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owned Procurement and Purchasing Enterprises (VEAB's), which formerly set yearly quotas for compulsory deliveries of farm output, mostly grain and animal products, and which now negotiate purchase contracts for supplies of these products, working closely with processors.

The outlets of the retail trade system—probably the most modern in Eastern Europe—can be divided into three categories: 1) Socialist retail trade outlets; 2) commission outlets; and 3) private enterprises. Approximately 80% of total retail trade turnover is accounted for by socialist outlets, consisting of a network of state-owned stores and restaurants belonging to the trade organization (Handelorganisation, or HO), under the general supervision of the Ministry for Trade and Supply, but under the direct control of the local economic councils. Also included in the category of socialist enterprises are industrial outlets and consumer cooperatives, which are indirectly controlled by the Ministry for Trade and Supply. The cooperatives are concentrated in the rural areas, since farmers apparently find the older cooperatives more acceptable than the state stores. Since 1950 socialist retail trade turnover has consistently grown at a faster average annual rate than total retail trade (Figure 25).

Commission outlets account for a little more than 9% of total retail sales, and since the late 1950's their sales have been increasing at a substantial rate. This can partly be explained by state pressure to force private stores to become commission outlets for the state network—buying and selling goods for the account of an HO or cooperative. The 1971 results, however, did not conform to the past growth trend. The portion of total sales attributed to commission outlets declined slightly, and the percentage increase from the previous year was less than that for total sales.

Private retail trade has been declining steadily since 1950; however, in spite of constant political and economic pressure, the private sector still accounted for 9.5% of total retail sales in 1971. A substantial portion of this can be attributed to the sale of foodstuffs; private outlets accounted for 13.7% of total foodstuffs turnover in 1971, but their share of the foodstuffs trade has been declining slowly since 1965 (Figure 26).

All trade is carried on at prices set by the state. During the 1950's and early 1960's, there were two sets of procurement prices—low prices for compulsory deliveries within the quotas assigned by the VEAB's, and high prices for deliveries above the quotas. In 1964 a single price system was established for grains and feedstuffs, in 1966 for poultry and wool, and in 1969 for meat and dairy products. The new single prices were set so as to provide about the same average return per unit of sales as farmers had been receiving under the dual price system.

There are two types of industrial prices: the enterprise, or factory price, based on production costs plus a small profit, which is used to verify plan fulfillment; and the industry delivery price—the enterprise price plus a turnover tax—which is used to measure the returns from sales to other enterprises and to wholesalers. The final consumer price is the industry delivery price plus an additional trade markup.

A dual pricing system for consumer goods existed until 1959. It consisted or relatively low ration prices and much higher HO prices for additional quantities above the ration amounts. The system reflected the large discrepancy which existed between supply and demand. In setting consumer prices the state is acutely aware of the need to meet the social requirements of the people. The 1972 state budget provided 9.2 billion marks—11% of the total budget—in subsidies so that the state could maintain low prices for goods and services which satisfy basic needs, such as food, transportation, and housing. In contrast, items which are considered nonessential or luxuries have extremely high prices. The government is also sensitive to increases in the price level and has instituted a price stabilization program designed to combat creeping inflation. During the present 5-year plan, it has decreed that consumer prices may not be increased and that retail prices of new and improved consumer goods must be confirmed by the Council of Ministers or by the Minister and Chairman of the Price Office. The state also began an attempt in 1972 to insure adequate supplies of selected lower priced goods by incorporating the production of fixed minimum amounts of these goods in the economic plan.

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