Conclusions and Appraisal

The adoption of profit as a criterion of enterprise performance and a basis for incentives to labour symbolizes the economic reforms on which the European Socialist countries (except Albania) have embarked since the early 1960s (since the early 1950s in the case of Yugoslavia). Although to varying degrees in different countries, industries and enterprises, on the whole profit is proving an effective economic instrument. Profit is the most synthetic of all the criteria ever used under socialism, as it reflects both the input and output aspects of an enterprise’s operations, and thus it promotes a reduction of costs and a growth of production for which there is demand. It best combines the microeconomic interest of enterprises and their workers with the macrosocial benefit. It promotes the reallocation of resources according to changing supply and demand conditions, i.e. changing relative scarcities of factors and products. It stimulates competition amongst enterprises and individual members of their personnel. Profit is also the main source of the self-financing of enterprises and as such it strengthens their independence and freedom of initiative.