State Finances

the sum total of economic relations and the system of the creation and distribution of monetary funds needed by the government for maintaining its organs and for discharging its functions. The term “state finances” first came into use in France in the 16th century. The nature of state finances is determined by the dominant mode of production and by the class character of the state. In slaveholding, feudal, and capitalist societies state finances serve as a means for the further exploitation of the toilers, since the main burden of taxes and levies falls upon them. The financial resources thus raised are used for maintaining the apparatus of class oppression and for the support and enrichment of the ruling classes.

In precapitalist societies state revenues and expenditures were chiefly in kind. The labor of slaves and their products served to cover the greater part of the needs of the slaveholding state. Military plunder and the tribute of subjugated peoples were also an important source for replenishing the army of slaves as well as the treasury. Under feudalism the most important source of government revenue was the labor of enserfed peasants and their produce. With the establishment of centralized states and the growth of their expenditures, nationwide taxes and duties began to be regularly imposed. The state treasury was separated from the private fortune of the head of state, and wealth itself increasingly took the form of money. Forced levies and loans gave way to public loans and to the centralized issue of circulating money. Thus, the complex system of state finances in the modern sense came into being.

Under capitalism in its premonopolistic period, state finances were intended to secure the material conditions for the state’s existence and functioning. The state’s expenditures went for maintaining its governmental organs and its army and navy, for conducting wars and colonial expeditions, for paying off the national debt, and for public works and railroad building. Revenues were raised by confiscating part of the people’s income through taxes and by government loans and the issue of paper money. During the period of imperialism and especially during the general crisis of capitalism, state finances greatly increased in importance as a means of redistributing income.

The exacerbation of the contradictions of imperialism and the development of state monopoly capitalism have brought about an enormous increase in government expenditures, in the tax burden, and in the national debt. The government actively intervenes in the process of capitalist reproduction. State finances are widely used for stimulating and regulating the capitalist economy. In connection with this, their role in distribution and redistribution of the national income has become more important. In the USA and Great Britain the part of the national income that was redistributed through the national budget increased in the 1960’s to 40 percent. In the imperialist countries the main cause of increased government expenditures, taxes, and public debt is the militarization of the economy and the arms race. Through its system of finances, the state promotes redistribution of income and accumulation of capital for the benefit of monopolies and, above all, for the benefit of the magnates of the militaryindustrial concerns, who enrich themselves with armament orders, with direct budgetary subsidies, and with open or concealed tax privileges. The financial system of capitalist countries is now in a state of severe crisis caused by the tremendous growth in military expenditures, the chronic deficit in state budgets, the increase in the public debt and taxes, the chronic inflation, and the unproductive squandering of financial resources.

In the countries that have won political independence since World War II and are struggling for economic independence, state finances are used for industrialization and agrarian reform and for the elimination of the consequences of colonialism in education, public health, and culture.

Under socialism, state finances become one of the most important tools of government economic and financial policy—that of socialist transformation. During the period of transition from capitalism to socialism in the USSR, state finances were used chiefly for the socialist industrialization of the country and the collectivization of agriculture, for the realization of the cultural revolution, and for the accelerated development of the national republics.

In the USSR and other socialist countries, state finances ensure the financial means for expanded socialist reproduction, the raising of the people’s material and cultural living standard, the maintenance of governmental organs, and the strengthening of the country’s defense capacity. State finances are closely connected with material production. They include national finances (state budget, and state property, personal, and social insurance) as well as the finances of state enterprises and branches of the economy. The finances of state socialist enterprises and of the branches of the national economy serve as the base of state finances and as the main source of the assets of the financial system, while the state budget acts as the guiding and directing link in the financial system. In connection with the economic reforms adopted in the USSR since 1966 and with the growing economic independence of enterprises, the finances of enterprises and of branches of the national economy have become more significant in state finances. In 1966, out of a total profit of 47 billion rubles, 11.9 billion rubles (or 25 percent) remained at the disposal of enterprises: and according to the plan for 1971, out of 88.6 billion rubles of profit, enterprises are to retain 35.8 billion rubles (or 40 percent). The resources of enterprises that are directed toward financing plan expenditures increased from 33.5 billion rubles in 1965 to 75.7 billion rubles, according to the 1971 plan. The state budget, which accumulates over 50 percent of the national income and unites all the financial resources of the socialist society into a single whole, continues to play the leading role in state finances. With the achievement of socialism and with the USSR entering the period of the building of communism, state finances are being used to establish the material and technical base of communism, to improve socialist production relations, to more fully satisfy the ever growing material and spiritual needs of the workers, and to develop and strengthen cooperation and mutual assistance between the socialist countries.