What Guarantees the Ruin of Economy? 10 страница
These people can talk more easily about a 10 or 20 per cent. cut in wages than they can about a 10 or 20 per cent cut in profits. But a business man, surveying the whole community in all its interests and wishing to serve that community, ought to be able to make his contribution to stability (put in bold type by the authors)» (Ch. 11. “Money and Goods”).
Now let us again turn to J. Stalin. Having come out with his understanding of the fundamental economic law of the historically real capitalism (the understanding we quoted in the beginning of Chapter 4.3), a few paragraphs further in the text of “Economic Problems of Socialism in the U.S.S.R.” Stalin gives the definition of the fundamental economic law of socialism:
«Is there a basic economic law of socialism? Yes, there is. What are the essential features and requirements of this law? The essential features and requirements of the basic law of socialism might be formulated roughly in this way: the securing of the maximum satisfaction of the constantly rising material and cultural requirements of the whole of society through the continuous expansion and perfection of socialist production on the basis of higher techniques.
Consequently: instead of maximum profits — maximum satisfaction of the material and cultural requirements of society; instead of development of production with breaks in continuity from boom to crisis and from crisis to boom — unbroken expansion of production; instead of periodic breaks in technical development, accompanied by destruction of the productive forces of society — an unbroken process of perfecting production on the basis of higher techniques» (put in bold type by the authors) (“The Economic Problems of Socialism in the USSR”, “Remarks on Economics Questions Connected with the November 1951 Discussion”, Chapter 7. “The Basic Economic Laws of Modern Capitalism and of Socialism”).
If one compares what Ford said about the goals of production in the society, about the purpose (function) and distribution of profit at an enterprise with Stalin’s definition of the fundamental economic laws of socialism one can see that Ford’s words fit into Stalin’s definition of the fundamental economic law of socialism very well. Therefore one needs to be very resourceful in justifying falsehoods if one seeks to negate the following conclusion:
Ford and Stalin were honest and conscientious laborers. They promoted the common cause of bolshevism (of which they might have had a slightly different understanding) in different countries, in different historic circumstances, but to the benefit of all workers (laborers) who earn their bread.
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Yet before we carry on (proceed) to the explanation Stalin provided for the fundamental economic law of socialism and the means to bring it to life (implement it) we need to make yet one more digression.
Digression 6:
Political Economy of the Industrial Civilization
(In brief)
Let us start with making clear that all statements about some countries entering the «post-industrial» stage or being very near to entering it are nothing more than ravings of a madman or an attempt to impose this delirious view upon people in order to make «milking» them easier.
All the so-called «industrial» and «post-industrial» societies cannot do without products and services produced by means of industry, i.e. through a functioning multiindustrial system of production and consumption in its integrity. It is true that some countries have shoved out enterprises most unfriendly to the environment or most labor-intensive and now specialize in high technology, legal squabbles of all sorts, financial and stock-exchange speculations and putting up shows. This fact does not alter the core of the matter: they are still dependent on the technosphere.[105]
The authors of textbooks on political economy which students studied in the Soviet-era universities kept babbling about «the law of value», «the law of regular and balanced development of economy» without grasping the essence of the practical economy existing in the society and thereby evading the object region of political economy as a science. The content of post-Soviet textbooks on political economy is not much more credible. They are also meaningless and absurd when judged from the positions set forth in Digression 2: “The Axioms of Modern Economics”.
While the authors of those textbooks and lecturers on social sciences in schools and at universities babbled about economy many readers had no custom and ability of thinking independently. The consequence of these two factors combined is that quotations from “The Economic Problems of Socialism in the USSR” which we are going to consider in the next chapter 4.5 would seem unclear to many. They would seem unclear simply because they have no concrete knowledge of metrologically consistent terms which could describe the microeconomic and macroeconomic relations termed by Stalin as «the law of value», «the fundamental law of socialism», «the law of regular and balanced development of economy», etc.
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These terms are a part of the sort of professional «slang» which was used by top party and government officials in the USSR of the Stalin era. Each of them covers a broad area of interconnected cultural and economic phenomena. That is why for the majority of our contemporaries who have no coherent understanding of the production and distribution processes in the society or have a twisted knowledge of them the following digression must be made in order to elaborate on the ideas stated quite briefly by Stalin in his work “The Economic Problems of Socialism in the USSR” which is in fact his address to all sane and well-meaning people.
There is none other «will» left after Stalin.[106]
The following digression deals with inter-branch proportions, defining objectives for production and distribution, market mechanism, addressed directive control and planning.
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The systemic integrity of any multiindustrial production having a historically formed set of technologies applied within the system can be characterized by the following three basic features:
· In order to get the final product consumed by people and social institutions outside the production sphere (the state, public associations, etc.) one needs to produce intermediate (raw materials, semi-finished goods, components, etc.) and auxiliary products (means of production, i.e. «investment goods») consumed within the production sphere.
Therefore full capacity of most branches of industry (usually termed «gross capacity») that includes both intermediate and final products is higher than the capacity of any such branch taken by itself when measured against its final product only. In other words the efficiency factor of a multiindustrial system of production and consumption is always less than one (or less than 100 % in a different representation) because of the necessity to manufacture intermediate and auxiliary products.
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· Production of a certain range[107] of final products requires a definite ratio of the full (gross) capacities of all the industries constituting such multiindustrial system of production and consumption.
For example, in order to manufacture one car one needs materials in amounts determined by the car’s design, technologies, production’s organization and general standard: this much of steel; this much of non-ferrous metals; this much or rubber and plastic; this much of glass; this much of transportation services, etc. All these goods and services are mostly delivered to the motor-car construction industry by other branches. Consequently the full (gross) capacity of, say, metallurgy, is the total volume of goods it delivers to other branches plus metal used for its own needs plus metal sold as the final product to consumers for everyday needs. The same approach should be applied to define production requirements and the full (gross) capacity of all other industries.
· Expanding the range of final products to a definite set value requires an increase of full (gross) production capacity throughout the whole of the production system in a definite proportion between different industries determined by the desired expansion of the range of final products.
In order to clarify this statement let us carry on with the previous example. In order to expand production of cars by a certain amount one needs to expand production in all the supplying industries by the appropriate amount. In order to expand production in a single supplying industry one needs to expand production in industries that are suppliers of that industry and so on.
Besides, an increase in the number of operated cars will in time cause a growing need for fuel, lubricating oil and hydraulic liquids, for expanding the motorway network, parking lot and servicing infrastructure. And those will in their turn require to increase production capacity of industries besides the suppliers of the automobile branch.
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Consequently expansion of automobile production and the secondary needs for petrochemicals, a better motorway infrastructure and servicing, etc. stimulated by this expansion require to produce the means of production necessary for the increase of output as well as for the renewal of equipment, technology, organization and management and for expanding all the industries involved.
And the fact is that production of means of production («investment products») for these industries in some cases must precede the growth of the automotive industry’s capacity though in other cases it may accompany this growth or follow it with a certain delay in time.
The above statements hold true for increasing the production output of any industry, the automotive industry simply taken as an explanatory example.
Besides, when certain technologies and business organization are adhered to proportions between different industries’ capacities are accompanied by certain rigid proportions of professional training and employment. It follows that:
Mobility of the systemic integrity of a macroeconomic system in terms of being capable of a structural reorganization and switching from one product to other products is to a large extent determined by whether the population’s general cultural background enables people to leave their current professions and acquire new skills in a short period of time.[108]
The proportions of the exchange in intermediate products between industries, which is involved in the process of manufacturing a certain range of final products, are described in interindustry balance equations. These formulas are heavily relied on by theories of macroeconomic planning and control worldwide and such theories have got practical proof of their workability.[109]
In terms of mathematics interindustry balance equations are a system of linear equations[110] (i.e. unknown quantities are included into the equations raised to the first power only). In this system the unknown quantities are the gross (full) capacities of industries, and the absolute terms of equations are the desired range of final products (i.e. the industries’ net output). The factors of the unknown quantities in every equation are called the factor costs and are the product volume of every industry of the set considered necessary to produce one registering unit of the industry described by the considered equation of the system (in the example of motorcar production considered above the factors of costs are the quantity of steel per car[111], quantity of glass per car etc.)
Interindustry balance equations can be considered in two forms. First, they can be based on natural calculation of capacities and costs factors in terms of output quantity according to the nomenclature of products and industries on which the balance model is based. Second, they can be based on calculation in value terms also in accordance with the nomenclature of products and industries on which the balance model is based. All these issues are fully covered in literature on the subject.
The following proportions are meant under microeconomic proportions. They are the ratios of full capacities of the different industries, which constitute this multiindustrial production and consumption system, and the ratios of these industries’ net outputs to their full (gross) capacities, as well as the proportions of the population’s professionalism and employment.
A structural reconstruction of macroeconomy is an alteration of these proportions and the absolute values of the production capacities in the entire lot of industries. A structural reconstruction can proceed on the basis of a plan having a clearly set out objective. It also can proceed under the pressure of circumstances, so to say, spontaneously. Though when looking into the matter more deeply one might find that the pressure of circumstances induced by the social and economic «element» turns out to be a process planned and controlled by backstage groups. This option has been predominant during the last few centuries.
Let us now turn from the issue of production to the issue of how products and services are consumed in the society. Consumption turns out to be characterized by its own proportions, which are determined by the two following factors. On the one hand, they are determined by the way needs emerge as such within the society (i.e. regardless of any limitations in satisfying them), and on the other hand, by the limitations imposed on how fully those needs may be satisfied by the system of distributing[112] manufactured products.
All the needs of people and social institutions fall into two categories:
· biologically allowable needs conditional on the demography. They comply with the healthy life-style maintained in succession of generations by the population and biocenoses of the regions where the products intended for satisfying those needs are produced and consumed. These needs are determined by the biological nature of the Homo Sapiens species, by the population’s cultural background, age and sexual structure;
· degraded parasitic needs. Satisfying them is directly or indirectly detrimental to those engaged in production, to consumers, contemporaries and descendants. It also disrupts the biocenoses located in the regions where the products are manufactured and consumed. These needs are primarily determined by perverted and defective morals and are maintained through those perversion and defects reflecting in cultural tradition and succession of generations.
Though some products may change one category for the another depending on the standards of production and consumption, most products of the modern civilization are unambiguously placed into one of the categories. The category is determined objectively due to the possibility of revealing the cause-effect relations between the product’s kind and the consequences its production and consumption have.[113] Only incorrect attribution of a certain product to one of the described categories is subjective (including mistakes caused by incorrectly determined standards of production and consumption). Yet life will make us face the consequences of those errors exactly because all needs and products are objectively divided into two mentioned categories.
Satisfying needs is the aim not only of production, but also of distribution of products in the society. We must elaborate on this phrase or it will be taken for an obvious and true commonplace, yet is essentially devoid of meaning due to its abstract nature.
If the society is in any way engaged in multiindustrial production and is in any way distributing products to be consumed by physical and juridical persons who need them (both in the production and consumption spheres) it follows that the means of assembling[114] the multitude of microeconomy into the multiindustrial production and consumption system are objectively set (tuned) to fulfilling certain definite goals — namely, the needs generated by the members of society (individually and collectively). It follows that:
«The market mechanism» is nothing but words (whose meaning is absent in some minds[115]) which designate a more or less efficient algorithms of the means of assembling the multitude of microeconomy into the systemic integrity of macroeconomy.
Therefore, the advocates of market self-regulation should cast aside their prejudice and learn that the «market mechanism» by itself cannot and does not perform the task of defining targets regarding production and distribution of products in the society. What it does is adjusting production and consumption to the targets that have already been formed and which the market mechanism turned out to be adjusted to. And such adjustment occurs regardless of whether the society (or some of its members) understands the nature and methods of adjusting the «market mechanism» to certain definite[116] goals or not.
In any process of control (or self-control) that is initially intended for achieving a certain number of defined aims those aims have different priority[117] and form a hierarchy where the most important aim comes first and the aim that could be rejected (declined, turned down) if the complete number of aims cannot be reached comes last. In this hierarchy termed as aims vector individual and group aims form a sequence contrary to the sequence in which they would be forcedly rejected under pressure of circumstances. One of the circumstances making it impossible to achieve the complete number of chosen (announced, stated) aims is their being mutually exclusive.[118]
It is characteristic of the crowd-“elitist” society that it generates a number of mutually exclusive aims. This leads to the market mechanism’s being adjusted to certain definite ranges of production and distribution in social groups according to the aims that are placed at the top of the hierarchy of needs. The crowd-“elitist” society has an inherent systemic property — its ruling “elite” is responsible for a larger part of the degraded parasitic range of needs[119]. Among other ways of abusing their power within society the “elite” make themselves superior to the rest of the society in paying capacity.[120] Because of this the «market mechanism» is objectively adjusted to satisfying the needs of the “elite” in the first place by means of income and savings distribution. As the degraded parasitic constituent prevails among those needs the demographically grounded needs of the rest of society (the majority of population) are satisfied due to such adjustment of market mechanism upon the residual principle[121]. Besides it is the “elite”’s way to «diminish» the rest of society in order to strengthen their “elitist” social position. To this end it encourages the common people to adhere to the degraded parasitic range of needs («it is easier to govern people who drink heavily» etc.)[122] This way the majority of people and the society on the whole have even a smaller chance of satisfying the range of demographically grounded needs.
The market mechanism regulates the distribution of products within production sphere and beyond according to what is termed by political economy as «the law of value». This law says that average prices of commodities express the average labor inputs for their production in the society. Yet since in many activities «labor inputs» cannot be measured directly[123] the «law of value» turns out to be inconsistent in terms of metrology due to grounding price formation on «labor inputs» whose quantity it is impossible to measure. Nevertheless, if one accepts the fact that market prices exist for an objective reality, price ratios of different products (intermediate, auxiliary, final) define the yield and profitability of their manufacturing under the technologies and business organization accepted by the manufacturers.
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