State Credit

the sum total of credit relationships in which the state acts as a borrower. However, in the system of international credit (with international loans), the state often acts as a creditor as well. The content and forms of state credit are determined by the character of a society’s economic system. In a slave-owning society and under feudalism, state credit existed in the form of loans that often assumed a compulsory character. Here elements of a tax and a loan were mixed together. The money obtained in this manner went basically to cover military and other extraordinary expenses.

The capitalist system of state credit arose from the 16th to the 18th centuries, first in the Netherlands and Great Britain and then in other states. With the development of the world market, international state credit developed; as K. Marx pointed out, international and internal state credit were two of the strongest levers of primary capital accumulation. Under capitalism, state credit is chiefly expressed as loans but also as short-term treasury bonds; deposits of the public in savings banks are subsequently placed by the savings banks in these public securities (directly or through a bank).

State credit is one of the forms for the movement of loan capital. In contrast to other forms of capitalist credit, which are related to one degree or another with the processes of the production and sale of goods, state credit serves as a means for attracting monetary resources primarily for nonproduc-tion purposes, that is, for the military expenditures of a state, the running of the administrative and police systems, and the direct and indirect subsidizing of the capitalists. For this reason, the direct consequences of the development of state credit are a rise in the state debt and a swelling of the amount of fictitious capital (in the form of the bonds of the state loans and the coupons for them, short-term treasury notes, and other credit documents). State credit helps to enrich the bourgeoisie. Free monetary capital lying unused in banks finds an advantageous sphere of employment in the form of state loans, as these loans provide a high guaranteed return. The source of funds for retiring state loans and paying interest, as for the other state expenditures under capitalism, is the direct and indirect taxes that lie as a heavy burden on the broad masses of the workers.

With the onset of the general crisis of capitalism, state credit has become an organic part of the financial systems of the bourgeois state and is used for directly financing the capitalist monopolies and providing them with the highest profits at the expense of the toiling masses and the petite or even the middle bourgeoisie. Characteristic for the modern capitalist states is the use of state credit for financing the expenditures of chronically deficit state budgets, deficits caused by the militarization of the economy as well as by the preparations for and waging of wars.

The swelling of state credit is one of the manifestations of capitalism’s parasitism, expressed in the growth of unproductive consumption and an increase in the number of rentiers who live off the income of securities. During the general crisis of capitalism, there has been a rapid growth of external debts, which are often used by the imperialist creditor nations for strengthening their economic and political dominance in the debtor nations.

In the nations that have escaped from colonial dependency, including India, Burma, Egypt, and Iraq, some of the funds mobilized by state credit are used for financing the development of industry and transport, as well as for strengthening the economic self-sufficiency and political independence of these countries. The imperialist states, in endeavoring to impose their will on these countries and restore their former dominance, have used international state credit. The socialist countries, for the purposes of providing financial aid to the developing states, have granted them long-term credits that are extended under preferential terms for a period of eight to 12 and more years, with an interest of 2–2.5 percent per annum (an interest rate below that usually offered by capitalist countries). Such loans are repaid by deliveries of traditional export commodities of the developing countries (without gold and hard currencies). The credit aid is given to these countries primarily for developing domestic industry, developing and strengthening the national economy, and training native specialists. The total long-term credits of the member-states of the Council for Mutual Economic Assistance to these states by the beginning of 1968 exceeded 8 billion rubles, including 4.5 billion rubles from the USSR.

Under socialism, state credit is used by the government as one of the methods for mobilizing the temporarily free money of enterprises and the savings of the public for national needs. The productive and socially useful character of the use of these funds is one of the fundamental characteristics of socialist state credit in contrast to capitalist state credit. In contributing to the growth of social production, state credit acts as a means for increasing the monetary income of the public. The funds secured by state credit are used to expand socialist production, and this makes it possible for the state to pay the holders of the state loan bonds a certain income in the form of lottery winnings [some bonds are sold with a lottery feature], and to repay its obligations. The Soviet state, which built a socialist society while faced with capitalist encirclement during the first five-year plans (1929–40) and then with the Great Patriotic War (1941–45) and postwar reconstruction of the national economy, used state credit as an important additional source of funds. When the accumulation of the socialist economy satisfied virtually all the state’s needs for money, the Soviet state abandoned in 1957 the use of loans placed by subscription among the public, replacing them as resources for state credit with the annual increase in savings bank deposits and with a freely convertible state 3 percent domestic lottery loan, which was issued in 1966 for a 20-year term.

The Soviet experience of organizing state credit has been valuable to other socialist countries. In these countries, an important role in developing state credit is played by their economic collaboration with and aid from the USSR, including the credit aid that has been provided both as loans and as deliveries of commodities and equipment and provision of various services under credit conditions. By 1968 the total Soviet credits to other socialist nations had reached approximately 10 billion rubles.