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