Circulation Time


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Circulation Time

 

duration of time for which capital (under capitalism) or the funds of enterprises (under socialism) stay in the sphere of circulation. Circulation time includes the period between the moment the finished product enters the warehouse and the time it is sold and the time during which the means of production necessary for a new production cycle are being purchased with the money received from the sale of the finished product.

During the circulation time, money capital under capitalism is turned into productive capital and commodity capital into money capital. Technical progress, the development of the means of transportation and communications, and improvements in the organization of trade create possibilities for substantial reductions in circulation time. At the same time, the intensification of the internal contradictions of capitalism has the reverse effect, increasing both circulation time and, as a consequence, circulation costs. Circulation time increases particularly in periods of economic crises and during recessions and depressions in “business activity” in capitalist countries. One of the major indicators of the in-crease in circulation time is the increase in unsold commodity inventories.

Under socialism, decreases in circulation time are connected to increases in the efficiency of the use of enterprise funds and, particularly, to the accelerated turnover of operating funds. A decrease in circulation time diminishes the need of a socialist enterprise for operating funds and makes it possible to release a certain portion of these funds either for the use of the given enterprise in additional production or for transfer of the funds through the state budget for the financing of other branches of the economy or of nonproductive spheres. The main methods and means of decreasing circulation time are technical progress; improvement of trade, transportation, the means of communications, warehouse organization, and the operating effectiveness of marketing bodies (thus diminishing the time the finished product stays in the warehouse of the enterprise): fulfillment of planned targets with respect to the schedule and to the assortment and quality of the products produced (thus eliminating the accumulation in warehouses and stores of products not in demand by customers); improvement in the work of material-technical supply bodies; and the establishment of direct ties between suppliers and consumers (in particular, between industry and trade). The economic reform being implemented in the USSR beginning in 1965 has made a number of changes in the organization of material-technical supply, increasing the independence of socialist enterprises. Enterprises have been granted more extensive rights in selling superfluous production stocks and in establishing direct ties with customers and suppliers. These ties facilitate further calculation of user demand and eliminate certain intermediary links in the sphere of circulation.

M. M. AVSENEV

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