Part 25 (1/2)

The proportions of national income (net material product) generated in each of the owners.h.i.+p sectors in 1971 were: state, 70 percent; collective, 21 percent; and private, 9 percent. The importance of private enterprise in the production of food, however, is much greater than its contribution to the national income may suggest. The private sector has provided more than one-fifth of the crop output and one-third of the livestock production (see ch. 13).

Whereas the leaders.h.i.+p has promoted livestock production on private farm plots, since 1968 it has placed increasingly severe restrictions on the activities of private artisans, who had originally been encouraged to expand their operations through liberal regulations issued in 1965.

Aside from providing essential services, private artisans played an important role in supplying a variety of consumer goods for the population. The restrictions on artisans' activities have been based on the BKP tenet that private owners.h.i.+p of means of production and the use of personal property to acquire unearned income are incompatible with the socialist order and the country's new const.i.tution.

Economic activities are centrally planned and directed along lines prescribed by the BKP. The functions of planning and control are exercised by the Council of Ministers with the aid of specialized economic ministries, such as the Ministry of Finance, the Ministry of Chemical Industry and Power Generation, and the Ministry of Foreign Trade, and of various governmental committees and commissions (see ch.

8). The state banking system and, more particularly, bank credit have also served as tools for the control of enterprises and trusts.

The economic management structure has been subject to frequent changes.

In the spring of 1972 there were fourteen economic ministries, including five ministries exclusively concerned with branches of industry and construction. The Ministry of Agriculture and the Food Industry, as its name implies, has functioned in two major economic sectors and has also had substantial responsibilities in the field of distribution. Among the committees and commissions the most important have been the State Planning Committee, the Committee on Prices, and the Commission for Economic and Scientific-Technical Cooperation. In December 1972 the Commission on the Living Standard was created to coordinate and control the fulfillment of the national living standard program decided upon by the plenum of the Central Committee of the Bulgarian Communist Party.

Attached to the Council of Ministers and chaired by a deputy minister, the commission is composed of ministers and deputy ministers, representatives of public organizations, scientists, and other members.

Since the beginning of 1971 economic management has been more highly centralized than before. A plan for partial decentralization of economic decision making adopted in 1965 was abandoned by 1968. The economy is organized into trusts (officially known as state economic a.s.sociations) that unite enterprises within branches of economic sectors along functional lines, such as metallurgy, textiles, food processing, railroads, freight forwarding, tourism, wholesale distribution, publis.h.i.+ng, and filmmaking. In agriculture, trusts are known as agroindustrial complexes; each complex unites several previously independent farms (see ch. 13). Trusts are subordinated to economic ministries and are ultimately responsible to the Council of Ministers.

The extent of the ministries' authority over trusts is not clear. In some important respects trusts receive instructions directly from the Council of Ministers.

Agroindustrial trusts number 170. In the nonagricultural sector about sixty-two trusts were originally created, with an average of thirty branches but as many as 106 in one instance. The process of concentration and centralization continued on a small scale at least until the spring of 1973, in part through the consolidation of separate trusts. Before the reorganization, trust branches had been legally and financially independent enterprises, and trusts served only as administrative links between enterprises and ministries. Whereas individual enterprises were previously regarded as the basic economic units in the country, it is the trusts that have been officially considered as such under the new system of management.

Trusts have a.s.sumed various functions previously performed by the enterprises themselves. They formulate economic and technological development policies for the trust as a whole and for each branch; establish relations with suppliers, distributors, and financial inst.i.tutions; and centralize research and development. Trusts have also been charged with responsibility for providing operational guidance to their branches and for organizing the export of products that they manufacture. Branches remain responsible for the effective organization of operations, efficient uses of resources, and the conscientious fulfillment of tasks a.s.signed to them by the annual plan.

Regulations governing the authority of trusts over their branches were intended to permit the establishment of flexible internal management organizations adapted to the particular needs of each trust. The trusts'

policies were expected to be based on the rule that whatever the trust could do better than the branches should be centralized in it and, conversely, whatever the branches could do better than the trust should be left in their field of competence. Each trust was supposed to arrive at an optimal combination of management centralization and decentralization.

The transition to the new management system involved difficulties because of delays in issuing pertinent regulations, misinterpretation of the regulations by trust managers, and the reluctance of enterprise managers to acquiesce in the loss of their independence. Most of the organizational and personnel problems were reported to have been resolved by the end of 1971, and in March 1973 party chief Todor Zhivkov reported that further consolidation of the new management structure had been achieved. In the long run, greater efficiency of economic management is to be attained through pervasive automation of all management functions with the aid of a synchronized national network of electronic computers.

Under the new system of trusts, profits of individual branches are pooled and redistributed by the parent organization. Highly productive branches may thus find themselves in the position of having to share their profits with unproductive branches. This feature, some observers believe, may reduce incentives to raise the level of efficiency, increase output, and improve the quality of products.

STRUCTURE AND GROWTH

National income (net national product, which excludes most services not directly related to production) was officially reported to have been 10.41 billion leva (for value of the lev--see Glossary) in 1971, compared to 10.53 billion leva in 1970. Nevertheless, the official index of national income growth showed an increase of 7 percent from 1970 to 1971. This example ill.u.s.trates the difficulty of using official statistics to describe the structure and growth of the economy or structural changes over a period of time.

According to the 1971 statistical yearbook for Bulgaria, the respective shares of industry and agriculture in national income in 1970 were 49 and 22 percent. The yearbook issued in 1972, however, cited 1970 figures of 55 and 17 percent instead. According to the earlier source, the proportion of national income contributed by industry increased by 6.5 percent in the 1960-70 period, whereas the subsequent source shows a growth of 17 percent for the same period. Similarly, the contribution of agriculture to national income was reported to have declined by 36.4 and by 33.3 percent. An upward trend in the contribution of trade to national income was shown in the earlier source, but a declining trend appeared in the latter.

The differences in statistical presentation resulted primarily from a major revision of wholesale prices, introduced by the government in January 1971. Price revisions made in earlier years, changes in the composition of individual statistical categories and other methodological modifications also contributed to the inconsistency of statistical time series in value terms. Because of differences in concept and coverage, Bulgarian national account data are not comparable with those of the United Nations or the United States systems of national accounts.

In the 1960-71 period national income at prices of 1957 was reported to have increased 2.25 times, which is equivalent to an average annual 7.7 percent rate of growth. The growth of national income was more rapid in the years 1966 through 1971 than it had been in the 1960-65 period. The official national income index implies an average annual increase of 8.5 percent in the latter period, compared to 6.7 percent in the earlier years. Reliable data on the growth of Bulgarian national income in Western terms are not available. Relatively high rates of economic growth are generally a.s.sociated with early stages of industrial development.

In 1971 industry still lagged behind agriculture in terms of employment, although the proportion of the labor force employed in industry had been steadily rising, while employment in agriculture had been declining. In the 1960-71 period employment in industry rose from 21.9 to 31.2 percent of the labor force, and employment in agriculture declined from 54.7 to 33.4 percent of the total. During the same period employment in the services sector increased from 9.2 to 13.4 percent of the labor force, and gains in employment were made in all other economic sectors except forestry, including construction, transportation and communications, and trade.

LABOR

Growth and productivity of the economy have been adversely affected by shortages of skilled labor and of adequately trained and experienced technical and executive personnel. In the words of the minister of labor and social welfare, the level of worker's current training is inconsistent with the country's industrial base; it lags behind the requirements of the scientific and technical revolution. The lack of required skills has contributed to frequent machinery breakdowns and to the output of low-quality products. As a means of upgrading the skills of workers and executives, a broad program for training and retraining was launched in October 1972 with the cooperation of the Ministry of National Education. About half the number of persons undergoing training were below the age of thirty.

Other persistent shortcomings in the field of labor that have plagued the economy and have been the target of frequent criticism and administrative action by the leaders.h.i.+p are inefficient organization of labor and poor labor discipline. Inefficient labor organization has been mainly an outgrowth of inferior management skills. Poor labor discipline has been a consequence of inadequate work incentives. In 1972 the minister of labor and social welfare estimated that more than 20 percent of the working time was lost through idling and other violations of labor discipline.

Adequate information on the structure of wages was not available in mid-1973. The main faults of the wage system that prevailed in early 1973 after repeated revisions, however, were outlined by the BKP leader, Zhivkov, and these faults were also discussed by labor ministry officials from the point of view of their effect on labor productivity.

The basic wage const.i.tutes the main incentive for work; bonuses, premiums, and honors play a minor role. Because of the large investment needs for industrial development and the corollary need to restrict consumption, wages have been kept low, and the rise in wages has been slower than the growth of productivity.

Basic wage pay has been based on the place of employment and not on the work performed. Wage scales for identical work have differed substantially between branches of the economy and industry. In industry, wage scales have been lower in branches manufacturing consumer goods than in branches producing capital goods; they have been lowest in textile mills. Wages have been determined by job cla.s.sifications within economic and industrial branches, the workers' level of education, and length of service. Normal increases in pay for workers remaining in the same positions have therefore been infrequent.