State subsidies

Definition

State subsidies are financial assistance programs provided by the government to support businesses, industries, or specific economic sectors. These subsidies aim to promote growth, stabilize markets, or encourage production in areas deemed beneficial for the economy. In the context of perestroika and glasnost, state subsidies became a crucial tool as the Soviet Union attempted to transition its economy and political landscape.

5 Must Know Facts For Your Next Test

1. During perestroika, the Soviet government allocated state subsidies to support failing industries as part of an effort to restructure the economy.
2. State subsidies aimed to cushion the impact of economic reforms on citizens by keeping prices stable on essential goods.
3. Gorbachev's government faced criticism as many state subsidies were seen as ineffective and led to inefficiencies within various sectors.
4. Subsidies were also used to promote agricultural production, helping to alleviate food shortages that were prevalent during this period.
5. The gradual reduction of state subsidies was part of Gorbachev's strategy to shift towards a more market-oriented economy, which ultimately faced significant challenges.

Review Questions

• How did state subsidies influence the implementation of perestroika in the Soviet Union?
  • State subsidies played a critical role during perestroika by providing financial support to struggling industries as the Soviet Union sought to reform its economy. These subsidies aimed to prevent immediate economic collapse and maintain social stability amidst the sweeping changes. However, while they initially helped cushion the effects of transition, they also contributed to inefficiencies and were criticized for sustaining failing enterprises rather than promoting genuine reform.
• Discuss the relationship between state subsidies and glasnost, particularly regarding public perception and transparency in governance.
  • Glasnost, with its emphasis on openness and transparency, created a backdrop where citizens became more aware of government spending and state subsidies. This increased scrutiny led to public criticism of how subsidies were allocated, highlighting cases where funds were mismanaged or wasted. As people called for accountability, the effectiveness of state subsidies came under fire, revealing tensions between the need for financial support and the push for greater governmental transparency.
• Evaluate how the reduction of state subsidies reflected broader economic changes in the Soviet Union during perestroika and glasnost.
  • The gradual reduction of state subsidies marked a significant shift toward a market-oriented economy in the Soviet Union during perestroika and glasnost. This change reflected Gorbachev's attempts to address inefficiencies within a command economy by encouraging competition and self-sustainability among enterprises. However, this reduction also led to significant social unrest and economic hardship as industries struggled without government support, illustrating the complex balance between reforming an entrenched system and maintaining social stability.

Related terms

perestroika:

A political movement for reforming the economic and political system of the Soviet Union, initiated by Mikhail Gorbachev in the 1980s.

glasnost:

A policy introduced by Gorbachev that called for increased transparency and openness in government institutions and activities.

command economy: An economic system in which the government makes all decisions regarding the production and distribution of goods and services.