M. Barengol’ts

CAPACITY OF THE INDUSTRIAL MARKET

IN THE USSR

1. INTERINDUSTRY CONSUMPTION OF PRODUCTS OF AGRICULTURE AND FORESTRY

Before we proceed to analyze the data on the dynamics of interindustry consumption of the products of agriculture and forestry, we must agree to understand by the latter only those forms of vegetable and animal raw materials that are turned over to industry for primary processing. But when raw materials of the same type are, after primary processing, handed to the same industry or to another one for further processing, we shall consider them as products of industrial origin since they have already been counted once before as products of agricultural origin at the moment they were handed over for primary industrial processing.

Thus, raw cotton reachingthe cotton-ginningplants is counted as an agricultural product. But when, after primary processing, it is sent to the cotton-spinning mills, it is considered as a product of industrial origin, and we count this as interindustry turnover. In the same way, grain arriving at a mill is an agricultural product, while flour reaching a bread factory is an industrial product. In brief, a raw material is counted only once as an agricultural product-at the moment of its passage from the nonindustrial sphere to the industrial sphere-while its further movements within that sphere are viewed as interindustry turnover.

Accepting this limited definition of products of agriculture and forestry, their share in the total volume of materials used in industry is estimated as follows (see Tables 1, 2, and 3).

In comparing the data in Table 1 for the present and prewar (1913) consumption of raw materials and fuel in “census” factory production, we note above all the sharp decrease in the share of consumption of agricultural and forestry products. Here, on the one hand, we see a certain change in the structure of industrial production and, on the other, the divergence of the price indexes for agricultural and industrial products. It is obvious that with a higher index of industrial prices, the share of the raw materials and materials of industrial origin used in industry, even if the physical ratio remains the same, will increase in value terms! while that of the agricultural products will, on the contrary, decrease. The changes in the structure of the gross turnover of industry itself reduced the share of the agricultural raw materials used in the “census” industry even further. The most striking example of this we find in Group X-the cotton-processing industries-in which we find the sharpest reduction in the relative consumption of agricultural raw materials. This share dropped from 49.49 per cent in 1913 to 2.52 per cent in 1922/23 and 7.23 per cent in 1924/25. It is true that the data for 1913 in the form presented in Table 1 are not fully comparable with those of 1922-25, since the latter cover onlythe raw cotton that reached the cotton-ginning plants, whereas the 1913 figure apparently includes the total volume of ginned cotton that reached the cotton-spinning mills, including imports which, according to the assumption underlying our calculations, should be counted as industrial raw material. However, if we consider the figure of 431 million rubles for cotton consumption in Table 1 as industrial raw materials, and if we estimate the value of the raw cotton processed in Russian cotton-ginning plants at 180 million rubles, still the total volume of consumption of agricultural products for 1913 will amount to 20.7 per cent for Group X, i.e., several times higher than the figure for 1922-25. This is explained entirely by the change in the production structure in Group X, in which the share of the production of the cottonginning plants has been considerably reduced, as can be seen from the following comparison (in millions of gold rubles expressed in prices at the place of consumption):

Fuel and Raw Material Consumption in “Census” Industry
(in millions of gold rubles)

Table 1

Utilization of Raw Materials, Fuels, and Auxiliary Materials in Factory Industries (in thousands of chervonets rubles in prices at the place of utilization)

As the production of the cotton-ginning plants increases, the share of agricultural raw materials in Group X will grow. We find something similar to what we have seen in Group X for cotton processing also in Group vn-the foodindustry-in which the share of grain milling has undergone sharp fluctuations, during the years under study, which could not fail to affect the figure for the total consumption of agricultural raw materials. We can obtain an idea of the way the share of agricultural raw materials is affected by changes that took place within the cotton processing and food industries from the following comparison of the total figures for all industry, excluding the two branches mentioned above.

We can thus conclude that if we eliminate the effect of the structural changes in the food and cotton processing industries, the share of agriculture remains more or less the same as it was in 1913, except for 1923/24, when we witnessed a sharp fluctuation in the price index.

Finally, along with the factors already mentioned as causes of the variation of the share of agricultural raw materials, we must also point out the recent greater use of mineral fuels in industry, which, of course, reduces the consumption of firewood, which has already been reflected in the figures for 1922-25. Although there is a certain fluctuation in individual industries, especially in 1922-25, when the consumption of firewood in the metallurgical industry increased (owing to the growth of the Urals iron and steel industry, which used charcoal), on the whole, the share of the consumption of firewood decreased steadily during the period under study.

For small-scale industry (see Table 2), for which we have data only for 1923/24 and 1924/25, there are rather sharp fluctuations in the consumption of agricultural raw materials in various industries. These fluctuations, like those in the “census” industry, can be accounted for mainly by the changes that have taken place in the internal structure of certain industries or production groups. But, on the whole, if we exclude the food industry, we obtain for these two years a stable figure of about 20 per cent.

(in millions of chervonets rubles)

Table 2

Utilization of Raw Materials and Products of the Snjall and Handicraft Industries (In thousands of chervonets rubles in prices at the place of utilization)

Table 3

Utilization of Raw Materials, Fuel, and Auxiliary Materials in Factory Industries, Small Industries, and Handicrafts (In thousands of chervonets rubles in prices at the place of utilization)

Table 4

Interindustry Turnover. Census Industry 1922/23 (In thousands of chervonets rubles in prices at place of utilization)

Table 5

Interindustry Turnover. Census Industry 1923/24 (In thousands of chervonets rubles in prices at place of utilization)

Table 6

Interindustry Turnover. Census Industry 1924/25 (In thousands of chervonets rubles in prices at place of utilization)

Because of the above-mentioned changes in the consumption of agricultural raw materials in factory and small-scale artisan industry, the total figure for the consumption of agricultural raw materials in industry as a whole (see Table 3) will be as follows:

(in millions of gold rubles)

2. INTERINDUSTRY CONSUMPTION AND INTERINDUSTRY TURNOVER

The interindustry consumption of industrial products is broken down according to function into the following four categories:

(1) the consumption of the means of production-machines, tools, raw materials, semifinished products, fuel, auxiliary ma-

(3) Personal consumption (work clothes, special food rations);

(4) Consumption of office materials (the last two groups, of course, account for only a small fraction of the total volume of

The consumption of the means of production can be again subdivided into (a) the consumption of advance fixed capital and (b) consumption of objects of working capital. The first (a), being a problem of the balance of reproduction, does not enter into the scope of this study, which is limited to questions connected with interindustry consumption within a given year. Therefore we shall concern ourselves only with the consumption of objects of working capital in the production process and with the relation among individual industrial enterprises and individual industries (interindustry turnover).

Table 8

Consumption for Current Production and Repairs of Industrial Products by the Census Industry
(In chervonets rubles)

Since the scope of construction, and therefore the consumption in construction, determines to a considerable extent the further capacities for the development of industrial production, while itself depending not only on the level of industrial production attained but also on the general economic and political situation (the ratio of productive to nonproductive consumption, the redistribution of accumulation in the country, the influx of foreign capital, etc.), it follows that the annual consumption of the means of production in production is a function of the given annual production.

Under given technological conditions (i.e., if there are no changes in the technology of production itself which result in a reduction of consumption of raw materials, fuel, or auxiliary materials per unit of output or which cause the replacement of one raw material or fuel by another one, cheaper or more economical), the physical volume of consumption remains constant relative to the volume of production. And if the value of consumption changes it will be due to the fluctuation of prices. Therefore, as long as there is no technical revolution in production, the coefficients of interindustry turnover relative to the so-called gross turnover will provide, in physical terms (and, with a correction for price fluctuations, in value terms), fairly stable dynamic indicators to determine the total volume of consumption and of interindustry turnover as well as to establish the specific relations among various industries.

This must be our main assumption in examining interindustry turnover, as it has been our assumption in our study of interindustry consumption. Here, however, we must note that for “gross production,” in the sense this term is used in our industrial statistics, the dynamic coefficients of interindustry turnover are less significant and do not display the same regularity of pattern as in the case of “gross turnover.” This is due to the constant structural changes in the organization of production (greater specialization and the separation of certain auxiliary production processes into independent production units increase statistically the size of “gross production”; conversely, the unification of several production units into one enterprise statistically decreases “gross production” without, however, changing the physical volume of production). Therefore, when we analyze the data on interindustry turnover, we must base ourselves on the “gross turnover” of the consuming industries, which determines the volume of the products of other industries consumed by them. In this connection we should look at the organizational structure of interindustry turnover.

From the organization viewpoint, interindustry turnover has three aspects:

(1) The total turnover of materials taking place in the process of production and reproduction within industry;

(2) The turnover only between establishments, which, in Marxist terms, would be more aptly described as turnover of goods;

(3) Exclusively the market turnover of goods.

“The total turnover of materials” should be understood not in its literal but rather in its statistical meaning, i.e., not as the turnover of materials taking place between different phases of each production process, but as the turnover between production processes in the same industrial concern which are included in what is called “gross turnover.” Thus the total turnover of materials is connected with “gross turnover” and includes, besides the turnover between concerns, the turnover within a concern between the individual statistically accountable production processes. In other words, “gross turnover” minus “total turnover of materials” equals “gross production” minus “turnover between concerns.”

By market turnover we mean the turnover between the trusts or the turnover carried out through the market, i.e., the turnover between all concerns minus the turnover between concerns of the same trust.

Speaking of the organizational structure of interindustry turnover, we must also differentiate between the turnover between the “census” industry and the small-scale artisan industry (see Tables 4 to 6).

3. INTERRELATION BETWEEN INDIVIDUAL BRANCHES OF THE “CENSUS” INDUSTRY

Before we pass on to an examination of the organizational structure of the total interindustry turnover in the “census” industry as a whole, we must give a detailed description of the various forms of consumption and, in the first place, consumption in the production process (including current repairs), of raw materials, fuel, auxiliary materials! and packaging materials, which consumption, as we have already noted earlier, determines and conditions the constant functional relation that exists between various industries.

Here it must be noted that for the period under study, which is 1922-25, in our industrial statistics, the industrial concern was used as the accounting unit. Now, if one single concern combined several production processes pertaining to different industries (e.g., flour milling and sawmilling, shoes and lasts, etc.), then the concern as a whole was still classified in one industry on the basis of preponderance. Thus the turnover between different industries that took place within one concern was missed by our industrial statistics.

Therefore the connection between individual industries can be examined only within the limits of the turnover between industrial concerns.

That turnover between concerns for 1922-25, expressed in prices at the place of production, is given in Table 8.

In examining interindustry consumption, we base ourselves on physical values, which, for convenience, we have re-evaluated in the prices in which the production of each individual commodity was evaluated. In this way we obtained an adequate expression in value terms of the physical volume of consumption, which we termed the conventional physical balance and which enabled us to compare consumption and production in various industries and to determine the share of consumption.

However, although to obtain the conventional physical balance we must study consumption expressed in prices at the place of production, from the viewpoint of the balance of reproduction, it is important to know the final gross value of the product when it leaves the sphere of turnover, i.e., in prices at the place of consumption. This is also necessary to study of net production. Therefore our tables for interindustry turnover between individual enterprises,^1. according to production groups and subgroups, give consumption both in producer and consumer prices.

At this point we feel it necessary to warn against attempting to deduce from the comparison of prices at the places of production and consumption the “surcharges” and their dynamics throughout the years. Such attempts, although theoretically quite legitimate, are, it must be stated emphatically, liable to give very unsatisfactory results. In the state of affairs that prevails in our industrial statistics to this day, there is no guarantee that prices at the place of production are really the factory prices, as they are supposed to be. Rather it must be assumed-and we are led to this conclusion by an analysis of prices for individual goods-that at the place of production the statistical valuation of production is not Sone at factory prices, but more often either at cost prices or at the prices fixed by the trust, or at any other conventionally fixed prices. Thus the estimated gross value of production is usually a statistical accounting or any sort of conventional expression rather than a reality. From the viewpoint of the conventional physical estimate with which we are concerned here, it does not matter that this estimate does not correspond to any concrete reality, for we are concerned here only with one thing: that the prices in which the consumption of certain goods is estimated should correspond to the prices in which their production is statistically estimated. But these prices obviously cannot be used to draw definite conclusions about the price increase between production and consumption and about industrial expenditures on distribution. Since this last matter is of current interest, especially for the correct organization of interindustry turnover, we only wish that our industrial statistics would pay more attention to determining concretely the prices in which the estimate of the gross production is made, and thus enhance the importance of this estimate.

Coming back to the table on interindustry consumption of the means of production in the “census” industry, we note that (except for the fuel and textile groups, in which, for the reasons given below, there was a decrease in the share of interindustry consumption in production in 1923/24) there has been a constant increase in interindustry consumption not only absolutely but also relative to the gross production.

Concerning the fuel industry, the above-mentioned reduction in 1923/24 can be accounted for by the overproduction of Donets Basin fuel and by an accumulation of considerable reserves of coal which caused the planners to reduce the scheduled production of coal for 1924/25.

In the oil industry, starting with 1923/24, the share of exports increased while the share of kerosene and of distillation in general decreased, which inevitably caused a relative reduction of the share of interindustry turnover. Along with this, we can point to considerable success in saving of fuel; the fuel expenditure rate per unit of production has been declining since 1922/23. This has the most obvious effect on the fuel industry itself, where its own consumption dropped not only relatively but absolutely despite the continuous growth of production. This is also noticeable in the iron and steel industry, where, in 1923/24, the consumption of fuel increased only slightly while its own output increased 50 per cent in prewar prices.

In the textile industry, the reduction of the share of the interindustry turnover was due to a reduction of the relative share of the internal turnover within the textile industry itself, for which there are several reasons. In the first place, imported cotton has not been included in the sum of consumption which is compared with production.^2. If we do count it, the internal turnover as a percentage of the textile industry increases somewhat relative to the gross production. In the second place, during these years, owing to the increase in the variety and the quality of the goods produced, we observe an increase in the share of products of other industries in the total volume of the materials consumed, especially dyes, and at the same time a drop in the share of textile raw materials. This trend is especially pronounced in the cotton industry.

The textile raw materials, as can be judged from Tables 1 and 8, accounted in the “census” industry for 91.8 per cent, 88.3 per cent, and 82.9 per cent of the total costs of raw materials and materials of industrial origin consumed in production in 1922/23, 1923/24, and 1924/25, respectively. Thus the growth of gross production exceeds the growth of the consumption of the textile raw materials and semifinished products, and the ratio of consumption relative to gross production decreases.

Thus the fluctuations in the interindustry consumption of producer goods relative to gross production can be accounted for mainly by the above changes in the fuel and textile industries. If we exclude these, we obtain a more even picture of uninterrupted growth of interindustry consumption, which can be seen from the following figures (in per cent of gross production):

The scope of this paper prevents us from giving a more detailed analysis of industrial consumption in the “census” industry and the interconnections between the various industries that are due to it. We shall, therefore, limit ourselves to a few observations on the cases in which, instead of the expected even development of the dynamic series, we come across sudden leaps, upward or downward.

Here it would be appropriate to emphasize once more the incorrectness of comparing the growth rate of the gross production of an individual industry and the growth of consumption in that industry of the products of other industries and expecting to find a strict correspondence. Besides the different dynamics of the prices and the structural changes within the gross turnover, we must also know the changes that have taken place in the quality of the raw material and in the variety of goods produced. Thus the replacement in the soap industry of animal fats by hy-drogenized vegetable oils decreases the share of agricultural products and increases that of industrial products, but this does not happen in proportion to the increase of the gross output of the soap industry. The assortment of cotton fabrics determines the consumption of dyes and other auxiliary materials such as starch, dextrine, etc. Therefore, for an analysis of interindustry consumption we must always take into account the various changes that may take place within individual industries. In this connection, when studying interindustry turnover, it is better to use the data referring to subgroups rather than total figures for groups of goods, which often play down and conceal substantial Changes.

Thus the sharp increase in the consumption of products of extraction and primary processing of minerals in the mining industry in 1924/25 can be accounted for by the relatively rapid growth in the iron ore and machine-building industries of shaped steel castings and, as a consequence of this, the increase in the production of fireclays (see table of consumption of the products of Subgroup la). The leap in the consumption of the products of Group I in the food industry is explained by the increased output of vodka products and the increase in the consumption of glassware.

In the iron and steel industry, on the whole, the dynamics of consumption follows the dynamics of production. For the metal processing industry, the interindustry consumption increases somewhat faster owing to the reorganization and improvement of the current repairs since 1923/24.

We observe the same trend in the woodworking industry, where, owing to more current repairs, the consumption of all sorts of timber supports has increased in the fuel and ore industry. The consumption of timber has also increased in metal processing and machine building, and in the food, paper, garment, and footwear industries, where wooden crates are used more and more. In the last three industries, electrification has been introduced in the past few years, which reduces their mineral fuel consumption.

Above we examined only productive consumption. Below we give data on consumption by the “census” industry of building materials, working clothes, and office materials.^3. To answer the question about the amount and composition of the expenditures of materials of industry in construction, we possess no direct statistical data, such as those on industrial consumption, for which there are yearly reports. This is due to the unfortunate fact that up until now, except for the balance reports in the total sum of expenditures, we have no regular statistics on individual construction and consumption of building materials. Hence, in making up our table, we had first to separate the sum spent on the purchase of building materials from the total sum of expenditures on construction. To find these figures, we have used the industrial balances of the Soviet Union and the Russian Republic for 1923/24 and 1924/25. The coefficients thus obtained, with some corrections, were extended to industrial construction as a whole. For the electric power stations and housing construction, we had to use estimated figures.

To find the specific composition of the expenditure of materials, these expenditures were broken down, on the basis of the direct balance sheets, into expenditures for: (1) capital repairs; (2) new construction (various types); (3) equipment.

Further, the composition of expenditures was calculated partly on the basis of the norm data and partly on the basis of various estimates. The composition of expenditures on new construction was determined on the basis of the Supreme Council of the National Economy’s study of the trusts’ construction work, which yielded some preliminary information for the determination of the nature of the construction projects.

Thus we have calculated the physical amounts of consumption of the various forms of building materials which were later evaluated in the same prices as was industrial consumption.

For working clothes, we had to use the normative calculations based on the approximate number of persons entitled to one type or another of special work clothing.

The consumption of office equipment was based on consumption per office employee. In view of the considerable increase in the consumption of building materials due to the development of capital repairs and new construction, we observe a relatively faster growth in the consumption of products of machine building and metal industries.

The relatively slow increase in the consumption of special working clothes is accounted for both by the price changes and by the revision of the norms for this clothing. On the whole, it must be noted that the growth of the expenditure on working clothes is nevertheless increasing at a faster rate than the growth of manpower engaged in the “census” industry.

Inversely, expenditures on office materials increase very slowly-above all because of the limitation and reorganization of office personnel, whose numbers increase very little in industry.

“Emkosf promyshlennogo rynka v SSSR,” Planovoe khoziaistvo, No. 7, July, 1928, pp. 325-348.

[Editorial note of the journal:] This work was started a few years ago on the initiative of the Industrial Economic Council of the Supreme Council of the National Economy. It was felt, however, that it could not be carried out on the intended scope at that time because of the state of the available data. Yearly figures are reported with great delays and thus the latest year we could use in this work was 1924/25. Then, for 1922/23 and 1923/24 the data are rather unreliable since during these years a falling currency was used alongside the chervonets. Moreover, because of the incompleteness of data, many gaps had to be filled by the use of indirect data and approximations. All this diminishes considerably the reliability of the coefficients calculated by the author. Nevertheless, the ratios of the figures found for the various years and industries are significant and can be used as preliminary estimates in this as-yet very little explored problem of the capacity of our market.

1. As for the turnover within an enterprise itself, this differentiation ceases to apply since here the price at the place of production is the same as the price at the place of consumption. Thus, when further on we examine the total turnover of materials (i.e., including the turnover within an enterprise) in the “census” industry, the latter will be expressed in production prices.

2. I must remind the reader here that ginned cotton, according to our method, must be classified as an industrial commodity. In our table by industries, we use the total figure, which includes imported cotton in the denominator.

3. Data on consumption by the census industry of building materials, working clothes, and office materials are given in the original in Table 7. This table has been deleted as nonessential.-Ed.