p Economic Efficiency of Capital Investment, an indicator expressed by the increase in national income or in fixed production assets with the minimum time of the application of the given volume of capital investment. If we take into consideration that beginning from the llth five-year plan period, rated net product has become the most important indicator of the production activity of Soviet ministries, associations and enterprises, the calculation of the effect of capital investment on the basis of national income assumes special importance. Greater economic efficiency of capital investment is decisive for raising the efficiency of social production. In the USSR the efficiency of capital investment (EI_cap) for the economy as a whole is determined by the relation of the increase in national income (A NI) to the capital investment which has provided this increase (/_cflp), in the fixed assets or to the increase in the fixed assets (A Af).

p AW

Since the fixed assets are created over a long period of time and the volume of capital investment during this period changes quite often, the efficiency of capital investment can be measured more precisely by the second indicator. Moreover, the indicator of the absolute efficiency of fixed assets can also be used. In this case El_cap is determined as the relation of the increase in national income to the increase in fixed and turnover assets. This indicator is most general and reflects the efficiency of the entire economy. The period of building and commissioning production facilities is extremely important for making capital investment more effective. This demands taking into account the time lag between the investment of capital and its effect, because the current year’s investment does not produce immediate effect on the increase in national income, but does so over a certain period ( 103 approximately from one to three years). Besides the indicator of absolute efficiency, the Standard Methodology also envisages the determining of the normative of comparative efficiency on the basis of the period of recoupment, comparing capital investment and the cost of production by variants. The comparative efficiency rate, inverse to the recoupment period, depends on the volume of accumulation and requirements in capital investment. The greater the accumulation, the smaller the rate, and vice versa, the higher the investment requirements, the greater the rate. When determining the efficiency of capital investment, indicators such as output-asset ratio, asset-output ratio, and capital-output ratio are used at all levels. The sectoral structure (for instance, the share of capital investment going into the most progressive industries) has an effect on increasing the efficiency of capital investment, along with changes in the correlation between capital investment going for new construction, and that going for the expansion and reconstruction and technical re-equipment of running enterprises, and the reduction of the number of incomplete projects. Better planning and boosting the effect of the economic mechanism on raising production efficiency and the quality of work call for several measures aimed at raising the efficiency of capital investment. They include: reducing the number of incomplete projects to established norms, further improving the structure of capital investment, and increasing the share of expenditures for equipment. The efficiency of capital investment is one of the most important advantages of the planned socialist economy, as it saves resources on the scale of the whole of society. Private ownership of the means of production and spontaneous economic development in the capitalist countries, far from creating conditions for the efficiency of the national economy, largely reduce the effect of capital investment in certain enterprises and monopoly amalgamations.