On October 29, 2021, Grigory Yavlinsky answered the questions of the Age of Economics, the international research project.
Why does economics matter?
Economy as a field of activity. Human use of natural resources. Household management Production and distribution. i.e. human activity to ensure life.
Economics — (1) science, knowledge about how people can use natural and other resources most effectively. (2) the science of human behavior in connection with the provision of their lives.
Economics as a science and policy — activity to ensure and improve the well-being of people. Unlike business, the goal of which is to earn as much money as possible and not to go to jail. A joke, but there is a grain of truth in it.
Economic Science & Engineering
What are the differences between economic science (academic economics) and economic engineering (policymaking)?
Economics as a science deals with human behavior and the psychology of people about the production and distribution of goods. This is a subject with very many unknowns. We can say that economic science (academic economics) is going through a period of youth and therefore assumes that it can model its subject with the help of mathematics.
However, there are too many unknowns in the subject and therefore any mathematical model in economics is very far from reality. There is a scientific similarity. As my supervisor said 50 years ago, this is done by those who do not know mathematics well and do not understand the real economy. This is, of course, a joke again, but academic economics as an academic science is very far from practice and reality.
Therefore, it does not really see and does not understand the prospects (it could not, for example, predict the crisis of 2007-2008) and is ready and easily serves any political mainstream.
Economic policy is different. Ideally, this is making decisions about improving people’s well-being, and therefore about the efficiency of the economy as a whole, and not just its individual sectors (for example, financial or banking). At the same time, it should be understood that well-being is, of course, income, but not only: it is the environment, and free time, and education, medicine, culture …
Economic science (academic economics) sometimes helps, but only if it is as close to practice and reality as possible. It is a gratifying fact that this year the Nobel Prize in Economics was awarded not for abstract mathematical models, but to David Card from Berkeley “for his empirical contributions to labor economics”. As a 1973 graduate with a degree in Labour Economics, I’m pleased by this event.
Using natural experiments, David Card has analysed the labour market effects of minimum wages, immigration and education. His studies from the early 1990s challenged conventional wisdom, leading to new analyses and additional insights.
«In fact no amount of data can reliably predict the future. Unfathomably complex, dynamic economies rely not on Big Brother but on the spontaneous behaviour of millions of independent firms and consumers. Instant economics isn’t about clairvoyance or omniscience. Instead its promise is prosaic but transformative: better, timelier and more rational decision-making.» “The Economist” October, 23, 2021
Society & Economics
What role does economics play in society? Does it serve the common good?
This question is very broad and incredibly important.
I must say that I discussed these and related topics in detail in my book “REALECONOMIK. The hidden Cause of the Great Recession” published by YALE University Press ten years ago, in 2011.
Four main theses:
I. The thesis that morality (not individual morality as personal qualities, but social morality = a set of informal rules, the observance of which is necessary for life success) is a part of economic life.
II. The second main idea is that public morality (unlike, by the way, individual morality) is changing and changing its role in society and the economy largely depending on objective conditions of development. That is, not only the economy depends on the state of public morality, but this morality itself depends on the economy. That is (sic!) unlike individual virtues and vices, social morality emerges not so much from nature (or God) as from the conditions in which history, natural conditions and features of economic life put a particular society.
III. The third main idea is that the picture that mainstream science (more precisely, social sciences) draws for society does not reflect reality.
IV. The fourth thesis, which is an important part of whole story, is what can be conditionally designated as transit “from post-industrial to postmodern”.
I. First point — social morality is a part of economic life.
Society is not composed of homo economicus. Ethics are a part of social life, as well as culture, intellectual values, family life, personal ambitions and relations, irrational feelings etc. There are things that are not subject to economic (market) reasoning and behaviour, and ethics are one of them.
But there is more to it than that. Economy itself, esp. modern capitalist market economy is very much dependent on moral constraints and public ethics to function smoothly and efficiently.
Essentially, it is a matter of trust. In the final analysis, the adoption of a decision in business simply depends on whether people feel like putting at risk the resources at their disposal. And here, continued trust in the efficacy of rules of economic game, and in institutions which enforce these rules when necessary, is an indispensable condition for the effective functioning of the market system.
Even the slightest change in the levels of confidence in existing institutions displayed by economic agents generally has a powerful impact on economic and especially financial indicators.
From this perspective, only the ability to support or strengthen public confidence in economic policymakers and administrative institutions in a capitalist market economy will determine the economy’s long-term future.
Confidence or trust, in turn, is linked to the existence of public morality. Morality (rather than the legal or illegal pressure orchestrated by the state) greatly facilitates daily actions aimed at the production of goods, exchanges, savings, investments and other basic economic actions. It provides the necessary degree of trust to conduct millions of daily economic transactions without thinking each time of the necessity to guard oneself against possible breach of contract or act of fraud by numerous counterparties. In the absence of public morality, a very large portion of today’s business activities would be impossible because of prohibitive costs of securing enforcement of contracts.
Morality, ethics – what is meant here is not the issue of individual vices or virtues, but collective attitudes =public morality. (Vices or virtues are eternal and no more prevalent in human beings today than they were in Shakespeare’s era, but public attitudes may change, and they do change)
To stress: the challenges for an economy rest not with individual vices or weakness, but with public attitudes and reactions which may channel individual behavior into various directions.
Government coercion to enforce compliance with the principles and rules of market relations is effective only when most economic agents follow these rules by virtue of adherence to principles of public morality, personal moral convictions and sense of responsibility. In such case (i.e., when nine economic agents out of ten stick to the rules not because of daily overt coercion on the part of the state but because they consider it fair and rewarding) inevitable violations of these norms are prevented or punished in accordance with majority sentiment and not against it, with a minimum use of coercion. As a result general compliance with the rules of the game set by society is achieved at minor expense or at the very least acceptable cost for the economy.
For example, laws against theft, fraud or bribery work best in the situation when society at large considers them not just illegal, but also immoral and unworthy of a respected person. If people known to be swindlers or bribe-takers are met with public ostracism and boycott, enforcement of laws against theft, fraud etc. is both effective and cost-efficient.
However, if a majority of players in an economy are not ready or are not inclined to comply with rules out of conviction or internal inclination to moral behaviour, the costs of rule enforcement reach prohibitive levels and norms are simply disregarded.
Public morality and efficacy of rules are interdependent: strong moral guidance helps to enforce rules, and if they work effectively that keeps people from breaching moral principles. And vice versa: weakening moral constraints make rules less effective, and that corrodes business ethics further.
Direct link is that business practices in the financial sector which were obviously harmful, endangering national interest and public morality, met neither public condemnation nor counteraction by authorities. Indirect link could be found in the fact that the very notion of public interest came to be treated so lightly and vaguely (advertising absolute freedom of consumer choice) that it became totally ineffective as an instrument for regulation.
This is all the more true for the financial sector, where high risks are presupposed, thus blurring the line between justified sharing of risks by financial institutions and their clients on the one hand, and conscious deceit or misuse of information on the other.
Many people have to bear their share of responsibility.
- Top managers of major financial institutions in their pursuit of still higher profit had been consciously accumulating doubtful assets while keeping their owners , stockholders and clients unaware of the associated risks;
- Rating agencies and other institutions, which were designed to keep down risks in the financial sector through gathering and disseminating reliable information, had been consciously underestimating risks in the system, failing to draw their clients’ attention to important but disturbing pieces of information;
- Regulators could and should have put an end to a dangerous accumulation of risks in the financial sector, using legal possibilities available to them under current regulatory system, but chose not to do so;
- Most institutions engaged in research and analysis had been presenting a wrong picture of the situation in the financial sector by understating risks and diverting the focus of attention away from alarming trends and facts;
- Consciously or not, politicians and public opinion leaders allowed interest groups connected to the booming financial sector to manipulate their actions to the detriment of national economic priorities and public interest.
Thus I argue that it was a very wide circle of people who by means of intended or unintended actions (or lack of action) provoked the crisis and made it possible. Consequently, now that the guilt has been placed on a few CEOs, and punishing them (in some form) has come to be viewed as closing the issue, there is absolutely no reason to believe that the wider circle of those responsible for keeping the financial house in order will act differently, if only because the overwhelming part of them didn’t lose much in the crisis but profited very much (some of them enormously!) from the processes which preceded it.
Next point is that the general trend of a regression in ethical constraints in business activities and their regulation that characterized the past few decades.
II. The second main idea is that public morality (unlike, by the way, individual morality) is changing and changing its role in society and the economy largely depends on objective conditions of development. That is, not only the economy depends on the state of public morality, but this morality itself depends on the economy. That is (sic!) unlike individual virtues and vices, social morality emerges not so much from nature (or God) as from the conditions in which history, natural conditions and features of economic life put a particular society.
It is important to note that this process of erosion, as I understand it , is not related to any change in human psychology (which always remains roughly the same), but rather to the weakening of the society’s collective will to force its individual members to respect and abide by the patterns of behaviour conforming to public interest and ethical norms. In other words, it is not the matter of people getting “spoiled” or immoral, but the matter of weakening disciplining role of public ostracism punishing anti-social behaviour.
Now, one can say that there had been serious reasons for public morality to get weakened:
Why moral enforcement of “fair play” rules was losing its strength?
First, there is a set of sociological (cultural) and political reasons.
Social patterns change as “consumer society” psychology takes root.
- Aggressive advertising, both overt and hidden, imposes “consumer society” attitudes as the dominating mindset –Traditional hierarchy of different needs is being reconsidered –The system of individual values and goals undergoes deep change. Professional career and reputation, public recognition and respect are losing weight as individual values and aspirations.
The society itself undergoes restructuring
- Swift changes in lifestyles and consumption patterns – society structure is being remodelled, social groups and classes redefined
- Traditional norms of behaviour developed by traditional classes lose former power over individuals
- New generation is taking control of society, higher (college) education gains prevalence. For the growing proportion of people hard toil as a means of survival becomes a purely abstract notion — Work ethics and personal responsibility for securing satisfaction of basic needs are losing ground
New international environment
- The West had no rivals in international affairs as USSR had been defeated in cold war – Political elites faced no powerful outside challenge or acute threat. Hence until the very recent time there hasn’t been any external pressure to keep elites alert and vigilant of fraud and waste.
- Also, demise of the two-polar world model gave more freedom for the West to act in international politics – formal laws and established rules of international behaviour are gradually giving way to political opportunism in international affairs, and that also inevitably affects public morality at home.
Then, there is a set of reasons within economy and economic system itself:
1. Economy is growing more sophisticated and “post-industrial”
a. Post-industrial economy»: tertiary ( third sector) industries are raising their share in the economy. Owners of intellectual assets and resources account for a progressively larger proportion of calculated costs and derived incomes. Intermediate transactors deriving their share of revenue from the sales of final product grow in number and sophistication. Cost calculation is becoming less transparent and more manipulative, which is stimulating intellectual machinations to derive profit “from thin air”.
b. Private business becomes infected with bureaucratic practices, such as growth and multiplication through deliberate want and needs formation; shielding itself from outside control; creating an air of mystery to boost importance of its activities.
2. Disproportional growth of the financial sector
3. The growing role of “brand economy”
4. “New economy”
- We are witnessing rapid growth of “new economy”, consisting of businesses aimed at 1) creating new market “niches” (“market innovation”) and 2) resorting to non-tangible resources, such as knowledge, information, creativity, influence as the means to create new value (“hi-tech”).
- «New economy», as compared to traditional one: is 1) less transparent (hard to calculate actual costs and/or consumer value, production turns into a ‘black box’), 2) more virtual (trades images, emotions, fetishes etc. ) and 3) difficult to regulate (by setting up standards, norms and restrictions , administering sanctions etc.)
- As a result it creates immense opportunities for self-interested machinations (“intellectual alchemy”) and abuse of trust (unfair or fraudulent business practices)
“The age of bewilderment is starting to give way to greater enlightenment. The world is on the brink of a real-time revolution in economics, as the quality and timeliness of information are transformed.
The real-time revolution promises to make economic decisions more accurate, transparent and rules-based. But it also brings dangers.” “The Economist” October, 23, 2021
5. Growing political power of the “new ” business
Interest groups connected to different segments of “new economy”, first and foremost the financial sector, consolidate their influence and power over mass media, political and academic elites.
- Agenda and content of public debate is increasingly influenced by groups developing and controlling new opportunities for making big easy money.
- Redistribution of financial flows to the benefit of “innovative” intellectual business is justified as fair and progressive.
- A change in values is occurring: “creativity” and “innovation” replace progress of production capabilities and technical abilities as the highest economic virtue and value.
6. New international division of labour
- “New economy” is located in wealthy and prosperous nations, while less lucrative traditional industries are being transferred to countries with cheaper labour and softer environmental regulation.
- Intellectual property (trademarks, patents, exclusive rights to provide a number of services) increasingly become important for the well-being of wealthier nations.
- It is also affecting mainstream ideology in the West: goals of equal opportunities and reducing gaps between nations give way to meritocracy, minimisation of redistribution and extremely liberal economic attitudes applied to international economy
III. The third main idea is that the picture that mainstream science (more precisely, social sciences) draws for society does not reflect reality.
The mainstream academic vision of social and economic realities could not be regarded as impartial, correct and to the point. Very far from that.
Research community and academia have tried hard to produce an impression that economics (as well as sociology and perhaps political studies too) have transformed (elevated?) themselves from humanities to sciences. A large role in this was played by mathematicians who faced contracting demand from engineering industries and the military. Under conditions they turned to economics which met rising demand from the financial sector, which looked for instruments to expand, as well as from government agencies which were in need of a nice and convenient justification for their policies. And newly bred economists offered a nice variety of lucrative products in the form of beautiful mathematical models individually designed to satisfy every possible whim of those who cared for mathematical dressing for their business or policies.
Naturally they portray themselves as high-minded disinterested scholars, Warriors of Truth, but should that be taken at face value?
Certainly they are part of the established system, part of the establishment, and as such they are no less interested, biased and prone to use people’s ignorance or delusions to their own private benefit than bureaucracy or private business.
For decades they have been fooling general public and even some politicians with an illusion that economic research could give them a reliable instrument to make economic activities safe from crises and failures, to manage successfully national economies and private financial businesses.
But all those “powerful instruments” prove convenient only to explain policy failures, not to prevent one. In spite of thousands and thousands of pieces of sophisticated research, “markets remain essentially unstable” (Soros).
Furthermore, the pretence of being “science” starts corroding other social sciences, like sociology and political studies. They increasingly resort to econometric tools under the pretext that they could give exact answers as to how certain actions could influence complex social reality. Instead they treat political life extremely simplistically, as the war between progressive (democratic, liberal) and retrograde (totalitarian, dictatorial, oppressive, anti-liberal etc.) forces, between ultimate Good of this world (us, progressively minded mainstream) and earthly Evil (them, our opponents )
These new “scientists” formed a closed community with distinct hierarchy awarding themselves with prizes and titles, dispatching lucrative positions and grants, undertaking research for private companies for both image-building and practical purposes.
IV. The fourth thesis, which is an important part of the whole thing is what can be conditionally designated as “from post-industrialism to postmodernism”.
Developed economies as a whole are embarking on a new stage associated by some sociologists (Jean Baudrillard, to give one example) with the concept of post-modernism. At this stage, the content of economic activity, if understood as satisfaction of reasonable and conscious needs of the consumer in an understandable and rational manner, is gradually assuming a lesser role as compared to satisfying instilled wants or social ambitions of consumers .
It has clearly exceeded the boundaries of the sector’s original mission of optimizing the allocation of economic resources and has been transformed into a completely independent business segment, capable of generating need and demand, and to meet this demand by producing financial products able to simultaneously generate new demand and new products. The chains of derivatives have been continuously extended, thereby creating colossal pyramids of diverse financial products, increasing the flow of money that is related in some way to this sector, and simultaneously expanding the range of intellectuals tied to this segment by material and career interests. The boundaries on the possible reallocation of the domestic product to the benefit of this sector have been stretched even further, giving birth to what is commonly defined as “financial capitalism.”
This process has not limited itself to the financial sector only. …Numerous extra links in the chain between producer and suppliers of basic economic resources (labor, capital, technologies), as well as between producer and consumer, have come to the fore, links that were originally used to help producers meet the needs of consumer in the most rational and cost effective manner. Logistics, accounting, design, advertising, marketing, public relations etc, have developed into separate industries, recruiting customers from established businesses. At the same these new industries along with their clients serve as customers for suppliers of other business services, such as research and consulting firms, legal offices and the like.
As such new links grew in number and scope, becoming ever more complex and filled with advanced content, their original rationale came to be increasingly blurred and sometimes totally missing, while the links themselves acquired some independent raison d’être.
They were an extremely convenient and far more effective way of making money (in terms of the cost/benefit ratio) than the facilities originally determined for user requirements from which these links originally sprang. So instead of optimizing total costs they rather turned into a powerful tool for redistributing total income of the society in favor of certain groups and individuals.
The economic liberalism of the 1980s-1990s derived from a different notion: any activity generating revenue is real economic activity, a legal component of domestic product. Taken to a logical extreme, this means that any revenue received by economic agents implies that they (or property that belonged to them, including intellectual property) had provided services, the value of which is determined exclusively by the size of the revenue it generated, and is totally unrelated to its content.
If we consider it correct, then we must admit that no value-based judgment can be applied to the problem of what should be produced and traded. Thus the only possible criterion for telling good from bad, efficient from inefficient, and true from false is the amount of revenue and profit received. Such an approach–call it Realeconomik if you will–leaves no place for moral judgment or value-based regulation, becoming a sort of reincarnation of Hegel’s statement that “what is actual is rational.” If an activity brings in revenues and profit, it should be considered both rational and necessary, provided it is waged within the boundaries of legality.
Moreover, there is an underlying temptation here to consider anything that generates significant profits to be effective, efficient and accordingly moral as well. Under this logic, businesses that employ deceptive tactics to mislead consumers and exploit their incompetence or psychological weaknesses should not be admonished. They are simply replacing the principle of “every good or service rendered should be adequately compensated” with: “everything that is paid for is a good, and its value is determined solely by the size of the payment.”
To take the argument still further, if we regard that the most effective modus operandi as the generation of maximum revenues at minimum cost, the ideal business activity is to generate revenues from “intellectual property” (brand names and techniques for tapping consumer awareness and artificially indoctrinating demand and standards for consumers. In these cases the costs of the “producer” of such products can be close to zero, while revenues may be infinite, and accordingly effectiveness, understood as the cost/benefit ratio, can attain fantastic proportions.
The fact is, however, that this line of thinking provokes sharp negative reaction from most people, except for those who make their living that way. A good example of it is recent upsurge in public indignation over the astronomical salaries and bonuses of investment bankers, investment fund managers, auditors, rating agency analysts, appropriate markets, in short, all the heroes of “financial capitalism” who are blamed today for the Great Recession. In terms of the logic of the “new economy” and its notion of efficiency, these people are rather the role models for achieving the greatest cost effectiveness, capable of generating colossal revenues, if not out of thin air, then out of a substance close to that.
Evidently from the viewpoint of purely economic (or rather business) thinking there is not a single consideration that could justify such negative public reaction on the rising proportions of the “new economy” or on large and extra-large incomes of those employed in it. The only satisfactory explanation I can imagine for myself is the moral feeling of the public. Whatever economic theory may have to say on the subject, most people instinctively believe that there is a difference between people’s real wants, which are self-evident and could be reasonably explained, and false wants imposed on them by aggressive advertising and slick persuasion.
This inversion of logic is of fundamental importance and not at all an abstract matter. We fundamentally reject all contributions of morality to economic relations when we believe that any money-making methods, from the manufacture of foodstuffs to the supply of services, such as those of a stock market analyst or developer of a new brand of handkerchiefs, are equally valuable for the prosperity and development of society and the economy. To be more precise, we abandon the connection between morality and economic relations when the value of a product is determined exclusively by the money that its producers can extract from the economic agents around them.
If we object to such an approach, we do it mostly on moral ground – it is absurd to treat dubious kinds of economic activities on an equal footing with those satisfying vital needs of the society, or developing intellectual and spiritual capabilities of its members. But these objections seem to bear direct relation to economic efficiency if seen in a longer perspective. Morality, one might say, is a long-term version of pragmatic approach, and thus could well be a factor of economic productivity and efficiency, helping to select and support the kinds of economic activities that will inevitably make the economy as a whole better suited to the needs of society and hence more productive and efficient.
Over the past two or three decades however the aggressive advance of the opposite mindset, the Realeconomik approach, has been more visible, and that, in my opinion, has to a great extent led to many negative consequences for the sustainability of national economies, their ability to withhold all manner of shocks and their overall efficiency.
Finally, another main thesis of a generalizing nature, which perhaps constitutes one of the “highlights” of the book– is that life in general, and economic life in particular, does not obey ideologically verified and strictly shaped laws of evolution. It is impossible to say with certainty that society (in particular, Western society) has emerged from such a state, has passed through such and such stages and is now naturally moving in such and such a direction and will come to such and such. Everything is quite flexible and devoid of predestination, and this applies to the economy, politics, and society as a phenomenon.
First, because if you look closely at the processes that are described or that are otherwise addressed in the book, it becomes apparent that although their embryos, some seeds, of course, was still thirty or forty years ago, no one (absolutely no one!) I could not clearly predict and describe what it would result in in three or four decades.
And secondly, and this is perhaps the most important thing, the last half century has shown that not only an individual, but society as a whole, are amenable to purposeful suggestion. The whole “new economy”, in essence, is built on the fact that the needs of the consumer, his preferences are not a given, they can be influenced and even shaped “for themselves”. There are, of course, certain limitations, and human consciousness is not a “white sheet” — something can be written on it, and something is difficult, something will not work at all, but in general, the formation of collective needs and preferences, even ideas, is possible. Accordingly, business does not have to adapt to society — it is possible to a large extent, on the contrary, to adapt it to itself.
Economics and the wider environment
Economics provides answers to problems related to markets, efficiency, profits, consumption and economic growth. Does economics do a good job in addressing the other issues people care about: climate change and the wider environment, the role of technology in society, issues of race and class, pandemics, etc.?
Firstly, all these problems have an economic aspect of revenge, so you can’t do without the economy, and, by the way, this economic aspect already has a direct impact on the situation with solving problems — on the eve of the UN Climate Change Conference of the Parties (COP26), it became known that the governments of countries such as the UAE, Australia and Japan tried to influence experts to mitigate the hazard assessments of those emissions, the reduction of which will negatively affect the economy of these countries.
Secondly, there is a feedback — unresolved and growing global problems are becoming an increasingly serious factor affecting the economy.
Thirdly, in general, it is very difficult to imagine how problems and issues related to the economy can be isolated from the global agenda — the world is changing, moving, and economics, like other sciences, are means of cognition, understanding, awareness of the changes taking place.
On the eve of global related events. As a result of the pandemic, the understanding began to come (albeit very slowly) that the threat of a new economic crisis is not so much in the stock market jumps as in the deepening political crisis in the core countries of the world economy. However, with a growing understanding of the need to act, there are more and more unanswered questions.
Pyramid of the interrelated problems:
The crisis of the capacity of political institutions and trust in them on a global scale — from the United States and Great Britain to India and Israel.
The threat of authoritarianism, the growth of right-wing radical and neo-Nazi movements on a global scale; the normalization of hate speech in mass media and politics; the narrowing of the space of civil society, the weakening and marginalization of leading human rights and other public organizations in Western countries.
Growing atomization, the emergence of an “asocial society”,
The extreme strengthening and consolidation of income and opportunity inequality (within and between countries); the prospect of the disappearance of professions displaced by artificial intelligence, with a sharp decline in demand and global economic growth.
Climate change, increased frequency of natural disasters, the risk of flooding of major megacities, total pollution, mass extinction of biological species.
The problem of keeping artificial intelligence and genetic engineering under state and public control; the threat of genetic manipulation leading to extreme forms of social inequality; protection of elements of private life under the domination of total surveillance technologies.
The Age of Economists
As we live in an age of economics and economists – in which economic developments feature prominently in our lives and economists have major influence over a wide range of policy and people – should economists be held accountable for their advice?
Actually, in the question itself, there is also some kind of medieval attitude to the economist as a predictor who does something chemical, guesses from the insides and books, and then gives advice. If the advice is wrong, his head is cut off.
In fact, responsibility is a completely different thing. This is not a punishment for the mistake of any particular person. Responsibility for a politician and an economist is the ability to have a broad, global vision, to understand the interconnection of everything happening in the world, as well as to understand how recommended and accepted decisions participate in these global connections. Responsibility is also closely linked to values and goal-setting.
And as for the punishment, the point is not whether a particular person will suffer it or not, but that everyone suffers from the absence of appropriate decisions.
As the Russian historian Vasily Osipovich Klyuchevsky said: “History is not a teacher, but a supervisor of magistra vitae (mentor of life): she does not teach anything, but only punishes for not knowing the lessons.”
Economics & Capitalism
Does economics explain Capitalism? How would you define Capitalism?
Capitalism is a system based on private ownership of the means of production and their use for profit.
At the same time, private property is the basis of self-expression and the basis of freedom and, very importantly, self-respect and life without fear.
Important: entrepreneurship is an organic element of human life.
The future lies in what will be the relationship between the participants :
By the State : the participant or the providing system.
Artificial intelligence gives unscrupulous governments new capabilities to snoop on, control and potentially coerce their citizens. “Financial Times” , October, 2021
No human system to date has so far been able to endure indefinitely — not ancient Egypt or Rome, not Feudal China or Europe, not the USSR. What about global Capitalism: can it survive in its current form?
If capitalism is a relationship between private property, labor and profit, then these relations will always be. The question is what? Can capitalism survive in its current form ? And why? It will change and modernize. The pandemic has already shown that there will be changes. In general, this is a question of names. Today’s capitalism is an important part of a person’s self-realization.
Capitalism and humanity
Is Capitalism, or whatever we should call the current system, the best one to serve the needs of humanity, or can we imagine another one?
Can there be another system for a person’s self-realization? The socialist system in the Soviet version did not take place. Now China is trying to make something so special out of capitalism. It will soon become clear what will come of it.
In fact, we must already realize that a multidimensional, voluminous global crisis is developing. There is a lot of talk that “something needs to be done”, but there is no proper action, and the situation is only getting worse.
The answer is in the field of values, the institutionalization of values, the answer is to think strategically, counting not for today and not for the near future, for decades.
This approach is by far the most practical.
And attempts to limit humanity’s thinking to short- and medium-term prospects lead to a huge loss of time. So 10 years have passed since the crisis of 2008-2009, and the world in 2020 has plunged into a new crisis.
A few words about “what to do”
Institutionalization of values and economics.
In the global economy, the institutionalization of values should be expressed in setting goals such as overcoming the choking overproduction in the countries of the golden billion, real institutional support and gradual economic alignment of the poor and the poorest countries and continents. This, the fundamental expansion of world markets, the institutionalization of global competition, is essentially the main recipe for overcoming the constant threat of the next financial and economic crises on a global scale.
In business, it should be, first of all, about the movement towards the institutionalization of business integrity. At the same time, the source of trust should be, first of all, the personality of the entrepreneur, and not group, corporate, racial or national affiliation.
Assistance to the weak and laggards in today’s situation should be considered not as a merciful handout to the poor from the master’s table, but as a central element of the organization of the international community. A very important and relevant component is assistance in accessing the coronavirus vaccine. But on this front, the opposite is happening: there is a request, but there is no response.
Institutionalization of equality. Apparently, the vector to be followed should be equality of opportunity, but not just its declaration, namely institutional support.
The pursuit of social equalization must somehow become part of the institution of ownership.
From the Christian point of view and from the point of view of morality, everything is clear here — this is the responsibility of the rich to society, to the “world”, the condemnation of someone who “gets rich not for the God’s sake”…
But after all, we should have a qualitative transition, and not just a return back to morality in business.
Or is the State responsible for the institutionalization of equality? In general, all the recommendations of economists concerned about the growth of inequality (Friedland, Milanovich, Collier) are in this line.
But in this way the idea of equality does not become part of the institution of property. This is an external alignment. This is the ground for new disputes about the effectiveness of economic policy, the role of the state, and freedom of entrepreneurship.
So something must be happening with the very understanding of the “sacred right of private property”. Indeed, for example, antimonopoly policy and antimonopoly legislation have long been confidently perceived not just as one of the possible directions of the state’s efforts, but as a necessary part of the capitalist economy that ensures competition. And the right of owners to collusion is not perceived as part of the sacred right of private property.
That is, there must be a worldview revolution — not just condemnation, but an understanding that plutocracy undermines the foundations of the capitalist economy.
Here, however, it should be noted that in the modern world, both antimonopoly policy and ensuring conditions for competition have become a problem. What to do with the multimonopoly of transnational digital “platforms” is completely unclear.
But that’s another big question.