subsidy

(redirected from Government subsidies)
Also found in: Dictionary, Thesaurus, Legal, Financial.

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
References in periodicals archive ?
The MPs also described the move to re-adjust the price of diesel as a "surprise decision" and agreed to hold discussions with the government on this issue in the next meetings to hammer out a joint mechanism on re-channeling the government subsidies while ensuring no citizen is harmed.
The current situation compels us to study the mechanisms of the government subsidies and to assess our options.
But without Government subsidies, sales are not expected to hold up.
For those concerned with the long term sustainability of the tiny gulf state, government subsidies create a distortion in the minds of consumers that permits waste and discourages responsible stewardship of precious natural resources.
Osaka Gas admitted in July that its group had improperly obtained government subsidies worth 51 million yen for a cogeneration system.
The above accounts dramatically downplayed or ignored the fact that biodiesel is "on the verge of going mainstream" only because it is priced artificially low because of government subsidies.
Wansbeck MP Denis Murphy has already called on the influential Commons spending watchdog, the Public Accounts Committee, to investigate how Government subsidies were used by owners UK Coal ( and has promised to raise the issue again with Tony Blair.
From everything I know about Norquist and conservatives of his ilk, they really do hate the idea of government help for the needy, whose misfortune they attribute to defects of character while their own prosperity has nothing to do with the government subsidies they have been able to wangle, the taxes they have managed to evade, or the silver spoon that was often theirs at birth, but is solely attributable to their own talent and hard work.
In the June 2004 issue of Environment, Development, and Sustainability, the team reported that government subsidies of traditional energy industries, which cost American families about $410 each year in taxes, keep fuel prices artificially low, thus encouraging greater consumption and importation.
Boeing could jeopardize the launch funding of the new 7E7 aircraft should it press for an investigation of government subsidies received by rival Airbus because Boeing itself has received government subsidies that violate world-trade agreements, according to David Pritchard, a research associate at the Canada-United States Trade Center within the University at Buffalo (N.
Constitution Houses of worship, he said, must be sup ported by voluntary giving, not government subsidies.
Level the playing field on tariffs and government subsidies.

Full browser ?