MATERIAL PRODUCT SYSTEM

For decades the Material Product System (MPS) was used in countries with centrally planned economies as a tool for analyzing economic processes at the macro level and policy making. Essentially, MPS performs the same functions as the System of National Accounts (SNA), but there are important difference between the two.

MPS divides the economy into two parts: material production, where national income (NMP) is created (industry, agriculture, construction, freight transportation, etc.), and the nonmaterial part of the economy. The concept of economic sectors and, hence, sectoral groupings, was entirely omitted in the MPS system. Such an approach toward estimation of macroeconomic indicators met the needs of planners and was instrumental in the process of centralized planning, centralized allocation of material resources, and tracking of plan fulfillment.

Essentially, MPS is a system of tables, of which the most important are the balance of production, consumption, and investment of the social product and national income; the balance of national wealth, the balance of fixed assets, and the balance of labor resources. A significant part of the MPS system was its series of input-output tables, which were compiled in the USSR beginning in 1959. In addition to the main MPS tables, there was a series of supplementary tables that gave a more detailed picture of certain aspects of the economic process.

The MPS as a system of aggregate macro indicators was an important tool for general assessment of the economic situation under the central planning system. Its drawback, however, was that it reflected economic processes in a somewhat inconsistent and partial manner. A large part of the economy, the so-called nonproductive sphere, was neglected in the balance of the national economy. In Soviet statistics, a methodologically sound and systematically integrated system of indicators was available only for the material production and distribution of material product. This significantly reduced the role of macro estimates as an instrument for analysis of economic developments.

Estimates of economic growth and international comparisons were also hindered by the lack of coordination between MPS indicators and financial flows. In the balance of state financial resources and the state budget, the financial resources of enterprises and organizations of both productive and nonproductive spheres are represented as a single entry. The balance of money income and expenditure of households shows the total money income of the population earned from both "productive" and "nonproductive" activities. The method used to derive this indicator is such that it is impossible to separate these two sources of revenue.

As a result, the macroeconomic indicators that reflect material resources are not balanced and comparable with the volume and the structure of financial resources. Also, export and import indicators in MPS are presented in a simplified way and differ from the similar indicators used in the balance of payments (SNA concept). Missing in the MPS approach are such indicators as disposable income, savings, and public debt.

The MPS system, which underwent some changes in the USSR in 1957, remained essentially the same for more than thirty years thereafter until the SNA system was introduced in the statistical practice of the countries in transition following the breakup of the Soviet Union.

See also: command administrative economy; economic growth, soviet

bibliography

Belkindas, Misha V., and Kostinsky, Barry L. (1990). "Official Soviet Gross National Product Accounting." In Measuring Soviet GNP: Problems and Solutions, A Conference Report. Washington, D.C.: Central Intelligence Agency, Directorate of Intelligence.

World Bank. (1992). Statistical Handbook: States of the Former USSR (Studies of Economies in Transformation, 3). Washington, DC: World Bank.

World Bank. (1993). Historically Planned Economies, A Guide to the Data, by Paul Marer, et al. Washington DC: World Bank.

Misha V. Belkindas