credit given for long periods and used primarily for the expanded reproduction of fixed capital (under capitalism) and fixed assets (under socialism).
Under capitalism. In the capitalist countries the characteristic form of long-term credit is the purchase of corporation securities —stocks and bonds. Because the corporation form of enterprise organization predominates in the leading sectors of the capitalist economy, the issue of stocks and bonds reaches enormous dimensions. For example, in the United States after World War II, the issue of securities accounted for about 30 percent of all resources used to finance gross capital investments in American industry. Direct credit in the form of bank loans is another source of long-term credit. Long-term loans occupy a steadily increasing share of loans issued by banks. In the United States, for example, indebtedness on credits awarded by the largest banks for periods of more than one year increased by one-third between 1967 and 1970 and at the start of 1971 amounted to $32.4 billion. The awarding of credit by bank monopolies to industrial monopolies is one of the forms of the coalescence of bank and industrial capital and of the strengthening of finance capital. Other important spheres of long-term credit are state credit and credit awarded for housing construction, which takes the form of mortgage bonds with real estate as security.
Credit-financial institutions (such as investment banks and trusts) that mobilize the monetary capital freed in the process of the circulation of industrial capital and institutions that attract the income and savings of different layers of the population act as creditors in the long-term credit market. The major insurance and bank monopolies, which hold most of the long-term loans, play the leading part. Long-term credit is also used extensively in international economic relations. Under imperialism it is one of the principal forms of capital export and imperialist expansion.
Under socialism. In the socialist countries long-term credit encompasses state credit for capital expenditures in different sectors of the national economy and for individual and cooperative housing construction and credit of foreign countries. In the USSR, credit for capital expenditures is granted through the system of the Gosbank (State Bank) of the USSR and the Stroi-bank (Construction Investment Bank) of the USSR. On Jan. 1, 1973, Gosbank was owed more than 20 billion rubles in long-term credit, and Stroibank was owed about 8.5 billion. By facilitating the movement of capital assets, long-term credit promotes expansion and modernization.
Long-term credit is granted for introducing new machinery (above all for setting up conveyor and production lines, establishing full mechanization, and mechanizing transportation and loading-unloading work), expanding the production of consumer goods, and expanding existing enterprises and building new ones. Long-term credit is used by the kolkhozes for construction, the equipping and mechanization of livestock farms and other production facilities, the installation of electricity and extension of the radio network, the purchase of farm machinery, and the cultivation of new land.
Unlike the financing of capital investments through state budget funds, long-term credit assumes repayment of resources received with interest, which is more appropriate to the principles of economic accountability. The terms of long-term credit for centralized capital investments are determined on the basis of established construction schedules and the rate of payback on expenditures after the fixed assets and production capacities are put into operation. Long-term credit for noncentralized capital investments related to the introduction of new machinery, improvement of production organization, and expansion of the production of consumer goods in granted for periods of up to six years on the condition that the expenditures are repaid within this time. Kolkhozes, which secure one-third of their capital investments through long-term credit, are given loans for periods of up to 20 years.
In the process of granting credit, banks check on the use of credit and apply vigorous pressure to those enterprises that make inefficient use of the means allocated. Like other forms of bank credit, long-term credit is an important factor in the development of socialist production and in the improvement of its quantitative and qualitative indexes.
V. M. USOSKIN