(SANITIZED)UNCLASSIFIED SOVIET PAPERS ON ECONOMICS AND FOREIGN TRADE(SANITIZED)

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP80T00246A017600500001-1
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 165
• Document Creation Date: December 22, 2016
• Document Release Date: December 14, 2011
• Sequence Number: 1
• Publication Date: August 23, 1962
• Content Type: REPORT

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.JV/\ I-1 IVIVI
, N . PLOTNIKOV
Professor Doctor of Economic
:science, Corresponding
le m er of the Academy of Sciences
of the USSR,Director of the
institute of Economics of the
Academy of Sciences of the USSR
PINTA vCT_AL AND GIR D1`L `SYSTEM IN THE USSR
The terms "finance" and credit" are current not only
in socialist economy. They denote certain categories in capitalist
economy as well, However, behind -these outwardly similar terms
there are absolutely dissimilar concepts, with a different nature
and a different economic, social and political content, which
are due to the disparity between the two economic,sacial and
political systems--capitalism and socialism-- to the fundamental
difference of socialist production relations from capitalist
production relations.
In socialist economy, which is based on the socialisation
of the means of ,)roductilon, on principles of planning that
embraces all aspects of the econori c life of the state--the
functions and direction of the activity of the financial and
credit system are subordinated to other tasks and purposes and
have a different character than under capitalism.
The very existence of finance and credit in socialist
society is due to the fact that commodity production and
commodity circulation are retained under socialism,i.e.,the first
phase of communist society. In its turn, this is due to the
following preconditions: inasmuch as under socialism there are
two forms of socialist ownershi p(state and collective- farm-
-co-operative) and also w=hile there is personal ownership of
the collective farmers over auxiliary husbandry, a mutual economic
inter-relation inevitably arises both between these two forms
of ownership an ,---'L between tho i, on the one hand, and the population,
on the other; this gives rise to a definite circulation of
separate parts of the gross national product. Moreover,similar
inter-relations also arise within the state sector of the
national economy, i.e., between individual state enterprises.
.And since there are objectively necessary commodity relations
then naturally, there must be a similar need for money as a
universal equivalent or, in other words; the need for a monetary
form of expressing the value of.goods. Here money is (and this is
of exceptional importance) a means of controlling the measure
of labour and the measure of consuraption,an instrument for
measuring planned and actual expend? Lures, a means of socialist
accumulation and savings of the working people, and so on.
From this we can already draw the basic conclusions on
the necessity and tasks of finance and credit in a socialist
state. Let us first examine the concept of socialist finance.
It would be wrong to reduce this concept to monetary funds.
In socialist economy, which is founded on the.socialisation
of the means of production,the concept of finance, the very
essence of this concept,cannot be reduced to such a primitive,
flat and treasury's, so to speak,formulation. It would mean
emasculating the effective role of finance.
Under socialism, f i.nance ry funds
50X1-HUM
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themselves but the aggregate of monetary relations embracing the
process of the planned formation of monetary funds, the process of
their distribution and utilisation and, lastly the process of
control over production and the distribution of the gross national
product.
One of the basic tasks that is fulfilled by the system of
socialist finance is the formation and purpose Sul utilisation of
the monetary funds of en:xp1tses. end the state, which are neces-
sary for the succ~,ssPiIf development of the economy. Through
finance ar4 f=ed the funds for compensating consumed means, funds
for expanding socialist production, and consumption funds.
In the process of fulfilment of ,this distributive function
and also zn the course of systematic, control over the utilisation
of monetary means, the financial system helps to promote the
planned, balanced development of the national economy. Control by
the ruble over production finds its expression in the fixing, of
planned production costs norms of working funds, wages funds and
so forth. In the USSR finance is an effective instrument for
bringing to light and mobilising the internal resources of economy,
an instrument for controlling the thrifty expenditure of intraecono-
mic accumulations.
In the USSR finance influences social production in a
variety of ways. Throuvh the mechanism of finance, the state
systematically strengthens economic accounting(khozraschzet) and
thereby promotes the most economic and expedient utilisation of
production means, the reduction cif the cost of output, and the
profitableness of production. It must be pointed out that finance
influences such important aspects of the activity of enterprises
as the organisation of production, the fulfilment of the estimate
of expenses, the purchase of means of production, the utilisation
of working funds and so on. To a large ej~tent, finaxice prev.etermi-
nes the volume and branch structure of ca>ital investments-.
Rinance plays ej~ceedingly important role in the
implementation of measures aimed at developing socialist agricul-
ture,building,transport and trade.
"4ithout finance, it would be impossible, as we shall show
later, to satisfy the social and cultural requirements of
socialist society and the needs of state administration, and also
to strengthen- the country t s defensive capacity.
,lith the concept of finance is linked up the notion of
the various kinds and forms of finance 3.nd the methods of their
action. In the USSR finance is subdivided into state finance
(consisting in its turn of c'eneral state finance and of the
finance of state 'enterprise and finance of co-operative-collective
-farm enterprises. The ag reS.v'r of kinds, forms and methods of
accumulation and utilisation of the monetary funds of socialist
society formsthe financial system. The state 3udget,througci which
a consiaerable portion of the national income is distrihuted,is
the leading link of this system. The financial system also
includes the finance of enterprises and brsncLaes of the national
economy, of state social insurance, of state property and personal
insurance and of state credit
Let us now dwell on the essence and content of the State
Budget,which is the principal financi.al, plan of the socialist
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state. In the same way as Soviet finance cannot be regarded as
monetary.funds , the concept of the State Budget cannot be reduced
simply to a schedule of state revenue and expenditures ,Naturally,
as any other budget,the socialist budget is built up in the form
of a schedule of monetary receipts into a state centralised fund
and expenditures for definite state purposes and measures. But
the essence of a socialist budget lies not only balancing of revenue and expendi tunes established byethedstate. and
here the crux of the matter is -that the sources of the budgetary
revenue and the methods of forming ud,revenue and also the purpose-
ful direction of expenditures express definite economic relations
preconditioned by the social and state system of the USSR. The
resources of the Soviet State Budget, as we shall show later, are
formed on the basis of a steadily developing socialist economy that
creates the-conditions for an uninterrupted growth.of socialist
accumulation, The resources acctunulated in the budget, in their
turn, are directed by the state towards ensuring the further
development of social production and other requirements of
socialist society`
The budget of the Soviet state is of a national-economic
character, and is closely linked up with all branches of the
national economy. The budgetary revenue is formed principally in
the sphere of material production, Budgetary funds are used for
financing capital construction and other requirements of the state.
Figures vividly show the tremendous importance of the
State Budget and of the scale of its revenue and expenditures.
I shall quote the main indices of the State Budget of. the USSR for
1962: the revenue is established. at 81,918,641,000 rubles and the
expenditures at 80,369 904 000 rubles, the revenue exceeding the
expenditures by 1,548,'737,6uu rubles.
The principles of the budgetary system of the Soviet Union
are legislatively recorded in the Constitution of the USSR. The
State Budget of the USSR is.. divided into the Union Budget and into
the State Budgets of the Union republic e The budgets of the Union
republics include the republican budgets, that are directly. under
the jurisdiction of the governments of the Union republics, and
also the budgets of the Autonomous republics and the local budgets
(regional,territorial,distriet, area, town, settlement and rural).
The State Budget of the USSR also includes the state social
insurance?budget,which is under the jurisdiction of the trade unions.
Like the entire political life of the Soviet Union, the
budget system is based on principles of democratic centralism.
The organs of state power, beginning with the Suprema Soviet of
the USSR and, ending -;yith the town and rural Soviet of Working
People's Deputies have their own independent budgets, All the local
Soviets are endowed with complete budgetary rights and have the
corresponding financial base at their disposal. The independence of
each organ of state power in the corresponding budget is combined
with the unity of the state budgetary system, with its centralisation:
the State Budget of the USSR as a whole is annually approved as a
law by the Supreme Soviet of the U;3A3R, This shows the organic
community of interests and of and purposes of the entire Soviet
state.
As is stated in the new Programme of the Communist Party,
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of p pro uc income and is the property
-the whole of socie
the budget Will retain it& important role in distributing the
gross national product and the national income for the entire
period of the fulfilment of the general tasks set by the Twenty-
Second Congress; At preseit the State Budget exceptional importance as one of the major factorsehelppi acquires
create the material and technical basis of communism, to
A considerable portion of the net income formed in the
sphere of material productid~n, and accumulated through the bud-
get is'one of the principal sources of revenue of the Soviet
budget. In the USSR 90 per cent of the budgetary revenue are
received from socialist enterprises,
The revenue of the State Budget of the USSR is subdivided
into receipts from socialist economy(including receipts from
state enterprises and organisations; payments of the collective
farms and co-operative organisations) and funds received from
the population through, its income and savings,
The receipts from state enterprises consist,in the main,
of two forms of payment--turnover tax and deductions from profits.
In order to give. You a clear idea of the economic nature of
these payments, it is necessary to state briefly what net income
means under socialism. Everything that is created by the produc-
tive labour of members of socialist society has the purpose of
satisfying the requirements of society and is used in the
interests of namely these requirements. With the exception of
that part of the product that is used to compensate for the
consumed means of production, the gross national
into two parts: one product is
divided
part is used directly for the personal
consum Lion of the working eo le n tie other orms what
is .mown as the su"r 1us
g at 3.'Gs disposal and source` or sates y, various social,%requir meats( lzedenlargement
of production, public health,education, social insurance, defence,
the formation of reserves, and so on).
The net income is divided into the net income of enter-
prises(profit) and the centralised net income of the state,
of the net income of enterprises is accumulated--through the pars
A
State Budget--in the centralised net income of the state;this is
achieved by
profits two methods and in the two forms mentioned above:
in the form of the turnover tax and in the form of deductions from
,
The receipts from the turnover tax are deductions of
a strictly definite part of the net income of enterprises. The
share of the turnover tax in the price of
rates established in the different branches.ofsindustry anfdefory
various goods,
Another form of receipts into the budget from the net
income of enterprises consists of deductions from profits, which
comprise a major source of budgetary resources. The system of
deduction from profits and the very procedure by which these
deductions are received into the budget combined with a special
analysis of the major indices of production have an organising
influence on the entire economic and financial activity of
enterprises,stimulating them to fulfil plans not only as a whole
but also in the assortment of goods, the deduction of production
costs and so forth.
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In speaking of de).uctions from profits, it must be
stressed1that a considerable part of the profits remains at the
disposal of enterprises and are used for enlarging production,
tJie formation of the funds of the enterprises with the purpose
of satisfying diverse requirements of the people working in them,
and so on. The format+_on of these funds is preconditioned by the
fulfilment of the established plan(as regards quantity, the,
assortment of goods, qualityereduction of production costs and
accumulation). The money from these funds is used for enlarging
production and also for building and repairing dwellings, for
improving cultural and everydc services to the staff, for boniirnrt,
The economic nature of the turnover tax and' of the dethic-
tions from profits, as well as of their sources, is identic'al.
These two methods of mobilising revenue from state entrprises
spring from the need to use finance as an effective and flexible
influence on economy with the purpose of fulfilling plans,
strengthening "kkhozraschet'',reducing production costs and
enhancing profitability .
A portion of the budgetary revenue derives from the net
income of the co-operative sector. A part of the accumulations
formed at the enterprises in this sector goes into the budget
in the form of the turnover tare and income tax on profits.
It should be borne in mind that while absorbing a part of the net
income of the co-operative enterprises, the state at the same
time supplies these enterprises (at reduced prices) with raw and
other materials, and equipment,and,consequently, participates in
the formation of accumulations at these enterprises.
An income tax, computed on the basis of a single ,pro-
portionate rate is levied on the collective farms, and the fact
that the rate does not progress with an increase in the income
shows the stimulating character of this tax.
Other sources of budgetary revenue include funds from the
population: taxes and dues,revenue in the form of a definite part
of the increase in the deposits at savings banks, proceeds from
the sale of loan bonds, deductions from the profits from state
insurance transactions. From a. characteristic of the role played.
by the budgetary revenue from enterprises, one can see that the
revenue from the personal means of the population occupies a very
insignificant place in the budget. The share of taxes in the
State Budget of the USSR in 1959 only added up to 7.8 per cent,
Indirect taxes which raise the price of consumer goods and, as
everybody knows, are a hegvy burden for the population, do not
exist in the USSR. The taxes 011 the population are mainly income
taxes on industrial, office and other workers and an
agricultural tax on collective farmers.; the agricultural tax is
levied on income from personal subsidiary husbandry and not from
earnings against works-fay units. In May 1960 the Supreme Soviet
of the USSR passed a law "On the Abolition of Income Taxes Oil
Iniustrial, Office and Other 'iyorkers`. Realisation of this law,
which was begun on October 1,1,60, is to be completed by October
111965, As a ,result of the complete abolition of income taxes,the
income of the population will increase by approximately 71400
million rubles by 1956.
Surmnin up the above-said about the revenue side of the
State Budget of the USSR,special emphasis must be laid on the
circumstance that with the rapid growth of the national income,
socialist accumulation, which,as w. have seen, is the main source..
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of budgetary revenue,is uninterruptedly increasing, The time
is close at hand when,with the abolition of income taxes .'on-the
population, this will become the only source of revenue of-one
State Budget.
Let us, now go over to a brief characteristic of the
expenditures of the State Budget of the USSR . Here the chief
place is occupied by expenditures on the national economy.
The next major group of budgetary expenses consists of expenditures
on social and cultural undertakings. The expenditures in these
two channels are growing continuously and in 1962 exceed 61,000
million rubles.
The budgetary funds for financing the national economy
are directed into the following main expenditures: l/ on
enlarging the basic funds of the national economy, i.e., on
capital investmentB in the construction and technical reconstruc-
tion of enterprises; 2/ on enlarging the working funds of
enterprises and economic organisations(endowing enterprises with
own working funds and ensuring the increase of these funds);
3/ on developing new industries; 4/ on operational expenses of
enterprises on research by enterprises and on the training of
personnel; 5/ on creating and increasing state material reserves.
In this field funds from the State Budget are thus
directed towards enlarged reproduct.on,the constant improvement
of production, the necessary renewal of basic production funds,
i.e., towards the consolidation and strengthening of the country's
economic might and increasing her social wealth.
One must not lose sight of the fact that, as w,: have
already mentioned, the budget fulfils not only a treasury func-
tion of allocating planned funds but also the function of control
or, as we call it, the function of control by the ruble,i.e.,
checking the expediency, thrift and efficacy with which state
resources are used.
In addition to expenditures on the development of industry
and agriculture, the expenditures on trade and transport must
also be included in the group of economic expenditures of the
)tate Budget.
In the final analysis, the expenditures from the State
Budget of the USSR on the development of the national economy
have the purpose of enhancing the people's wellbeing, of raising
the standard,of living. This purpose is. achieved, first, by the
expenditures on the development of the heavy industry, which
is the foundation of all other branches of industries, including
the light and food industries, and second(and simultaneously)
by the direct expansion of the output of consumer goods and
foodstuffs,
In the socialist countries constant concern is shown
by the State for the all-sided development of culture and science,
for the health of the population,lor improving housing and living
conditions of the working people. All these cares are vividly
reflected in the budgetary expenses on the corresponding measures.
With the development of the Soviet state the various requirements
of the population are satisfied to an ever increasing extent at the
expense of social funds, and the role of the budget increases in
forming these funds and in their expedient distribution and
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utilisation, Budgetary expenditures on pensions and allowances,
on free tuition and medical attention, on the building of
boarding schools, on the upkeep of childrents establishments and
on the satisfaction of other social and cultural requirements
of the population are steadily increasing. In 1960 nearly 24,500
million rubles were spent on social insurance, allowances,
pensions, scholarship grants and many other social and cu.itbural
allowances and privileges tot L population, in 1965 the.
expenditures on th poses will rise to 36,000 milli'bn rubles
and add up t9 rubles per working person a year. In addition,
more than 80 rubles per working person a year will be spent on
the construction of dwellings, schools and cultural, everyday
service and medical establishments.
The Government has definite expenses for the upkeep of
the administrative apparatus. In a socialist state this appara-
tus selves the entire people and fulfils social useful functions.
However,in allocating the necessary funds(which occupy an
insignificant place in the budget) for the administrative
apparatus, the state systematically took and continues to take
measures to improve and simplify the management bodies and to
rationalise their work,thereby reducing the expenditures on
their upkeep. In tile period 1954-1961, 2,000 million rubles
were saved in the expenses on the administrative apparatus by
enterprises,offices and organisations. In 1962 the expenses on the
management apparatus are 23 million rubles less than in 1961.
While pursuing a peaceful policy and working persevering-
ly for .world peace, the Soviet Union is however, compelled to
take measur.es to ensure its o.in security and protect its
frontiers against the possibility of an armed attack by the
imperialist countries. The protection of the Soviet people, who
are engaged in peaceful creative labour, against possible
aggression requires definite expenditures on the upkeep of the
Armed Forces of the USSR. In the State Budget of the USSR' for
1961, the share of expenses on'defence was set at 11,9 per cent
as against 32.6 per cent in 1940 and 20 per cent in 1950. However,
because of the intensifying arms race in the West and the
increased threat of war, the Soviet Union was forced to increase
its expenditures on defence by 3,144 million rubles, in 1961;
in 1962 these expenditures were set at 13,400 million rubles.
Let us go over to the characteristic of another important
institute of our economy-credit.
Like socialist finance, credit represents a system of
monetary relations, the necessity for which, like the necessity
for finance, is due to the presence of commodity economy under
socialism and to co=odity and money relations. Through credit
the socialist state tises the temporarily liquid funds in the
economy and in the hands of the population as w11 as the funds
that form through the constant excess of revenue over
expenditures in thw budge rI uses them in a strictly organised
and planned way-- on term repay&Sbility within a certain time
limit-for expanding reproduction,.
Let us explain. Reserve monetary funds form at every
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enterprise at various times of the production process: for
example,incoming payments may not coincide with outgoing payments
both with regards to time and the sum;til-he sale of large lots of
goods may not coincide with the time the enterprise purchases
goods
and other materials,, fuel and so on, Another important source
is the availability of temporary free balances in the accounts of
budgetary enterprises: this is quite natural because being on a
budget,an enterprise spends its allocations not at once but in
the measure as the plan is fulfilled,under certain conditions, by
a fixed time-table(for example,the payuent of wages) and so on.
The principal sources of credit are thus being formed,
On the other hand, enterprises may find themselves tempora-
rily short of funds. This can be due to the need to make large
seasonal purchases of raw materials and so on and also to a
possible disparity between the availability of monetary means
and the extent of urgent expenditures. Lastly, there are other
reasons, for example, overfulfilment of the production plan and,
consequently, a temporary increase in the volume of unfinished
output. This, of course, is far from being a complete list of
reasons for a temporary shortage of funds in enterprise's,
In socialist economy the importance of credit is very
.great. Credit is called upon to promote tho growth. of production,
turnover of goods and accumulation,the strengthening of the
'khozraschet'hnd its introduction into all the links of production,
the mobilisation of internal resources,the thrifty and most
effective utilisation of material,financial and manpower
resources, the growth of labour productivity, the reduction of
costs,the increase of -che^basic and working funds of enterprises,
and collective and state farms, and the acceleration of the
turnover of working funds, In carrying out this many-sided role,
effectively implementing the'control by the ruble over the course
of production and circulation, and applying a differentiated
approach in crediting as a means of influencing the economy of
enterprises, credit is one of the state's most important means
of creating the material and technical basis of communism.
Credit and the banks extending credit , are a state
monopoly in the USSR. This is quite natural under socialism,
under conditions of public ownership of the means of production.
By virtue of these conditions, w. do not have, mutual commercial
credits, i.e., direct credit relations between enterprises. There
is no need for such relations, to say nothing of the fact that
mutual commercial credit would bring chaos into the redistribu-
tion of funds among enterprises and prevent any possibility
of seeing to it that they are purposefully utilised.
In socialist economy credit bears a direct and purposeful
character; its main feature is that it is repayable and is granted
against security in the form of material values.
Under socialism, banks play a very important role.
V. I. Lenin, founder of the Soviet state wrote: "Socialism
would have een unfeasible without big banks." As the example
of the Soviet Union shows, banks are more than simply an
apparatus for the mobilisation of temporarily free monetary
means and the granting of credits at the expense of mobilised
resources, Under socialism,banks play, an important role in
organising a nation-wide accounting of production and distribu-
tion of products, controlling by the ruble the fulfilment of
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production,trade and purchasing plans, the progress of capital
construction, and help, as we have already pointed out, to
strengthen khozraschet and to keep costs down to a minimum In
addition,as we shall show later, banks are settlement, cash and
issue centres for the country's entire economy; socialist banks,
furthermore, have the task of regulating the circulation .of money
and the settlement of accounts in foreign trade relations.
Let us"stop in greater detail on banking functions, primar-
ily the functions of credit.
Depending on the time terms bank loans are granted, (and
also depending on their object and purpose) credit is divided into
short-term and long-term credit. As a rule, short-term credit is
granted for a period of not more than one year and, chiefly, for
supplementing working funds to meet the temporary requirements of
production. Thus, enterprises with seasonal production,circulation
and procurements receive credit against stocks over and above
the established norm; but enterprises with non-seasonal production
are likewise granted a certain, credit for the partial formation of
normal stocks; there are also credits for turnover,which serve
the production process at all stages of the circular movement/Tunds
of an enterprise, Furthermore, credits are extended against goods
en route, against funds in the process of settlements and so on.
The very nature of credit, in that it is repayable within a
definite period of time,understandably,requires material values
as security: these values, which are at the disposal of enterprises,
must guarantee the timely repayment of funds received from the
bank. It does not require proof to show that control by the bank
is necessary to ensure the repayment of loans by enterprises.
Another form of credit--long-term credit - has the purpose
of enlarging the basic funds of the national economy or ensuring
their capital repairs.
Credit investments in the various branches and enterprises
of the national economy are planued,and are distributed in
accordance with credit plans, These plans are based on material
balances production plans, plans for the turnover of goods and
financial plans, Credit planning' gives the activity of banks a
strictly organised,national-economic character: the requirements
of separate enterprises are examined, not in isolation or
haphazardly,but in combination with the interests of the country,
with the aims and direction of the economic development plan.
A few words must be said about the rate of interest charged
for credit, This interest, whose rate is established by the
state, by no means plays the role of regulator of one aspect or
another of the country's economic life; it does not influence
the direction and volume of credit because they are mapped out
in the credit plan, which, in its turn, is founded on the
country'B economic development plan. Uncier socialism, interest
is a source for covering a bank's expenses and, to a certain
extent,one of the sources of the credit itself. * At the same time,
interest is to some extent an instrument of bank control
* The State Bank of the USSR charges an interest of 2 per cent
p.a, on term loans,l per cent p.a, on loans against documents
en route and other forms of settlement credits, and 3 per cent
p.a. on overdue loans. The rate of interest on long-term credits
is from 1 to .2 per cent. p.a.
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over the economy and helps to strengthen credit discipline in
the national economy.
Mention has already been made of an important
between economic
the banks, the function of effectin~ g settl
organisations. It must be emphasised that these settlements are
effected solely through the bank, by clearing ,i.e., by
transferring the corresponding sum from the account of one
economic orgal.isation to the account of another. The bank can
only effect such transfers with the agreement of.the payer and
providing there are free funds in his settlement account.
In addition to.settlement and cash ser ices,the bank has
one more function, - to receive and disburse
of the State Budget, This function is carried out by the State
Bank of the USSR.
In the USSR the credit system has changed many times
in conformity with the development of the country's economy and
with the changes in ta relations between
and enterprises of the
separate `stages of this development.
At present the credit system in the USSR consists of the
State Bank of the USSR the All Union Bank for Financing Capital
Investments (Stroibank5 and the Bank for Foreign Trade of the
USSR(Vneshtorgoankathere savings a part stateocredit.
credit system, or
The State Bank of"the USSR grants short-term credit for
production and the turnover of goods; finances-, and grants
long-term credit for capital investments in agriculture and
for the consumer's co-operative; finances capital repairs and
grants credit for new technology, extends long-term credit for
individual housing construction in the countryside. In addition,
as we have already mentioned, the State Bank effects settlements
and also acts as cashier for the national economy and the budget.
Lastly, in the territory Statee UBank SS a the
oof issue of notes of the and also of J_ Bank has a
and metal coins.
The above-listed functions of the State Bank. t. the
accompanying tasks of controlling production
of goods by the ruble, facilitating the development of p oduction
the StateoBeyankin
and goods turnover and earofgthe va~ttrolecirculation
the country, give an id
plays in the economy of the' Soviet Union.
A%t present the network of the State Bank's local
branches consists' of 6,736 offices, branches and agencies. The
sum of short-term credit extended by the State Bank increases
with the development of production and the turnover of goods
For example,the credit investments of the State Bank on JanU million 1,
1961 amounted to 44,200 million rubles as against 3814-00
rubles on January 1,1960; in this period the credit investments
in industry increased by 7.6 per cent: in agriculture by 32.1
per cent and in trade by 4.4 per cent. Towards the close of the
Seven Year Plan period,the credit investments of tState5Bank
in the national economy will increase by approximately per cent. The State Bank and the Bank for Foreign Trade of the
USSR effect foreign exchane as-actions with more than 1000
foreign banking in ens more than in 80 countries.
The Strd bank conducts the following operations:
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a) financing and long-term crediting of capital investments of
state enterprises in industry, transport, communications,cultural
and everyday services,housing construction and home and foreign
trade; b) financing capital repairs of the basic funds of
contracting building and assembly organisations; c) long-term
crediting of individual housing construction in towns; d) short-
-term crediting of contracting building and assembly organisations.
The Stroibank"s resources for financing capital investments are,
in the main,budgetary allocations and own funds accumulated
through depreciation deductions and deductions from the profits
of enterprises.
In the sphere of its activity the Stroibank controls the
observance of design and estimate discipline and the planned cost
of building,secures the mobilisation of the internal resources
of building projects, and so forth. An important feature is that
building is financed to the extent of actual fulfilment (under
the contracting method--'at the completion of elements of the
job,-- and under the economic method--for separate elements of
expenditure).
As a rule, the capital investments of state enterprises
and organisations are financed on a non-repayable basis.
The Bank for Foreign Trade of the USSR credits foreign
trade (a function performed until 196.1 by the State Bane of the
USSR); effects collection, letter-of-credit, commission and other
transactions in settlements with foreign banks, handles the
clearing accounts of these banks for the trade turnover and
non-commercial payments; and also handles currency exchange
transactions for tourists arriving in or leaving the USSR .
The Bank for Foreign Trade of'the USSR has correspondents in most
of the countries of the world.
The functions of the state savings banks are: receipt
and payment of deposits; sale and purchase of state loan bonds;
money transfers,by order c=f?depositors,for the payment of communal
services.. The balance of the deposits in the savings exceeded
11,660 million rubles on January 1,1962.
The socialist state, whose economic life if planned, has
all the necessary conditions for a planned organisation of the
monetary system and for a planned circulation of money.
There are three kinds of money in the USSR : 1) notes
of the State Bank of the USSR in 100, 50, 25 and 10 ruble
denominations; 2) treasury notes. of 5, 3 and 1 ruble*; and
3) coins from 1 ruble to 1 kopek. In passing, I shall note that
as from January 1,1961, the Government of the USSR enlarged the
scale of prices 10 times and replaced the money in circulation with
new money.
State Bank notes are secured by gold, precious metals
and other assets of the State Bank of the USSR, it must be noted
that these "other assets" include short-term credit granted
against the security of commodity values,whose total value is
considerably higher than the entire sum of the notes issued and in
circulation.
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Treasury notes are secured by all the property of the USSR,
and their economic nature is identical with that of the State
Bank notes; no special form of security (gold or other bank assets)
has been established for treasury notes, but this .does not deprive
them of stability or of their importance as one of the sources of
short-term bank credit.
As has-been already mentioned, the State Bank of the USSR
is the note issue centre in the country, and issues (or withdraws)
money in conformity with the economic development plan and the
cash requirements of the country's economic turnover at definite
periods.
The planning and regulation of the circulation of money
is closely linked up with the plans for the output and sale of
goods,the State Budget(which is the basic financial plan in the
Soviet Union),the credit plan(which co-ordinates the credit
investments of the State Bank and its resources) and the cash
plan (which establishes the cash requirements of enterprises
and the sources for satisfying these requirements). The planning
of the circulation of money is furthermore based on the balances
of the population's money incomes and expenditures. The aggregate
of all these plans and balances reflects the different aspects of
the harmonious system of socialist economy, which is governed by
the economic law of planned,proportionate economic development and
takes into account the requirements of socialist society and
the state, Resting on these plans, the state has the possibility
of purposefully planning the cir.-alation of money in the interests
of the entire people.
In the Soviet Union the monetary unit is the ruble, whose
value is established at M87412 grams of fine gold. The Soviet
ruble is stable by its very nature, by the nature of the planned
organised monetary system and by`the conditions in which this
system operates; it is a striking expression of the might of the
steadily developing socialist economy. With its peaceful,
creative economy, the Soviet Union has no budgetary deficits and
does not require unhealthy issues of money over. and above
requirements, as an additional means of covering expenditures.
That is why the Soviet state is free of inflation,an evil. which
corrodes the monetary system and causes tremendous harm to the
working people.
In the USSR, as in all-the socialist countries, there
is a monopoly of foreign exchange. All foreign exchange resources
are concentrated in the hands of the state and all international
settlements, as we have already pointed out,are made solely
through the bank. Foreign exchange is not in free circulation in
the USSR.
Like the monopoly of foreign trade,the monopoly of
foreign exchange is a major condition for the normal functioning
of the planned system of socialist economy, of its self-suffi-
ciency and independence,
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M.
. USOSKIN
Professor, Doctor of Economic
Science,Head of the Chair of Money
Circulation and Credit of the
Moscow Institute of Finance
Short-Term Credit in the U.S.S.R.
A far-reaching programme of building a communist society
is to be completed in the U.S.S.R. within the next 20 years in
accordance with the Programme of the C.P.S.U., adopted at the
Twenty Second Party Congress. Commodity and money relations will
be fully utilised in the course of this entire period ins
conformity with the new content that they have acquired under
socialism. An important role is being played by money, price,
cost, profit, trade, credit and finance. The achievement, in the
interests of society, of the biggest possible result at the
lowest possible cost is a major law of economic development in
the U.C.S.R. In its turn, this requires that all economic
organisations make the most rational and effective use of all
their resources--material,labour and financial,reduction of
production and circulation costs. Economic accounting (khozraschrt)
ice., a system of management by which each enterprise must run
its affairs in such a way as to allow its income to cover the
.necessary costs and, over and above that, show a profit that an
be used for the further enlargement of production, is a key
condition for rational management. That is why it is of the
utmost importance to enhance economic accounting as much as
possible, to keep expenses down to the lowest possible level,
-to reduce production costs and increase the profitability of
production.
The Soviet banking system and short-term credit play
a very big role in the fulfilment of these important tasks.
In the U.S.S.R., in conformity with Marxist-Leninist teaching,
banks have been nationalised and are the property of the people;
credit is a state monopoly and expresses the relations between
state banks(the State Bank and the Bank for Financing Capital
Construction - the Stroibank) and socialist enterprises and
organisations, and also the relations between banks,savings banks
and pawnshops on the one hand and the population on the other.
Credit also plays a very trig role ,in strengthening the Soviet
Union's economic relations with other countries.
A feature of Soviet credit and the factor determining
its nature is that the socialist state, in the person of banks
and other state credit institutions,acting as a creditor or
debtor, is always one of the parties in credit relations. In
the U.S.S.R. the nature of credit is unique,but this unity
does not exclude difference which, in the main, are due to the
existence of two forms of socialist ownership--public and
collective-farm-co-operative.
In the inter-relations between the state and the
collective farms and also between socialist states, credit
expresses relations between different owners of one and the
same type; within the state sector credits are extended on the
basis of single public ownership; the funds at the disposal
of enterprises do not belong to them, the state retaining
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ownership over these funds, and in the redistribution of funds
through credit they do not pass from one owner to another. These
differences are important for understanding the features of
credit in the state and co-operative sectors of economy.
The difference between public and collective-farm-co-
-operative forms of ownership precondition some of the features
of' credit in the two sectors of socialist reproduction in the
presence of the above-mentioned unity of credit throughout
the national economy and the presetvation of the basic advantages
of socialist credit in both sectors. The most essential difference
is that the spheres and'boundaries of the application of credit
do not coincide in the two sectors. In the state sector, where
credit rests on public ownership, it functions chiefly in the
movement of working funds and, to a lesser extent, in capital
investments. In the inter-relations with collective farms and
co-operatives, credit participates in both the basic and work-
ing funds' movements.
In socialist society the existence of credit is closely
connected with the presence of commodity production, trade
and money using economy.
Credit necessarily arises out of the circulation of the
funds of socialist enterprises and organisations, taken in the
a gregate, as part and parcel of the circular movement of funds
of socialist economy.
.The material and monetary resources of each enterprise
are in constant motion and pass through three stages of the
circular movement--monetary, productive and commodity stages. By
virtue of the peculiarity of the circular movement there are
funds at each enterprise that are not used at the given moment
and are thus periodically free viz: depreciation deductions until
their use for capital repairs or new construction; a part of
the proceeds from the sale of finished products and accumulated
for the periodic payment of wages, payments to suppliers of raw
materials,and payments to the budget and the banks. At the same
time,in connection with the features of the circular movement of
funds, enterprises may find they have additional requirements for
funds due to seasonal or irregular deliveries of raw materials or
a seasonal output of goods, as a'consequence of a lack of coinci-
dence in the turnover of purchases and sales in the given period,
the approach of the date of payment of wages when the process of
the sale of the product and its transformation into money has not
been completed,and so on! These phenomena exist, in socialist
economy side by side and intertwine into a single circular
movement of funds of various enterprises.
At a time when temporary free funds form in some enterprises,
other enterprises find they temporarily require additional
funds.
From this we can see that the objective need for credit,
i.e., for an uninterrupted redistribution of funds between
socialist enterprises through the use of the temporarily free
funds of some enterprises in the economic turnover of others for
production purposes, arises in the process of reproduction.
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In accordance Vvitii this, the working funds of socialist
enterprises consist of own and borrowed funds. Own funds of
enterprises are fixed by plan and their size is determined by
the minimum requirements ensuring the uninterrupted work of
these enterprises. Newly-organised enterprises are, as a rule,
endowed with own funds from the budget; operating enterprises use
a part of the profit from their economic activity to increase
their own working funds as production and the sale of output
increase , Co-operatives and collective farms form their own
working funds out of entrance and share fees and profits.
Borrowed funds consist of bank credits,mainly from the
State Bank. Credits are granted to enterprises and organisations,
over and above their own working funds, for planned seasonal and
other stocks of goods and other material values; for settlements
and other purposes,
The ratio between own and borrowed working funds is seen
from the following : at the beginning of 1960 own funds comprised
38 per cent and credits 44 per cent of the working funds of economic
organisations. But these are average figures. In the different
branches the ratio is different. For example, in industry it was
correspondingly 49 pnd 38 per cent , in trade 30 and 58 per cent
and in purchasing organisations 14 and 72 per cent.
At the beginning of 1960, the working funds in socialist
economy totalled 85,900 million rubles, of which 40 per cent
was in industry, 35 per cent in trade, supplies and sales, and
11 per cent in agriculture and purchases.
Short-term credits serve the circular movement of working
funds ;in accordance with the character and duration of this
movement,sho_-t-term credits are granted for a term not exceeding
one year.
In socialist economy the functions and role of credit are
determined by the essence and nature of the credit. Proceeding
from the above-said,note must be made. first and foremost, of the,,
function and role of credit in the redistribution of the monetary
resources of socialist society. Credit takes part in the planned--
mobilisation of part of the national income and of the temporarily
free monetary funds of enterprises and in their redistribution
for productive use in the process of the expansion of socialist
reproduction. This, so to speak, distributive function of credit
has two inter-related and mutually supplementing sides--the
mobilisation of monetary funds and their redistribution on the
basis of repayment; it represents a single process of a planned
.redistribution of monetary funds through credit in enlarged
socialist reproduction. Utilising this distributive function. of
credit, the Soviet state influences production and the formation
of its proportions.
Banks,primarily the State Bank, on the one hand,through
their passive operations accumulate all the temporarily free
monetary funds of state and co-operative enterprises and
organisations, collective farms, public and other organisations,
the savings of the population and also the monetary reserves of
the budget and credit system. All enterprises, organisations and
institutions, the budget and budgetary establishments must keep
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their monetarv reserves in the banks and through them pay each
other for goods, services and so on. The budget funds and the
resources in the settlement, current and other accounts comprise
the main mass of the bank's resources. The resources for short-
term credits are likewise the bank's own funds and note-issue,
which is planned in strict conformity with the turnover
requirements.
The banks distribute the above resources by plan among
enterprises and organisations as special-purpose,repayable,
term credits.
On January 1 1962,' the credits extended by banks totalled
51,600 million rubies, of which short-term credits amounted to
47,400 million rubles and long-term credits to 4,200 million
rubles. Credits from the.State Bank account for about 94 per cent
of the total sum of credits extended in the country.
On January 1,1960, short-term credits were distributed
in the national economy as follows:
Industry (excluding supplying.and selling organisations)
16,400,million rubles or 34.6 per cent
Agriculture and purchases - 6,500 million rubles or 13.7 per cent
Transport and communications - 500 million rubles or 1 per cent
Construction -2,300 million rubles or 4.9 per cent
Supply & sale -3,200 million rubles or 618 per cent
Trade -17,100 million rubles or 36 per cent
Other branches -1,400 million rubles or 3 per cent
Total
-47,400 million rubles 100 per cent
Credit plays an important role in socialist economy,
facilitating the growth of nro n and commodity circulation,
a fuller utilisation cceleration of the turnover of material
and monetary re ces in the process of reproduction and, on
this basis. increasing socialist accumulation, In fulfilling
these functions, credit promotes the growth and strengthening
of extended socialist reproduction and the planned,balanced
development 'of socialist economy.
But the functions and role, of credit in socialist economy
are not limited to this. Credit is closely linked up with the
entire money turnover of the country, The money turnover
consists of two spheres-cash and non-cash turnover. In both
these spheres the money turnover rests on credit and is promoted
with the aid of bank credit.
Through the bank all forms of money turnover take.the
shape of credit relations between the bank and its clients. Thus,
if an economic organisation instructs the bank to transfer money
from its settlement account to the settlement account of another
economic organisation(or institution), we find two inter-related
credit transactions--the deposit of one economic organisation
decreases in the bank and the deposit of another economic
organisation. increases simultaneously. This means that the owner
of one account in the bank transfers his right of demanding a
certain sum from the bank to. the owner of another account.
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If a bank grants a loan to an economic organisation, it
either tr ers this money to the settlement account of the
borrower or, his instructions, to the account of the supplier
as payment for material values or services.When clients receive
a loan or money from the settlement account, they can in certain
cases, in addition to non-cash orders, receive cash for the
payment of wages or-for certain other payments.
The function of credit we are examining consists in
replacing money in circulation by various forms of credit
transactions, in replacing money by credit media(for example,
the transfer of money from one bank account to another, the
offsetting of.mutuul claims of economic organisations and so on).
Thanks to this, credit accelerates the money turnover and saves
public costs of circulation. At the same time,it plays an
.important role in the planned regulation of money circulation
and in the strengthening of the Luble.
1hberprises and organisations pay the bank an interest
for the use of credits. In their turn, banks and savings banks
pay an interest on the settlement and current accounts of enter-
prises and organisations and on the deposits of the population.
The net income of socialist enterprises is the source
for the payment'of interest in the U.S.S.R.; through the inter-
est it receives, the bank in its turn pays interest to depositors
and covers*all'its own costs. The remaining balance is the bank's
net profit. Half of this is paid into the budget, and the
second half is us o increase the banks own funds which are
used as credit to various branches of the economy. Interest is,
thus, a form of redistributing the national income.
In socialist economy tho rate of interest is established
not spontaneously under the influence of demand and supply (as
in capitalist economy), but consciously, by plan, on the basis
of the task of strengthening economic accounting stimulating the
economic utilisation of material and monetary resources by
enterprises and organisations,ensuring the timely repayment of
credits and also encouraging the depositing of free resources in
the banks. In the U.S.S.R. the rate of interest is systematically
decreaseu,this being due to the powerful development of socialist
economy and credit and other financial resources and also
to the systematic reduction of the relative level of bank costs.
For example, since 1955 the rates of interest have been halved.
At present banks charge an annual rate of interest of 1 and 2
per cent for short-term loans, 3 per cent for overdue loans, and
0.75-1-2 per cent for long-term loans. Naturally, the rate of
interest paid by the banks is lower,considering the need to cover
costs and to receive a certain profit. Banks pay 0.5 per cent on
settlement and current accounts, and 2 and per cent on sight
& time deposits of the population.
In socialist economy credit is based on cost accounting,
closely intertwines with it and is combined with bank control.
Credit stimulates the observance and strengthening of cost
accounting because in order ~to receive credits and to ensure
the repayment of these credits in the established time limit,
enterprises must fulfil the quantitative and qualitative indices
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of the plans for the output and sale of products, reduction of
costs and profitability, and also make proper use of loaned
working funds in their economic activity, accelerate the
turnove# of funds and observe financial discipline. The
payment of interest for credits and the receipt of interest on
settlement accounts stimulate the economic use by enterprises
of their own -and borrowed funds.
Credit relations are the foundation for bank control by the
ruble over the economic and financial activity of enterprises,
over the fulfilment by them of the quantitative and qualitative
indices of their plans. A differential approach is taken in
extending credits to,enterprises and organisations. In the
granting of credits, the bank extends privileges to smoothly
working enterprises, and, conversely, applies a special,stricter
regime of crediting to bad y working enterprises. The granting
of credits in acc e with the actual fulfilment of plans
and the claiming- of payment on the basis of the planned time-
-table of payment of the enterprises receiving credits enables
'banks to control the fulfilment of plans by economic methods,
resting on cost levers of socialist economy, i.e, on money,
credit,4eonomic accounting and so forth. Thereby,credits are of
great importance in promoting the fulfilment of production and
circulation plans.
Principles of the Organisation of Short-Term Credit
and the Different Forms of Credits
Bank credit is the predominant form of credit in
socialist planned economy. Commercial credit, i.e.,reciprocal
granting of credits by economic organisations only existed in
the early stage of the development of Soviet economy.
Commercial credits were prohibited in the U.S.S.R,as from 1930.
In addition to credits received directly from banks(called
direct bank credits in the U.S.S.R.), there are inter-management
credits or rather advances received by one economic organisation
from another: for example, collective farms receive advance
payments from purchasing organisations against agreements for
the delivery of farm produce. This form of crediting is practised
on a small scale. Moreover, mention must be made of consumer
credits extended by trade organisations to the people(for the
purchase of goods on the instalment plan). The two latter forms
of credit are closely related to bank credits. Purchasing and
trade organisations grant these credits entirely at the expense
of credits received from the State Bank and do not involve
their own funds in these transactions.
Direct bank credit is thus the dominating form of credit
in the U.S.S.R.
The basic principles of direct bank credit are:. a planned
purposeful character, fixed term and repayability,security with
material values.
The purposeful character of credit is determined by
credit plans in accordance with' the demand for funds for the
creation of reserves of material values or for expenditures at
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different stages of the process of reproduction provided for by
economic development plans. The purposeful character of credit
is of great importance for the planned distribution of credit
resources in the national economy, in conformity with the
requirements of socialist economy that are determined by the law
of planned, balanced economic development. Strictly adhering to
this principle, banks have only one correct criterion of the
credit policy--the use of credit as a means of promoting the
fulfilment of production and circulation plans, and of controlling
the fulfilment of economic and accumulation plans. Resting on the
purposeful character of credit, the bank has the possibility of
granting loans in accordance with progress in the fulfilment of
a planned transaction for which credits are received and also
in conformity with the actual accumulation of materials and goods
or expenditures, but these credits cannot exceed the figures
provided gor in the plan.
If,for example, the plan of a canning factory is to
accumulate a seasonal stock of finished products worth 500,000
rubles, the bank can, within limits of this sum, grant loan* against these. products as the stocks are accumulated; if the
seasonal stock comes to 150,000 rubles, a loan will be granted
commensurate with only this sum, and when the stocks are
increased to 350,000 rubles, the factory can receive an additional
200,000 rubles, and so on until the full 500,000 rubles' worth
of seasonal stock is accumulated. However, if the seasonal
stock exceeds 500,000 rubles: worth, the bank will refuse to
grant an additional loan. above that sum;
The purposeful character of credit thus makes it possible
to direct credits strictly in conformity with the plan and with
the actual fulfilment of the plan. This shows the importance of
this principle for ensuring the planned distribution of credit-
and for using credit as a means of achieving a balanced
distribution of material resources in the process of reproduction
and control by the bank over the actual fulfilment of plans.
This special character finds expression in the object of
credits, this being understood as a definite form of material
values or expenditures, for the formation(or realisation) of
which credits are granted,for example, raw materials, finished
products or goods and so on.
By their economic character, objects of credit are
distinguished depending on the role they play in the process of
reproduction. As a rule, working funds at various stages of
production and circulation are objects of short-term credit.
As objects of cz?edit,working funds are distributed as follows:
material values -raw and other materials,fuel,
packing finished products,goods
and so on;
expenditures -values in unfinished production
or future expenditures;
sums in the process of
settlements
-material values shipped to
buyers letters of credit,special
accounts, and so on.
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Credits may also be granted for capital investments.
For example,for enlarging or building new enterprises producing
goods for the population or offering services to the population,
for the purchase and installation of new equipment and machines,
and other purposes. These credits will be examined in greater
detail in the next lecture.
In the sphere. of working funds; most of the objects of
credits are material values, the credits for these values adding
up to nearly 75 per cent of all the credits serving the
circulation of working funds; the next biggest share of credits
falls to those invested in settlements (settlement credits)--
nearly 19 per cent.
Values that play the same role in the process of production
or circulation are grouped in one object of credit. This serves
to enlarge the objects of credit. For example, all forms of raw
and basic materials and purchased half-finished products comprise
one enlarged object of credit;fuel, auxiliary and repair materials,
packing and all forms of purchased material values comprise another
object of credit; finished products and goods or incompleted output
and half-finished products of own manufacture are separate
objects of credit. Experience has shown that it is not advisable
to divide up the objects of credit because this weakens the
purposeful character of credit,hinders the correct manoeuvring
with credit in the course of the fulfilment of the plan and
complicates the technique of the work of the bank and economic
organisations.
Evaluations of material and other values that are objects
of credit (price of crediting) are very important in the granting
of credits. If the evaluation is wrong, economic organisations
may be overcredited or undercredited. As a rule, all purchased
material values(raw and other materials, fuel and so on) are
evaluated at their actual purchase price with the addition of the
actual expenses for transportation and storage; finished products
are evaluated at the planned factory or mill cost;unfintshed
output is evaluated at actual cost but not above the planned cost;
shipped goods are evaluated at their planned cost plus
transportation expenses.
The purposef character of ,credit is closely linked up
with security of cul redit. Thanks to their purposeful character,
credits are linked up directly with the movement and availability
of a given form of values at a definite stage of production or
circulation. Credits must therefore be guaranteed with material
or other values,against which they have been extended. Most
credits ar8 secured by commodity and material values-raw and
other materials finished products and goods(evaluated as
described above.
An important principle of credits,proceeding from their
nature,is that they are repayable at a given fixed date. Credits
are subject to repayment within an established time-limit. This
time-limit is determined on the basis of the plan of movement-
of commodity and material values. For example, when credits
are granted to trade organisations against goods, the time-limit
is determined by the plan of the turnover of goods. Credits
extended to industry against remains of raw and other production
materials are granted for the period planned for the processing
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of these materials. Credits granted against shipped material
values are exacted in the time-limit corresponding to the actual
turnover of documents under the acceptance form of settlements,
and any delay in the payment of the invoice by the buyer because
of a lack of funds is not taken into consideration.
Credits are repaid:
by the payment of fixed term obligations issued upon the
receipt of a loan; the sum and the date of repayment are indi-
cated in such an obligation;
by planned payments. whose size is, as a rule,determined
on the basis' of the plan of consumption of raw and other materials
or the sale of finished products and goods; planned payments
are made periodically-daily or every two or three days by agreement
between the bank and the economic organisation concerned.
In some cases, provided for by decisions of the Government
of the U.S.S.R.,credits are exacted to the extent of the actual
(not planned)consumption of credited values. This procedure is
applied when credits are granted to organisations procuring
or processing(primary) agricultural raw materials(organisations
engaged in purchasing grains,livestock, sugar refineries,cotton
ginneries and so on). Here the repayment of credits depends on
the actual receipts,which are directly used for the repayment of
credits (by-passing the settlement account).
Depending on the procedure of issue and registration,which
is connected with the economic nature of individual objects of
credit, two forms of loans must be distinguished: for the turnover
of.material values and for the stock of goods. The sirs , oans
for the turnover, are granted in cases when credit participates
in the entire turnover of the funds of a given enterprise in
addition to its own funds: for example, c-redits granted to trade
organisations,to industrial enterprises where production is of
a non-seasonal character, and so forth. Loans granted against the
stock of goods are rarer and are extended in cases where the
object of credit is a separate form of value at some stage of the
turnover(for example,credits against packing and so forth). At the
same time,mention must be made of a mixed form of loans,uniting
the above-mentioned cases. This concerns loans granted to
seasonal enterprises for the puxchase of agricultural raw
materials and other material values for the period they are
processed and sold.
In conformity with this there are two types of loan
accounts,in which all bank loans are registered:
-simple or fixed term loan account,which,as a rule,is used
for loans against the stock of goods;
-special loan account, which is used for loans against
goods in the turnover.
Material values are the basic object of short-term credit.
There are two forms of credit against material values-against
above-normal stocks of values and against a part of normal stocks.,
The first are loans extended in cases when by plan the stock of
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material values exceeds the norm covered by own working funds,
Most of these loans are granted to enterprises where production
bears a seasonal character or where there are seasonal operations
during separate periods, for example, state farms, enterprises
of the timber, peat, light and food industries, and so on.
In the overwhelming majority of cases, credits against
above-normal stocks of material values are provided for by
economic plans and are planned credits.
In the,work of economic organisations there are times
when unplanned,so-called over-plan stocks of material values
form. If these stocks are due to temporary deviations in the
course of the fulfilment o~ the plan for reasons-not depending
on the enterprise(overfulfilment of the plan, irregular supply
of raw materials,delay in the shi ment of products through the
fault of the transport, and so on), the enterprise can receive
loans for temporary requirements against these values for the
creation o favourable conditions ensuring normal production
conditions.
The second form includes credits which together with own
working funds take part in forming a planned normal reserve
of material values (normativ). This form of credit is met with
in trade (credit against commodity circulation) and in industry
where production is of a non-seasonal character. In these cases
own funds are differentiated from credits by the sharing of each
in the formal reserve of values. For example, in the commodity
circulation of state trade,own funds account for 40-50 per cent
of the commodity reserve,and credits for 50-60 per cent;
in the consumers' co-operative the share of own funds is lower and
of credits higher ; in industry where production is of a non-
-seasonal character,if,aay, the funds invested in the production
reserves add up to 40 per-cent, bank credits have to add up to
60 per cent of these stocks,
In granting credits to enterprises against reserves of
commodity and material values,the bank pays special attention to
see that enterprises observe the structure of these values as
established by plan, do not accumulate surplus reserves which
are needed by other enterprises, and do not delay the sale of
products and their quick movement from the place of production
to the consumer. I
As we have already noted, credit plays an important role
in the money turnover,in particular, in non-cash settlements
(clearings). There are several varieties of these credits,called
settlement credits, depending on their participation in various
forms of settlements. In this connection,two groups should be
singled out:,credits to suppliers of goods and credits to buyers.
Suppliers require credits for settlements for goods
through acceptance or set-off. In these cases, the supplier
is in need of additional funds for continuing his economic
activity in the period from the shipment of goods to the receipt
of money from the buyer. The bank grants him credits for this
period to the sum of the shipped goods.
If letters of credit, a special account, a cheque from
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a limited cheque book is used as a medium of settlements,additional
funds are required for the period of settlements not by the suppl.
ier but by the buyer. The bank grants these credits for opening a
letter of credit, a special account or the purchase of a limited
cheque book. These credits are exacted periodically(nce in
7-10-15 days) to the extent funds are used for settlements.
Moreover, in some cases a settlement credit is granted
to buyers under an acceptance form of settlement for the payment
of supplier's invoices when they have a lack of funds in their
settlement accounts.
Planned credits. The planned character is a very important
advantage and feature of credit in the USSR. Credit resources
are mobilised by the banks and redistributed among various
branches of the national economy in accordance with requirements
determined on the basis of state economic development plans.
Thanks to this, credit helps to achieve the planned proportions
and rates of development of production and circulation. Short-term
credits are planned with the aid of the credit plan, the procedure
under which it is drawn up and fulfilled will be dealt with in one
of the following lectures,
The credit plan of the State Bank,approved by the Government
of the USSR,serves as a directive for economic bodies and the bank,
and guides them in their credit relations.
Implementation of a credit policy,determined by the credit
plan, in all the links of the bank, the observance of the principles
underlying credit and the exercise of control by the ruble ensure
the utilisation of the bank's resources for over-all assistance
in the development of socialist economy.
In the Soviet Union's socialist economy, which does not
suffer from crises of overproduction,credit grows uninterruptedly
in conformity with the planned growth of production,popular
consumption and trade. The bank does not have to resort to
artificial measures to stimulate the enlargement or contraction of
credit by reducing or increasing rates of interest or by other
methods employed in the ,apitalist countries,
The enormous growth of production and construction envisaged
in the Programme of the Communist Party of the Soviet Union is
necessary for the creation of the material and technical basis
of communism and will require ever greater financial resources. In
the next 20 years, capital investments alone will amount to two
trillion rubles, the basic production and ,.-orking funds will have
to be increased nearly five times, and the earmarked five-fold
increase in commodity circulation is likewise linked up with
approximately a similar increase in commodity reserves in the
country. The planned increase in short-term credits to be extended
by the State Bank,determined by these rates of growth,will likewise
help to carry out the great programme of communist construction.
Moreover,the role of credits will grow as an instrument of control
by the ruble furthering economic efficacy in the use of basic and
working funds, strict economy of materials, fuel and other material
values and the realisation of the immutable law of socialist
economic management: the achievement in the interests of society
of the greatest results with the minimum expenditure.
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P.S. IVANOV,
Candidate of Economic Science
Vice-Chairman of the State
Planning Committee of the USSR
0EVELOPMENT OF THE NATIONAL ECONOMY OF TIM
U .S . S . R. UNDER THE SEVEN-YEAR PLAN
I.
Allow me to begin with a general characteristic of the
economy of the Soviet Union.
Today, as you all.know,the U.S.S.R. is one of the
most powerful, industrially developed countries of the world.
Its territory embraces 22,400,000 square kilometres or a
sixth of the earth's land surface. This territory is
inhabited by more than a hundred different nationalities
totalling 220 million people.
The Soviet Union has the worlds greatest reserves of
'hydropower, timber, coal,peat,iron ore, copper, lead,
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manganese,zinc. The U.S.S.R.'s share of the world's
total reserves of coal comes to 57 per cent, of peat to 60
per cent, of iron ore to 41 per cent, and of timber to a
third.
Many scientific previsions of Soviet geologists
have been realised in recent years. The huge reserves of iron
ore in the Kursk magnetic anomaly, the copper ores of the
Urals and Kazakhstan and the enormous deposits of petroleum
and gas in the Volga Area andtrals and other places are
now being utilised in industry.
The extremely rich reserves of minerals, the vast
sources of water power and the unbounded expanses of
fertile soil ..are one of the major material prerequisites for
the rapid development of the Soviet Union's economy.
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In the U.S.S.R. there are more than 200,000 factories
and mills, over 8,000 big statB agricultural enterprises
and about 41,000 agricultural artels.
Towards the close of 1962 the stock of metal-cutting
machines and press and forge equipment will add up to nearly
2,700,000 units, which is about 90 per cent of the present
stock of these machines and equipment in the U.S.A.
In 1961 the U.S.S.R, produced nearly 71 million tons
of steel, 327,000 million kilowatt-hours of electricity, 166
million tons of petroleum, 510 million tons of coal and 51
million tons of cement.
It would be to the point to make the reminder that
our economy was built up in the course of just under 45 years,
the period that has elapsed since the Great October
?
Revolution. Of these at ],east 18 years were occupied by the
wars that were imposed on us and by rehabilitation of the
destruction wrought by these wars.
In order to enable you to make a correct appraisal
of the path that our country has traversed in this period,
I shall take the liberty of giving you some comparative
figures.
In 1913 Russia's industrial development was three
times below the average industrial level in the world.
The present level of industrial development in the U.S.S.R.
is three times above the average level in the world.
In 1917 Russia produced less than 3 per cent of the
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world's industrial output, Today the U.S.S.R. accounts for
nearly 20 per cent.
As you all know,at present the United States of America
is, economically, the most powerful capitalist country in
the world. This was due to certain historical conditions of
that country's development.
But the United State is losing its economic superiority,
Our country has outstripped the U.S.A. for the output of
iron ores coal, coke, prefabricated reinforced-concrete+
diesel locomotives, tractors, grain combines,sawn timber,
sugar,wool.fabrics and a number of other items.
The rate of industrial output is higher in the Soviet
Union than in the U.S.A. In the past few years the annual
rate of growth of industrial output averaged 10 per cent in
the Soviet Union and a little over 2 per cent in the United
States,
At the same time that it built up a big industry, the
Soviet state resolved another historic task,that of uniting
millions of backward peasant households into big collective
farms equipped with modern ma chi ry. This made it possible
to achieve a c erable increase in the total and
marketable output of agriculture even though the number of
people engaged in agricultural production was almost halved.
The training of personnel was one of the important
problems that we had to resolve while developing our
economy. I~ was a difficult task. In old Russia almost
three-quarters of the population were in general illiterate;
the number of people with a higher or secondary special
education was less than 2 per
1,000 of the population.
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During Soviet years tremendous work was done to raise
the cultural level of the population and train highly
qualified engineers and skilled workers on a big scale for
all branches of the economy.
Today the national economy of the U.S.S.R. employs
nearly 10 million specialists with a higher or secondary
special education,
The vocational technical schools annually train about
700,000 skilled workers for industry and construction.
'The general economic result of our country's development
following the Revolution was that the national income became
25 times bigger than in 1913.
How and with what resources was the Soviet state able
to carry out such a far-reaching programme of economic and
cultural development and turn backward Russia into a leading
industrial power within such a relatively short span of
time?
The decisive factor was the consolidation of a new
social system following the triumpth of.the Socialist
Revolution.
Public ownership of the means of production brought
to life new and unprecedented forces and possibilities for
the country's rapid economic development.
It would be difficult to overestimAtn the economic
(to say nothing of the political)advantages held out by
the concentration of the basic resources in the hands of
the socialist state.
Suffice it to point out that under this concentration
the efficiency with which the basic means of production and
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other resources are used in the interests of the whole of
society rises imm(Yasurably, the possibility arises of
planning the distribution and redistribution of these
resources and also of flexibly manoeuvring with them to
resolve the main tasks of general-state importance,and new
sources of accumulation and development appear.
This and nothing else explains the rapid rate of our
country's economic development without outside assistance,
II 0
The method of planning and of organising a planned
economy as applied in our country has in recent years been
attracting steadily increasing interest. and attention abroad.
In this connection, I shall allow myself to discuss
these two questions.
The objective conditions for planning on a nation-wide
scale were created by the Socialist Revolution,which made it
possible to socialise the main means of production in the
-Since then planning has traversed a long and
tortuous road, uninterruptedly developing and improving,
1
embracing the country's economic life more and more fully
and penetrating ever deeper` into its various fields.
The beginning of this road was marked by the first
long-term Plan of the Electrification of Russia,which was
drawn upon under the guidance of our great teacher V. I.
Lenin.;It is now known as the GOELRO plan, and was
followed by the first, second, third, fourth,fifth and
sixth five-year plans. At present we are working on a
seven-year plan of economic development,embracing the period
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1959-65, and have, at the same time,started fulfilling the
general twenty-year plan of the building of the material
and technical basis of communist. society in our country.
A planned economy offers tremendous advantages in
rates of development, in the rational use of resources,
scientific and technical progress and in improving the
material and cultural standard of our people.
The socialist system of planned economy eliminates
all the rvasong that under capitalism cause crises and
unemployment.
Planning rests on the objective laws governing the
balanced,planned development of socialist economy, on a study,
knowledge and utilisation of these laws in the interests of
the whole of society.
Naturally, in a planned economy, as well, there can be
partial unconformity in the development of individual
branches of the national economy due to miscalculation in
the plans or to the un en of tasks in various
branches of -t e economy.
This unconformity is eliminated by plan through the
utilisation of available potentialities and the
redistribution of labour,materifl and financial resources.
In order to create a properly co-ordinated plan,
planning bodies draw up planned balances of the gross
national product, the national income,labour,materials and
finance.
In the balance of the national income,for example,
the most favourable ratio is established between accumulation
ftnd cunsumption. To a large extent the national income is
distributed through the State Budget.
Resources are brought to light and mobilised to the -
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fullest possible extent with the help of financial plans
and are'utilised in accordance with the interests of the
state as a whole. With the help of the financial plans and
the budget, the Soviet state determines the size of the
material and monetary resources that it can use during
the period covered by the plan.
The balance in the population's money incomes and
expenditures is used in planning the output of consumer
goods, determining other resources to meet the requirements
of the population, and establish the retail trade turnover.
By calculating the wage, pension and allowance funds
and also the allocations for other payments to workers and
employees and taking into account the money income of the
peasants from the sale of agricultural produce,the state
has the possibility of determining the demand of the
population for goods and plan the size of the retail
'turnover in accordance with this demand.
The organization of a planned economy is called upon
to ensure the planned, harmonious development of material
production, which is, essentially, a continiuaus process.
This means that at each given moment the national
economy as a whole and the individual enterprises and
economic organisations must have plans that determine their
current activity and their long-term development.
Long-term and current plans are drawn up in the
Soviet Union. The longterm plans deal with the major
problems of the economic policy of the Soviet state. The
current(annual) plans provide for the successive fulfilment
of the tasks set in the long-term plans and,at the same
time,deal with individual tasks that arise out of the
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conditions in the given year. The combination of current
and long-term plans make planning effective,purposeful and
operative.
Planning of the national economy of the U.S.S.R. is
built up on a combination of centralised state management of
the economy with the broad creative initiative of local
organs of administr4tion,factories and mills,public
organisations and individuals.
Some foreign economists argue that economic planning
requires rigid centralisation,that a planned economy is
incompatible with initiative and independence by local'
organs.
But arguments of this nature are only put up by persons
who have a poor knowledge of our country or deliberately try
to distort facts.
V.I.Lenin, founder of the Soviet state, said that
"centralism, as understood in a really democratic sense,
presupposes the first possibility in history of promoting the
full and unhindered' development not only of local features,
but also of local initiative and a variety of ways,methods
and means of advancing towards the common goal".
This proposition formu4ates the principle of
democratic centralism, which is one of the basic principles
of leadership and planning in the Soviet Union.
As applied to the organisation of planning,this means
that the principal tasks and proportions in the development
of the national economy on a nation-wide scl-1e and in the
separate Union republics are determined in the centre,while
enterprises, economic organisations and republican organs
are given broad initiative in drawing up detailed economic
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plans in conformity with local possibilities and conditions,
The system of drawing up plans is mainly as follows:
In conformity with the economic policy of the Soviet
state, the planning organs of the U.S.S.R. jointly with the
Union republics work out control figures-basic indices of
economic development---which are communicated to the Economic
Councils and other economic organisations and,through them,
to enterprises and building projects, The latter, on the
basis of these control figures, draw up detailed plans,which
are discussed by the personnel of the enterprises concerned
and are carried into effect after they are approved by
higher bodies._
The plans of enterprises are used as a basis for
drawing up the plans of the economic administrative
regions and Union republics and,lastly, of the general
? state plan of economic. development..
The way the 1959-65 Seven Year Plan of Economic
Development of the U.S.S.R. was drawn up can serve as an
example to show how economic plai.s are drawn up on the
basis of broad democracy. 'During the discussion of this plan
there were more than 968,009 meetings all over the country--
and these were attended by more than 70 million people.
p,discussed and approved they
acquire th rce of juridical laws that have to be fulfilled.
In the centre the Government of the U.S.S.R. has
working bodies that draw up and check the fulfilment of
plans. These include the State Economic Council,which draws
up long-term plans,and the State Planning Committee whose
functions are to draw up, current....plans.-.--Tha -activities of
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these bodies are co-ordinated by the Government of the
U.S.S.R.
In the Union and Autonomous republics there are state
planning committees under the governments of these
republics,while in the territories,. regions, towns and
districts the planning committees are subordinated to local
government bodies, that plan the development of economy
in their territory. Economic Councils, enterprises,building
and other economic organisations have planning boards or
departments.
Such is the or, Iona structure of the planning
bodies fr_o op to bottom.
The organisation of planning and the management of
economy are being uninterruptedly improved.
An important stage in this sphere was the
teorganisation of the management of industry and
construction that was undertaken in 1957.
The result of this reorganisation was that the
departmental system under which enterprises were subordinated
to central branch ministries was replaced by Economic
Councils that direct industry, and construction in the
territory of the economic administrative regions and have
the possibility of utilising the resources of these regions
more rationally and fully,of organising a more correct -
specialisation by enterprises and of establishing close
production ties between them.
The plans of economic development of the U.S.S.R.
are drawn up in co-ordip.atica with the plans of the other
countries of the socialist camp, who are ,embers of the
Mutual Aid Economic Council,a new international
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organisation set up in 1949 and functioning on principles
of equality of its members. This co-ordination of our plans
creates the conditions for broad specialisation and co-
operation, eliminates superfluous duplication in industry,
allows the potentialities and means of each country to be
utilised economically and makes it possible effectively to
tackle economic tasks.that are beyond the powers of one
country.
III,
The Seven Year Plan of Economic Development for
1959-65 was adopted in 1959. By that time the Soviet Union
had a huge economic potential that allowed it to set new
gigantic tasks in the further enhancement of the national
economy and the welfare of the people.
. The Seven Year Plan ushers in the decisive stage
In the peaceful competition between the economy of the
U.S.S.R. and the economy of the U,S,A., which is the leading
capitalist country of the world, Fulfilment of the Seven-
-Year Plan will bring the industry of the Soviet Union close
to the level of output achieved in the U,S.A., while for a
number of important indices, for example, iron and steel,
cement, mineral fertilisers it will surpass that level.
Soviet economists have calculated that in 1965 Soviet
industry as a whole will be producing almost as much as is
being produced today by the industry in the U.S.A.
The Sever Year Plan envisages the all-slddd development
ofall branches of the national economy of the U.S.S.R.
J3-eavy industry is growing at a rapid rate and this is
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ensuring the accelerated enlargement of the output of
consumer goods,which is a feature of the Seven Year Plan.
With the total volume of industrial output scheduled to
increase by 80 per cent during the Seven Year Plan period,
the output of the means of production will be increased by
85-88 per cent and of consumer goods by 62-65 per cent.
Exceptional attention is being paid to the further
rise of agriculture in order to ensure a sharp increase in
the output of farm produce. The Seven Year Plan target is to
increase the volume of agricultural production by 70 per
cent.
The outlook for scientific and technical progress is
very great in our country. The outstanding achievements
that have already been scored by Soviet science and
technology,achievements that have won world recognition,
are enabling us to place huge forces of nature at the
service of man, make his work lighter and considerably
increase its productivity. The Seven-Year Plan envisages
increasing labour productivity in industry by 45-50 per cent
in terms of per worker,in building by 60-65 per cent, and
in agriculture by approximately 100 per cent at the collective
farms and by 60-65 per cent at the state farms, and, at the
same time, it provides for a shorter working day.
The material facilities of a new technology are
rapidly being enlarged. This is finding expression, in
particular, in the priority growth of the power, chemical
.r
and engineering industries. Tv~ith the total output of
industrial production due to increase by 80 per cent under
the Seven Year Plan, the output of electric power will be
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increased by more than 100 per cent, while the chemical
industry will step up production approximately three
times and the engineering industry by about two times.
Fundamental changes yielding a great saving of
social labour and thereby accelerating the rates of our
development are taking place in the structure of material
production on the basis of technical progress and the
enormous reserves of power and mineral resources that have
been discovered.
New manufactures that conform with the present level
of technology are continually appearing and energetically
developed in industry. The metallurgical industry is goigg
over to the production of the latest types of metal
sections. Building is being industrialised and inefficient
timber materials are being replaced by new building
materials. In the development of power engineering priority
has been given to the building of thermal power stations,
which require relatively smaller capital investments per
unit of installed capacity. The structure of the fuel
balance is changing rapidly in favour of oil and gas,which
are the cheapest fuels.
In the total valum6of output of fuel, the share of
oil and gas will rise, from 31 per cent in 1958 to 51 per cent
in 1965. A huge volume of work is being done in the machine-
-building industry to develop and promote the broad
utilisation of new highly-productive machines,mechanisms
and instruments and improve their technical,econ.omic and
operational properties.
In agriculture important changes are being
introduced into the system of--crop rotation and the
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structure of crop areas by replacing low-yielding crops
with high-yielding crops.
A sweeping technical reconstruction is taking place in
transport. Electric and diesel haulage, which is of decisive
importance in ensuring the growing volume of transportation,
is being introduced can all railways.
In 1958 electric and diesel locomotives accounted for
26 per cent of the freight turnover on the Soviet railways.
In 1965 electric and diesel locomotives will be transporting
85-87 per cent of the freight on the railways.
It is difficult to give an exact estimating of the
economic effect that these measures will have. But I can
cite some figures that give an idea of their economic
significance. For example, in the current seven-year period,
the change-over from coal to gas and petroleum will save
more than 12,500 million rubles. The replacement of steam
engines by electric and diesel locomotives will allow
reducing the coal consumption of the railway transport by
400 million tons in the course of seven years and reduce
operational expenses by 4,500 million rubles.
A growth of material production and of labour
productivity salted by the Seven Year Plan, will ensure an
increase of 62-65 per cent in the national income during the
seven year period and a per capita rise of 40 per cent in
the real incomes of industrial,office and other workers and
of the peasants.
One cant help recollecting the fact that after the
Irublioation of the Seven Year Plan some of foreign
economists declared'this plan to be a new propagandistic
step and that the adopted plan does not conform to potentiali-
ties of the country.
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Today when three years of the Seven Year Plan
period have already passed nobody raises the question of
whether the plan will be fulfilled or not.
In the period 1959-61 the average annual rate of increase
of industrial output was not 8.3 per cent as was envisaged
in the calculations for three years but 10 per cent. In.
the past three years approximately 19,000 million rubles'
worth of goods were produced over and above the targets
for these years set in the Seven Year Plan.
In this period our above-plan output included about
2,000,000 tons of pig iron, more than 9,000,000 tons of
steel, about 8,000,000 tons of rolled stock, 10;000,000
tons of petroleum, a considerable quantity of cement; fabrics,
butter and furniture, ,a large number of tractors and other
farm machines,shoes,radio receivers, TV sets, refrigerators
and numerous other items for the national economy and the
population.
In a number of key industries, for example, the
ferrous metallurgical and machine-building industries, the
level of production planned for the current year of 1962
has reached the level envisageql by the Seven Year Plan for
1963. There are all grounds for considering that industry
as a whole will likewirse overfulfil the Seven Year Plan
The growth of production is accompanied by rapid
scientific and technical progress.
The Soviet Government strives to provide the most
favourable conditions for th4 creative activity of
scientists, to bring science closer to production and to
raise the importance of fundamental researches. In the
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,U.S.S.R. major scientific work is, in effect, co-ordinated
by plan on a nation-wide scale.
The allocations for scientific development in the
U.S.S.R. for 1962 add up to 4,300 million rubles, which is
almost five times greater than' the sum that was spent for
this purpose in 1950.
Extensive work has been done in the past few years to
re-equip all branches of material production.
Giant thermal and hydroelectric power stations, fitted
with the latest power equipment and means of automation
have been built and placed in operation through the efforts
of our scientists, engineers and workers. The most up-to-
date automatic machine-tools, mechanisms and entire
automatic production lines as well as electronic automatic
regulating devices have been introduced into production.
These achievements of science and technology enable us to
automate production on a still bigger scale, secure a
substantial increase in labour productivity and
fundamentally change the very character of labour in the
sphere of material production.
Improvement of the machine~y and technology used in
modern production is based on the widespread utilisation
of electric power. The growth of speeds,temperatures, and
pressures requires an increase in the consumption of
electricity by industry. At the same time there is a
steadily rising demand in the national economy for
high-grade steel, non-ferrous and rare metals, and
products of the chemical industry; for whose production
a large quantity of electric power is consumed, Lastly, it
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17.
is only through the broad use of electric power that it
is possible to promote the over-all mechanisation and wide
automation:. of production. Thus, electrification is the
material. basis of all technical progress and of increasing
the technical. means available to labour.
Towards the close of the Seven Year Plan period the
Soviet Union will be producing 500,000-520,000 million
kilowat-hours of electricity, while, compared, with the
1958 level the%insta' ap4city of the power stations
will be morel than doubled.
Power engineering is developing with particular speed
in the Eastern areas. Kazakhstan alone now produces many
times more electricity than all the power stations of
Russia in 1913.
Extensive work is being done to build u? a signle
power grid in the European part of the U.S.S.R. and in
6entral Siberia, and also to unite the power systems of the
North-western and Western regions, the Transcaucasus,
Kazakhstan and Central Asia.
A fundamentally new technical policy aimed at building
big and highly economical thermal power stations has been
adopted during the current seven-year period. None of the
thermal power stations that were built during the post-war
Five Year Plan periods has a capacity of over 300.000-500,000
kilowatts,but the capacity of the thermal power stations
that will be placed in operation in the immediate future
will each have a capacity of 1,000,000-2,000,000 kilowatts
and then 3,500,000-4,000,000 kilowatts.
There are enormous prospects for the building of
hydropower stations as well. A cascade of mammoth hydropower
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stations has been built on the Volga. Even larger
hydropower stations are under construction on the Yenisei
and Angara rivers in Siberma. Big hyydropower stations are
to be built in Kazakhstan and Central Asia.
At present the U.S.S.R. is building about 150 big
thermal, atomic and hydraulic power stations with a total
capacity of 120 million kilowatts, A large part of these
projects are already operating.
An important task is to promote the rapid development
of the machine building industry, which, as you all know,
determines the technical level of all branches of the
national economy and decisively influences their economy,
In order to draw up the programme for the machine-build-
ing industry under the Seven Year Plan our point of departure
was that it had firstly to ensure all the enterprises under
construction or reconstruction with the necessary technically
f
modern equipment, secondly, to increase the number of highly
productive machines at the factories and mills in operation
and,thirdly, sharply to increase the output of the means
of mechanisation, primarily for those branches of the
national economy where manual labour still occupies a
considerable place. '\
In the U.S.S.R. much has already been done to
mechanise labour. Naturally, the most arduous and difficult
operations were machanised first. The task now is to
further the comprehensive mechanisation and automation of
production processes,
We intend to complete the comprehensive
mechanisation of industry, agriculture, transport and
communal services already within the next ten years.This
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19.
will eliminate manual loading and unloading and exclude
heavy labour in basic and auxiliary production operations.
The next step will be the comprehensive automation of
production on a big scale with an increasing transition
to automated factory departments and entire factories with
a high level of technical and economic efficiency.
Today there is no branch of the national economy that
can develop without chemistry.
In the past three years the output of chemicals in
the U.S.S.R. has increased by 50 per cent, while a
particularly large increase has been registered by the
output of new, cheap synthetic materials whose operational
qualities are much superior to those of natural materials.
At the same time chemi'stry is becoming an important source
of raw materials for the production of fabrics,clothes,
shoes and articles of household use.
In the past three years the state has invested more
money into the chemical industry than in the preceding seven
years. This has made it possible to put in operation dozens
of new factories, build powerful chemical industries in the
Volga Area,Bashkiria, the North. Caucasus and Azerbaijan,
and to begin the rapid construction of big plants and
combines in Central Asia, Siberia, Altai Territory and
Byelorussia which will start production in the near future.
Important tasks are being carried out in the current
Seven Year Plan period in the development of other branches
of the national economy.
It goes without saying that huge capital investments
are required in order to fulfil these tasks. In the seven-
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-year period nearly 200,000 million rubles will be invested
in the national economy by the state alone. This is more
than the sum that was invested in the national economy in
the entire period f ollow?ing the Revolution.
Nearly 3,000 big new state industrial enterprises
went into operation in the period 1959-61. They include such
giants as the Lenin and Twenty-Second Congress of the
C.P.S.U. hydropower stations on the Volga, the Karaganda and
Kuibyshev metallurgical plants, the huge ore-concentrating
combines in the Ukraine, Kazakhstan and near the deposits
of the Kursk magnetica-13; -the oil-refineries in Irkutsk
and Ferghe artificial fibre plants in Ryazan, Kursk
and Engels, and many machine-building, and cement plants,
sugar refineries and textile mills.
There are now big building reserves in all branches of
.the national economy and this is making it possible to
place in operation thousands of new enterprises in the
immediate future.In order to accelerate the-placing of these
enterprises into operation, capital investments are being
concentrated first and foremost on the most important
projects and also projects that are almost completed.
Consumption is growing systematically in the Soviet
Union.
As economic development proceeds ever greater
allocations are being directed by the state to enlarge the
output of consumer goods, step up housing construction and
develop public education and public health.
The Soviet Government considers increasing the
welfare of the people as its central task and therefore'
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devotes much attention to agriculture,
Among the measures that were taken in recent years to
step up agricultural production, a very important role was
played by the ploughing up of 42 million hectares of virgin
and disused land. This was a difficult task. New settlements,
large production premises, roads,dwellings and cultural and
everyday services premises had to be built within a short span
of time in order to provide the necessary conditions for the
hundreds of thousands of people who came to the sparsely
inhabited steppe regions of Kazgkhstan,Siberia and other areas
from other parts of the country, The undertaking proved to be
economically justified.The marketable grain alone not only
repaid the state all the investments that it made into the
agriculture of the newly-developed areas but also gave a net
income of 3,200 million rubles.
In stepping up the output of farm products of very great
importance were also the measures that were taken with the aim
to give the collective farmers a greater incentive in the
results of their work; to develop a powerful material and
technical base; to decisively improve the utilisation of the
land and of the technique, and to increase efficacy of the
organisation of labour.
Having this in view,the procurement prices of farm
products,-meat and milkrin particular, - have been substant-
ially increased, and at the same time prices for agricultural
machinery,building materials and other goods of production
considerably
use in the countryside have been/reduced.
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All this has had a beneficial effect on the economy
of agricultural production. The-total grain output in the
U.S.S.R. has now reached 128-136 million tons a year. In
the past four years the cattle population has increased by
15 million head and the pig population by 22 million head.
The rate of growth of the output of farm products is,
however, still lagging behind the rate of industrial
development and the growing requirements of the population.
The immediate task,therefore,is to achieve a sharp increase
in the output of grain,meat,milk and other products within
the next few years and thereby create an abundance of
aj~e
foodstuffs and agricultural raw material. We ponfident
that this is a practicable task. The principal thing here
is to make correct use of the land on the basis of a
reorganised pattern of crop areas, increasing the
efficiency of farming, successively intensifying agriculture,
comprehensively mechanising production processes in crop
farming and animal husbandry and broadly disseminating
advanced experience and the achievements of science.
The experience of many collective farms, districts and
entire regions that have grown bumper harvests and
attained high indices in livestock productivity makes
us confident that the Seven Year Plan will be fulfilled in
agriculture as well.
All the measures aimed at raising the living
standard:of our people are based on the high rate of
growth of the national income.
The real incomes of industrial,office.and other
workers and also of the peasants are increasing on
this basis. The basic trend in increasing the population's
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real incomes is now following three main directions, which
Firstly, that wages and salaries are being increased.
Wages and salaries have in the past few years been
regulated in industry, construction, transport and other
branches of the national economy with the result that
nearly 40 million people or two-thirds of the industrial,
office and other workers employed in the ncL-icnal economy
have been switched to new terms of payment for labour.
The aim of this measure was chiefly to establish a
more correct ratio in the wages and salaries of people
engaged in various trades, professions and branches of the
national economy. Most of the 4,000 million rubles that the
state has spent on this purpose were directed towards
vel of workers in the relatively low-paid
Secondly, income taxes are being successively
lowered. The Government of the U.S.S.R. has passed a
decision to abolish all income taxes as from October 1,1965.
Two stages of this measure have already been passed as a
result of which the real incomes of the population have
increased by 800 million rubles annually.
groups.
Thirdly, public consumption funds are being
systematically increased. Through these funds the
population of the U.S.S.R. satisfies a large portion of
its material and cultural requirements. State insurance
covers nearly 20 million pensioners, state scholarship
grants are received by about 4 million students, and more
than 7 million working people and their children annually
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spend their holidays and vacations at health or holiday
homes,and in Young Pioneer camps at the expense of social
insurance funds and the collective farms. About 7 million
mothers receive allowances.
Last year the payments and allowances to the population
out of public funds came to more than 26,000 million rubles.
It is planned not only systematically to increase the absolute
sum of these payments and allowances but also to increase
their share in the total consumption fund of the population.
In characterising the living standard of our people
and the steps the Government is taking to raise that
standard, emphasis must also be made on the fact that the
Soviet Union is ahead of mane countries for the birth-rate
and has the lowest death-rate in the world. This is ensuring
a rapid growth of the population of our country, including
its able-bodied portion. Inspite of this, there is no
problem of employment by us. The right to work is guaranteed
by the Constitution of the_U,S.S.R. This right is ensured by
the high rates of development of the national economy and
also the planned distribution of production in which account
is taken of each district's manpower resources.
In recent years the working day has been shortened
to seven and six hours for industrial,office and other
workers in all branches of the. national economy. Many of
you probably know that far from being accompanied by a
reduction in wages and salaries,this step has brought
with it an increase in wages and salaries.
The Soviet state is spending huge sums of money to
promote culture, public education and public health. Thee
1959 census showed that almost 59 million people or 30
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per cent of the population have a higher or secon:iary
education.
Moro than 52 million people are at present studying
(this includes preparatory and refresher courses for
industrial, office and other workers directly at their
place of work). In other words every fourth citizen of the
U.S.S.R. is studying.
?
The number of boarding schools is growing rapidly.
These schools are attended by nearly a million children,
while towards the end of the Seven Year Plan period this
number will be considerably increased.
Extended-day schools are becoming widespread in the
Soviet Union side by side with boarding schools. They have
quickly won deserved recognition in the country. These
schools give enrolment priority to children of working
parents,and provide facilities that keep children busy to
six or eight o'clock in the evening.
In extended-day schools and groups children are served
meals for a small cost. By decision of the Executive
Committees of local Soviets of Working Peoples Deputies,
parents with a relatively low wage are not required to pay
for these meals.
In the U.S.S.R. heal tion is an important
state concern-i here are 1,236,000 doctors in the world,
and more than a quarter of these live and work in the
U.S.S.R.'
All industrial,office and other workers pay nothing
for medical attention. In the event of illness they
are paid a temporary disability allowance which comes to
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26.
90 per cent of their wage.
Seven Year Plan provides for measures aimed at
improving working conditions and organising the
recreation of the people-. Large sums of money have been
allocated for the building of new health and holiday homes,
boarding houses and other spa establishments.
In the U.S.S.R. every effort is being made to
satisfy the housing requirements of the people as quickly
as possible. State allocations for housing construction
exceed 5,500 million rubles a year, which is about half
the annual capital inues ~ent~into heavy industry. Modern
dwellings h a total floor space of 367 million square
metres have been built in the U.S.S.R. in the past five
years (excluding housing construction in the collective farms)
Nearly 50 million people have received new apartments.
As you all know,the Soviet Union is a multi-national
country. Naturally, the correct development of-national
relations is of great importance in planning the national
economy and culture. The Soviet state has succeeded in
resolving the national question and achieving actual
equality of all peoples in all spheres of public life.
An important task of the Seven Year Plan is correctly to
distribute the productive forces in order to achieve the
greatest economic effect and ensure a rise of the economy
and culture of all the republics in -the Soviet Union.
Data concerning the Kazakh Soviet Republic can be
cited to illustrate this.
Prior to the Revolution,Kazakhstan was one of the
most backward colonies,a market for the sale of goods and a
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source of raw materials for Russia's industry. The tremendous
natural wealth of Kazakhstan remained unexplored. The mining
industry consisted of small mines. Most of the population of
Kazakhstan were nomad herders. More than 92 per cent of the
population were engaged in primitive pasturage agriculture.
During Soviet years Kazakhstan became a big industrial
republic with a high level of culture.
The Kazakh republic occupies a leading place in the
U.S.S.R. for its reserves of chromium,phosphorites,lead,zinc,
copper, iron ore, coal,manganese,molybdenum,nickel, and
other key minerals.
It has 26,000 factories and mills, one of the largest
coal industries in the country,modern metallurgical plants,
power stations and enterprises of the chemical,machine-
-building,.light and food industries. Compared with 1913,
,the total industrial output of Kazakhstan has increased
by more than 60 times.
In the past few years more than 23 million hectares
of fertile land have been ploughed up in the republic,with
the result that it now occupies second place in the U.S.S.R.
for the output of marketable. grain.
The Karaganda Metallurgical Combine,which will have
better equipment thqn the best metallurgical plants in the
U.S.A., is under construction. The Sokolov-Sarbai Ore-
Concentrating Combine, one of the largest in the Soviet
Union, is being placed in operation in Kustanai Region.
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Non-ferrous metallurgy and the machine building and
chemical industries are to be further developed. By
1965 Kazakhstan will be one of the biggest producers of
mineral fertilisers. The Great Kara-Tau Mining-Chemical
Combine for the production of phosphorites will be
completed.
Many scientific, cultural and public health
establishments are being built. The Academy of Sciences
of Kazakhstan has started building an Institut4 of Nuclear
Physics.
The outlook for the further development of the Soviet
Union's economy is very great. It is outlined in the
Programme of the Party adopted at the Twenty-Second Congress
..of the G.P.S.U. Fundamental changes will take place in all
spheres of the life and activity of the Soviet people in the
course of the ne:t twenty years, The volume of industrial
output will increase by more than six times and of
agricultural output by 3.5 times.
In planning such a far-reaching programme of
development of the productive fcrces,the Soviet Government's
point of departure was that it will enable the country to
create an abundance of material and cultural blessings for
the people, to give people thO highest living standard in
the world.
Allow me here.
Thank you for your attention.
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I. D.SHER
'Frofessor,Doctor of Economic
Science,Head of the Chair of
Financing of the Branches of
National Economy of the Moscow
. Institute of Finance
LONG-TERM CREDITING AND FINANCING OF INVESTMENTS
IN THE USSR
In the 44 years that have elapsed since the Great
October Socialist Revolution, of which nearly 20 years were
taken up by wars forced upon the Soviet people and by post-war
economic rehabilitation, the USSR, once an economically
backward agrarian country, has become a mighty socialist
industrial power with a developed, large-scale agriculture,
and advanced culture and a high standard of living among all
its peoples, including the peoples of the formerly especially
backward outskirts of tsarist Russia.
These years have witnessed the rise of many new
modern branches of industry, the achievement of impressive
successes in science and technology, which have ensured world
leadership in space exploration, the utilisation of atomic
power for peaceful purposes and the indestructible might of
the Soviet state.
More that 37,000 newly-built or restored large state
industrial enterprises, not counting medium and small enter-
prises as well as enterprises run by the collective farms and
co-operative organisations were put in operation in the USSR
in the p riod 1918-1961. In addition, a large number of
state industrial enterprises were completely reconstructed.
Agriculture has been supplied with more than 3,500,000
tractors ( in terms of 15 h.p. units) and 900,000 harvester
combines; tens of millions of hectares of new land have been
developed; the operational length of the railways has been
increased by nearly 80 per cent; and more than half the freight
turnover is now accounted for by electric and diesel haulage.
The dwelling houses built in the towns in this period have a
total floor space of nearly 880 million square metres.
The production capacities that are being put in operation
and the housing space being opened for tenancy are increasing
from year to year. For example, compared with the 15 pre-war
years 1926-1940, the production capacities placed in operation
in the 15-year past-war period'1946-1960 showed the following
increases:output of pig iron and steel 2.3 times, iron ore
4.5 times, power stations 5.8 times, cement 7.1 times, refined
sugar 9.9,times, leather footwear 2.1 times and housing space
4.1 times.
Housing development has been proceeding at a
particularly rapid rate in recent years. In the five-year
period 1951-1955 housing construction in the towns averaged
30,400,000 square metres a year, in the period 1956-1960 it
averaged 65,500,000 square metres a year, while in 1961 it
totalled more than 80,000,000 square metres. In terms of per
1,000 of the population, over two times more housing is now
being built in the USSR than in the USA,Great Britain, France or
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I. D.SHER
rrofessor,Doctor of Economic
Science,Head of the Chair of
Financing of the Branches of
National Economy of the Moscow
Institute of Finance
LONG-TERM CREDITING AND FINANCING OF INVESTMENTS
IN THE USSR
In the 44 years that have elapsed since the Great
October Socialist Revolution, of which nearly 20 years were
taken up by wars forced upon the Soviet people and by post-war
economic rehabilitation, the USSR, once an economically
backward agrarian country, has become a mighty socialist
industrial power with a developed, large-scale agriculture,
and advanced culture and a high standard of living among all
its peoples, including the peoples of the formerly especially
backward outskirts of tsarist Russia.
These years have witns_ed-the rise of many new
modern branches of .-ndustry, the achievement of impressive
successes in_,sci nce and technology, which have ensured world
leadership in space exploration, the utilisation of atomic
'power for peaceful purposes and the indestructible might of
the Soviet state.
More that 37,000 newly-built or restored large state
industrial enterprises, not counting medium and small enter-
prises as well as enterprises run by the collective farms and
co-operative organisations were put in operation in the USSR
in the p riod 1918-1961. In addition, a large number of
state industrial enterprises were completely reconstructed.
Agriculture has been supplied with more than 3,500,000
tractors ( in terms of 15 h.p. units) and 900,000 harvester
combines; tens of millionsof hectares of new land have been
developed; the operational length of the railways has been
increased by nearly 80 per cent; and more than half the freight
turnover is now accounted for by electric and diesel haulage.
The dwelling houses built in the towns in this period have a
total floor space of nearly 880 million square metres.
The production capacities that are being put in operation
and the housing space being opened for tenancy are increasing
from year to year. For example, compared with the 15 pre-war
years 1926-1940, the productioa capacities placed in operation
in the 15-year past-war period'1946-1960 showed the following
increases:output of pig iron and steel 2.3 times, iron ore
4.5 times, power stations 5.8 times, cement 7.1 times, refined
sugar 9.9 times, leather footwear 2.1 times and housing space
4.1 times.
Housing development has been proceeding at a
particularly rapid rate in recent years. In the five-year
period 1951-1955 housing construction in the towns averaged
30,400,000 square metres a year, in the period 1956-1960 it
averaged 65,500,000 square metres a year, while in 1961 it
totalled more than 80,000,000 square metres. In terms of per
1,000 of the population, over two times more housing is now
being built in the USSR than in the USA,Great Britain, France or
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Italy.
In 196C, despite the tremendous destruction that was
wrought in the USSR during the Second World War, the basic
funds were six times greater than in 1928: production funds
rose eight-fold ( of these, in industry and construction-- 37
times) and non-production funds increased 4.5 times ( of these,
housing--3.7 times).
For the physical size of basic production funds, the
USSR has left all the European capitalist countries far be-
hind. The tremendous increase and the great qualitative
changes of the basic, production and non-production funds are
due to the. advantages of the socialist system of planned
economy, which makes it possible uninterruptedly to increase
the volume of capital investments and utilise them with the
greatest efficacy and, at the same time , systematically
improve the people`s standard of living.
The USSR has far outstripped the capitalist countries
for the rate of growth of capital investments. For example,
in the period 1951-196C, the average annual increase in
capital investments was: in the USSR 12.7 per cent, in the
USA 1.9 per cent, in Great Britain and France 5 per cent.
In recent years, the physical size of the capital investments
in industry, agriculture and housing has likewise been bigger
in the USSR than in the USA. The capital invested in the USSR
in the period 1918-1961 totalled 370,000 million rubles.
The huge volume of capital investments, drawn from
domestic sources, became possible thanks to the exceptionally
high rates of growth of the national income, which belongs
to the whole people. In 1960, compared with 1913, the
national income in the USSR.( within the present boundaries)
increased 23 times, while in the USA it increased 3.6 times,
and in Great Britain and France the increase was just more
than double. In terms of per head of population the increase
was: in the USSR 17 times, in the USA 1.9 times, in Great
Britain 1.8 times and in France 1.9 times, i.e., the rates
of growth of the national income in the USSR are higher than
the rates of growth of the national income in the USA,
Great Britain and France as a whole by approximately 9 times,
although the physical volume Qf the national income in the
USSR is at present about 60 per cent of the volume of the
national income in the USA.
It must be noted that in the US.3R the national income
is growing continuously, while in the capitalist countries
it grows spasmodically.
In the USSR the exceptionally high rates of growth
of the national income, which belongs to the people, allows
making large capital investments side by side with the consi-
derable growth of the real incomes of the workers and peasants.
In 1960, compared with 1913, the real incomes of workers in
industry and construction(after deduction of income taxes
and taking into account pensions,allowances, free tuition and
medical attention, and other grants and privileges paid for by
the state) increased 4 times, and if the abolition of unemployement and
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the shortening of the working day is taken into account they
increased 5.8 times, while the incomes of the peasants in
cash and kind increased 6 times.
Public ownership of the land and other means of prpduc-
tion and, on this basis, the planned development of the national
economy allow siting industry and directing funds in the most
rational manner, and fully itilising production capacities,
thereby ensuring the greatest efficacy of capital investments,
which manifests itself, first and foremost, in a huge growth
of output. In 1960,compared with 1913, the volume of industrial
output increased 45 times, whit,:, the output of the machine-
building and metal-working industries increased more than 300
times.
As N.S.Khrushchov, Head of the Soviet Government, stated
in his report to the Twenty-Second Congress of the C.P.S.U. in
1960-1980 the volume of capital investments will add up to
approximately 2 trillion rubles. In this period, the country's
basic productioh funds will increase five-fold and the housing
resources three-fold. The Soviet Union will have the world's
biggest, youngest and most modern production apparatus in the
world.
The huge programme of capital investments, envisaged for
the next twenty years, whose fulfilment will be accompanied by
a steady improvement in the material oonditions of the life of
the people, whose standard of living will be higher than in
any capitalist country, is quite feasible. This is shown in
particular, by the figures for the rates of growth of capital
investments and the national income in the past few years.
In the five-year period 1956-1960, the capital investments total-
led 150,000 million rubles, increasing by 80 per cent as com-
pared with the preceding five-year period.
The immense capital investments being made in the USSR
required and continue to require large domestic financial
resources and the development and implementation of a system of
granting funds and controlling the thrifty utilisation of these
funds, which will facilitate to the utmost the measures aimed
at rapidly increasing production capacities and the country's
basic funds as envisaged in the economic development plans.
The system of financing and crediting capital invest-
ments and also the organisation of the banks providing the nece-
ssary funds arebeing deve1ped and improved side by side with the
development of Soviet economy and the improvement of the methods
of planning it.
At present, the financing and long-term crediting of the
main body of capital investments in production projects as
well as in cultural, everyday service and housing projects in the
towns are handled by the All-Union Bank for Financing Capital
Investments,(known as the Stroibank of the USSR . A part of the
capital investments--primarily the capital investments in
agriculture--are financed and credited by the State Bank. The
latter also extends long-term credits for housing construction
in the countryside and certain capital investments of state
enterprises, chiefly for expenditures involved in introducing
new technology.
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Like the State Bank of the USSR the Stroibank is directly
under the jurisdiction of the -:.icil of Ministers of the USSR.
The Stroibank is a special banking institution, which excercises
state financial control over capital investments.
It carries out all its operations through a network of
offices, branches and authorised agents at the State Bank's
branches.
The State Bank, which is the only note-issue and cash
centre in the country, acts as cashier of the clientels of the
Stroibank,
The principal content and tasks of the Stroibank ( and
of the State Bank wit1 regard to the financing and crediting of
capital investments) are to control the use of capital invest-
ments, the fulfilment of the plans of capital construction and
of the work involved in putting projects in operation and in
reducing the cost of building and assembly work, the mobilisa-
tion of inner reserves, the timely receipt from enterprises and
economic organisations of funds earmarked for financing capital
investments, the observance of estimate, plan and financial
discipline and the strengthening of "Khozraschet" in construc-
tion.
The system of financing and crediting capital investments
in operation in the USSR is directed towards the fulfilment
of these tasks and is founded on the following main principles.
Like the capital investments themselves, the sources from
which they are financed bear a planned character. Provision is
made for them in the State. Budget, which is the fundamental
financial plan of the formation and utilisation of the general
state fund of monetary resources of the Soviet Union-- and in
financial plan (income and expenditure balances) of state
enterprises, Economic Councils, ministries and departments.
The sources of financing state capital investments are
budgetary funds and the funds of enterprises and organisations
directed into capital investments. These include, chiefly,
depreciation deductions and profits. *
The correlation of the various sources of financing capi-
tal investments--budgetary allocations, depreciation deductions
and profits--was dissimilar in the different branches of the
national economy and at the different periods of development
of Soviet economy. However -the national economy as a whole,
budgetary allocations-w e and continue to be the main source
of financing st tb capital investments. In recent years the
share of these allocations came to about '/0 per cent of all the
sources, while the rest consisted of profits and depreciation
deductionsx Here it must be borne in mind that the plan of
capital investments makes no provision for expenditures on
capital repairs, while the composition of the sources of
financing capital investments only provides for a part of the
* A small part of the capital investments, at the
expense of special sources such as credit resources, may be
made over and above the state plan,
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depreciation deductions, i.e., the share earmarked for capital
repairs is deducted.
The combination of budgetary allocations and the own
funds of enterprises (profits, depreciation) in the composi-
tion of the sources of financing capital investments on the one
hand provides a firm financial basis for capital investments
and, on the other, stimulates the fulfilment of the plan of
monetary accumulation;, by enterprises.
In the composition of the sources of financing capital
investments directed towards expanding and reconstructing
industrial. enterprises, the share of enterprises' own funds
comes to 40-50 per cent and more. The share of budgetary
allocations is very high in the sources of financing capital
investments directed towards the building of new industrial
enterprises and enterprises in other branches of the national
economy.
All the funds earmarked for financing capital invest-
ments are concentrated in the bank, which carries on its activi-
ties in this field within the limits provided for in the plan
of budgetary allocations, and as the own funds of enterprises
and economic organisations arereceived. The procedure by which
the bank extends funds for capital investments is uniform and
does not depend on the composition of the sources of financing.
The bank only provides funds for expenses on the building
of new and the enlargement or reconstruction of operat
enterprises as envisaged in the plan.
The drawing up of plans begins at the lowest level--at
the enterprises. The name list of projects is established
depending on their economic importance, estimated cost and
subordination.
Banks take an active part in examining draft plans of
capital investments drawn up by individual enterprises, Economic
Councils, ministries and departments and also by planning
bodies for an entire economic r gion, a republic and the Soviet
Union as a whole. Thy-p~irpose of this participation is to help
achieve the most rational direction of capital investments,
including for projects ensured with economic designs and esti-
mate documents, for the completion of the building of projects
in the time-table set in the plan, and for reducing the volume
of uncompleted work.,
After the annual plan of economic development(including
the plan of capital investments, which is one of its components),
the State Budget and the financial plans (income and expenditure
balances)of the Economic Councils, ministries and departments
are approved, the Ministry of Financesof the USSR, the
ministries of finances of the Union republics and the local
financial bodies notify the bank's b anches of the financing
plan as a whole for each; Economic Council, ministry and depart-
ment and indicate the composition and size of the sources.
The Economic Councils, ministries and departments
notify the banks offices of the plans of capital investments
and the financing plans for each of the projects and
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e-1--,prises subordinated to them. After checking the figures
in the submitted documents against,the indices of the economic
development plan and also the financing plans received from
financial bodies, the bank's offices send the bank's branches
sited in the locality of projects and enterprises the plans
of capital construction, of the utilisation of basis funds,
and of financing as established for them.
Expanding on the plans of capital investments
established for them, enterprises and building projects draw
up project title lists, indicating, the estimated costs of the
projected jobs and of putting the projects into operation
and, together with data on the approval of the project and
estimate documentation (in the case of new projects), these
are sent to the bank by the organisation being financed by it.
After checking the documents presented to it by the projects
and the conformity of the indices in the project title lists
with the provisions of the plans of capital work and the time-
table of construction, the latter be,;ins the financing of the
projects.
Thus is achieved a planned, purposeful use of funds
appropriated for capital investments. It should be noted that
the bank extends funds directly to those enterprises and or-
ganisations for which plans of capital investments have been
established.
Designs and estimates of construction are a necessary
8ondition for including projects in the title lists and for
financing them.
Design and estimate documents are carefully examined
in-order to ensure a high economic efficacy of capital
investments and to make sure that the latest achievements of
science and technology have been taken into account in the
designs. Construction by standard projects is acquiring
increasing importance in the USSR. At present standard
designs are used for most housing,cultural, everyday service
and agricultural projects. Standard designing is becoming
rapidly widespread in industrial construction./
The banks see to it that projects have all the
necessary design and estimate documents effect selective
checking of the economic efficaoy of the designs, the
observance of the established expenditure norms during the
drawing up of estimate documents, and finance and credit
projects within limits of the estimated costs.
Funds for capital investments are extended by the bank
as non-repayable grants ( i.e., without obligations to the
bank to repay them within a certain period) and a.:, loans that
are repayable within different, stipulated periods. Various
procedures for granting funds for capital investments
predominated at the different stagecof development of Soviet
economy. In the period from the thirties to the present
non-repayable financing of the plans of state capital
investments has been the predominant procedure. in the past
few years, there has been a considerable increase in the volume
of credits extended by the State Bank and the Stroibank chiefly
to operating state enterprises for above-plan capital
investments connected with the introduction of new technology
and with measures aimed at stepping up the output of consumer
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goods, foodstuffs and articles of household use, and at
,improving the cultural and everyday services for the population.
The funds for capital investments by collective farms, the
co-operatives and working people, chiefly for individual house
construction, were and continue to be extended solely as long-
term credits.
The possibility of financing state capital investments
on a non-repayable basis is due to public ownership of the
basic funds created through capital investments, and of the
monetary accumulations that are received in the process of
utilising these basic funds. This makes for the'fullest
possible concentration of the monetary accumulations of state
enterprises in the State Budget and for the utilisation of
these accumulations primarily for the building of new enter-
prises of the heavy industry, which require enormous investments
that are not returned for a long time.
In must be emphasised that the non-repayable
character of state capital investments in the basic funds of
production should not he understood in its absolute meaning.
Monies invested in the production funds of the national
economy facilitate the growth,cf production, and the rise of
labour productivity, and, on this basis, the growth of
monetary accumulations. These accumulations are partly
channeled into the State Budget, while the bulk remains at
the disposal of enterprises concerned,- which are the property
of the socialist state,- and is used by these enterprises for
purposes provided for in the plan.
The recently achieved sharp reduction in the time
required to build, reconstruct or enlarge state enterprises
ahd the faster return of the corresponding capital invest-
ments make it expedient to apply the repayable (credit)
methods of extending funds to planned capital investments an_
an ever bigger scale.
The collective farms are making large capital
investments. In the period 1918-1960 these investments
amounted to 28,000 million rubles. In the past few years,
the annual volume of capital investments by the collective
farms has been adding to more than 3,000 million rubles.
Most of the capital investments of the collective farms are
made from their own funds organised in specially-created
non-distributable assets. The state helps the collective
farms to make capital investments by granting them long-
term loans, which have in recent years been amounting to
more than 700-800 million rubles a year.
The circumsta'hce that collective farms (and the
co-operative organisations) are only granted repayable (credit)
funds for capital investments is due to the fact that they
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are found on a group (and not public) form of ownership.
Capital investments are financed and credited to the
extent of the actual fulfilment of the plans of capital
investments and of the task-s- -of--placing projects into
operation.Funds_a~e-extended by the banks in the process of
settlements,-mainly non-cash, authorised by the borrower and
controlled by the bank.
The procedure of granting funds is determined first and
foremost by the manner in which construction is carried on--
by contractors, i.e., by special permanently functionning
building and assembly organisations working under contract
with clients,or by the economic method, i.e., by the
manpower and means of the enterprises engaged in production.
The advantages of the contractor method of
construction is that it allows. training and making the best
use of builders and assemblymen and opens up the possibility
of effectively utilising building machinery and prefabricated
structures and other building elements, and establishing
' hozraschet" relations between contractors and clients
(providing for the procedure of settlements and mutual
material responsibility in the event the terms of the
contracts are violated This has helped to make the
contractor method widespread and to organise a large number
of contracting, general building and specialised organisations.
At present more than 85 per cent of the building and assembly
work in the country is done by contracting organisations.
The procedure of settling payments and of financing
expenditures for building and assembly carried out under
the contractor method depends on the volume of the work, the
building time-table and the branch of economy in which the
work is being done. Expenditures on projects, where the volume
of building and assembly is not big, are financed after the
work has been finished and the project can be put in
operation. In such cases no intermediate settlements are made.
This procedure of settlement and financing gives the
contracting organisations a material incentive to complete
all jobs in the shortest possible time.
In the case of larger projects, partial payment for
work is permitted to the extent of the progress that is made.
Enlarged settlements and financing are now becoming
more and more widespread,.
The volume and estimated cost of the actual work done
is indicated in certificates and protocols periodically
drawn up and signed by the clients and contracting
organisations. These documents together with the bill are
presented to the bank, which by instructions of the client
and after a check extends the necessary funds and credits
the settlement account of the contracting organisation. The
bank checks the protocol on the fulfilment of the plan both
as a preliminary and as a subsequent measure.
As a preliminary measure, the bank checks if the jobs
included in the title lists have been carried out and if they
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have been supplied with approved design and estimate documents,
if the estimate valuations have been applied, and whether the
cost of the completed jobs has not exceeded the estimated cost.
As a subsequent measure the bank takes control measure-
ments and checks if the volume of the completed jobs has been
correctly indicated in the protocols and if the estimated valua-
tions have been correctly applied.
This control, particularly with regard to big projects
whose construction continues over a long period, promotes the
purposeful utilisation of funds. .
In all cases, final settlements are made, with account
of the sums paid out earlier, after all the jobs in a project
have been completed. These settlements are made against esti-
mates drawn up on the basis of working drawings. Therefore, if
with the agreement of the client the contracting organisation
undertakes rationalisation measures (replacement of materials,
changes in structures andsoin) that at the same time ensure the
required quality of the work, it will, proceeding from the full
estimated cost of the job, as provided for in the working
drawings, receive means that give it an additional profit, a
part of which can be used for the creation of an encouragement
fund. This procedure of settlements and financing gives con-
tracting organisations the incentive to develop rationalisation
measures and reduce the cost of building and assembly work.
As regard construction carried out bSconomic method
the order of financing it depends on the volume of the work
at these building sites and operating enterprises. Capital
construction departments ( at operating enterprises) or build-
ing managements ( at new building projects) are set up if the
volume of the work is large. In this case, funds are extended
under the same procedure as for construction by contractors--
to the extent the work is fulfilled. At small projects, build-
ing and assembly is financed in accordance with individual
elements of expenditure--i.e., by extending funds to pay for
building materials, constructions, wages and so forth.
A similar procedure is,.followed in granting state
enterprises funds in the form of'credits. If credits are
required for capital investments not provided for in the state
plan of economic development, the borrowers present to the bank
the computations of the efficacy and repayability of the
expenses, and on the basis of an analysis of these computations
the bank establishes the expediency of granting credits and
the period in which they must be repaid.
In the structure of capital investments in industry, a
large portion ( at present more than 40 per cent) is occupied
by expenditures on equipment. Bank credits, which are repayable
(after the equipment is installed) through funds earmarked
capital investments in the corresponding projects, are granted
for the purchase of Soviet-made and imported large-scale
technological and power equipment.
The procedure of financing capital investments in
housing construction has its own features, which are to a large
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extent linked up with the industrialisation of construction,
prefabrication, the use of standard designs and the price list.
Housing construction in towns, districts and town-type
settlements in conformity with standard designs is financed
in accordance with price lists separately for underground
and surface work. Underground work is financed in such a
way that 50 per cent of the estimated cost of this work is
paid out after the work is completed. Surface work is paid
.for and. financed in conformity with the technical readiness
of enlarged structural elements within limits of 95 per
cent of the price list cost, and the final settlement is
made after the house in question is completed.
In recent years, this procedure of settlement and
financing has been applied to a number of production,
cultural and everyday service projects.
The order of settling for and financing housing
constructing by house-building combines is somewhat dif-
ferent. These combines not only manufacture large building
elements in factory conditions but also install them with
their own manpower after the underground work has been
completed.
When houses are built by house-building combines,
the underground work is financed in accordance with the
procedure described above, while all the other jobs are
financed after the work is completed and the house is ready
for occupancy.
Thus, in recent years, the practice is becoming
more and more widespread of financing (and crediting)
expenditures on finished projects ready to be placed in
operation, this being closely linked up with the fundamental
changes in the technology and speed of construction.
At the same time, much attention is being given to
the granting of short-term credits to contructing
organisations, chiefly in connection with seasonal
requirements. These organisations receive credits on the
same footing as industrial enterprises, the credits being
planned, purposeful, repayable on a certain fixed date and
given security.
The Stroibank and the State Bank control the
cost of building and assembly, particularly the expenditures
on wages.
The system by which contracting organisations are
financed and credited depends on the results of their work.
This differentiated approach is based not only on the
information available to the bank but chiefly on an analysis
of reports on projects and contracting organisations and
on-the-spot inspections.
Long-term crediting of collective farms for capital
investments has certain features of its own. The objects of
credit are, chiefly, expenditures for the promotion o.Veommon
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livestock breeding (for the building of livestock premises,
the mechanisation of livestock farms and the purchase of
livestock), for the purchase of farm machinery, for the
building of power stations, and for electrification and
radiofication. The extreme time limits for the repayment of
loans are different and depend on what the loans have been
received for, but the maximum is 15 years. The concrete
dates of repayment are. established with account taken of
the fingncial position of the collective farm concerned. In
addition to extreme dates, the initial dates (which are also
differentiated) are established in such a way as to give
collective farms the possibility, as a result of the measures
taken with the aid of long-term credits, to receive a profit
that can be directed towards the repayment of loans.
Long-term loans are granted for capital investments by separate
collective farms and also by groups of collective farms (the
building of inter-collective-farm power stations, enterprises
producing building materials or processing farm
produce, the setting up of inter-collective-farm building
organisations, and so on). Long-term credits are granted
for capital investmen s-to organisations of the consumers'
co-operatives,-an-d up to the close of 1960 they were granted
to the producer's co-operatives.
Long-term credits for capital investments are granted
to collective farms and co-operative organisations by the
State Bank of the USSR.
In addition, the State Bank ; ndthe Stroibank
extend credits to workers, engineers, technicians, office
employees. teachers, doctors and, in a number of cases, to
collective farmers and other groups of working people for
individual housing construction, for the purchase of house-
hold articles, and so on.
Credits for individual housing construction by
workers and employees of self-supporting("Khozraschet')
enterprises are extended through these enterprises. Borrowers
participate in the building of homes with their ,own money and
personal labour and also with the labour of members of their
families.. The credit requirements of individual workers and
employees are established (within definite limits) by the
heads of enterprises and by the trade unions.
Long-term credits are extended by the State Bank and
the Stroibank on the basis of long-term credit plans apprQved
by the Government of the USSR and making provision both for
the direction of funds in accordance with the principal
groups of borrowers and projects and of the sources of credit,
The latter include the special funds of banks, sums received
in repayment for earlier credits and, to a large extent,
budgetary funds. This structure of the credit plans (drawn
up separatel from the plans of short-term credit
transactions makes it possible to separate resources
earmarked for long-term credit from short-term resources and
to follow the fulfilment of the credit plan.
Thus, uninterruptedly improving the methods of
financing and crediting and systematically improving and
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developing their economy , e banks through control
b ~- the rule achelp to make the most efficient use
of the means directed into capital investments, to speed up
the completing of the latest and most economical production
capacities and basic funds. They thereby assist in creating
the material and technical basis of communism, in abolishing
the housing shortage and in ensuring the people of the
Soviet Union with the highest standard of living compared
with any capitalist country.
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,~ _? 50X1-HUM
V.A. VOROBYEV
Deputy Chairman
Board of Directors of the State
Bank of the USSR
PLANNING OF MONEY CIRCULATION AND CREDIT
IN THE USSR
Planning credit and money circulation in the USSR
is a component of the over-all system of economic planning.
Just like the entire system of economic planning, it is
subor'inated to the principal task of our society, which is
successfully to build communism.
The classics of Marxism-Leninism teach and the
experience of our country confirms that credit, money and all
the other economic instruments and categories will be
necessary for the entire period of building communism. In the
first phase of communist society, i.e., under socialism,
despite the rapid rates of growth, social production does not
reach a level of development that can ensure an abundance of
consumer goods for distribution to members of society
according to requirements. That is in a socialist
society there must be the strictest accounting and control
by the state over the 'easure of labour and the measure of
consumption, which is only possible in terms of value, with
the aid of money.
In:connection with-this, much attention is paid in
the USSR to the proper organisation of credit and.of the
circulation of money and, in particular, to the planning of
credit and of the circulation of money.
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1. Organisation of Credit Planning
The State Bank of the USSR is the centre of short-
term credit for all branches of the country s national
economy. In addition, at the expense of resources specially
aportioned for this purpose,.it handles operations with regard
to the extension of long-term credits to agricultural producers'
co-operatives--collective farms--and to the financing of state
agricultural enterprises.
In the USSR credit is founded on production and
commodity circulation and is a necessary condition for the
formation of working funds at all stages of socialist
reproduction--from the procurement of raw materials to the
sale of finnished products.
In the USSR all enterprises are the property of-the
state or of collective farms and co-operatives. All are
juridical persons and are run on a self-paying basis
(khozraschet). State enterprises have their own working
funds in sizes necessary for their normal economic and
financial activity Cooperative organisations and collective
farms form their own working funds at the expense of their
income.
As has been already pointed out in the preceding
lectures in the process of producing and circulating
commodities enterprises, co-operative organisations and
collective farms, experience a temporary or seasonal need for
funds, which they cannot cover from their own means. At the
same time temporarily free funds are being created in the
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circular monetary flow in the economy.
It would be unwise to endow each enterprise with its
own means of circulation in proportion with the maximum
seasonal requirements, because in this case large financial
resources would be frozen during seasonal ( temporary)
reductions of the volume of procurements, production and
commodity circulation.
Accumulating the temporarily free monetary resources
of state and co-operative enterprises, of collective farms
and public organisations and also of the State Budget, the
State Bank directs them as planned credits for definite
periods into the national economy, and thereby promotes the
most rational utilisation of the country's financial resources.
Credits to the national economy are extended by the
State Bank of the USSR on the basis of credit plans. The
credit plan of the State Bank establishes the sources of
credits, their allocation and volume and also, jointly with
the cash plan, the directive on the circulation of money.
Being base the state plans of economic development,
the credit plan at the same time influences the formation of
various indices of the economic development plan. When they
are compiled and during their current fulfilment the credit
plan and the money circulation plan actively influence the
achievement of the qualitative and quantitative indices of
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the state plan, This influence of the credit and cash plans
is based on the unity of the economic, credit and note
issuing policies, on the community of tasks that are carried
out through the entire system of state planning in the USSR.
In the USSR credits are planned by the State Bank of
the USSR and the All-Union Bank for Rinancing Capital
Investments, known as the Stroibank of the USSR.
The credit plans of banks are drawn up as a balance;
showing on the one side the resources on the basis of which
the credit investments in the national economy are planned,
and, on the other, the volume of credit investments and their
break up at the end-of the planned period. At the close of a
quarter, the planned balances of the State Bank's credit
investments and resources are compared with the balances at
the beginning of the quarter and show an increase or decrease
of individual credits and resources for the given quarter.
Depending on the economic features of the planned quarter
and time of year, the plan provides for an increase of
credits in some branches of economy and forms of credits
and a decrease in others.
The principal items of the State Bank's short-term
credit plan are:
resources--funds and profits of the State Bank;
funds of the State Budget; balances of economic enterprises
on settlement accounts and in the process of settlements;
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balances on the current accounts of collective farms, State
insurance, social insurance, trade unions and other orga-
nisations; funds of the Stroibank, savings banks and other
credit institutions; cash in circulation, and o:-:er resources;
allocation of resources--loans against commodity and
material values and for seasonal expenditures; loans for
expenditures on the introduction of new technology and the
fqr
extension of the output of consumer goods; loans/effecting
settlements;loans against documents en route; loans for
temporary requirements; reserve of the Head Office of the State
Bank.
Changes in the balances of various items of the credit
plan are tabulated as follows: the plan for the current quarter,
the expected fulfilment of the approved plan, the plan for the
next quarter, and the increase or decrease of credits and
resources in the planned quarter with regard to the expected
fulfilment of the approved plan for the preceding quarter.
It goes without saying that the turnover in each
form of credit and in the resources drawn upon by the State
Bank are considerably bigger than the changes in the balance
as mirrored in the credit plan.
The State Bank's short-and long-term credit plans
are set up territorially for each economic administrative
region The branches of the Bank are actively engaged in this
work.
Estimates of credits-to be extended to most
branches of the national economy are composed on the basis of
planned data of the Economic Concils, the administration of
the local industry, the republican, regional and territorial
chains of the trading system, and the collective farms.
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The regional, territorial and republican (autonomous
republic ) offices of the State Bank send the drafts of credit
plans to the State Bank's offices in the Union republics.
After thoroughly checking the data and summing up the plan
for a Union republic, the office concerned sends the draft
on to the Head Office of the State Bank of the U13SR.
All-Union ministries and departments, that have
enterprises and economic organisations subordinated to them,
submit summary credit plans for their system directly to the
Head Office of the State Bank.
Some forms of credits as well as of the State Bank's
resources are planned in a centralised manner.
. In recent years, particularly after the reorganisation
of the management of industry and construction and the extension
of the rights of local organisations, the rights and duties of
the State Bank offices in planning credits have been extended,
while the Board retains centralizing and regulating functions
in its hands.
The State Bank's long-term credit plan is also a
balance of resources and the utilisation of these resources..
These resources include:the special long-term credit fund, the
all-Union budget and the budgets of the Union republics and
also the free resources of the collective farms in the form of
their non-distributable funds held with the atate Bank.The
plan provides for the utilisation of these resources separately
by the collective farms,individual borrowers in.rural
localities and organisations of the consumers co-operative.
The drafts of the long-term credit plans are first
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examined by the appropriate State Bank office jointly with
the government of the respective Union republic and submitted
to the Head Office of the State Bank.The plan is then examined
and approved by the Government of the USSR with regard to the
whole volume and utilisation of resources as well as to each
Union republic.
The credit plan of the Stroibank of the USSR provides
for short-and long-term credits within the sphere of its
activity. They are,primarily, long-term credits for the
organisation and extension of the output of consumer goods,
and for the ":wilding and enlargement of everyday service
establishments for individual housing construction in towns'
and workers settlements. Then there are short-term credits
to building and erection contractors for the procurement of
building materials in connection with seasonal work and
seasonal conditions of delivery; for capital repairs of
building machines and other basic equipment at the expense of
future depreciation deductions; against documents en route
and some other purposes.
In the USSR a sharp distinction is made between an
enterprise's own and borrowed working funds, in connection
with which,when the size of credit is determined,the volume
of the enterprise's own working funds must be taken into
account.The banks' point of departure in determining the credit
requirements in each planned period is that to form current
reserves of mat values and production, enterprises must
first and foremost make the maximum use of their own working
funds and on4y them use bank credits for seasonal and other
requirements arising out of the plan.On this basis the Bank
organises control over the security and correct use of own
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working funds of enter r- s and also of the working funds
borrowed by them.
The link between the credit plan and the production
and material and technical supply plans is that being based
on the indices of the national economic plan, the former,when
it is drawn'up,takes into account the material balance of raw
materials, the production materials, finished products,the
expense estimates of industrial and agricultural production and
also separate tasks set in the course of the fulfilment of the
plan.
When a draft credit plan is drawn up,account is taken
of the rates of development of various branches of the national
economy,the volume of output of industry and agriculture,the
freight turnover, commodity circulation and procurements
established in the national economic plan,and also the prospective
further growth of the national economy as envisaged in the
annual and quarterly plans.
The State Bank's credit plan takes into account the
utilisation of the free balances on the accounts of the Union,
republican and local budgets as well as of all budget
organisations for extending credits to the national economy.
This provides the foundation for the relationship between
the credit plan and the State Budget because all the revenue
of the State Budget goes to accounts in the State Bank and is
used to cover all the Budget expenditures. Large budgetary
funds are being concentrated in the State Bank in th$ form of the
excess of revenue over the. expenditures.
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The credit plan is fulfilled by each of the State
Ba:i::' .3 branches within the limits of its rights. The State
Bank's credit operations ere based on a strict 'regulation of
these rights and duties both of the Bank itself and of its
clients. This regulation is of great state importance and the
Bank requires that credit'diseipline be strictly observed by
its clients sand that credits are used most rationally with
the purpose'of fulfilling and overfulfilling production and
commodity circulation plans and that the proper effect is
ensured.
In planning credits and also in its control over the
fulfilment of the credit plans, the Bank watches:
the fulfilment of production and commodity circulation
plans, the fulfilment of financial and accumulation plans, the
strengthening of the system under which enterprises are run on
a self-supporting basis, the observance of economy and payment
discipline;
the observance of the principles under which short-tem
credit'is granted: its term, repayment and utilisation for
purposes specified.
- the expenditure by enterprises of their own and
borrowed funds in accordance with their designation, and in
particular, the prevention of accumulation of surplus goods
that are not required by the economy.
During the fulfilment of the credit plan, the State
Bank's branches study the economic and financial position of
enterprises and economic organisations receiving credits, using
for this purpose the balance sheets and operative reports of
these enterprises and organisations sent to the Bank. Where
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necessary, to carry out checks and examinations on the spot,
disclose the reasons for deviations in the fulfilment of
economic and financial plans and through the enterprises
themselves, and also through higher economic links, to take
measures to remove the revealed shortcomings. The Bank's
institutions see to it that loans are repaid, and also keep
an eye on the payment discipline of enterprises and jointly
with them see to it that settlements are made in due time.
The State Bank has a rule under which some forms of
credits are unlimrnted, while other are strictly limited.
This enables the Bank to influence through the extension of
credits various processes taking place in the economy.
The State Banks institutions have sufficiently
broad powers to manoeuvre with credit limits. The manager of
a town or district branch of the State Bank has the right to
distribute credit limits among enterprises which are part of one
and the same economic system, Economic Council, central
administration, or ministry. In agreement with economic
bodies, State Bank offices can by themselves, on the basis
of requirements arising out of the fulfilment of the plan,
decide to increase the credit limits established for some
economic organisations at the expense of the free limits of
other economic organisations and enterprises,and also to
redistribute credit limits among various objects of credit.
Republican offices of the State Bank have the right to
redistribute credit limits among separate Economic Councils,
ministries and departments, and also among various objects
of credit v ithin the framework of the general limits
established for the given Republic as a whole.
Thus, in the USSR the granting of credits is planned
in such a way as to stimulate the development of credit
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w in Cho economy and promote the most effective
utilisation of the financial resources of the socialist state.
II. PlanningyMoney Circulation in the U
While noting the need for money in the transition period
from capitalism to socialism, V.I.Lenin said: "Can it (money--
Ed.) be abolished forthwith? N. Long before the socialist
revolution, the socialists wrote that money cannot be abolished
at once, and we confip is with our experience. There must
be trery many technical and, which is much more difficult and much
more important, organisational gains in order to abolish money....
We too could not abolish money at once. We say: money will remain,
and it will remain for quite a long time in the course of the
transition period from the old capitalist society to the new
socialist society" (V.I. Lenin,Collected Works, Russ. ed.,Vol.29,
P. 329).
Under socialism, while retaining its old form, money
like other economic categories, changes its nature,acquires a new
content and is used as an important economic instrument for the
planned consolidation of socialist economy. In the Soviet Union
money cannot be converted into capital in the hands of individuals,
and it is not an instrument of profit and exploitation of man by
With the aid of money socialist enterprises are run on
a self-supporting basis and pursue a course of economy in their
activity, and economic relations are maintained between state-run
industry and the collective farms.
In the Soviet Union money serves as a means of implemen-
ting the socialist principle of distribution in accordance with
the quantity of work, and to-provide material incentives for the
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growth of labour productivity. The money measure is used as a
basis for state accounting and control, which are an important
condition for the planned distribution of the gross national
product and the national income in the interests of the whole of
society.
In all its functions as a measure of value, a medium
of circulation, a means of payment, a means of saving and
accumulation, as world money--money is used by plan in the
U.S.S.R. in all branches of social production.
In the post-war period, and particularly in recent years
considerable successes have been achieved in further strengthening
the circulation of money in the Soviet Union, The high rates of
development of industrial and agricultural production and the
growth of the national income have led to a rapid increase in the
retail trade turnover, in an extension of commodity resources and
a considerable growth of the real incomes of the population. This
creates a stable foundation for the circulation of money and
ensures a continuous return of cash into the bank through state
and co-operative trade, the rendering of services and ensures a
steady rise of the purchasing power of the ruble.
Recent years have witnessed a further extension of
commodity and money relations in the national economy, which, in
particular, was the result of the reorganisation of the machine-
and - tractor stations, the sale of machinery to the collective
farms and the change in the system of procuring farm products.
These measures led to a rise in the marketability of agricultural
products and to an increase of money circulation in rural
localities.
Tho oxt-oncio-n -of -commodity and money relations in the
country-side was,furthermore, due to the considerable increase of
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the money incomes of the collective farmers, as a result
of the measures that were taken to promote all branches of
agricultural production and to increase the material
incentive of the collective farmers in the fruits of their
labour.
Important measures have been taken in recent years to
increase wages, incomes of collective farmers and pensions.
At the same time, a number of practio...1 measures were
implemented to incfease the output of consumer goods for sale
to the population, as a result of which the reserves of goods
in the trade network have increased considerably and the
commodity security of the ruble has been enhanced. At
present, more than ever before, the Soviet ruble is based
on commodity security.
Side by side with the rise in the commodity security
of the ruble, recent years have witnessed a considerable
reduction of the share of that part of the country's money
circulation that goes through the collective farm market.
The share of the collective-farm market in the total retail
turnover in the country dropped from 5.9 per cent in 1955
to 4.7 per cent in 1961. This is due to the considerable.. rise
in the incomes of the collective farms from the common
economy and to the diminished role of the personal holding.
The ,result of these changes was that the share of the
money circulating through the cashier's offices of the State
Bank increased in the circulation of cash in the country, and
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the state began to have a greater planned influence on the cir-
culation of money. The role of money became stronger as a means
of public control over the measure of labour and consumption,
particularly in collective-farm production.
The quantity of money in circulation fully corresponds
with the requirements of the cash turnover in the country.
Stable circulation of money was instrumental in
strengthening the system of payment for labour and raising labour
productivity. It should be noted that the growth of labour
productivity in Soviet industry and agriculture was particularly
great in recent years, when in addition to measures aimed at
improving the organisation and planning of economy, great material
incentives were provided in production. In 1961 the 1955 labour
productivity level r s surpassed b y 43 per cent in industry, by
60 per cent in construction and by 56 per cent on the railway
transport, despite the fact that the working day was shortened.
Trust in the Soviet ruble was further consolidated and
its purchasing power was increased. As a result of the systema-
tic reduction of state retail prices, the purchasing power of
the ruble increased more than 2.3 times since the monetary reform
in 1947. The balance of deposits by the population in savings banks
on January 1,1948 came to 1,260 million rubles(in new money) and
by January 1,1962 this balance increased to 11,660 million rubles.
The Level that has been attained by the money incomes
of the population facilitated the rise of the material and
cultural wellbeing of the Soviet people.
The growth of the money incomes of the population side
by side with the curtailment of subscriptions to state loan bonds;
the reduction of prices and taxes testifies to the considerable
rise in the real earnings of induttrial,office and other workers
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and also in the real incomes of the collective-farm peasantry.
In recent years there has been a particularly marked increase in
the demand for a great range of goods and for goods of a high
quality, and the share of purchases of non-food goods and
durable goods has risen considerably.
The systematic and rapid growth of production and of
the national income in conditions of stable circulation of
money made it possible to enlarge the Soviet monetary unit on
January 1,1961, and to change the price scale that was in
operation until 1961. At the present time, on the basis of the
experience that has been accumulated, it may be stated with
every grounds that the aim the Party and the Government had set
by changing the price scale has been fully reached. The measure
has increased the significance of the ruble in the economy and
will facilitate the accelerated development of Soviet economy
in the period of the full-scale building of communism in the
Soviet Union.
When the price scale was changed, the interests of
the population and of the state were fully observed, inasmuch as
both the incomes and the expenditures of the population were
re-calculated on the same scale.
The price scale was changed simultaneously with an
increase in the gold content of the ruble and a change in the
rate of exchange of the ruble with regard to foreign currencies.
In determining the gold con-uent of the ruble and the rate of
exchange with regard to foreign currencies, account was taken
of the essential changes that have taken place in the economy
and finances of the Soviet Union and of the capitalist countries.
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As we have already pointed out, the purchasing power
of the Soviet ruble is rising steadily. The Soviet Union's
foreign trade, which is founded on planned and organised
exports and imports and on the stable balance of payments of our
country, is increasing rapidly.
State monopoly of foreign trade and of foreign exchange
reliably safeguards the Soviet ruble against fluctuations in
the world capitalist market. There are and can be no questions
of inflation in the USSR.
Taking all the above circumstances into consideration,
the Soviet Government decided that as from January 1,1961,
the Soviet ruble would be equal to ".98?412 grams of fine gold,
and the rate of exchange of US$l would be 90 kopeks. In
accordance with this decision, the State Bank of the USSR has
recalculated the rate of exchange of the ruble with regard to
foreign currencies.
As provided for by the Programme of the Communist
Party of the Soviet Union, the period of the full-scale
building of communism will witness a further strengthening of the
monetary system, the consolidation of Soviet currency, a steady
rise of the rate of exchange of the ruble on the basis of a growth
of its purchasing power, and an 'yancement of the role of the
ruble in international relations.
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Socialist economy created the possibility of
organising the circulation of cash in the most rational
manner,.which is yielding the maximum economy in the utilisation
of payment means and increasing the velocity of cash circulation
to the highest degree.
Public ownership of the means of production and a
planned national economy are the foundation for the planned
organisation and regulation of the circulation of money in
the USSR. Public ownership of the means of production allows,
first, to demarcate two spheres of the money turnover: the
sphere of the turnover of the money incomes of the population
and the sphere of the turnover of production funds and the
accumulation funds of socialist enterprises; second, to
concentrate the circulation of cash chiefly in the sphere of
the turnover of the money incomes of the population; third,
on the basis of the law governing the circulation of money
to determine by plan the circulation of cash in accordance
with plans of production and distribution of the gross
national product.
In socialist economy the circulation of cash is
almost exclusively concentrated in the sphere of the turnover
of money incomes and expenditures of the population. Book
transfers predominate in the money turnover among socialist
enterprises and organisations. Cash is only used for the
payment of small sums.
The State Bank of the USSR is the sole centre of
issue and cash centre of the country, which concentrates cash
in its hands, plans its circulation, and sees to it that cash
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is spent correctly in accordance with the plan.
The planned system of economy in the USSR , the
pricise demarcation of the sphere of circulation of cash and
the concentration of the cash turnover in the State Bank
create the possibility and the need for planning the circulation
of money. That is w'-.y the state plans the circulation of money
on a national scale and also on a territorial basis.
The volume and structure of the population's money
incomes and expeditures are determined by the economic
development plans of the USSR. These plans annually establish
the wages fund, the volume of purchases of-farm products,
the volume of goods to be placed on sale for the population,
the volume of services to be rendered to.the population and
other indices connected with the money incomes of the
population. In the plan there is thus the possibility of
establishing the necessa .roportions between the money
incomes and
nditures of the population.
In order to establish these proportions in the
most correct manner, planned balances of the money incomes
and expenditures of the population and cash plans of the
State Bank of the USSR are drawn up.
The balance of money incomes and expenditures of
the population makes it possible to determine the volume
and sources of the population's money incomes, and also the
volume and structure of the population's money expenditures
for the planned year or for a longer period. The circulation
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on money, called forth by the movement of these incomes and
expenditures, is thereby determined.
In the USSR are compiled annual estimates of
balances of the money incomes and expenditures of the
population, and also annual and current quarterly cash
plans of the 'State Bank for the country as a whole and for
each republic separately.
The balances of the money incomes and expenditures
of the population are worked out by the State Planning Committee
of the USSR jointly with the Councils of Ministers of the
Union republics, the Ministry of Finances of the USSR and
the State Bank of the USSR. The planned balances of the
money incomes and expenditures of the population for the
different republics are submitted for approval to the
all-Union government.
I
With the participation of the Councils of Ministers
of the Union republics, the State Bank also drawn up annual
estimates of the cash plans for the Union republics and
submits them for approval to the Council of Ministers of
the USSR.
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With the help of the balance of money incomes and
expenditures of the population the necessary objectively correct
propvDtions between the money incomes and expenditures of the
population, and the volume of retail trade and paid services
are established in the t conomic development plans.
The law governing the circulation of money, formulated
by Marx, remains in force under socialism, but by virtue of the
planned character of socialist economy this law acquires
specific features. The 'volume of the cash turnover and the
velocity at which money circulates ib. each of its links are
brought to light on the basis of the dependence, established by
Marx, of the quantity of money in circulation on the size of
the turnover.in which money performs the functions of means of
circulation and means of payment, and the velocity of the
circulation of money from which are deducted mutually offset
payments. At the same time, money that performs the functions
of savings and the formation. of accumulations in the form of
cash is taken into account.
Under socialism, the conformity between the quantity of
money and the needs of circulation is thus achieved by plan,
on the basis of a planned, balanced development of the entire
national economy. This ensures the stability of money and
enhances its role in the development of socialist economy
.At every stage of the development of socialist economy
the law governing the circulation of money is not implemented
automatically. or in an unorganised manner. The requirements of
this law are fulfilled by a correct economic policy and by na-
tional economic planning, by the entire range of measures aimed
at fulfilling plans, by planning the circulation of money and
by the appropriate policy of note issue.
Under conditions of the socialist way of running the
economy in the U.S.S.R.,the specific feature of the law of the
circulation of money in action is that-here the object of plan-
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ning is the volume of money; the price level of goods, the
volume of goods, the trade turnover and trade services.
An important condition fnr meeting the requirements of
the law of money circulation by plan in the period of the full-
-scale building of communism in the U.S.':-~.R. is the creation
of such a balance in economy under which the production of
consumer gbods outstrips the growing requirements of the people.
Thanks to the creation of a huge industry, the necessary
prerequisites to fulfil this condition are already present.
In its turn, this requires an improvement in the planning of
the circulation of money and allows establishing the most
favourable co-relation-b weep the population's money incomes
and expenditures on the basis of the creation and increase of
material reserves.
The cash plan of the : state Bank of the U.S.S.R. is an
operative plan of the circulation of money.
It envisages the size and sources of the Banks cash
receipts and also the size and purposes of disbursements of
this cash. The circulation of money is regulated by plan and
the sum of money placed into circulation or withdrawn from
circulation is determined on the basis of the cash plans.
While leaving the cen:tralised regulation of the note
issue and cash resources of the U.S.S.R. in the hands of the
State Bank, the role and responsibility of local organisations
has in recent years been increased in the drawing up of plans
of the circulation of money in the republics, territories and
regions, and in the fulfilment of the task in the circulation
of money as set in these plans.
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The prevailing system of drawing up quarterly cash plans
.makes it possible to bring to light any changes in the
population's money incomes and expenditures that arise out of
the fulfilment of the state plan of economic development and
to take timely measures to ensure the necessary balance in the
circulation of money.
The turnover of cash through the State Bank is planned
for the separate sources of receipts and forms of disbursements
on the basis of the tasks of the economic development plan and
mirrors the co-relation between the population's cash incomes
and expenditures in the planned period.
The cash plan of the State Bank is itemized as follows:
Recei2ts
Trade receipts
Railway,water and air
transport receipts
Taxes and revenues
Rent and communal payments
Local transport receipts
Disbursements
Salaries and wages
Payments for agricultural
procurements and purchases
ithdrawals from the accounts
of collective farms
Withdrawals from deposits
for non-agricultural procur-
ements and other purposes
Loans for individual house
construction,f or the
acquisition of furnishings
and for pawnshop operations
Deposits to accounts of:
collective farms
undertakings of the Ministry Withdrawals from the
of Communications accounts of:
Ministry of Communications
savings banks Savings banks
entertainment Pensions, allowances and
enterprises insurance
everyday service Payments for business
establishments missions and economic
operational expenses
Receipts from lotteries
Other receipts
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Receipts from trading organisations from the sale of
goods to the population are the principal source of cash in
the State Bank,
Most of the cash disbursed by the State Bank is used by
enterprises and organisations to pay wages and salaries to
industrial,office and other workers. These disbursements are
planned on the basis of the wages funds determined in the
national. economic plan.
In recent years, as a result of the measures taken to
promote agricultural production,there has also been a considerable
increase in the disbursements of cash by the State Bank from
the accounts of collective farms for payment to collective
farmers and for the payment of pensions and allowances.
The drawing up of the State Bank's quarterly cash plan
begins in its district and town branches on the basis of the
planned estimates, submitted by factories, offices and
organisations,of the receipt of cash in their cashier's offices
and of the disbursements expected in the coming quarter.
Drafts of the cash plans of the State Bank's
branches go to the appropriate offices of the State Bank
where they are examined with due consideration for the
data supplied by republican,territorial and regional
planning bodies, and after they are studied by the Councils
of Ministers of the republics, while in some republics, also
by the Councils of Ministers of the Autonomous republics and
the Executive Committees of Regional and Territorial Soviets
of Working People's Deputies, they are submitted to the Head
Office of the State Bank.
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In submitting the cash plan for examination to the
Government of the USSR, the Board of the State Bank,
proceeding from the tasks in the circulation of money, also
submits the necessary suggestions on measures aimed at
extending commodity circulation, communal and other services
to the population,'and at increasing the bank's cash
receipts.
The Government of the USSR examines and approves
the State Bank's cash plan as a whole and for each of the
Union republic. Thereby the plan of the State Bank- the single
issue institute, is brought to its local branches. The
approved cash plan is the directive on the circulation of
money in the planned period.
The planned direction of the circulation of money is
snot limited to the drawing up of the State Bank's cash plan.
Responsible organisational work guiding the fulfilment of the
cash plan begins after it is drawn up, approved and sent to
the State Banks offices and branches.
Approved for the republics, territories, regions,
towns and districts, the cash plan is fulfilled on the basis
of and in close connection with the production, commodity
turnover and financial plans. The fulfilment of the cash plan
by all of the State Bank's offices not only gives rise to
broad opportunities for but also requires daily operative
control over the course of production, the turnover of
commodities in the republics, territories, regions and
districts.
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Furthermore,the Councils of Ministers of the Union
republics systematically supervise the fulfilment of the
State Bank's cash plans and take measures to increase
commodity circulation,extend the activities of enterprises
rendering paid services to the population,and save state means
in order to ensure the necessary proportions between the
population's money incomes and expenditures and the fulfilment
of the cash plan drawn up for each republic.
While extending the rights of the Union republics, this
scheme at the same time increases their responsibility for
the organisation of the work entailed in drawing lap and carry-
ing out money circulation plans.
In order to ensure the fulfilment of the plan, the
State Bank's offices and branches implement an entire system
of measures,the most important of which is to control
production and commodity circulation with the ruble during
the granting of credits and the settlmment of accounts.
The state Bank's offices and branches regularly
report to the local organisations on the fulfilment of the
cash plans,work out the necessary measures aimed at
removing shortcomings in the work of enterprises in order
to smooth the way for the fulfilment of the cash plan,make,
their suggestions and
fulfilment of the
decision takexn these questions by local organisations.
The economic co-ordination of the credit and cash
plans is of very great importance. This co-ordination is based
on the correct reflection by these plans of the basic positions
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a.
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arising out of the fulfilment of the economic development plan
with consideration for the course of the fulfilment of the plan
for the preceding period. The credit and cash plans for the
country as a whole and for each republic, region, and
territory separately, are based can the indices of the economic
development plan for the volume of output and the sale gf goods,
the purchase of farm produce, commodity circulation and so on,
In co-ordinating the credit and cash plans, the State
Bank's offices aee to it that no excess credits are granted
against goods and production reserves, whose accumulation is
not linked up with normal conditions of production, sale and
storage and is not called for by the economic development plan.
The most noteworthy index of the complete co-ordination of the
credit and cash P1an ? the sum of money issued or withdrawn
from circulation. The quantity of money in circulation must
coincide in the credit and cash plans, while changes in the
State Bank's resources at the expense of this source are
determined by economically necessary increases or reductions
of the sum of money for a given planned period in accordance
with the requirements of.the objectivel7? overning the currency
circulation under socialism.
The Communist Patty and the Soviet Government
attach great importance and pay much attention to the
development of the credit and monetary system of the U.S.S.R.
In implementing its credit and note issuing policy the
State Bank of the USSR strives to make the largest possible
contribution to the successful building of a communist society.
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A.V.SIDORENKO
Professor,Uoctor of Geology and
Mineralogy, Corresponding Member
of the Academy of Sciencies of
the USSR,Minister of Geological
Survey and Conservation of Mineral
Resources of the USSR
NATURAL, RESOURCES OF THE USSR
The New Programme of the Communist Party of the Soviet
Union,adopted at the Twenty-Second Congress of-the C.P.S.U.
scientifically substantiates with the utmost precision a
specific plan for the building of communism,and defines the
principal economic task of the Party and the Soviet people
as that of creating the material and technical basis of
communism within the next twentybears and ensuring an
unprecedented rise of national prosperity.
Soviet geologists are playing a big and responsible role
in carrying out this great task,because one of the decisive
cohditions for the development of the country's productive
forces and the creating of the material and technical basis
of communism is the massive industrial utilisation of the
country's natural resources,particularly the mineral
resources in the bosom of the earth.
It is common knowledge that for its level of
development pre-Revolutionary Russia was one of the backward
countries of the world. A very limited quantity of minerals
was mined, and many kinds of raw minerals were imported. Despite
the inconsiderable requirements of the industry of that period,
Russia had a shortage of coal, non-ferrous metals, raw
materials for the chemical industry and mineral fertilisers.
At present Soviet geologists have built a huge and
varied mineral and raw material base and our country now
occupies the first or one of the first places in the world for
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explored reserves of all key minerals, including iron and
manganese ores, chromite, coal, petroleum, copper, lead,
nickel, cobalt, tungsten, molybdenum aluminium ore,
mercury, asbestos,potassium salts, apatites and sulphur.
Following the discovery of the diamond fields in
Yakutia,"the Soviet Union no longer had any minerals in
short supply, all branches of industry and agriculture
were fully ensured with explored reserves of all types
of mineral raw material and the necessary state reserves
were created.
The volume of''minerals exported by the Soviet Union
and the number of countries using these minerals are
steadily increasing. In recent years more than 50 kinds of
mineral raw material and by-products have been exported
to 46 countries,
In contrast with the Soviet Union,many of the other
industrially developed countries are compelled to cover a
considerable part of their mineral raw material requirements
with imports. For example, almost the entire requirement of
the U.S.A. in diamonds is covered through imports from
Africa. The entire demand of the American industry for tin
is met through imports from Malaya, Indonesia and other
countries. The U.S.A. import more than 90 per cent of
their chromite from Turkey, the South African Republic,
South Rhodesia and the Philippines; asbestos from Canada
and the South African Republic; mica from India and
Brazil; be
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the Congo, Brazil, Argentina, the South African Republic
rn_ t i. More than 80 per cent of the manganese ore used
in the USA comes from Brazil, India, Ghana, the South
African Republic and Mexico; bauxite from Jamaica, Surinam
and Haiti; nickel from Canada; cobalt from the Congo
and Canada; antimony from Great Britain,Yugoslavia
and Mexico; mercury from Spain and Italy. Imports account
for 50-60 per cent of U.S. consumption of t D.gsten, lead,
zinc, ca&-iium,bismuth. In addition to their own big output
of petroleum (about 350 million tons a year), the U.S.A.'
import 60-70 million tons of petroleum from Venezuela and
from the Middle East.
Let us consider how rich is the Soviet Union in
separate key minerals.
The Soviet Union has the world's biggest mineral fuel and
power resources.
The geological reserves of hard and brown coals add
up to 8,700,000 million.tons or more than half the world's
reserves.
Industrially workable deposits of coal have now been
found in almost all the main economic regions of the Soviet
Union.
The potential productive capacity of the prepared
reserve of coal fields exceeds the capacity of the mines in
operation by a minimum of one and a half times. For the
output of coal our country occupied first place already in
1958.
The Donets Basin, where 182 million tons or morO
than 35 per cent of the coal produced in the country was
mined in 1960,continues to be the major fuel base in
the Soviet Union.The share of this basin in the output of
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coking coals was even higher(57 per cent).
There are great reserves of hard and brown coals in the
other coal b . the European part of the Soviet Union,
among which are the Pechora,Moscow, Dnieper and
Lvov Volhynia basins.
Mote than 90 per cent of the Soviet Union's geological
reserves of coal arp concentrated in the country's eastern
regions. The Kuznetsk Basin is a major supplier of power
and coking coals. Its geological reserves of coals
suitable for the production of coke are estimated at
about 200,000 million tons. The thick seams lying close
to the surface make it possible to mine the coal by the
open-cast method and increase the output to 80-90 million
tons a year.
There are huge,practically inexhaustible(more than
6000000 million tons) reserves of coal in the Lena,Tungus,
'Kansk-Achinsk, Taimyr and Irkutsk basins in Siberia. Many
of the explored seams are very thick,lie close to the
surface and can be open-cast mined, which is the cheapest
method. Big chemical plants and also thermal power
stations requiring the smallest possible investments and
generating power at the lowest cost can be built on the
basis of this coal wealth. The cost of open-cast coal in the
Kansk-Achinsk Basin is about 10 times less than what the cost
of underground mining averages in the Soviet Union as a whole.
The South Yakutsk Coal Basin with its coking coals,
which has been discovered and partially explored in recent
years,is acquiring major importance. The industrial
development of this basin will make it possible fully to
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satisfy the requirements of the future metallurgical plants
of Siberia and the Soviet Far East,
Numerous deposits of hard and brown coals have been
explored in Kazakhstan. The biggest of these deposits are in
the Karaganda, Turgai; 1iaikyuben and Ekibastuz basins.Almost
all the coal in the Karaganda Basin is suitable for the
production of coke but it has a high ash content and has to be
concentrated.
The Soviet Unions reserves of petroleum and natural
gas are among the biggest in the world, In tsarist times
workable deposits of petroleum were known only in the Caucasus,
but today huge petroleum and gas centres have been set up in
many regions. A considerable part of the explored reserves
of petroleum is concentrated in an enormous territory between
the western slope
the Urals and the right bank of the Volga.
In this oil-bearing regions workable deposits have been
discovered in the Tatar and Bashkir autonomous republics, and
in Perm, Orenburg, Kuibyshev, Ulyanovs