| Abstract: | Conclusion In this paper we have described the process by which an industrial enterprise or kombinat negotiates a contract for credit with which it may finance investment projects as well as the administrative preconditions which are typically required for and the stipulations which are sometimes imposed by means of such contracts. We have shown these preconditions and stipulations serve to shape the material incentives of the enterprise management in favour of more efficient projects and in favour of efficient implementation of planned projects. Our analysis has pointed out that the interest rate cannot be used exclusively to fashion the correct incentive system, and that therefore these administrative controls may in many cases be optimal planning devices. This paper is therefore an important contribution to the western planning literature which has typically presumed that the interest rate should be the preferred rationing mechanism.Our explanation of the role which these preconditions and stipulations in credit contracts play can contribute as well to a deeper understanding of the historical development of the planning system in the GDR. The history of investment financing exhibits a gradual development of the role of enterprise responsibility for initiating and designing projects and this has been parallelled by the development of the system for negotiating credit contracts between economic agents such as bank branches and enterprises and the use of more intricate incentive systems in such negotiations. Socialist authors have emphasized the importance of the development of contracting as a component of the planning system; we have shown in this paper how this development has been used to make the system of investment planning more effective. At the same time, we have identified some of the real bounds against which such a system of administrative incentive structures operate within a socialist economy: the history of the enterprise contribution to financing investment projects has been identified as an important subject for a case study in the history of socialist nations attempting to identify this boundary.I would like to thank the faculty of the Economics Section at Humboldt University in Berlin for the generous assistance which they gave to me during my research visit there in the Autumn of 1983. I am especially grateful to Professor Karlheinz Tannert for the many hours of discussions which guided me in my studies and without whose assistance this work could not have been completed. My thanks extend as well to Professor Stoll and Dr Lemke of the Staatsbank for their co-operation, to the staff of the libraries at the Economics Section of Humboldt University, the Hochschule fur Okonomie— Bruno Leuschner , and the Staatsbibliothek, for their assistance, and to Dr Heidrich for his aid and friendship.This research was supported by a grant jointly funded through the Ministry of Higher Education in the German Democratic Republic and the International Research and Exchanges Board in New York |
