the system of monetary and credit measures used by the state to achieve definite economic goals; one of the elements of general economic policy.
Under capitalism. In the capitalist nations the bourgeois state uses credit policy to mitigate the contradictions inherent in a capitalist economy—that is, to weaken the periodic crises of overproduction, to limit inflation, and to establish an equilibrium in the balance of payments. The central banks, which are entrusted with setting the exchange rates and the actual execution of the credit policy, endeavor primarily to control the amount and structure of credit operations in the banking system and in this manner to influence the dynamics of capital investment, price formation, employment, and foreign trade. Here the actions of the central banks are determined by the interests of the ruling groups of monopolies and are aimed at providing general conditions for the functioning of a capitalist economy. In the capitalist nations the most common methods and forms of credit policy include changing the discount rate of the central banks, buying and selling certain types of securities on the open market, and varying the reserve requirement of the country's banks.
During a period of economic weakness and crisis, the policy of credit expansion is accompanied by the stimulation of consumer and investment demand in the country. The central bank increases the total monetary reserves of the commercial banks in order to expand the total volume of credit operations in the banking system: a low discount rate is set, the compulsory minimum reserves of the commercial banks are reduced, and bonds are purchased. For example, during the 1957–58 economic crisis in the USA, the Federal Reserve system reduced the discount rate of the commercial banks three times (from 3.5 percent in August 1957 to 1.75 percent in April 1958); changed the compulsory reserve rate five times, reducing the demand-deposit reserve requirement from 21 percent to 18 percent; and in 1958 purchased $3 billion worth of bonds.
When the economy is overheated and there is speculation on the stock market, credit restriction (limitation) is the usual policy. Thus, during the 1969 economic boom in West Germany, the Bundesbank increased the discount rate from 3 percent in April 1969 to 7.5 percent in March 1970, raised the rate of compulsory reserves from 9 percent to 11.65 percent of total demand deposits, and sold some of the securities from its portfolio.
The history of the credit policies followed for many years by the capitalist countries has shown the limitations and ineffectiveness of bourgeois credit methods, particularly as stimulators of economic growth.
Under socialism. In the socialist nations credit policy is aimed at developing and strengthening social production. The nationalization of banking and the proclamation of a state monopoly in banking during the first years of Soviet power provided the necessary conditions for a uniform state credit policy.
In all stages of socialist construction the credit policy of the Soviet state aimed at solving the most important national economic problems. Thus, during the transition from capitalism to socialism, the credit policy concentrated on developing and strengthening the socialist sector and forcing private capital out of industry and trade. During the years of socialist industrialization and the collectivization of agriculture, the credit resources of the Gosbank (State Bank) of the USSR were used to create the basis of heavy industry and accelerate the formation of cooperatives from the peasant farms. During the Great Patriotic War of 1941–45, easy credit terms were provided for major defense projects and for the rapid rebuilding of the economy in the newly liberated regions of the country. After the war credit policy focused on reconstruction and development of the national economy, improvement of the quality targets of various enterprises, and mobilization of internal reserves and reduction of product costs. The Twenty-fourth Congress of the CPSU pointed to the necessity of increasing the role of credit relations and strengthening the influence of the banking bodies on the more complete mobilization of production reserves and the improvement of credit efficiency. Gosbank and the Stroibank (Construction Bank) of the USSR, in crediting enterprises and organizations, are obligated, when they establish credit preferences on the basis of rapid repayment and satisfaction of the primary needs of the national economy, to become more influential in selecting the most efficient construction and technical reconstruction projects.
V. M. USOSKIN