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State Loans

a credit relation in which the state (or its local institutions) appears as a borrower or lender. As a rule, s
tate loans are issued in monetary form, although sometimes (in case of devaluation of the currency) th
ey are issued in kind andrepaid in products.
State loans may be short-
term (current) if the term of payment does not exceed one year, intermediate (from one year up to five
years), or long-
term (over five years). According to their yield, state loans fall into two categories: interestloans (the ho
lders receive a fixed income according to an established rate) and lottery loans (the returns are paid th
rough a lottery drawing at the time of liquidation).
State loans are floated by subscription to the population through banks and savings banks, by sales at
the stock exchanges, and by auction. According to where they are floated, state loans may be internal
(in national currency) andexternal, that is, bonds sold in foreign money markets (in the currency of the
creditor country, the debtor country, or a third country). The bonds of internal loans may be bought by
foreign citizens (corporations) in the country of issueand the bonds of external loans by domestic citize
ns; the bonds of external loans are often bought up abroad by the issuing state or its citizens and are t
hus repatriated to the debtor country. The size of the external debt of a givencountry is established by
the value of all the bonds floated abroad.
The social content of the state loan as a means of attracting funds to cover state outlays is determined
by the nature and functions of the given state. In precapitalist formations, state loans appeared for the
first time in slaveholdingsocieties and were used mainly in extraordinary circumstances. Under capitali
sm, state loans are a basic form of the functioning of the state credit system. A bourgeois state can rai
se sizable funds in a comparatively short period oftime by means of loans. As a rule, state loans are v
oluntary; that is, the bourgeois state offers a profitable investment to capitalists. Compulsory loans are
floated by capitalist states only in case of a grave disruption of the financialsystem of the country. Com
pulsory loans originated during the initial period of the capitalist system in Italy and were often used in
the 15th through 18th centuries. They undermine the credit system of the state, and therefore they hav
egradually lost their importance. After World War I, compulsory loans were issued in a number of West
ern European countries because of the disruption of state finances. During World War II, compulsory s
tate loans were issued infascist Germany and Japan. Such loans represent an undisguised exploitatio
n of the working masses by the bourgeois state. One of the newest forms of the compulsory loan is the
inflationary issue of paper money. ―Everybodyadmits,‖ wrote V. I. Lenin in September 1917, ―that the i
ssuing of paper money constitutes the worst form of compulsory loan, that it most of all affects the con
ditions of the workers, of the poorest section of the population, and that it isthe chief evil engendered b
y financial disorder‖ (Poln. sobr. soch., 5th ed., vol. 34, p. 187).
Under imperialism, especially during the general crisis of capitalism, state loans are used to finance st
ate budget expenditures, which chronically experience deficits because of militarization of the econom
y, preparation for and wagingof war, and maintenance of excessively large military and police apparat
us. During World War I, 61 percent of all the state expenditures of the USA were covered by state loan
s, 68 percent of Great Britain’s, 81 percent of France’s and84 percent of Germany’s. During World Wa
r II, state loans covered 54 percent of all state expenditures in the USA, 50 percent in Great Britain, 61
percent in Germany, and 58 percent in Japan. A bourgeois state that resorts to stateloans un-
avoidably increases its state debt. External loans contribute to the export and investment abroad of th
e relative surplus of capital and serve as a means for the creditor country to capture the markets and s
ources of rawmaterials in the debtor country. The export of capital by monopolies is due above all to th
e much higher rate of interest in economically underdeveloped countries compared to the rates of inter
est in developed countries, as well as topolitical and military-
political goals. With the development of state-
monopoly capitalism, the bourgeois state usually takes the role of the lender. The growth of foreign ind
ebtedness leads to a much stronger economic and politicaldependence of the debtor country on the cr
editor country; this is especially true of the leading world lender, the USA, particularly in the period foll
owing World War II. Foreign loans of American imperialism turned into a direct means ofexpansion, ag
gression, and international reaction.
The burden of state loans in capitalist countries is carried by the toiling masses, because the sources f
or the redemption of loans and paying of interest are funds received from the mass of taxpayers. At th
e same time, the capitalistsreceive the overwhelming percentage of guaranteed income in the form of i
nterest. Therefore, the loans as well as the taxes effect a redistribution of national income in the intere
st of the exploiting classes. V. I. Lenin pointed out that,in the process of enriching these classes by me
ans of the growing income from state loans, finance capital exacts a tribute from the whole society (ibi
d., vol. 27, pp. 349–50).
In contrast, the state loans of socialist countries mobilize temporarily unused funds for economic and c
ultural development, based on the labor savings of wide sections of the population. In the USSR befor
e 1963, stable residualdeposits in savings banks were also placed in state loans. In socialist countries
the characteristic features of state loans are their production function, their mass character, and the us
e of funds in the interest of the whole nation.
During the first years of Soviet power, state loans existed in two forms: in money and in kind (payment
s in kind arose out of the insufficiently developed money relations and out of the intention to protect th
e bondholders from thedepreciation of paper money). The first Soviet state loan was issued on May 20
, 1922, for 10 million poods (163.8 million kg) of rye grain for an eight-
month term. In 1923 two more state loans in kind were issued—
grain and sugar(noninterest bearing). The first Soviet money loan was issued on Oct. 31, 1922, for 10
0 million rubles in gold for a ten-
year term. From 1924 to 1928, four guaranteed loans were underwritten for a total amount of 900 milli
on goldrubles; enterprises and organizations purchased the bonds. With the growth of the profitability
of production, state and cooperative organizations acquired a large percentage of the bonds of these l
oans, and funds from the sale ofthese bonds were used for the development of different sectors of the
national economy. During the same years peasant lottery loans were also issued. A new way of floatin
g loans was introduced: placement among the populationthrough subscription payment in installments.
The growth in income of the working people has contributed to the greater role of Soviet state loans.
On a large scale the subscription was conducted for the industrialization loan (three issues), for the Fiv
e-Year Plan in Four Years Loan, for the loans for the third five-
year economic plan (four issues), and others. These issues wereone of the sources of funds for sociali
st industrialization and the development of the national economy in the prewar years. The loan for stre
ngthening defense (1937) and loans during the war (four issues) played an important role infinancing t
he military expenditures of the state in the Great Patriotic War (1941–
45). In the postwar years, the funds acquired from floating Soviet state loans (five issues of loans for th
e rehabilitation and development of the nationaleconomy of the USSR, 1946–
50, and loans for the development of the national economy of the USSR, 1951–
57) contributed to the restoration and development of the Soviet economy.
The budget receipts of the USSR from state loans amounted to approximately 50 billion rubles during t
he years of the prewar five-
year economic plans, to 76 billion rubles during the Great Patriotic War, and to 260 billion rubles from1
946 to 1958 (in terms of the pre-
1961 money scale). The number of subscribers to the loans increased from 6 million in 1927 to 60 milli
on by early 1941 and to 70 million by 1946. In 1958 the floating of state loans throughsubscription amo
ng the population was discontinued. In general, approximately 5 percent of the national budget revenu
e before the Great Patriotic War came from loans; during the war it was not more than 10 percent, and
in 1965,because of the discontinuance of issues of loans distributed through subscription among the
population, it decreased to 0.2 percent. The Twenty-
fourth Congress of the CPSU passed a resolution calling for the early redemption ofthese loans beginn
ing in 1974, in order to shorten the term of payment of the national debt by six years and to complete t
he paying off of bonds in 1990. According to this resolution, in the state five-
year economic plan of the USSR for1971–
75, 1 billion rubles for 1974 and 1975 were appropriated for these goals. Beginning in 1938, freely circ
ulating loans were issued in the USSR; with these loans the bonds can be freely bought and sold by th
e savings banks. Oneof such loans, which was issued for a 20-
year term, was the State Three Percent Internal Lottery Loan (1966). The holders of these bonds recei
ve income in the form of lottery prizes.
In other socialist countries the first state loans were issued soon after World War II. The revenues from
state loans were originally used for the restoration of the national economy (in Bulgaria, the Freedom
Loan [1945]; in Poland, theRestoration Loan [1946]; and in Hungary, the First State Loan [1946]). The
se loans were floated among production and clerical workers, cooperatives, and other organizations, a
s well as among a segment of the bourgeois population;later on, to attract funds for industrialization, th
e loans were floated by subscription among the population (except in Czechoslovakia, Rumania, and t
he German Democratic Republic). The proceeds from internal state loansrepresented no more than 2–
4 percent of the total revenue of the budgets of socialist countries. By 1956, the European countries a
bandoned the use of state loans because of the rapid growth of socialist savings. External state loans
of the socialist countries are an example of the new type of economic relations—
cooperation and mutual aid; they are characterized by favorable terms, low interest rates (2–
2.5 percent per year), and long-
term credits (ten to 12years), as well as advantageous conditions of redemption (in commodities or co
nvertible currency at the choice of the debtor country).
I. D. ZLOBIN and T. M. KLAVDIEVA