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(Russian, subsidiia), a benefit, primarily in monetary form, granted by the state out of the state budget to local bodies of power, natural and juridical persons, and other states.
Subventions may be direct or indirect. In precapitalist formations, a subvention was primarily a form of financial aid to military allies. In the early stages of capitalism, the bourgeois state made broad use of direct subventions for the encouragement of national industry and the financing of military expenditures. Under imperialism, especially during the period of the general crisis of capitalism, various forms of indirect subvention have been the rule. Indirect subventions include the sale of nationalized enterprises to monopolies at artificially low prices, the acquisition of the output of monopolized enterprises (chiefly those in the military-industrial complex) at inflated prices, government purchase of the shares and unsold goods of bankrupt companies, tax privileges for the monopolies, and state guarantees and insurance of deposits and export credits.
Since World War II, subventions—in the form of “aid” to foreign countries—have been made on a large scale, primarily in order to prop up puppet regimes. They are used to restore the solvency of particular companies or whole branches of the economy, to stimulate the growth of capital-intensive industries, and to encourage the monopolies to expand foreign trade. Indirect subventions are paid out primarily through the mechanism of credit privileges, tax privileges, and high or low monopolistically set prices. Subvention in the capitalist countries is dictated by considerations of class and is subject to the interests of monopoly capital. The subventions paid out of the state budget place an added burden on the bulk of the taxpayers—the working people.
The socialist countries make no use of subventions.
A. A. KHANDRUEV