Capital, Profit and Bonus in Soviet Industry

The economic controversy in the Soviet Union initiated by the publication of the Liberman proposals2 in late 1962 covered a wide range of micro-economic problems. Four concepts in particular interest me here: the introduction of capital charges in Soviet industry; the linking of money bonuses to the rate of profit on capital; the more extensive r6le of profits per se as an enterprise incentive; and the use of a capital , that is, the payment of bonuses to management by multiplying the incentive rate per unit of capital by the quantity of capital used within a plant.3 The particular dangers involved in using such a capital multiplier can be shown by a study in detail of one element in the Liberman proposals. In his original article Liberman gives a sample scale of the relation between the incentive rate per unit of capital and profitability. (Profitability is equal to price less average variable cost multiplied by output, and expressed as a percentage of total fixed and working

Business · Economics · Market economy · Neoclassical economics · Profit (economics) · Economic theories and models · Economic Theory and Institutions · Russia and Soviet political economy