Finance and capital accumulation in a planned economy

The agricultural surplus hypothesis and Soviet economic development, 1928–1939

Robert (Bob) Allen

    Research output: Chapter in Book/Report/Conference proceedingChapter

    Abstract

    Finance and capital accumulation are closely related, although fundamentally different. “Capital accumulation” refers to increases in productive structures and equipment, while “finance” refers to the borrowing and lending undertaken by and through banks, securities markets, and among private individuals. In market economies, many real investment projects require a corresponding financing plan, so finance is often the complement to capital accumulation. In such cases, a more efficient financial system may increase the pace of capital accumulation or better direct it. Financial transactions, however, need not necessarily lead to capital accumulation, and projects financed out of retained earnings need not involve any new financial dealings. What about nonmarket economies? Is there a relationship between finance and capital accumulation? In a case like the Soviet Union in the 1930s, there is the possibility of no link. After all, in a market economy where capital formation requires monetary outlay, a lack of money can stop investment, but in a planned economy where investment goods are allocated by fiat, why should money matter? However, even Stalin balanced his budget, so finance was an issue in Moscow as well as New York. The agricultural surplus hypothesis is the link usually suggested between finance and capital formation in the U.S.S.R. The hypthesis deals with two issues – state finance and farm marketing. So far as finance is concerned, the agricultural surplus hypothesis contends that the investment drive of the 1930s was financed by mobilizing the agricultural surplus.

    Original languageEnglish (US)
    Title of host publicationFinance, Intermediaries, and Economic Development
    PublisherCambridge University Press
    Pages272-287
    Number of pages16
    ISBN (Electronic)9780511510892
    ISBN (Print)0521820545, 9780521820547
    DOIs
    StatePublished - Jan 1 2003

    Fingerprint

    Finance
    Planned economy
    Economic development
    Surplus
    Capital accumulation
    Capital formation
    Market economy
    Farm
    Moscow
    Marketing
    Lending
    Borrowing
    Financial system
    Capital projects
    Financing
    Soviet Union
    Retained earnings
    Securities market
    Investment project

    ASJC Scopus subject areas

    • Economics, Econometrics and Finance(all)

    Cite this

    Finance and capital accumulation in a planned economy : The agricultural surplus hypothesis and Soviet economic development, 1928–1939. / Allen, Robert (Bob).

    Finance, Intermediaries, and Economic Development. Cambridge University Press, 2003. p. 272-287.

    Research output: Chapter in Book/Report/Conference proceedingChapter

    Allen, Robert (Bob). / Finance and capital accumulation in a planned economy : The agricultural surplus hypothesis and Soviet economic development, 1928–1939. Finance, Intermediaries, and Economic Development. Cambridge University Press, 2003. pp. 272-287
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