Credit Systems

Credit Systems

 

(1) In the broad sense of the word, the aggregate of credit relations; the forms and methods of credit practiced in the branches of one or another socioeconomic formation.

(2) In the narrow sense of the word, the system of credit institutions of one or another state in a certain historical period.

Under capitalism. The capitalist credit systems are the aggregate of banks and other credit and financial institutions that mobilize free monetary capital and income, grant loans, and issue credit means of exchange. During the early stages of the development of capitalism, the structure of the credit system was comparatively simple. The issue and commercial banks were its chief elements, and in addition there were savings banks and credit cooperatives. Under modern capitalism the credit systems are a complex and far-flung network of purely credit and credit-financial institutions that differ in affiliation, legal forms of organization, and activity. State and private institutions are differentiated in terms of their ownership. The state institutions include central issue banks (which in virtually all capitalist nations belong to the state), individual commercial banks, postal and savings banks, and certain other institutions that perform special functions in crediting a certain area of the economy. The private institutions include most of the commercial and investment banks, insurance companies, and other credit and financial institutions. Among the legal forms of organization are stock companies, cooperatives, and private credit institutions.

The modern capitalist credit systems include (1) the issue banks, which are the centers of the credit system (”the banks' banks”) and which issue bank notes; (2) the commercial banks, which credit industrial, commercial, and other enterprises, chiefly from the monetary capital of their deposits; (3) investment banks, which are concerned with long-term crediting of industry and other sectors of the capitalist economy, the placement of stocks for them, underwriting, and so forth; (4) specialized banking institutions, concerned with specific types of crediting (for example, mortgage banks specialize in providing long-term loans for real estate, and foreign trade banks specialize in crediting exports and imports); and (5) specialized nonbanking credit and financial institutions. Among the specialized institutions are investment and finance companies, which mobilize money capital not by accepting deposits but rather by issuing their own stock and bonds and investing this capital in the securities of industrial and other companies; insurance companies, which mobilize the money of others in the form of insurance premiums and use these premiums for investing in securities and granting long-term loans; pension funds, which are set up by capitalist companies to pay pensions to production and office employees but which to a significant degree are used for long-term credits and investments in securities; savings banks, which centralize the monetary income and savings of various classes and strata of the population and convert them into loan capital; credit cooperatives, which mobilize money from the shares and deposits of their members and provide credit for them; and pawnshops, which grant loans for personal consumption against property collateral.

The structure and function of credit systems have had specific features in the various periods of capitalist development. In the era of premonopolistic capitalism there was a tendency toward specialization and separation of functions among the different credit institutions. However, the age of monopolistic capitalism has been characterized by a tendency toward universalization. For example, the large commercial banks in certain countries, in addition to short-term crediting for industry and trade, are involved in long-term financing of industry through the issuing and placement of stocks for industrial enterprises, as well as the purchasing of corporate securities and the granting of loans using the securities as collateral. At the same time, they compete with the savings banks in attracting small savings and intervene in the sphere of consumer credit. Under monopolistic capitalism the most important feature of the credit system is its subordination to the financial oligarchy. The monopolistic banks and the financial credit institutions merge with the industrial monopolies to become an element of financial capital.

Credit systems also have distinctive features in the developed capitalist and developing countries, as well as in each individual country. The chief features of the credit systems in the colonial and dependent countries are the dominance of the foreign banks, which serve as an implement of imperialist exploitation of the colonial peoples; the lack of development of the national banking system; and the prevalence and importance of usury. New phenomena can be observed in the credit systems of the developing states that have freed themselves from colonial rule since World War II. These states are setting up their own national credit institutions, expanding the state sector in the credit system (in the countries that have chosen the noncapitalist path of development, all banks have been nationalized), developing bank crediting for the state sector in the economy, and actively using the credit system for accelerating their economic development.

E. IA. BREGEL

Under socialism. The credit systems of the socialist states are the aggregate of banks, credit cooperatives, savings banks, and other credit institutions. The creation of a socialist credit system included the transformation of the banks and other credit institutions into state property and the organization on socialist principles of the operation of the nationalized banks.

During the transition from capitalism to socialism, the Soviet credit system helped carry out the socialist transformation of the small-scale peasant economy and accelerate the creation of the material and technical base of socialism. This first credit system differed substantially in its structure from the present one. The credit institutions that operated in the first years of the transitional period consisted of banks, credit cooperatives, mutual credit societies, savings banks, and pawnshops. In terms of the forms of ownership, the credit institutions were divided into state and cooperative institutions, as well as state-capitalist institutions (the Russian Commercial Bank, the Southeastern Bank) and private capitalist institutions (the mutual credit societies). This was caused by the existence of a mixed economy during the transitional period in the USSR. The transition to the construction of a socialist society and to the creation of a material and technical base was accompanied by an organizational reform of the credit system. Short-term crediting was concentrated in the Gosbank (State Bank) of the USSR, the sectorial short-term credit banks being eliminated. Private capitalist credit institutions were also eliminated, their functions being transferred to specialized banks founded for financing and long-term crediting of capital investments. The organizational reform lasted from 1927 through 1959 and culminated in the creation of the USSR credit system operating according to the principle of the functional specialization of banking.

The Soviet credit system as of 1972 includes Gosbank, the Vneshtorgbank (Foreign Trade Bank) of the USSR, the Stroi-bank (Construction Bank) of the USSR, and the state savings banks.

The activities of the Soviet credit system are based upon the principle of state monopoly: all credit institutions belong to the state. They are managed by the state, that is, by the supreme bodies and state administrative bodies of the USSR (see art. 14 of the Constitution of the USSR).

The credit systems of the other socialist nations have been set up and developed in light of the experience of the USSR; most of them are also organized according to the principle of the functional specialization of banks. The central banks of these countries (called state, national, or people’s banks) are simultaneously the basic institutions for short-term crediting. Aside from these, a number of socialist countries have investment banks and international payments banks.

Thus, the banks that constitute the credit systems of the socialist nations, in terms of their activities, are divided into sectorial and functional banks. The sectorial banks are concerned with the short-term and long-term crediting of enterprises and economic organizations in one or several economic sectors, such as industry or agriculture. The functional banks perform particular banking operations—for example, financing and long-term crediting of capital construction or of international payments. In the German Democratic Republic, the credit system has been organized according to the principle of sectorial specialization. Banks there include the German Issue Bank, which also performs the role of banks’ bank, the Industrial and Commercial Bank, and the Agricultural Bank.

The credit institutions that constitute the credit system of the socialist states accumulate temporarily free money, as well as the savings of socialist enterprises and the public, and transfer these funds in the form of term loans to those enterprises and organizations that need funds for fulfilling production and commodity turnover plans.

V. S. GERASHCHENKO

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