Table Of ContentSECRET INCOMES OF THE SOVIET STATE BUDGET
Secret Incomes
of the
Soviet State Budget
IGOR BIRMAN
•
1981
MARTINUS NIJHOFF PUBLISHERS
THE HAGUE / BOSTON / LONDON
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Library of Congress Catalog Card Number: 81-50369
ISBN 978-94-011-8642-1 ISBN 978-94-011-9427-3 (eBookl
DOl 10.1007/978-94-011-9427-3
Copyright © 1981 by Martinus Nijhoff Publishers bv, The Hague.
Softcover reprint of the hardcover 1st edition 1981
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or
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566, 2501 CN The Hague, The Netherlands.
In Memory of
Rush V. Greenslade
Table of Contents
Preface IX
Chapter I. Secret Revenues of the Budget
Chapter II. Classification of the Budget Revenues 19
Chapter III. Budget Revenues by Articles of the
Classification 24
Chapter IV. Other Budget Revenues 60
Chapter V. Balances of Budget Funds: Budget "Profits" 96
Chapter VI. Emission of Cash 114
Chapter VII. Savings of the Population. Inflation in Cash
Circulation 141
Chapter VIII. Noncash Circulation and Bank Credit 169
Chapter IX. Sources of Credits 180
Chapter X. Bank Loans to the Budget. Inflation In the
Noncash Sphere 199
Conclusion 225
Appendix A. Profits of "Other" Sectors 233
Appendix B. Monetary Income and Expenditures of the
Population 235
Appendix C. Estimate of the Income of the Population
from the Sale of Produce to the State 261
Appendix D. Estimate of Amounts of "Lump-Sum Assist
ance" from Economic Stimulation Funds 266
Appendix E. Estimate of the Expenditures on the Pay of
the KGB and MVD 268
Appendix F. The Cost of Reusable Glass Containers 272
VII
Appendix G. Expenditures of the Population on Payments for
Services 275
Appendix H. Estimate of Membership Dues 278
Appendix I. Share of the Expenditures of the Union, Re
public and Local Budgets 282
Appendix J. "Other Monetary Accumulations" 283
Appendix K. Hidden Budget Revenues in 1944-45 289
Appendix L. The Puzzle with the Social Insurance Fund 291
Bibliography 295
Index 309
About the Author 315
Vlll
Preface
As far as I know, relatively little attention has been devoted in the
West to the study of various financial problems in the USSR. Among
the works I have seen are Gallik et aI., The Soviet, 19681-evidently the
most important work on this theme; Powell, "Monetary," 1972, in
which the statistics of monetary circulation in the USSR are examin
ed; Laulan, Banking, 1973, in which some of the questions I examine
are also addressed; and CIA, The Soviet, 1977, which is about an
analysis of the budget. Moreover, many specialists have turned to the
analysis of the expenditures of the budget in an attempt to determine
the amount of financing of military expenditures-for example,
Holzman, Financial, 1975.
Due to the scarcity of data a large number of important problems
have remained unstudied in all these works. One of these is the
following. If we believe official Soviet statistics, the state budget of the
USSR regularly comes out with an excess of revenues over expendi
tures; each year a "budget profit" is formed. This in itself already
seems quite strange. We all know that the Soviet economy, although
it developed quite rapidly (especially in the past), has experienced
constant and serious difficulties; we know that the plans are rarely
fulfilled and that there were years of great crop failures. In spite of
all these things, we are assured that with the exception of only three
years (that is, not even every year during World War II) the Soviet
budget has not had a deficit.
Also directly connected with this is a mystery to which attention was
turned long ago in the West. In the attempt to figure out the sources
of all budget revenues, a considerable and ever increasing gap comes
to light, and it is simply impossible to explain it.2
In the summer of 1976 I advanced the hypothesis that a part of this
gap is covered by the emission of cash, and then together with Rush
V. Greenslade we suggested the existence of emission, so to speak,
into noncash money circulation (bemalichnoye denezhnoye obrash
cheniye). This led to an effort to determine how much emission in both
the cash and noncash spheres of circulation can be considered
IX
"normal" for the Soviet economy and to identify all other revenues
which might account for this gap. This book is an attempt to prove
that the Soviet budget is in fact of a deficit nature and the regular
"budget profits" are just a financial-statistical trick. Moreover, I do
not limit my task only to proving this fact, but I also attempt to make
the appropriate calculations in order to quantitatively evaluate this
phenomenon.
The study of this problem is closely connected with a number of
other very important questions which have also, in my opinion, been
inadequately studied. Among them are: the budget revenues from
foreign trade, the monetary savings of the population (and in
connection with this the balance of the monetary income and expen
ditures of the population) and bank credits to enterprises and
organizations. These questions are examined here most of all in
connection with the main subject, but at the same time an attempt is
made to show their importance for the overall financial and, con
sequently, economic situation in the country.
What is the logic of this research and the presentation of its results
in the book which is in front of you?
In chapter I, regularly published data about the annual amounts
of budget revenues and various items on the income side of the
budget are considered. A large and rapidly growing gap between the
total figure and the sum of separate items is demonstrated here.
Thus, the chapter raises the question which is in fact the central topic
of the book.
Further, in the following chapters, I try to consider all revenues of
the budget, attempting to do so as ~crupulously as I can, and make
all the necessary computations.
The analysis begins in chapter II, where the official classification of
revenues of the budget is presented. Such a classification has never
been published in the Soviet literature and I had to collect bits of relevant
information from numerous sources.
On the basis of this classification all the revenues are considered
item by item in chapter III. I try here to establish which particular
revenues are included in the published data and which are not and
to determine the concrete amounts of the revenues. As a result we are
able to reduce the gap, mainly by taking into consideration some
revenues of republic budgets.
However, for some items of the classification this is not possible
those particular revenues are rather, or even very, ambiguous.
Chapter IV is devoted to just these revenues, especially those from
foreign trade. All hypothetical revenues of the budget are also
considered here. Lacking reliable data, I make some estimates in this
x
chapter, and once again, we are able to reduce the gap substantially.
The "profit" of the budget was already mentioned above. I
consider this phenomenon in chapter V and conclude that the profits
are left-overs of money appropriated but not completely spent during
the budget year. It is important that the existence of these "profits"
does not explain the rest of the gap and, on the other hand, does not
contradict the fact of the deficit nature of the budget.
In chapter VI, using data from appendix B and some other
appendices, I consider the balance of monetary incomes and expen
ditures of the population and conclude (in spite of some evidence to
the contrary) that the incomes are annually higher than the expendit
ures. I make some, of necessity, rough estimates and demonstrate that
these amounts (with some adjustments) are covered partially by
emission of money into cash circulation. Thus, the gap is reduced
again, but not eliminated.
Chapter VII analyzes the astronomically rapid growth of the
savings of the population. Strictly speaking this chapter does not
belong directly to our topic, but the very fact that the Soviet
population has accumulated such savings is extremely interesting and
in my deep conviction this has many, and very important, economic
and political consequences.
Chapter VIII is about noncash circulation, including bank credits
to enterprises and organizations. It is shown here that budget funding
and bank credits are interconnected and in many cases substitute for
each other.
Sources of bank credits are considered in chapter IX. The main
conclusion is that, quite on the contrary to Soviet theory, the total
amount of bank credits in the country is not limited and is not in
reality coordinated with the corresponding material and labor re
sources. In other words, even given the limitations of the Soviet
theoretical conception of credit resources, the Soviets could extend
more bank credits than published data show.
In chapter X, on the basis of the entire foregoing analysis I reach
the conclusion about the constant deficit of the Soviet State budget.
This means that expenditures of the budget are covered by (in
addition to real revenues) emitting cash into circulation and by
something like emission in noncash circulation. The latter is most
likely technically done as bank credits to the budget, which are never
paid back. I also analyze here various consequences of the budget
deficit.
In the conclusion some unanswered questions are listed, and I
consider the very complicated one of how the result of this research may
affect computations of the well-known model of Soviet GNP accounts.
Xl
