subsidy

subsidy,

financial assistance granted by a government or philanthropic foundation to a person or association for the purpose of promoting an enterprise considered beneficial to the public welfare. Subsidies were used in England in the later Middle Ages, when Parliament granted funds to the king to augment or replace customs and other taxes collected by royal prerogative; such early subsidies later became the means by which the power of taxation was taken from the king and lodged in Parliament. At first a nationwide levy, it became (in the reign of Charles II) a land tax levied annually without the intervention of a parliamentary vote. In France the king was able to retain his control and acquire financial powers that made him independent of any subsidy granted by the States-General. The term subsidy has had widely varied usage in the 20th cent. Subsidies may be granted to keep prices low, to maintain incomes, or to preserve employment. They are most important as grants to private corporations for performing some public service, such as to shipping companies and airlines for carrying the mail or to railroads for maintaining passenger service. These are often required where a necessary public service, particularly one that might otherwise not be profitable, is granted funds to remain in operation. In the United States, the National Railroad Passenger Corporation (Amtrak) receives federal subsidies for its intercity railway network. American cities have frequently subsidized transit companies to induce them to provide metropolitan transportation facilities for the public. Other commonly subsidized enterprises include agriculture (see agricultural subsidiesagricultural subsidies,
financial assistance to farmers through government-sponsored price-support programs. Beginning in the 1930s most industrialized countries developed agricultural price-support policies to reduce the volatility of prices for farm products and to increase,
..... Click the link for more information. ), business expansion, and housing and regional development. In the United States, 5 million households received housing assistance in 1998. Medical and educational institutions are among the largest recipients of subsidies (see foundationfoundation,
institution through which private wealth is contributed and distributed for public purpose. Foundations have existed since Greek and Roman times, when they honored deities.
..... Click the link for more information. ); in 1997, for instance, federal spending in the United States paid 46% of national medical costs. Subsidies have also been granted by one country to another country to aid it in pursuing a war effort, to gain its goodwill, or to help stabilize its economy. Very similar to a subsidy is a bountybounty,
amount paid by a government for the achievement of certain economic or other goals. It often takes the form of a premium paid for the increased production or export of certain goods. The bounty was an important technique of mercantilist economic policy (see mercantilism).
..... Click the link for more information. , except that it usually takes the form of a per-unit premium or reward for a service already performed.

Subsidy

an allocation in the budget for the liquidation of expected losses (planovye ubytki) and for the balancing of subordinate budgets.

In capitalist systems subsidies are widely used to put capitalist enterprises in good order and to give financial assistance to war industry and nonprofit capital investment spheres (such as sectors of the infrastructure, including education, communications, and the like). Subsidies are appropriated for scientific research. Bourgeois states also use subsidies as a means of regulating the budgets of local “self-government,” which increases their dependence on the center. Subsidies are often paid to compensate the losses of monopolies in the extractive industry to continue mining deposits that would otherwise not be economically feasible and to pay farmers to reduce land under cultivation in order to support high price levels. Under imperialism, subsidies serve as additional enrichment for the financial oligarchy.

Under socialism subsidies are appropriated from the state budget for payment of expected losses of government enterprises and economic organizations that sell their basic production for prices lower than the planned cost price. Subsidies are also received by certain organizations in the nonproduction sphere, such as theaters.

The use of subsidies in the heavy industry of the USSR during the reconstruction period, the Great Patriotic War (1941-45), and the first postwar years accelerated the process of industrialization of the country and the reconstruction of sectors of the economy on a new technological basis. How-ever, the wide use of subsidies was an emergency measure, and it economically contradicted the principles of economic accountability. In 1949 wholesale prices for the production of certain sectors of heavy industry were increased. As a result, the system of subsidies was canceled in most of the sectors of the industry, though it was kept in many sectors of the extractive industry, in some sectors of the manufacturing industry, and also in unprofitable enterprises of other branches of industry operating according to the plan. The economic reform which began to be implemented in 1965 created the necessary prerequisites for the liquidation of expected losses in unprofitable industrial sectors and enterprises; wholesale prices were reviewed (1967), which made possible the liquidation of expected losses of certain sectors and the reduction to a great extent of the number of enterprises operating on the basis of expected losses (for example, in the coal, timber, and fishing industries). As a result, the enterprises were given greater incentive to use material, labor, and financial resources more efficiently.

Subsidies are also allocated from higher to subordinate budgets to fill the gap between revenues and expenditures in the latter. Before the 1930’s in the USSR, general subsidies were used to strengthen the resources of local budgets and were also applied to special subsidies for strictly defined purposes. In 1932 deductions from ail-Union revenues became the basic method of balancing subordinate budgets. The scope of subsidies was sharply limited. This change strengthened the stability of Union and local budgets and increased the responsibility and the incentives of Union republics and local soviets for procuring their own revenue sources. Subsidies from higher budgets are used only in instances when other, more efficient methods of balancing budgets are exhausted. Measures carried out in the course of the economic reform to strengthen the revenue base of local budgets, and especially village and settlement budgets, have significantly reduced the scope of subsidies.

R. D. VINOKUR

subsidy

1. a financial aid supplied by a government, as to industry, for reasons of public welfare, the balance of payments, etc. 2. English history a financial grant made originally for special purposes by Parliament to the Crown 3. any monetary contribution, grant, or aid

subsidy

Subsidy

Financial assistance provided by a government to another entity, usually a business or industry. Subsidies are given to keep otherwise unprofitable ventures in business; for example, a family farm unable to compete with agribusiness may receive a subsidy from the government to maintain operations. Subsidies may also exist as a protectionist measure to make domestic goods less expensive than imports. Proponents of subsidies argue that they maintain employment in the domestic economy while critics state that they distort the market and make it less efficient. See also: Bailout.

subsidy

the provision of finance and other resources by the government or a firm to support a business activity or person. Subsidies can be direct (cash grants, interest free LOANS etc.) or indirect (DEPRECIATION write-offs, RENT rebates) and can be used for a variety of purposes. They include:

PRODUCTION subsidies: the subsidization of suppliers by government to encourage them to increase the output of particular products by partially offsetting their production costs or even financing losses. The objective may be to expand production at a low price of some product which is deemed to be ‘essential’ (for example a particular foodstuff thereby also subsidizing consumers); or, for example, to assist in the start-up of a new firm (see ENTERPRISE INVESTMENT SCHEME) or industry (see INDUSTRIAL POLICY), and encourage firms to locate in particular areas (see REGIONAL POLICY). Also such subsidies are used to support failing firms and declining industries to facilitate orderly restructuring. See PROTECTIONISM;
EXPORT subsidies: the subsidization by the government of exports in general or of a particular product which is exported, as a means of assisting the country's balance of payments;
EMPLOYMENT subsidies: the subsidization of wages by the government as an incentive to businesses to provide more job opportunities, thereby reducing the level of unemployment in the economy;
INCOME subsidies: the subsidization of persons through government transfer payment systems (for example, social security benefits) in order to allow them to enjoy some minimum standard of living;
cross-subsidization: businesses themselves regularly practise internal or cross-subsidization as a means of expanding their activities, for example, using the profits generated by established products to finance NEW-PRODUCT DEVELOPMENT and DIVERSIFICATION into new-product markets.

subsidy

the provision of finance and other resources to support a business activity or person by the government. Subsidies can be direct (cash grants, interest-free LOANS, etc.) or indirect (depreciation write-offs, rent rebates) and can be used for a variety of purposes, including:

PRODUCTION subsidies: the subsidization of suppliers by government to encourage them to increase the output of particular products by partially offsetting their production costs or even financing losses. The objective may be to expand production of some product at a low price that is deemed to be ‘essential’ (e.g. a particular foodstuff, thereby also subsidizing consumers); or, for example, to assist in the start-up of a new firm (see ENTERPRISE INVESTMENT SCHEME) or industry (see INDUSTRIAL POLICY) and encourage firms to locate in particular areas (see REGIONAL POLICY). In the first cases, subsidies are used as an instrument of income redistribution by reducing the price of products such as bread and milk that figure prominently in the budget of lower income groups or by directly subsidizing incomes.
EXPORT subsidies: the subsidization of a particular product that is exported, or exports in general, by the government as a means of assisting the country's balance of payments.
EMPLOYMENT subsidies: the subsidization of wages by the government as an incentive to businesses to provide more job opportunities, thereby reducing the level of unemployment in the economy INCOME subsidies: the subsidization of persons through government transfer payment systems (for example, social security benefits) in order to allow them to enjoy some minimum standard of living.

Subsidies encourage increased output of favoured products but distort domestic RESOURCE ALLOCATION processes in general and can adversely affect international trade. See REDISTRIBUTION-OFINCOME PRINCIPLE OF TAXATION, PROTECTIONISM, CROSS-SUBSIDIZATION.

subsidy

Benefits granted to persons or groups in order to encourage behavior or outcomes deemed important to society. Rent subsidies encourage construction of adequate affordable housing because the owner can be ensured of an income stream as long as the housing meets government requirements.The same subsidy encourages better consumer choices because of the availability of affordable alternatives. Tax credits to contractors for energy-efficient construction are subsidies to encourage the use of energy-efficient alternatives.

subsidy

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Synonyms for subsidy

noun aid

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Synonyms for subsidy

noun something, as a gift, granted for a definite purpose

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Words related to subsidy

noun a grant paid by a government to an enterprise that benefits the public

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