of the Tomsk Sovnarkhoz the share of special and specialized machine tools, as well as automatic and semi-automatic machine tools, amounted to 21% of the total machine-tool stock²). At the same time, the share of universal, low-productivity equipment is large. In 1955 the share of lathes in the machine-tool stock of the USSR was 28.5%, while in the USA it was 14%.

This is explained by the fact that our machine-tool industry does not produce enough machine tools of progressive groups.

¹) Calculated from equipment census data as of March 1, 1955 and August 1, 1958, based on materials of the Tomsk Regional Statistical Administration.
²) Calculated from equipment census data as of 1/VIII-1958.

Output of machine tools of progressive groups as a percentage of the total production of machine tools¹)

Therefore, the interests of intensifying production require not only faster rates of growth in the output of metal-cutting and metal-forming equipment as compared with the general rates of development of our industry, but also changes in the direction of qualitative improvements in the machine-tool equipment being produced.

It should also be said that the task of improving production at existing machine-building enterprises was previously not sufficiently taken into account in the distribution of new metalworking equipment. A considerable quantity of new machine tools was sent to branches where they are not of decisive importance, while at machine-building plants there remained a large number of obsolete, morally worn-out machine tools. This is one of the reasons why the age composition of metal-cutting equipment in the machine-building industry proved, by the end of the fifth five-year plan, to be considerably worse than in other branches of industry.

Thus, for example, according to the equipment census of 1955, the timber industry had the youngest stock of metal-cutting machine tools. Here, machine tools up to 10 years old constituted 77.2% of the stock. In the coal industry they constituted 62.7%, and in the oil industry—62%²). At the same time, in the tractor industry, machine tools that had been in operation for less than 10 years constituted 51% of the stock; in agricultural machine building—45.3%; in the bearing industry—31.4%; in the machine-tool and tool industry—28.5%; and in the automobile industry—26.7% of the stock³).

According to the equipment census of 1958, at the machine-building plants of the Tomsk sovnarkhoz, machine tools that had been in operation for less than 10 years constitute 47.3% of the stock, while non-machine-building plants have 80.8% of such machine tools (Table 6).

Age composition of metal-cutting equipment at enterprises of the Tomsk economic region as of August 1, 1958⁴)

Table 6

¹) Based on the materials of the All-Russian Conference of Machine-Tool Builders in Moscow in 1958.

²) A. E. Prokopovich, Modern Designs of Metal-Cutting Machine Tools. Moscow, 1957, p. 38.

³) Calculated from the data of the census of metal-cutting machine tools in machine building as of March 1, 1955.

⁴) Based on materials of the Production-Technical Department of the Tomsk sovnarkhoz, calculated from the equipment census data as of 1/VIII–1958.

The new structure for managing industry and construction, in our view, helps to organize a more rational distribution of metal-cutting equipment. It is necessary, in a planned manner, to redistribute machine tools; to direct to branches of extractive industry, light and food industry, and also to RTS and collective farms those machine tools removed from machine-building plants; and to re-equip machine-building enterprises constantly with the newest equipment. The entire national economy would benefit from this, since equipping machine-building plants with the newest technology leads to an increase in the output of equipment for all branches of the national economy and to a reduction in its cost.

In this connection it seems advisable that the sovnarkhozes, when drawing up applications for new equipment and plans for its distribution, should make broad use of the right of partial redistribution of equipment among enterprises in the interests of its most rational utilization.

Along with the replacement of obsolete equipment by new equipment, an important reserve for reducing production costs and increasing output is the modernization of aging equipment. Modernization of equipment is objectively necessary. With the present and, moreover, rapidly increasing scales of production, it does not appear possible, through the output of new equipment, to ensure the complete and timely replacement of all morally obsolete means of labor with new ones. Take, for example, metal-cutting equipment. As of January 1, 1958, the national economy had 1,950 thousand machine tools, while 138 thousand were produced in 1958; that is, the output of new machine tools amounted to 7.1% of the existing stock of machine tools. It must also be taken into account that a significant part of the new output of equipment is used to equip new enterprises. In addition, part of the new machines goes for export. Hence it is clear that, if we do not systematically modernize existing equipment, we shall be faced with the necessity of using morally obsolete machines in production for a long time.

The redistribution of equipment in the national economy (discussed above) and the modernization of existing means of labor make it possible to reduce substantially the losses to the national economy connected with the moral depreciation of machines. Modernization of the existing stock of machines must become a continuously operating factor, one of the basic links of technical progress.

Many enterprises already have considerable experience in modernizing equipment. But it must be said that, on the whole, industry still pays insufficient attention to the modernization of means of labor.

For example, in machine building over the last 10 years approximately 4% of the existing stock of machine tools has been modernized. The main efforts were concentrated on increasing the speed and power of machine tools, while little attention was paid to their mechanization and automation. For this reason, with an overall reduction in expenditures of machine time by a factor of 3–4, the time spent on auxiliary operations decreased only by 20–40%; as a result, the share of auxiliary time increased, and the overall effectiveness of the modernization of machine tools proved to be low.

If one proceeds from the fact that, in mass and large-scale production, machine tools should be used for an average of 10 years, then at machine-building enterprises not less than 5% of the stock of metal-cutting machine tools should be modernized annually. In doing so, all factors affecting the productivity of machine tools and ...

machines, and, first and foremost, the level of mechanization and automation of machine tools must be raised in every possible way.

For the planned modernization of operating equipment, work must be carried out systematically to determine the technical condition of equipment and to develop standard means of modernization. It is quite obvious that the modernization of the large number of obsolete ID62 machine tools available at plants, produced in previous years by the Krasny Proletarii plant, can be carried out in the shortest possible time and at the lowest cost provided that the plant which previously manufactured these machine tools develops standard means of modernization and organizes their mass production. The task of developing standard modernization projects and the mass production of standard parts and units needed for the modernization of machine tools produced in previous years is being solved by the machine-tool industry very slowly, especially with respect to the production of standard means of modernization. This circumstance compels machine-building plants to carry out modernization by semi-handicraft methods, which is economically less advantageous or not advantageous at all. This is one of the substantial reasons for the insufficient expansion of work on equipment modernization.

It is also necessary to resolve the question of funds for carrying out modernization. Obviously, it is most expedient to use Gosbank credits for this purpose. On the other hand, a larger part of the depreciation fund should be left at the disposal of enterprises so that, together with capital repairs, enterprises could carry out large-scale modernization of existing instruments of labor.

The growing role of improving existing production as a factor in the development of industry will inevitably lead to a change in the structure of capital investments. The expansion and intensification of production at operating enterprises will make it possible to use funds for capital construction more effectively.

In the branches of machine building indicated in Table 7, according to data for the end of the Fifth Five-Year Plan, up to 60% of all expenditures on capital construction consisted of expenditures on construction-and-installation work, i.e., expenditures on construction proper, and only 38–46% consisted of expenditures on equipment.

Table 7

Structure of expenditures on capital construction in 1954 (in % of total)¹

¹ Calculated from materials of the former machine-building ministries.

In the national economy as a whole, the share of construction-and-installation work amounts to more than 60% of the total volume of capital investments.

Practice has shown that it is often far more economically advantageous to use capital investments for the renewal and modernization of equipment, as well as for the reconstruction and partial expansion of the capacities of operating enterprises, than to build new plants and factories.

Table 8

Share of construction-and-installation work in the total volume of capital investments in the machine-building industry of the Tomsk Sovnarkhoz under the plan for 1959–1965 (in %)¹

In improving and intensifying production at operating enterprises, a large part of capital investments goes toward the renewal of equipment, and this is accompanied by their accelerated and effective return through an increase in output.

To carry out further expansion of production mainly by building new enterprises, while leaving operating enterprises without forward movement, without renewal of equipment, would be entirely wrong. Industry must continue to develop to a considerable extent on the basis of renewal of technology and the comprehensive utilization of the production reserves of operating plants. This, of course, does not exclude the construction of new plants equipped with the most advanced technology.

The Seven-Year Plan marks the beginning of a qualitatively new stage in the development of the industry of the USSR. During the period of the country’s industrialization and in the years of the postwar five-year plans, industry developed above all through the construction of new enterprises. Many branches of industry were essentially created anew, and the industrialization of formerly backward regions of the country was carried out. Therefore, there were objectively no conditions for a mass-scale improvement and intensification of production at operating enterprises. At the present time, when our country already possesses a highly developed socialist industry, it has become possible and objectively necessary to cha—

¹ Calculated from materials of the Tomsk Sovnarkhoz.

...of directions for the further development of industry. If, with respect to individual regions in the east of the country with newly discovered natural resources, the proper use of capital investments will be for the construction of new enterprises and, above all, enterprises of the extractive industry, then in manufacturing industry—and especially in machine building—one of the principal directions becomes the fundamental reconstruction, partial expansion, and technical re-equipment of existing enterprises.

Questions of improving production at existing enterprises, replacing and modernizing obsolete equipment, acquire special urgency for Moscow, Leningrad, and other old industrial regions of the country, where there are personnel of especially high qualification, but where the construction of new plants is inexpedient, while the existing plants are equipped with machinery that is considerably inferior in its level to the equipment of plants built in recent years.

Intensification of production is also of great importance at the enterprises of the Tomsk and a number of other sovnarkhozes in the eastern regions of the country, taking into account that here, too, there is a significant number of enterprises built during the prewar five-year-plan periods, and especially the fact that in these regions there exist quite a few enterprises that arose during the years of the Patriotic War on the basis of plants transferred from the west, with their equipment, which by the present time has become morally obsolete.

According to the seven-year plan for the development of the Tomsk economic region, the output of industrial products by the machine-building plants of the sovnarkhoz is to increase 3.5 times, including at existing enterprises—2.4 times. Alongside the construction of many new enterprises, the existing machine-building plants will receive rapid development. Thus, at the Fifth State Bearing Plant the volume of output will increase 5 times; the tool and pressure-gauge plants must increase output by more than 3 times; “Sibelektromotor”—by 2.2 times. During the seven-year period it is planned to introduce more than 90 automatic and semi-automatic machine-tool lines at the plants of the sovnarkhoz, and to double labor productivity.

Despite the fact that during the seven-year period a significant number of new machine-building plants will be put into operation, thanks to the intensification of production at existing enterprises 62.7% of the total increase in machine-building output will be obtained, and only 37.3% of the increase in output will be provided by newly constructed plants.

Thus, one of the most important directions in the development of the material and technical base of socialist society in the period of transition to extensive communist construction, alongside the construction of new enterprises equipped with the latest technology, is the systematic renewal of equipment and improvement of production at existing enterprises. The content of this direction is the intensification of production, the maximum use of internal production reserves, the growth of the productivity of social labor and the reduction of production costs, and the increase of output through a fundamental improvement in the qualitative indicators of production.

1. According to plant materials. ↩