tion of measures of labor productivity and product 

 quality to primary success indicators. Encouraging 

 growth in labor productivity is designed to induce 

 the establishment to seek out process innovations. 

 Greater emphasis on product quality indicators is in- 

 tended to promote product innovation. Again both 

 these measures depend on administrative evaluation 

 procedures. Ivanov describes the system as follows: 



Fulfilling plans for the introduction of new 

 technology at enterprises has a direct effect 

 on the financial indicators of their economic 

 activity, and in particular on the generation 

 of incentive funds and funds for social-cul- 

 tural and housing programs. This link is real- 

 ized by means of periodic certification of prod- 

 ucts manufactured by plants. The results of 

 this certification are used to adjust the base 

 standards for forming these funds. During the 

 Ninth Five Year Plan, for example, enterprises 

 which set for themselves higher targets than 

 those of the plan were permitted to increase 

 their allocations to the incentive funds by 2 

 to 9 percent for each one percent increase in 

 the production of high quality output, calcu- 

 lated on the basis of its total output. Also 

 if the output of high quality products exceeded 

 the norms of the plan, they could increase the 

 allocations by 1 to 4 percent depending upon 

 the share of this production to total output. 

 Conversely, incentive allocations were reduced 

 by 3 to 10 percent for each one percent decrease 

 of high quality production as compared with 

 planned targets. In addition, for each one 

 percent increase in the volume of low quality 

 output above the permitted norm, these alloca- 

 tions were cut by 1 to 10 percent depending on 

 the share of low quality production in the total 

 output .90 



Such procedures are also costly to administer but al- 

 legedly have worked. 



Finally, Soviet authorities have introduced a pro- 

 vision which stipulates that a portion of the primary 



231 



