Financial Rescue

Financial Rescue

 

in capitalist countries, a system of measures taken to improve the financial condition of enterprises and prevent them from going bankrupt or to improve their ability to compete. The enterprises in question are usually joint-stock companies. Financial rescues may be carried out either by the capitalist enterprise, or by other, financially more powerful, companies, banks, or by the state. Financial rescue is one of the means by which capital is centralized and the financial oligarchy strengthened.

Methods of financial rescue include reducing the joint-stock capital by curtailing the issue of new shares and exchanging them for a greater number of old shares. The face value of shares may be reduced, resulting in the distribution of the profits over less capital. This serves as the basis for obtaining new credit, state subsidies, soft loans, and tax privileges and makes it easier for the enterprise to merge with or to be absorbed by another firm or company. Nationalization is another method of financial rescue.

In Imperialism, the Highest Stage of Capitalism, V. I. Lenin referred to the financial rescue of the Union Mining Company, a joint-stock company in Dortmund, by German Disconto-Ge-sellschaft, a major bank. As a result of the operation, the bank made more than 73 million marks in 30 years, and less than 5 percent of the shares remained in the hands of the original stockholders (Poln. sobr. soch., 5th ed., vol. 27, p. 353). Financial rescues of enterprises were especially common during the world economic crisis of 1929–33, which caused an unprecedented wave of bankruptcies. Government participation in financial rescue operations, which became common during this period, essentially represented the direct use by the monopolies of state funds—the taxpayers’ money.

Since World War II (1939–45) the imperialist states and the largest monopolies have frequently resorted to financial rescues. For example, in 1971, Rolls Royce, one of the largest British firms, went bankrupt because it was unable to fulfill a contract with Lockheed, an American company, to build aircraft engines for the TriStar planes. The British government saved Rolls Royce by nationalizing several of the firm’s key enterprises.

G. G. MATIUKHIN

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