Abstract

Development Trends in the Financial and Credit Systems of European Socialist States

The new people’s democracies which came into being after World War II took over the financial and credit system of the Soviet Union initially without any great deviations. This system was designed to counter the spreading of market economy conditions and to strengthen the centralization principle in planning procedure. It soon proved, however, that the system had to be subjected to more or less far-reaching changes, if higher efficiency in economic development were to be attained. In this connection, by no means the least important factors which played a decisive role were the different development levels of the various countries and their particular political situations. In many instances they did not permit strict centralism and resulted in several socialist countries in „mixed“ economic conditions which have some centrally planned and some market economy features. In other countries, however, more intensive centralization was attempted with the object of avoiding uncontrolled economic developments. In this connection an important function is performed by the government’s budget and the financial system of the “People’s Enterprises”. In the extreme case there is complete centralization of all financing means in the Central Budget. In the course of development, however, it has proved expedient to allow a certain amount of financial leeway to lower-level public authorities and also to the People’s Enterprises. This was intended, above all, to provide standards for the efficiency of the People’s Enterprises and an incentive for improving performance. In particular, the make-up of the incentive fund was determined in many instances by considerations as to the manner in which the efficiency of the control system could be ımproved. In this respect, not the least important consideration was the manner of pricing, and here a trend towards cost prices (“production prices”) became manifest. Finally, in some cases experiments were also carried out with a view to improving the efficiency of the control system by fixing the wage fund and allocating investment funds. The further development of the financial and credit system of the socialist states depends on the extent to which the emerging, more or less strong or weak, trends towards making greater allowances for market conditions and towards further decentralization of planning procedure gain acceptance.