Wholesale Price

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Wholesale Price

 

under socialism, the price at which an enterprise or marketing organization sells its production to other enterprises and organizations. The wholesale price reflects socially necessary expenditures of labor for manufacturing and marketing of production. It stimulates scientific and technological progress and improvement of the quality of products through a system of bonus discounts for quality.

A distinction is made between the enterprise wholesale price and the industry wholesale price. The enterprise wholesale price includes planned sector-average prime costs, which reflect outlays for the manufacture and sale of the given product as well as the normative profit. This profit standard is set at a level that will allow normally operating enterprises of the given sector to make established payments into a budget, to form an economic incentive fund, and to cover other costs. A variation on the enterprise wholesale price is the estimated price, used in certain sectors of industry, which takes into account differences in the conditions faced by individual enterprises in producing a given output.

The industry wholesale price for consumer goods differs from the enterprise wholesale price by the sum of the turnover tax plus deductions for the maintenance of sales organizations; prices which include free delivery must cover the cost of delivery as well.

Since wholesale prices include the costs of transporting production from the factory to the place of consignment, wholesale prices of either the free-delivery type (transportation paid by the supplier) or freight-paid type (transportation paid by the consignee) are used. In certain sectors, such as the garment industry, the wholesale price is determined by deducting trade markups from the retail price.

Wholesale prices may be applied on either a permanent, temporary, one-time, or stepped (sliding) basis. They are used in planning and accounting when it is necessary to express the volume of production, labor productivity, production costs, and the effectiveness of capital investments and new technology in monetary terms. Wholesale prices for products of the same type are uniform for the entire country, but zonally differentiated prices are established for certain products, such as lumber, coal, and ores.

In the course of the economic reform in 1966, the problem of making wholesale prices approximate the socially necessary outlays for industrial production was basically solved. The unprofitability of a number of branches of the mining industry was eliminated, and the number of enterprises permitted by plan to operate at a loss was reduced. New wholesale prices were introduced in most sectors of light industry and the food-processing industry in late 1966 and early 1967. On July 1, 1967, new prices were introduced in all branches of heavy industry. The overall index of enterprise wholesale prices rose by 9 percent in comparison with 1966, including increases of 17.5 percent in heavy industry. The corresponding rises in industry wholesale prices were 7 percent and 15 percent. Wholesale price indexes for light industry and the food-processing industry in 1967 remained practically the same as before.

Changes in wholesale prices in 1966–67 were effected without raising the retail prices of consumer goods. Prices of tractors, agricultural machinery, and mineral fertilizers sold to kolkhozes and sovkhozes were also maintained at the same level. Industry wholesale prices are currently 37 percent lower than in 1949; enterprise wholesale prices are 24 percent lower. Compared to 1940 the overall level of industry wholesale prices in 1972 was higher by 33 percent, including increases of 12 percent in heavy industry, 84 percent in light industry, and 46 percent in the food-processing industry. (For changes in wholesale prices from 1965 to 1972 see Table 1.)

The overall level of wholesale prices is approved by the Council of Ministers of the USSR, as are changes in the overall level. Depending on the nature and economic value of the product involved, specific prices are authorized by the State Committee on Prices and its organs, by the councils of ministers of the Union republics, and by certain Union ministries.

Wholesale prices are also used in foreign socialist countries. On the whole, although there are certain differences, they fulfill the same functions as in the USSR. Industry wholesale prices in the USSR correspond to wholesale prices with the same designations in the German Democratic Republic (GDR), the Mongolian People’s Republic (MPR), and the Rumanian Socialist Republic (RSR). Soviet wholesale prices for industry also correspond to market prices established in the People’s Republic of Bulgaria (PRB) and the People’s Republic of Poland (PRP) for certain types of producer goods and for consumer products sold by marketing and supply organizations. Industrial enterprises in the GDR, the MPR, and the RSR sell their production at enterprise wholesale prices; in the PRB and the PRP, enterprise wholesale prices are referred to as factory and mill prices, and in the People’s Republic of Hungary, simply as wholesale prices. Sector-average prime costs and a defined rate of profit constitute the basis for enterprise wholesale prices in member countries of the Council for Mutual Economic Assistance.

In capitalist countries wholesale prices are used in exchanges between manufacturers and wholesalers and between wholesalers and retailers. Producers’ prices, that is, prices set by manufacturing enterprises, firms, and corporations, are close to wholesale prices. They are based, as a rule, on the production costs of a given enterprise, warehousing expenditures, interest on credit and fixed charges, marketing costs for the shipping, verifying, testing, and regulating of the product, advertising costs, and profit. Wholesale prices of successive links in the chain of production and marketing include the wholesale prices of the preceding link as a basic component.

The average annual growth rate of the wholesale price index in developed capitalist countries between 1957 and 1970 was 1.5 percent; in 1970–72 it rose to 2–2.5 percent. Under the impact of inflation, wholesale prices for industrial commodities increased

Table 1. Changes in the structure of industry wholesale prices (percent)
 19651972
 All industryHeavy industryFood-processing and light industryAll industryHeavy industryFood-processing and light industry
Industry wholesale prices ....100100100100100100
Components of industry prices..      
Costs of industrial enterprises and marketing organizations.74.781.367.673.576.869.1
Profits of industrial enterprises and marketing organizations ........9.411.67.113.617.58.7
Turnover tax..........15.97.125.312.95.722.2

in 1972–73 by more than 30 percent in the United States in comparison with 1963, with corresponding increases of more than 20 percent in the Federal Republic of Germany, nearly 40 percent in Italy, and 25 percent in Japan.

G. I. KABKO, V. E. RYBALKIN

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