Harmonious Economics or The New World Order. Vladimir Emelyanovich Chabanov
of their owners. Therefore, for them, private property is preferable. Medium enterprises function better using the cooperative property form, because it best combines the entrepreneurial qualities of the owners with the collative benefit of the business. However, this would not be sufficient for the functioning of large businesses, as they demand a higher level of professionalism, organizational skills, a broad mind, and a respect of social interests. What they require is professionalism, management skills, and broad thinking. That is why such large organisations are usually run by specially hired managers, instead of the owners themselves. In this last case, the public property form is the most appropriate for big businesses, including strategic economic sectors and monopolies.
The above explains why the advanced economies have all types of property that prove their respective advantages in fair competition. And it is not the political forces, the selfishness of individuals, or the ideological dogmas that manage it, but the very nature of the coherent structure of the society and productive competition within it.
Countries with established capitalist traditions see their business and political elite formed through years-long natural selection process. They have a reliable legal framework; the culture of liability imbued to the society provides this framework with the said sources of income and power. However, post-Soviet states knew no selection of this kind, and the experience of civilized private management had been interrupted. As the result in most cases power and property were dished out in an emergency mode, that is, to whoever came by. And no requirements as to the social liabilities of these owners were imposed on them. On the contrary, the allocation of former social property often led to personal enrichment, instead of its employment for the benefit of all. That is why there should be no surprise that most of such liabilities have not been discharged. Liquid assets are sold and appropriated, premises are rented or abandoned. What could be the usefulness of such “private property’? !
What is more, while in other countries it is mostly unprofitable businesses that are privatized, in Russia the privatized ones are the most profitable and lucrative. While across the world natural rent is a significant addition to the state budget, in the Russian Federation it is mostly appropriated by private individuals. Thus, according to President Vladimir Putin, advanced economies allocate 80% of oil industry profits to the budget, and only 20% is receivable by the natural resources producers; in Russia this ratio equals 50% to 50%.
As the result, as academician A. S. Lvov has formulated it, more than 70% of all entrepreneurial class income in Russia is due to the rent, and only 30% – to productive activities. For the same reason, over 44% of the GDP in Russia is brought in by the rent. Thus, when during the discussion about the restructuring of Russian debt at the beginning of the twenty-first century, Paris Club Chair referred to the huge active foreign trade balance enjoyed by Russia, the former Prime Minister M. Kasyanov admitted that, in reality, the trade proceeds were owned by private individuals, and not by the state.
For what real merits have such people been allocated social property, do we actually need such “property owners’? This question is ever more topical today, when, in the modern Russian conditions of privatization, the ownership of public funds has often been passed over to those uncapable of using the property in a decent or efficient way. It is true that an increased income of private individuals can be considered fair and useful as long as it is compensated by an additional social benefit. But when such income grows at the expense of social benefit, then it cannot be deemed fairly earned, on the contrary, it has been appropriated and results from exploitation.
When the nominal GDP in Russia dropped by 35.6% between 1989 and 2005, the share of state budget in the GDP also decreased, from 47.3% in 1985 to 16.8% by 2013. This means that budget revenue got almost 5 times smaller. In other words, the income of the property owners in this period increased not through improved economics, but through legalized robbery of the state and society.
Table 1. Correlation between the actual GDP amount and the privatization rates in Russia [11].
Summing up, it may be admitted that in most cases privatization in Russia has no social benefits. So, the secret of market economy, if any, is not pinned to private property but to development of competition. To demonstrate this idea, let us use the statistics data on the dynamics of the actual GDP in Russia and of the number of enterprises privatized in the first five years after the privatization reform. This data is presented in Table 1. It should be pointed out that privatization was at the core of the 1990s reforms, and in that decade, most of the privatization transactions were passed.
Let us calculate the correlation coefficient between the two factors mentioned in the table to assess their influence upon each other. The resulting figure is negative, and it equals 0.992. This value is so close to 1, that it can be asserted that the more enterprises in the 1990s Russia went private, the worse the economics functioned. And this conclusion is not at all surprising, as “as long as there is any property, and while money is the standard of all other things, I cannot think that a nation can be governed either justly or happily’42 (Thomas More).
This signifies that the privatization model adopted by Russia was the major reason of the large-scale economic collapse of the country. By consequence, unless the interests of authorities and property owners coincide with those of the people and the state, such occurrences will be frequent. Unless private property is made productive, its further use is destructive. In the industrial development conditions, “Private property is less and less wholly private. Free enterprise has become progressively less free’ (P. Samuelson and W. Nordhaus [35]).
Such “state policy’ has driven Russian government into bankruptcy. It has lost the capacity to govern the country in the market conditions. That is why all state programmes are poorly financed, and the economics has got out of control. The salaries of civil servants, that is, the salaries assured through the budget, often drop below the living wage, and the population is exploited beyond imaginable. Its purchasing capacity has decreased, but on the other hand, the number of millionaires keeps growing. What is the sense of such politics, and why during the entire reform its course has not once been adjusted, like it was done in China, for instance? Does this mean that despite the lack of social benefit, some people find this situation satisfactory?
In summary, it is exploitation, that is, the parasitism of the few through appropriation of the values created by others, that constitutes the key reason of the accelerating economic degradation in Russia and across the world. Only the most naïve or cynical persons can see any progress in the insatiable egotism of certain people, deprived of any talent, morality, or knowledge, but craving for wealth at any expense. This phenomenon that is behind the majority of human troubles, all the wars, violence and crime, has become a scourge of the humanity.
In addition, it is reasonable to limit the middle class to those who are not exploited by others, but neither exploit anybody themselves. That is, these are the people who earn their living honestly and are not robbed by anybody. The middle class cannot be defined through the concept of the average income, for it is too vague. Thus, if 30% of the richest people and an equal share of the poorest people are excluded, the remaining 40% will constitute the middle class. But if 20% of each of the extremes is not included in the category, then the middle class embraces 60% of the entire population. However, a criterion varies with the statistics trickery is not appropriate for the assessment. Furthermore, the policy of middle class expansion should be given a completely different approach.
One more factor that leads to SLP suppression is usury. Without generating anything useful, it depresses the real economics, forces the producers to support the money owners, and sucks the resources out of production. The source of usury lies in the money deficit, which is inevitable in economics. In the past, when money was guaranteed by gold reserves, the valuable metals available were not sufficient for serving all the trade flows in the
Cit. ex T. More,