Net Material Product

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NET MATERIAL PRODUCT

Net material product (NMP), the approach to national accounts based on Material Product System (MPS), was introduced in the USSR in the 1920s. Harmonized in 1969 by the Statistical Commission of the Council for Mutual Economic Assistance (CMEA), it was adopted by all centrally planned economies.

The central indicator of the (Western) System of National Accounts (SNA) is gross domestic product (GDP), which is a basic measure of a country's overall economic performance. For planned economies, the role of the main indicator in the MPS is assigned to the net material product.

NMP covers material production (industry, agriculture, construction) and also includes material services that bring material consumer goods from producers to consumers (transport and trade) and maintain the capital stock (maintenance and repairs). Nonmaterial services, such as health, education, administration, business, and personal services, are not included in productive activities; therefore, the central indicator NMP encompasses only the total income generated in the material branches, and the distinction is kept between "intermediate" and "final" products and between consumption and accumulation.

The division of services into "material" and "nonmaterial" originates from a theoretical proposition of Karl Marx's writings. Marx, in the classical tradition of Adam Smith, considered as productive only activities that yield tangible, material goods.

Numerous incidental differences exist between GDP and NMP, including the treatment of business travel expenses, which are intermediate consumption in the SNA but labor compensation, and therefore part of the sectoral NMP, in the MPS. Cultural and welfare services provided by enterprises to employees are also intermediate consumption in the SNA but final consumption in the MPS. Some losses on fixed capital, the borderline between current and capital repair, and other relatively small items are treated differently. SNA has displaced MPS in all transition economies.

See also: economic growth, soviet; marxism