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Marx and Modernity

A volume in Advances in Research on Russian Business and Management Elena G. Popkova, Series Editor

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Marx and Modernity A Political and Economic Analysis of Social Systems Management

edited by

Marina L. Alpidovskaya Financial University under the Government of the Russian Federation, Moscow

Elena G. Popkova Plekhanov Russian University of Economics, Moscow, Russia

INFORMATION AGE PUBLISHING, INC. Charlotte, NC • www.infoagepub.com

Library of Congress Cataloging-in-Publication Data   A CIP record for this book is available from the Library of Congress   http://www.loc.gov ISBN: 978-1-64113-749-2 (Paperback) 978-1-64113-750-8 (Hardcover) 978-1-64113-751-5 (ebook) This book was made with the financial support of the Russian Foundation for Basic Research, project No. 18-010-00877 A “The Problems of the Configuration of the Global Economy of the XXI Century: The Idea of the Socio-Economic Progress and the Possible Interpretations.”

Copyright © 2019 Information Age Publishing Inc. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, microfilming, recording or otherwise, without written permission from the publisher. Printed in the United States of America

SCIENTIFIC REVIEWERS Alexandr V. Buzgalin—Doctor of Economic Sciences, Professor, Profes-sor of Department of Political Economy of the Economic Faculty of the Moscow State University Ladislav Žák—Director of Karlovy Vary Development Institute, Member of INSOL Europe Dmitry E. Sorokin—Advanced Doctor of Economic Sciences, Professor, Corresponding Member of the Russian Academy of Sciences (RAS), Financial University under the Government of the Russian Federation Michail M. Guzev—Advanced Doctor of Economic Sciences, Professor, Professor of the Volgograd State University; Sergey S. Slepakov—Advanced Doctor of Economic Sciences, Professor, Professor of the North Caucasus Federal University; Alexey Y. Arkhipov—Advanced Doctor of Economic Sciences, Professor, Professor of the Southern Federal University.

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CONTENTS

Introduction.........................................................................................xiii

PA RT I THE RELEVANCE OF THE MARXIST METHODOLOGY 1 The Problem of the Relevance of the Works of Karl Marx in the 20th and 21st centuries............................................................... 3 Elena V. Lapteva, Vladimir V. Ostroumov, and Sergei A. Tolkachev 2 The Realia of the Progressive Development of Antagonistical Economic Systems................................................................................ 13 Sergey S. Slepakov, Nataliya N. Novoselova, and Rashid K. Kecherukov 3 A New View on “The Capital” by Karl Marx...................................... 25 Petr Arefiev, Kirill Gorelikov, and Alexey Komarov 4 The Concept of Time in Economics as a Modern Treatment of Karl Marx’s Theory.......................................................................... 41 Elena G. Popkova 5 How Karl Marx Dealt With the “Classical” and “Vulgar” Political Economy Research Paradigm Concerning Both Theoretical and Methodological Bases.............................................. 79 Ya. S. Yadgarov 

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6 Joseph Alois Schumpter and Marxist Doctrine: Comprehension of the Method........................................................... 89 Elena Kukina, Irina Koroleva, and Nadezhda Solovykh 7 Systems and Reproduction Methodology as a Basis of the Relationship of Economic Research................................................... 99 Marina Kosolapova 8 The Use of Political Economy Approach in Modern Teaching of Economic Theory........................................................................... 109 Iskander G. Tursunmuhamedov, Natalia Y. Trutneva, and Natalia N. Gubernatorova 9 Political Economy Today: Did M. I. Tugan-Baranovsky’s Prophecy Come True?.........................................................................119 Galina A. Rodina, Vitaly A. Nekludov, and Dmitry V. Tumanov 10 Old–New Political Economy Potential of Research of Modern Economy........................................................................... 133 Ludmila Karaseva and Alexey Zinatulin

PA RT I I THE DIALECTICS OF THE MODERN MARXIST STUDIES 11 Historical Destiny of Capitalism: Keynes Versus Marx.................... 143 E. Naydenova 12 Land and Rental Relations: From Classics to Modernity................ 153 Nelli V. Tskhadadze ande Aza D. Ioseliani 13 Labor as the Main Factor of Development and Its Evolution in the First Volume of “Capital” by Karl Marx and in the Modern Conditions............................................................................ 165 Elena E. Nikolaeva 14 The Working Force in the Theory of Karl Marx and the Present: A System Approach.............................................................. 175 Elena V. Ivanova and Irina A. Smirnova 15 Marxism and Capitalism: Struggle and Unity of Oppositions in the Context of Social Time........................................................... 185 Galina G. Sillaste

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16 Karl Marx’s Heritage: “Humanization” of Relationship Between the Natural and Human World.......................................... 199 Olga Nikolaichuk, Galina Terskaya, and Larisa Cherednichenko 17 Dialectics of Equality and Justice in the Economic Theory of Karl Marx........................................................................................ 215 Saida T. Makhamatova, Tair M. Makhamatov, and Timour T. Makhamatov 18 Actuality of Karl Marx’s Social Conflict: 150 Years Later................ 225 Marina A. Allenykh, Svetlana A. Varvus, and Maria G. Novichenkova 19 The Era of Chance—A New Stage of Alienation............................. 239 Aza D. Ioseliani Nelli V. Tskhadadze 20 Karl Marx and the Political Economy of Power............................... 249 Vyacheslav V. Dementyev 21 Global Governance: Nature and Ostensibility................................. 259 M. A. Pivovarova and T. A. Yerofeyeva 22 Dynamic Processes, Entropy, and Information in Natural and Social Systems.............................................................................. 269 N. V. Katargin 23 Spatial Economics, Geopolitics and Marxism.................................. 279 Svetlana L. Sazanova, Fanis F. Sharipov, and Maria A. Dyakonova 24 Dialectics of Karl Marx as a Hidden Form of Organicism in Economics........................................................................................... 289 Konstantin Lebedev, Yulia Budovich, and Anna Lebedeva 25 New Forms of Relations Arising in the Capital Flow....................... 299 Alexander Yermolenko, Olga Brizhak, and Olesia Digtiar

PA RT I I I FROM CRISIS TO THE ECONOMY OF THE FUTURE 26 Heritage of Karl Marx and “Turbulence” in the Modern International Trade............................................................................ 321 Mayya V. Dubovik and Igor S. Gladkov

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27 The Reasons of Intersectoral Value and Price Disproportions in the Light of Marxist Theory.......................................................... 331 M. N. Besshaposhny and G. K. Dzhancharova 28 Industry 4.0—Machine Production of the 21st Century: Scientific and Theoretical Substantiation and Methodology of Study................. 343 Alexander N. Alekseev, Julia V. Ragulina, Aleksei V. Bogoviz, and Svetlana V. Lobova 29 To the Methodology of Consumer Behavior Analysis: The Relevance of the Marxian Interpretation of the Price............ 351 Dinara Peskova and Galina Rossinskaya 30 A Research of Macro-Institutional Foundations of Neo-Global Innovation Growth in the Light of the Karl Marx’s Theory of the Capitalism Crisis...................................................................... 361 Bahadyr J. Matrizaev, Olga S. Gaissina, and Leyla Madat kyzy Allakhverdieva 31 Marxism and the Study of Equal Exchange in the Context of the Modern World Crisis............................................................... 373 Sergey A. Tolkachev and Oleg O. Komolov 32 Classical and Neoclassical Interpretation of Cost Growth and Market Price Issues..................................................................... 385 Rafkat Gaysin 33 Digital Economy: A Marxist View of the Present and Future......... 395 Larisa A. Chaldaeva 34 Dialectics of the Financial Market Category in the Russian Economic Science: From the Marx Era to the Digital Economy.... 401 Irina Guseva, Elena Kulikova, and Boris Rubtsov 35 Marxism and Digital Money as a New Reality of Social and Economic System........................................................................ 411 Marina Abramova, Svetlana Dubova, and Svetlana Krivoruchko 36 The Role of the Price Factor in Ensuring the Global Competitiveness of Chinese Industrial Goods................................. 423 Aleksei V. Bogoviz, Julia V. Ragulina, Svetlana V. Lobova, and Alexander N. Alekseev 37 Innovative Interpretation of Labor Productivity in the Digital Economy...................................................................... 431 Svetlana V. Lobova, Alexander N. Alekseev, Aleksei V. Bogoviz, and Julia V. Ragulina

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38 New Laws of Productivity Growth in Industry 4.0........................... 439 Julia V. Ragulina, Svetlana V. Lobova, Alexander N. Alekseev, and Aleksei V. Bogoviz 39 Dynamics of Duration of Working Hours According to Karl Marx: The Come True Forecast........................................... 447 Elena Bekker, Olga Orusova, and Maria Ekaterinovskaya 40 Projects of “Future” in “Capital”...................................................... 459 Dmitri P. Sokolov, Nizami S. Askerov, and Alla I. Varlamova

PA RT I V THE SOCIO-ECONOMIC DEVELOPMENT AND MANAGEMENT OF MODERN ECONOMIC SYSTEMS 41 Comparative Analysis of Economic Concepts in Karl Marx’s “Capital” and the Modern Theory of Innovative Economy............ 473 Anzhelika P. Buevich, Olga V. Karamova, and Evgeny V. Sumarokov 42 Theoretical Understanding and Substantiation of Organizational and Economic Mechanism for Managing Innovation with a Marxism Position................................................. 483 Elena A. Pakhomova and Olga V. Rozhkova 43 Nature of “The Capital” and the Modern Russian Economy’s Growth.............................................................................. 497 Marina L. Alpidovskaya, Vasily I. Kornyakov, and Natalia A. Vakhrusheva 44 The Marx Theory of Economic System Development and the Issue to Substantiate the Russian Pattern of Economic Development....................................................................................... 507 Sergey V. Laptev and Faina V. Filina 45 Forecast, Foresight, and Utopia in the Innovation Development....517 Ekaterina Pogrebinskaya, Galina Rybina, and Valentina Kuznetsova 46 Collaboration in the Aspect of Formation of Innovative Economy of Russia.............................................................................. 525 Svetlana Nosova, Galina Kolodnyaya, and Sergey Bondarev 47 The Role of Monetary Policy in Ensuring the Priority of the Reproductive Model of the Development of the Russian Economy in the New Global Context................................................ 535 Viktor Y. Pishchik, Aleksei V. Kuznetsov, and Petr V. Alekseev

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48 Marx’s Conceptual Views and Directions for Improving the Tax System in the Structure of the Economy................................... 547 Irina A. Zhuravleva and Semen Y. Bogatyrev 49 Management of Competitiveness Through the Prism of Marx’s Ideas: Evolution of the Russian Models............................................ 559 Alexey M. Tsikin, Azamat B. Berberov, and Ali B. Berberov 50 The Modern Collective Investments Market of the Russian Federation as a Guided Economic System........................................ 573 Irina Yu. Shvets, Yu. Yu. Shvets, and Ya. N. Radzievskaya 51 Management Update of Macro-Regional Reproduction of Production Factors: Cluster Accents of Regional Space Development............................................................................ 587 Svetlana V. Makar, Zarema M. Khasheva, and Aziza V. Yarasheva 52 Problems and Opportunities of Development of the Agricultural Industry of Russia from the Point of View of the Marxist Theory................................................................................... 599 Svetlana L. Sazanova and Galina N. Ryazanova 53 Improvement of the Methodology for Assessing the Predicted Efficiency of Government Programs Based on the Political Economy Analysis............................................................................... 609 Vladimir Kvasha, Daria Kozlova, and Roman Kolesov 54 Institutional Approach in the Analysis of the Interactions of Small Business with Public Management Structures.................. 621 Natalia Morozko, Nina Morozko, and Valentina Didenko 55 Marxism and Management Structures in Economic Organizations..................................................................................... 631 A. A. Lapinskas, M. M. Khaikin, and L. A. Makhova 56 Political and Economic Analysis of the Peculiarities of the Modern Anti-Money Laundering Policy........................................... 641 Tatyana G. Martseva, Vladimir I. Berezhnoy, and Olga V. Berezhnaya

INTRODUCTION

May 5, 2018 marked the 200th anniversary of the birth of Karl Heinrich Marx, German scientist, philosopher, economist, and sociologist. His creative genius developed a system-functional model of his contemporary society, defined its socioeconomic nature, and formulated scientific and ideological approaches to cognition. Marx also developed methodological keys for identifying and substantiating the economic nature of phenomena, processes, and socioeconomic relations mediating them, which are so relevant today. Before Marx, political economy was an eclectic combination of individual theories and concepts belonging to different thinkers and philosophers. Karl Marx was able to transform it into a holistic science with a single systems approach. It is generally accepted that today researchers in the domain of social and economic problems and phenomena have a certain indisputable advantage over Marx’s genius. Nevertheless, modern generally accepted mainstream economics faces certain difficulties in its attempts to explain in detail the causes of the current global economic crisis. They believe that on the edge of the 21st century, capitalism has no tendency to “dissolve.” G. Hodgson, modern representative of Cambridge School, in his work “Economics and Institutions: A Manifesto for a Modern Institutional Economics” notes that despite the endless flow of publications after World War II the state of economic theory as a science remains disappointing. The main accusation made against economic theory is that “. . . within the framework of the main direction of theoretical thought, it is not possible to convincingly explain

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many economic phenomena and to develop policy recommendations that allow to explicitly resolving urgent economic problems.” Nevertheless, the problem areas of modern socioeconomic system are be-coming increasingly apparent. It turns out that the capitalist system is not that stable and durable, and the former “bourgeois” were not superseded by the generation of new leaders, armed with new management methods and able to fix the situation. Philosophical background of the capitalist economic system has knocked out the pivotal basis of sustainability from under the whole of modern economy, politics and ideology. Capitalism as a development system, apparently, ceases to exist . . . However . . . Truth extracted in the past should not be turned into a museum exhibit, nor can it be completely rejected. The purpose of this publication is to reactivate fundamental philosophical, political, economic, and managerial studies of the laws governing the functioning of the global geo-economic system from the perspective of contemporary interpretation of Karl Marx’s concept of objective processes in the modern socioeconomic system under conditions of a systems crisis of capitalism. The authors of the presented monograph tried, maintaining the traditional classical Marxist understanding of economy, to combine it with the modern theoretical interpretation, to show the evolution of its development from the moment of its emergence to the present day. The 200th anniversary of Karl Marx is an excellent opportunity to trace how the ideas of his central work, “Capital,” influenced the development of economic thought, including in terms of core theoretical trends in economic, management, political and philosophic science formation. The team of authors presented their vision of modern socioeconomic contradictions and outlined ways to resolve them within the existing socioeconomic system. The material of the monograph is informative, natural, rather complex, but interesting. It requires considerable learning and information processing skills. The authors tried to modernize existing approaches and are not limited to “past achievements.” Staying abreast of all the latest trends, the authors retained the core of their own conceptual principles. In almost all subjects the studied context is applied to the realities of Russian and global economy. —Marina L. Alpidovskaya

PART I THE RELEVANCE OF THE MARXIST METHODOLOGY

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CHAPTER 1

THE PROBLEM OF THE RELEVANCE OF THE WORKS OF KARL MARX IN THE 20TH AND 21ST CENTURIES Elena V. Lapteva Financial University Under the Government of the Russian Federation, Moscow, Russia Vladimir V. Ostroumov Financial University under the Government of the Russian Federation, Moscow, Russia Sergei A. Tolkachev Financial University under the Government of the Russian Federation, Moscow, Russia

LIFETIME ASSESSMENT OF THE WORKS OF KARL MARX Karl Marx is one of the most famous theoreticians of the 19th century. German economist, philosopher, literary and public figure, the author of the

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most famous work in the sphere of economy- “Capital.” His main work, “Capital,” belongs to the section of political economy, contains a critical analysis of capitalism. The main work of Marx was created in 1867 and is an extended continuation of the “The critique of political economy.” This is a multifaceted work. In addition to economic aspects, numerous scientists and practitioners-revolutionaries saw in this Marx’s work the justification of the mandatory destruction of capitalism, the eve of the proletarian revolution, and even viewed it as a kind of call to action. It is the conclusion about the inevitability of the collapse of capitalism that attracts particular attention in the period of economic crisis. Attitude towards Marx among his contemporaries in the Western world was mostly neutral. If Marx’s works interested his contemporaries, it was rather an interest of an academic environment. “If the workers had an idea of the sacrifices made to complete this work, written only for them and in defense of their interests, they probably would have shown a little more interest,” Jenny Marx wrote with bitterness and irony [2]. The “Capital” of K. Marx, after its publication in 1867, was poorly sold, despite the efforts of F. Engels to promote it. American authors D.Smith and F.Evans with a fair amount of irony cite the words of Marx’s mother, Henrietta: “It would be better for you to earn money than to write about them” [8, p. 21]. Interest in the works of Marx, and especially in “Capital,” grew gradually. In the 20th century, the teachings of Marx gave rise to many branches and transformations, such as Juche (North Korea, Kim Il Sung), Hoxhaism (Albania, Enver Hoxha), Titoism (Yugoslavia, Joseph Broz Tito), Prachanda (Nepal, Pushpa Kamal Dahal), Luxembourgism (Poland/Germany, Rosa Luxemburg), Guevarism (Cuba, Ernesto Che Guevara). HSE scientist O. Ananyin believes that in the West, Marx’s perception has undergone a complex evolution. In the late nineteenth and the early twentieth century Marx was known rather as the ideologist of the proletariat movement than a scientist. He was better known in the left-wing political circles than in the academic environment; better in Germany and Central Europe than in the Anglo-Saxon world. The contemporary leaders of academic science, with the exception of the Austrian O. Böhm-Bawerk and the Italian V. Pareto, did not consider the polemic with Marx an urgent task [10]. KARL MARX AND SOCIAL SCIENCE IN THE TWENTIETH CENTURY. “NEW LEFT.” At the beginning of the 20th century , Russian economic, political and public figures showed a keen interest in the theoretical developments of Karl Marx. Studying Marx’s interpretation of the crises, the special attention they paid to his criticism of Say’s law.

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“Say’s law of markets,” according to the economic teachings of Marx and his followers, is one of the manifestations of vulgarization in bourgeois (class) ideology, i.e., one of the attempts to glide over the surface of real (objective) economic phenomena, and, therefore, a lack of understanding that “old bourgeois society with its classes and class opposites is replaced by an association in which the free development of each is a condition for the development of all” [6, p. 447]. G. Plekhanov, a well-known follower of Marxist teachings, agrees with K. Marx on the fact that, contrary to the interpretation of J. B. Say, economic crises do not appear as a random phenomenon of a particular imbalance between the aggregate demand and aggregate supply [7, p. 235]. Marx’s criticism of Say’s law corresponded to the ideas of V.Lenin, for it indirectly confirmed that proletarian revolution was close V. Lenin interprets the essence of the economic crises as a temporary and transient phenomenon of a “disturbed equilibrium” [4, p. 353]. As you can see, the followers of the Marxist doctrine, in particular, V. Lenin and G.Plekhanov, in their critical perception of “Say’s law of markets,” agree with K. Marx. At the same time, it is also quite obvious that to prove their case, they also used “a thoughtful and sophisticated device designed by Marx,” the essence of which, according to Blaug, is the following: “What really affected people and convinced them was sometimes just brilliant rhetoric on the pages ( of Karl Marx’s works), which, instead of boring abstractions, contained vivid descriptions of working class poverty under capitalism and apocalyptic predictions of an inevitable collapse of capitalism with the categorical confidence which is common to the predictions in the sphere of natural science” [1 p. 202–203]. Economic provisions Karl Marx, who viewed crises as an impetus to social protest and the eve of the proletarian revolution, were put in practice on the one-sixth of the Earth’s land surface. Proletarian Revolution swept away the capitalist way of life in Russia. The world experienced tremendous changes. The attitude towards K. Marx and his works has also changed. In the first third of the twentieth century, after a difficult period of revolutions and the Great Depression in the USA and Europe, Marx was studied on the one hand, as a Teacher who opened the road to a bright future for all humanity (Soviet Russia and its followers), and on the other hand as a prominent economist, one of the founders of the study of crises in the economy. After World War II, the West witnessed changes in the economy, ideology and culture, which had an effect on the interest towards the main work of Karl Marx. It balanced on the verge of “economy”/political science. The 1960s were particularly notable in this regard, when after the youth revolution of 1968 in France, the “new left” became more active. They considered the study of Marx as a certain challenge to the old society; Marx, as an economist, did not particularly attract them. From Marx’s “Capital” and

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the works of his follower, V. Lenin, they carried out the ideas that a) capitalism itself dug its grave [3, p. 119] b) capitalism’s death is inevitable c) such death is most likely close because capitalism has long been in its last stageimperialism. For them, the position developed by Marx in Chapter 24 in Volume 1 of “Capital” was important: “The centralization of the means of production and the socialization of labor reach a point where they become incompatible with their capitalist shell. It explodes. It beats the hour of capitalist private property. The expropriators are expropriated . . . Capitalist production creates . . . its own denial. This is denial of denial. It restores not private property, but individual property on the basis of cooperation and common ownership of the land and the means of production produced by labor itself ” [5, p. 773]. But the “new left” were criticized by scientists; from the pedantic scientific point of view, Marx, who wrote that the developed countries all at the same time approach the barrier of the revolution, which will declare the end of capitalism, was not quite right. It was illustrated by the practice of transition from capitalism to socialism in the USSR. This provision gave rise to a heated discussion, the main points of which were advanced in the journal “History of Political Economy” in 1995. In this controversy, the British expert on classical political economy, S. Hollander, noted that the Marxist forecast was more contradicted by an establishment of the Soviet command system at the beginning of the twentieth century than by its collapse at the end of the century, and the Soviet experience itself cannot testify against Marx, because he had no elaborated project of a communist society. “The absence of Marx’s portrait on the Red Square,” Hollander summed up, “is not a reason for Marxist economic thought historians to review their research programs” [15, p. 170]. In general, summarizing, we can say that the “new left” attitude to Marx was a kind of attempt to explain the changing world, economy, culture, to find priorities. For the “new leftists,” to which such figures as D.Lukach, N.Poulantsas, L.Althusser, and others can be attributed, Marx was interesting not as an economist, but rather as a philosopher and social theorist. L. Althusser claimed: “My main goal was to show what exactly Karl Marx asserted in reality [14, p. 18]. L. Althusser believed that economic contradictions of capitalism, which Marx described in Capital, are important, but they do not appear in their pure form, remaining an internal structure, hidden by external political and ideological contradictions. He appreciated Marx as futurologist, sociologist and philosopher more than as an economist. He was no alone in his attitude. Many of the ideas of the “new left” were reflected in the works of representatives of “European communism”: Santiago Carrillo, Enrico Berlinguer, Antonio Gramsci. But the ideas of the “new left,” particularly vividly expressed in the views of the representatives of the so-called “Frankfurt School,” gradually lost

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their popularity and by the 1970s and had much less followers than a decade earlier. The views of the “new left” differed from Marxist positions. They believed that the social base of the “new” revolution has radically changed. It consisted of the society “bottom”: lumpens, migrants, unemployed, rebellious youth, a small group of intellectuals, drug addicts, representatives of sexual minorities. The “New Left” of the 1970s were confident in the coming social revolution, and therefore relied on Marx as on a futurist. They believed that capitalism and bourgeois ideology have no future. THE WORKS OF KARL MARX IN THE ASSESSMENT OF THEORISTS OF THE TWENTIETH CENTURY: AN INCREASE IN INTEREST In the last third of the 20th and early 21st centuries, interest in Marx’s works increased in the academic environment. In 1970s–1980s, basing on the Marxist theory of value, neo-Ricardians formed their theories. Huge discussions among Marxist scholars were provoked by Pierro Sraffa (Cambridge School), who emphasized the transformation of value into the price of production, highlighting the quantitative emphasis [19]. On the basis of the mathematical equations of simple and extended reproduction, P.Sraffa tried to construct a special theoretical model of the primary comparison of goods in terms of the cost of a certain “standard product.” This attempt subsequently caused a storm of heated debates among Marxist researchers; Sraffa’s ideas have found both advocates and opponents. Some researchers of this period believed that a kind of synthesis of Marx’s theory of labor and the concept of Sraffa should be created. A. Chepurenko names representatives of this point of view: R.P. Wolff,, S. Bowles, H. Gintis and others [9] Other scientists believed that the teachings of Marx should be freed from extraneous loadings, ideas and their synthesis (A. Bhaduri, P. Garenyani, S. Pak). Since the 1970s, claims about the need to revise the concepts presented in Marx’s “Capital,” were increasingly being heard. In 1973 M. Morishima published the work “Marx’s Economics: A dual theory of value and growth.” [17] where he put forward the idea of “theoretical reconstruction” of Marx’s theory of surplus value. In the academic environment, advocates of Marx’s concepts foundations revision do not always find support In 1977, Roman Rosdolsky published the work “The making of Marx’s “Capital”“, where he examines the main work of the great economist, its structure, content, responds to it by some contemporaries of Marx, and also analyzes the works concerning the issues of Marxism by Marxist scientists and politicians of the twentieth century. His assessment of Marx’s Capital, from the standpoint of the scientist of

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end of the 20th century, is very high: “. . . we hope to show that we are dealing with a very complex and delicately structured theoretical construction, which, despite the considerable period of time that separates us from its origins is still, apparently, in good condition today and has the character of a sharp analytical tool,”–writes Rosdolsky [18, p. 313]. He thinks that the degradation of Marxist theory and its development in the first half of the 20th century is not an accident and caprice of history, but the result of the predominance of conservative interests in society (excluding, of course, socialist society -E. L.). Rosdolsky considered these “conservative interests” the main obstacle to the development of contemporary Marxism. He is opposed to the idea of distillation and purification of Marx’s teachings to the state of certain “eternal values,” believing that” eternal values “are difficult to reconcile with Marx’s critical and revolutionary dialectic” [18, p. 572]. Rosdolsky believes that it is necessary “to combat the pressure of conservative interests in all spheres. This is the only way to move beyond neo-Marxism (or rather “vulgar Marxism”) both in sociology and economy” [18, p. 572]. In the 1980s there appears a direction which has received the name of “analytical Marxism” (J. Roemer,, J.A. Cohen, J. Hodgson). Representatives of this trend abandon Marx’s labor theory of value, but partially apply the theory of surplus value, replacing it with the “surplus concept.” Aa school of the University of Tokyo of Professor K.Uno has also contributed to the development of Marxism. K.Uno tried to clarify which ideas of Marx’s “Capital” can be attributed to the general laws of the capitalist mode of production, and which ones–only to its pre-monopolistic stage [20]. In the 1980s, among Marxist scholars, there emerges an idea of creating a “general theory of exploitation” based on the concepts of Karl Marx ( M. Stephenson and P. Roberts). In 1982, on the threshold of the year of Marx (1983), J. Roemer, professor of the University of California, publishes the book “The General Theory of Exploitation and Money,” where he abstracts from Marx’s theory of value and puts forward the proposition that modern capitalist exploitation is adequate to Marx’s theory of surplus value. He is developing a universal theory of exploitation, including the exploitation in socialist society, and this has made him a lot of enemies. The interest in Marx of the 1980s is completed by the work of B.Mazlish “The Meaning of Karl Marx” (1984). But in the 1980s, the direction that is defined by the term “post-Marxism” and focuses on the study, analysis and updating of Marx’s teachings related to class theory, is still more developed Representatives of this socio-philosophical trend, which emerged from neo-Marxism by the 1970s–1980s, emphasize both their loyalty to the ideals of Marxism and their willingness to radically overcome the “theoretical deadlocks” of the Marxist heritage.

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CHANGING ATTITUDES TOWARDS CLASSICAL MARXISM IN THE EARLY TWENTY-FIRST CENTURY A new round of interest in Marx’s “Capital” and his other works appeared in the early 2000s, with the economy falling into a long crisis period. Representatives of Western society, familiar with the works of the “new left,” during the crisis of the early 2000s were preoccupied with the situation, given the fact that the social composition of the leading Western countries continued to change, increasing groups of migrants, poor elements, drug addicts, etc. In search of an answer to the question who can become the new grave-digger of capitalism, they turned to the works of Marx. They also wondered, how to avoid the coming social explosion in the crisis condition, and whether Marx had the answer to this question. Before the crisis of the early 2000s. the attitude towards K. Marx and his “Capital” among economic history scientists was mainly critical. O.Ananin writes about this, referring to the article in the journal “History of Political Economy” published in 1995. Western researchers believed that Marx’s works did not have a significant impact on the development of economic science and were mainly “shifting of known ideas into new terms” [10], therefore, the study of Marx’s works is necessary only for further criticism and establishing a”deadlock” of his research. But after the crisis of the 2000s. there was a growing public interest in Marx’s “Capital,” and economic history scientists were forced to reconsider their views Why interest in Marx’s “Capital” persists today? In “Capital” Marx highlighted a tendency to marginalize direct labor from the modern production process and expanding the technological application of science. He foresaw the era of automated production, where “. . .  the means of labor passes through various metamorphoses, of which the last is a machine, or rather, an automatic system of machines” [5, p. 203], in which the human fulfils only informational and organizational and managerial functions. This will certainly create certain difficulties. Karl Marx foresaw that the transition to such (automated and informational-auth.) type of production would entail drastic social and economic consequences. We must also pay attention such Marx’s idea, as the transition of the role of the main source of wealth to scientific knowledge. It is in this context that Marx’s catch phrase about “universal public knowledge . . . turning into an immediate productive force” appears [5, p. 2–3]. Speaking about the role of science, Marx assumes that the man of the future will not be able to do without it in the production process [5, p. 215]. It gives food for thought for the modern worker in evaluation of its competitiveness in the labor market. In search for an answer, people turn to Marx. At the beginning of the XXI century, interest in the main work of Karl Marx has seen a new rise. The Associated Press reported that the crisis that

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the world economy is experiencing now has boosted the sales of Capital, the main work of Karl Marx, the founder of scientific communism. KarlDietz Verlag, Berlin Publishing house of political literature since the beginning of 2008 printed 1.5 thousand copies of “Capital” [12] In September alone, 200 books were sold–in previous years the same number was sold over a year “Definitely, the book is now in fashion,” says the director of the publishing house, Jorn Schütrumf. According to J. Schüthrumpf, the book is bought mainly by educated representatives of the young generation who doubt the correctness of the political and economic policy chosen by their parents and the usefulness of decisions taken by the Government in response to the global financial crisis. “There is a younger generation of scientists who pose difficult questions and seek answers to them in Marx’s work” [12], says J. Schüthrumff. During the crisis, the publication of Marx’s “Capital” became a successful commercial project. In October 2008, Capital became the bestselling book at the Frankfurt book fair, and in Britain the demand for the main work of Marx tripled. “Capital” began to be republished in Turkey, where not so long ago it was on the list of banned books. Over the past two months, 40,000 “pilgrims” visited the homeland of Marx. Amid market crashes, defaults and credit system collapse, Karl Marx began to be perceived as a kind of prophet. After the crisis of 2008, the book by Chris Yarman “Zombies of Capitalism: A Global Crisis and the Relevance of Marx” was published, in which the author tried to answer the question of how much Marx is needed by modern society and whether his doctrine can answer the questions posed by the modern economy in period of crises [21]. In 2012 the festival “Marxism-2012” was held in London. The festival organizer, Joseph Chunaru, a member of the Socialist Workers Party, notes that an increasing amount of young people are seen the participants of the festival [13]. In 2011, the book devoted to the contemporary crisis was published: The Failure of Capitalist Production: Underlying Causes of the Great Recession [16]. Its author, Andrew Kliman, professor of economics at Pace University in New York, standing in Marxist positions, proves that the current crisis was inevitable; moreover, his certain characteristics, yet unknown in the time of Marx, deepen the crisis and accelerate the inevitable end of capitalism predicted by the great economist. Marx’s “Capital” does not contain any guidance or calls to action. This rich intellectual heritage is still true and can be interpreted from different positions. “Marx is a toolbox. The challenge of modern theorists is use them correctly” [11], said Dr. Manfred Neuhaus, a member of the International Editorial Board for the publication of works by K. Marx and K. Engels in the original.

the Relevance of the Works of Karl Marx in the 20th and 21st centuries    11

Thus, considering the increased interest of the early 2000s. to the works of Karl Marx as a whole, and to the “Capital” in particular, we can distinguish three levels of interest: 1. The interest of academicians, theorists, fighting purity of Marxism or vice versa, building a variety of theoretical constructs on the basis of Marx’s teachings; 2. The interest of the left radicals, seeking a response to pressing social issues and a kind of program of struggle for freedom of the lower social classes in Marx’s works; 3. The interest of the ordinary people who in difficult times for the economy, especially in times of crisis, try to cope with their own problems by addressing to the works of the classical economists. The first level is characterized by a traditional passion for science, for study and analysis, criticism, dialectics, and the construction of new theoretical constructs on the basis of well-known works and concepts. The second level attempts to reconsider Marx’s “Capital” as a social-political theory that is true at all times and as a blueprint for action. The third level is characterized by an attempt to find the answer to personal questions in the writings of Marx—how to survive a crisis and become more competitive. Despite the differences in approaches and objectives, the mere fact of an increased interest in Marx and his main work “Capital” indicates that the ideas of Karl Marx remain relevant even a century and a half later. REFERENCES 1. Mark Blaug. 100 velikikh ekonomistov do Keynsa [100 great economists before Keynes]. St. Petersburg, publishing house “Economic School,” 2008. (in Russian). 2. Jenny Marks-Kugel’manu, 24 dekabrya 1867 g. [Jenny Marx-Kugelman, December 24, 1867]. Marx K., Engels F. Works. 2nd ed. (in Russian). 3. Lenin V. Po povodu tak nazyvayemogo voprosa o rynkakh [According to the socalled question of the markets issue] 5th ed. M.: Publishing house of polit. literature, 1967. Vol.1(in Russian). 4. 3. Lenin V. O lozunge Soyedinennykh SHtatov Evropy [About the slogan of the United States of Europe]. Lenin V. I. Full collection of works. M.: Publishing house of polit. literature, 1997. Vol. 26. (in Russian). 5. Marx K. Kapital. T. 1: Kritika politicheskoy ekonomii [Capital. vol.1 Criticism of political economy]. Marx K., Engels F. Vol. 23/(in Russian). 6. Marx K., Engels F. Manifest kommunisticheskoy partii [The Manifesto of the Communist Party]. Marx K., Engels F. 2 ed. M.: Publishing house of polit. literature, 1955. Vol. 4. (in Russian).

12    E. V. LAPTEVA, V. V. OSTROUMOV, and S. A. TOLKACHEV 7. Plekhanov G. V. CHernyshevskiy N.G. [Chernyshevsky N.G.] St. Petersburg, Shipovnic, 1910. (in Russian). 8. Smith, D., Evans F. «Kapital» Marksa v komiksakh. [“Marx’s Capital all illustrated” ]. 2017. Russ. Ed.: publishing house “E,” 2017. (in Russian). 9. A. Chepurenko. Metodologicheskiye problemy ekonomicheskogo ucheniya K. Marksa v sovremennykh diskussiyakh na Zapade: kriticheskiy analiz [Methodological problems of economic teachings of Marx in modern discussions of the West: A critical analysis]. Published summary of a thesis Institute of Marxism-Leninism under the Central Committee of the CPSU, 1989. (in Russian). 10. Ananin O. Karl Marks i ego «Kapital»: iz devyatnadtsatogo v dvadtsat’ pervyy vek. [Karl Marx and his “Capital”: from the nineteenth to the twenty-first century]. [Electronic resource]. 2007. Retrieved from https://www.hse.ru/pubs/ share/direct/document/74836409 (in Russian). 11. Krizis porodil interes k «Kapitalu» Marksa [The crisis has generated interest in Marx’s “Capital” ]. Vesti [Electronic resource]. 2009. Retrieved from http:// www.vesti.com/doc.html?id=253873 (in Russian). 12. Pochemu iz-za krizisa «Kapital» Marksa stal bestsellerom? [Why did Marx become a bestseller because of the crisis?]. [email protected] [Electronic resource]. 2009. Retrieved from https://otvet.mail.ru/question/19002900 (in Russian). 13. Pochemu marksizm snova na pod”yeme [Why Marxism is on the rise again]. Russia today [Electronic resource]. 2012. Retrieved from http://inosmi.ru/ europe/20120706/194575698.html (in Russian). 14. Althusser L. Essays in Self-Criticism.—London: New Left Books, 1976. 15. Hollander S. Comment // History of Political Economy. (1995). Vol. (27)) 16. Kliman, Andrew. The Failure of Capitalist Production: Underlying Causes of the Great Recession. NY: Pluto Press, 2011. 17. Morishima M. Marx’s Economics: A dual theory of value and growth. Cambridge, 1973. 18. Rosdolsky, Roman. The making of Marx’s “Capital.” L., Pluto press, 1977. 19. Sraffa P. Production of commodities by means of commodities: Prelude to a critique of economic theory L., Cambridge, 1960. 20. Uno K. Principles of Political Economy: Theory of a Purely Capitalist Society. Brington, Highlands (NJ). 1980. 21. Yarman, Chris. Zombie Capitalism: Global Crisis and Relevance of Marx. Chicago: Haymarket, 2010.

CHAPTER 2

THE REALIA OF THE PROGRESSIVE DEVELOPMENT OF ANTAGONISTICAL ECONOMIC SYSTEMS Sergey S. Slepakov North-Caucasian Federal University, Pyatigorsk, Russia Nataliya N. Novoselova North-Caucasian Federal University, Pyatigorsk, Russia Rashid K. Kecherukov Government of the Karachay-Cherkess Republic, Cherkessk, Russia

ACTUALIZATION AND RETHINKING OF K. MARX’S THEORY The transformation of the philosophy of development of interstate relations and the relations of states themselves over the past thirty years, the advancement of the new world order, profound changes in the institutional

Marx and Modernity, pages 13–23 Copyright © 2019 by Information Age Publishing All rights of reproduction in any form reserved.

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sphere, the growth of global contradictions and crisis tendencies in the modern world have actualized the new study and rethinking of K. Marx’s theory. Discussions in the philistine environment, as a rule, boil down to a kind of quiz on the topic: whether Marx was right or wrong, whether his theory withstood the test of time, what was confirmed and what was not. Let us cite the opinion of one of the most authoritative experts, Corresponding Member of the Russian Academy of Sciences, Doctor of Economics, Professor Greenberg R.S., who, to help the interested public, published his reasonings on this issue. In his view, K. Marx’s predictions came true concerning the following points: capitalism objectively leads to the concentration of production and monopolies; to the deepening of material inequality and income polarization; financial speculation can cause and exacerbate economic crises; Marx foresaw globalization; he pointed out that the bureaucracy subjugates the state; he substantiated the transformation of scientific knowledge into a direct production force; he advocated overcoming the alienation of labor, that is, the isolation of a person from the results of his work. K. Marx was wrong in the following: he considered inevitable the clash (conflict) of the proletariat with the bourgeoisie, idealized the revolution, believed in the victory of world revolution and communism. [1] We will not comment on the conclusions of the distinguished professor. It is not only legitimate but also inevitable to examine Marx’s doctrine to confirm his conclusions in the realities of the 21st century. Collisions of positions on the “omnipotence and fidelity” of Marx’s doctrine, as a phenomenon, arose during Marx’s lifetime and have never stopped from then onwards; apparently, they will never stop. Marx left a profound imprint on science and social practice. However, let us be aware that events and changes that have occurred in the world over the past 200 years have repeatedly turned over all the perceptions. Marx had no opportunity to take into account the realities of the next centuries. Therefore, it is possible to correctly assess the correctness (wrongness) of Marx only with the support of real information and scientific research tools that he could have. Marx devoted his tremendous work to the problems and laws of the reproduction of social and economic activity under capitalism: • discovered and formulated objective laws, substantiated antagonistic contradictions of capitalist society; • proved that antagonisms are insoluble within the framework of this economic system, therefore, capitalism is doomed; • stated that capitalism will be replaced by a new economic system, which is free from antagonisms, economically and socially effective. In substance, Marx’s doctrine passed the test of time. Capitalism, which Marx researched, played its historical role, endowed mankind with both

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outstanding achievements and global, systemic losses and remained in the distant past. K. Marx, noting heterogeneity and dynamism of nature and the institutional organization of the social and economic process, wrote: “Bourgeois society is the most developed and the most complex historic organization of production. The categories which express its relations, the comprehension of its structure, thereby also allows insights into the structure and the relations of production of all the vanished social formations out of whose ruins and elements it built itself up, whose partly still unconquered remnants are carried along within it, whose mere nuances have developed explicit significance within it”[2, p. 731]. V. I. Lenin stated, pointing to the continuity of social and economic development: “But who does not know that if we consider any social phenomenon in the process of its development, then it will always contain remnants of the past, the basis of the present and grounds of the future?” [3, p. 181]. Modern social and economic systems, in full accordance with the methodology of K. Marx and V. I. Lenin, are extremely mobile and difficult in their interpenetration. Separate topics are a new reading and development of Marx’s doctrine. In fact, this work is the rethinking and deepening of our ideas about this doctrine, the possibilities of its modern application. Hypothetically, it is possible to assume, at least, the ambiguous attitude of the ingenious Marx to the conclusions of his enlightened descendants. There is a diametrical divergence of views on the following issues: the authenticity of modern Marxism, the relevance of this doctrine, its right to exist in the realities of the 21st century and the right of scientists to call themselves Marxists. The monograph of professors of Moscow State University, doctors of economics, representatives of the school of “critical Marxism,” A. V. Buzgalin, A. I. Kolganov is one of the most significant modern scientific theory of research of K. I. Global Capital, [4] the contents of which will summarize hundreds of publications of famous authors, whose works have been translated into many languages. The work critically applied the methodology and theoretical legacy of Karl Marx’s Capital and revealed the anatomy of the modern global capitalist economy. In the view of V. L. Inozemtsev, a representative of neoliberalism, “Marx (. . .) was one of the greatest thinkers in Europe (. . .) Nearly two centuries ago he caught the most important lines of history and his methodology remained unsurpassed. But this is about general methodology, not about particular forecasts. There is no such phenomenon as modern Marxism and, actually, it cannot exist. (. . .) Personally, I treat Marx as a scientist with great respect. And, therefore, I wish his modern “followers” to respect their teacher and not call themselves Marxists” [5]. We fully share the attitude of V.L. Inozemtsev to K. Marx and his doctrine, though, it is hard to agree with the judgments that Marxism was denied the

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right to exist (“There is no such phenomenon as modern Marxism and, actually, it cannot exist.”), as well as reproaches to colleagues who consider themselves Marxists, in their disrespect to Marx. Moreover, Marx did not give “particular forecasts,” there were scientific concepts and hypotheses. The specificity of Marxism in modern realities is that K. Marx’s laws (primitive accumulation of capital, the universal law of capitalist accumulation, concentration of capital, capitalist competition, the basic economic law of capitalism, etc.), predicting capitalism’s inevitable death, continue to operate. However, the economic system, which, in the old manner, continues to be called capitalism, has been transformed, though, it lives and develops with all its contradictions, crises and antagonisms. Its role remains dominant in the modern world. It is manifested in the development of global and national markets, collapse and disintegration of the socialist system, and the application of market mechanisms in a number of socialist states (China, Vietnam). Social and economic activity is extremely dynamic and changeable. New circumstances pose new problems and dictate new solutions. The reality of the progressive development of antagonistically contradictory social and economic systems in the modern world requires reflection. LIBERATION OF LABOUR FROM EXPLOITATION AND ALIENATION In this regard, it is interesting to justify the problem of the liberation of labour from exploitation and alienation in modern conditions. In the present arrangements, the use of the concept of the “exploitation of labor,” as a rule, means coercion in an attempt of an employer to assign the results of unpaid labour of workers, that is, their oppression. But are the notions of exploitation and oppression of labour synonymous? And is the question of the eradication of the exploitation of labour appropriate? First of all, let us talk about the very concept. Exploitation is the use (production, profit, business turnover, etc.) of diverse objects (resources) for self-interest. But self-interest is an inevitable attribute of economic activity in all its manifestations. In addition, common sense and centuries-old economic practice clearly indicate that the exploitation of man by man is an objective reality and is the content of every labour act. The labour process in all cases consists in the exchange of activities between people who, one way or another, exploit each other. It is the way how people live and how income is generated. This non-contradictory conclusion gives reason to believe that, in the prevailing social and political practice, the generally accepted concept of exploitation preferred inversion to the true meaning of the phenomenon, absolutizing the meaning of only one of its sides, that

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is, abuse in the form of oppression. As a result, the fundamental, semantic meaning of the concept and phenomenon of exploitation was lost. The problem is not the presence of the phenomenon of exploitation itself in the labour process (I repeat, it is present in all cases), but its real content, according to which the interests of workers may be violated, but which can be quite rational and civilized. For the 19th and the first half of the 20th century, discrimination of the interests of workers in the process of exploitation of labour by capital was not only a typical but also structural phenomenon. The problem of infringement of the interests of workers (and employers) has not left the agenda today. It should be noted, in all fairness, that in the modern world (Russia is far from being an exception), the intensity of the conflict between the interests of labour and capital sometimes goes off scale. However, from the second half of the 20th century to the present moment, humanity has passed a certain path and accumulated valuable experience on the way to its resolution by institutional means. People learned to regulate the degree to which the conflict between workers and employers develops in the process of labour exploitation in a civilized way, avoiding the means of “expropriating the expropriators” accompanied by massacre. The goal of putting an end to exploitation in the modern world is actually reduced to the civilizational problem of liberating a person’s labour from oppression, the resolution of which requires an effective system of protecting workers from arbitrariness. We are talking about the development, introduction and monitoring of the implementation of institutional conditions that ensure the legal and mutually beneficial nature of the labour process (nowhere near the proletarian revolution followed by dictatorship). Thus, the liberation of labour consists not in the rejection of exploitation, but in the civilized deliverance of workers from arbitrariness and oppression. As we defined our attitude to the exploitation of labour, let us now turn to the question of whether the economic liberation of labor really requires an end to its alienation? First of all, the problem is not seen in a positive or negative attitude towards the very phenomenon of alienation, since alienation is a necessary component of the economy, serving as the division of property between subjects of appropriation. Let us refer to K. Marx: “Alienated labor has resolved itself for us into two component parts, which mutually condition one another, or which are merely different expressions of one and the same relationship. Appropriation appears as estrangement, as alienation; and alienation appears as appropriation, estrangement as true admission to citizenship” [2, p. 44], he wrote. That is, any “one’s own” is really only relative to the “alien.” In this sense, there cannot be property, as well as labour, without alienation.

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But the basis of civilized labour relations in the economy is the inalienability of an individual, his inviolability, the preservation as a subject of ownership of himself, his own resources (temporary, institutional, economic, qualifying, professional, nervous, physiological, moral, cultural, etc.). An individual acquires the economic freedom to choose between the appropriation and alienation of the resources of his own life activity only as a real subject of the economic system. By alienating his time, strengths and skills consciously and voluntarily, an individual retains invaluable capital, i.e., a thing that represents absolute value both for society and for himself. By this, we mean the ability to freely determine the meaning of one’s own economic activity. Exploitation, which is carried out on the basis of inalienability and protection of the main subject-forming function of its participants, the free meaning of creation of their economic activity, serves as a natural, civilized form of realization of relations of appropriation and alienation of man by man. The validity of this statement is determined by the fact that only under this condition in each labour process does the employer alienate and assign not the whole individual, but only a certain function of it, limited in time and space. What is more, it is done deliberately, based on the mutual agreement of the parties of the transaction. At the same time, the individual, as a subject of ownership, belongs to himself, that is, labour relations are reproduced as free economic and subject ones, in opposition to the tyranny and arbitrariness of societies alienating the person himself. Referring to the history of the issue, we note that in Economic and Philosophical Manuscripts of 1844 Marx defines the alienation of labour in four forms: the alienation of the product of labour, of the labour process itself, of the labor activity of the clan essence of man; of man from man [2, p. 86– 89] and characterizes this process extremely negatively, as “the worker’s self-estrangement, which turns his life activity, his essence only into a means for maintaining his existence” [2, p. 93]. However, from the text of Economic and Philosophical Manuscripts of 1844 it clearly follows that, according to Marx, the worker’s alienation in his product has, at least, two meanings: a natural one, as a necessary element of society; and the one brought about by circumstances related to the rising cost of things, while “the human world is simultaneously devaluing.” The alienation of the worker in his product–K. Marx wrote,–has not only the meaning that his work becomes an object, acquires an external existence, but also the fact that his work exists outside of him, independently of him, as something alien to him, and that this work becomes an independent force opposing him. [2, p. 88] A clear preference for the second of the given meanings, however, does not cancel the value of the first one, which, upon closer inspection, turns out to be no less significant. Emphasizing that labour produces: himself, a worker as a commodity and the goods themselves in general, K. Marx states

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by this that production, even being a capitalist one, is not limited only to the enslavement of hired labour, its alienation by acts of buying and selling labour. Though it is precisely these acts that characterize capitalism in England in the first half of the 19th century, by virtue of which Marx is interested in them, so they become the subject of his research. As a result, the opposite between labour and capital, formulated by K. Marx as “(. . .) the opposite between the absence of property and the property (. . .) in its active relationship, in its internal relationship” [2, p. 113]– acquires fatal forms of its manifestation. The self-sufficient, objective essence of capitalism is absolutized, alienating its essence from man. Marx treats a worker with sympathy, but denies that he has a human nature: “(. . .) a worker has the misfortune to be alive and, therefore, he needs capital (. . .)” [2, p. 100]. With regard to a bourgeois, Marx calls him a man, but with the proviso that he is a stranger, opposing the worker. The absolutization of capitalism basically contains a conflict between “people who have completely lost themselves”: an absolute exploiter and an equally absolute exploited. Then the latter, as it is well known, turns out, despite the loss of everything human to such an extent that he has nothing more to lose, “except for his chains,” to be the most advanced and revolutionary class. The question occurs: is it true that people really become materialized and dehumanized under capitalism? It is all about the circumstances. Taking as a starting point the situation when “(. . .) the worker becomes poorer the more wealth he produces” [2, p. 87], Marx explains this economic fact as modern (which is underlined by him). The power that dominates people in the conditions of private property, as evidenced by the experience of modern civilization, can be quite reasonable, constructive and humane. The twentieth century, with all its development proved that the individual, who is alienated, not self-owned, not exploited on the basis of an employment contract by other owners, can really only pay the highest price for his actions and results of work. Science and historical experience provide grounds for concluding: the choice between extremes–to maintain social and economic inequality or to end it, in principle, does not solve the problem of social and economic justice. Rational and socially effective economic systems are implemented not by the absolutization of private property and not by its destruction, not by the dictatorship of power and not by market arbitrariness. In these cases, it is not the alternatives that work, but the mechanisms of social and economic integration and evolution such as private property, social and economic subjectivity of individuals and protection of the interests of society and its members from economic and social upheavals, from the arbitrariness of business and government.

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COORDINATION OF SOCIAL PRODUCTION WITH THE CAPITALIST FORM OF APPROPRIATION In the second half of the twentieth century, humanity gained a firm conviction that class contradictions (antagonisms) cannot be resolved through revolutions and civil wars (mutual destruction of antagonists). Radical decisions are politically, economically, socially inhuman and impracticable, which is why they are unacceptable. Labour and capital are doomed to social and economic coexistence and cooperation. The civilized method of reducing the tension of the contradictions between the interests of the working class and the bourgeoisie has not only required, but also brought to life a system of institutions that harmonized the social nature of production with the capitalist form of appropriation. The state administration of social production and the social sphere received a huge development in the capitalist countries. D.Sc., Ph.D. in Economics, Assoc. Y.V. Latov, while characterizing this process, drew attention to the strange dissonance between the mainstream of modern economics, that is neoclassicism, which is actively protecting market self-regulation from the “totalitarian” aspirations of state regulation, and the reality in which Western states create and develop systems of social insurance, antitrust regulation, central banks, large-scale government orders. “Now, in the XX1 century (. . .) there is not a single developed country where the state would not play the role of one of the leading actors of economic life, but supporters of the” invisible hand of the market “still remain the mainstream.” [6, p. 5] At the same time, the economy fell into a state of deep decline and noncompetitiveness, and production did not meet social needs in countries that, at one time, got rid of private property, entrepreneurship, competition, and used the resources for the development of socialist production. The experience of the historical development of the countries, where socialism got the victory, convincingly proved the vital necessity of including market mechanisms in social and economic processes. The forcing of a revolutionary conflict of class antagonisms, that explode the established world order, does not have a scientific justification. A key argument in favor of this judgment is that both capitalism and socialism (both the plan and the market) are institutional systems. Institutions (rules of the game, forms of organization, structural structures, etc.), in their meaningful purposes, are elements of the aggregate, which K. Marx defined as a category of “means of production.” In all their diversity, they are used more and less efficiently as mechanisms and instruments of economic development but they cannot and should not serve as meanings and goals of social and economic development.

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It is also significant that the results of revolutions at all times were impressive social and economic losses, the deepening of problems and contradictions. Progressive development requires the preservation of the world order and creative work. The antagonisms, which are unabated and not eradicated, in all cases cost the society less than the results of revolutionary coups and civil wars. Loyalty to orthodox ideas, principles and meanings, the destructive role of which has been tested and confirmed by history, social and economic practice has no other perspective than the dynamic, progressive movement of countries and peoples into economic dead ends. “Fundamentalism” in politics, presented in any of its variants (“market,” “state”) is absolutely unacceptable and should remain in the past. Today it has become obvious that the basic contradiction of capitalism formulated by Marx–between the social nature of production and the capitalist form of appropriation–has not led and will not lead humanity to the world proletarian revolution. The reality indicates that the future of humanity will not be either capitalist or communist. And this means that the possibility of transforming capitalism into a system capable of reconciling social production with the capitalist form of appropriation, which (we mean possibility), according to the fair conclusion of Marx, was not implemented in the 19th century, but is implemented in social practice of the second half of the 20th and the beginning of the 21st century. THE MAIN SOCIO-ECONOMIC CONTRADICTION OF THE MODERN WORLD ORDER It seems to be logical that the classical definition of the main contradiction of capitalism continues to operate in modern conditions. However, its manifestation is characterized by a number of particular features. In the modern world, the global financial capital and the subjects of the global economy, that is MNCs, are the dominant, governing, priority beneficiaries of the mega economic system. There is a need to identify the main social and economic contradictions, corresponding to the realities of the 21st century. It is in the approval of the priority of global interests over the interests of national states that contributes to the implementation of the newest model of the conquest of the world by global powers, in terms of its resources, scale, dynamics and effectiveness, which has no analogues in world history. According to the author, in the realities of the 21st century, the role of the main social and economic contradiction objectively belongs to the conflict between global interests, which are aggressively dominant (politically, financially, economically, informationally, etc.) over national-state (public) interests of peoples and states.

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The 20th century was marked by a global, irreconcilable confrontation of two world systems. In the 21st century, the social and economic system has excluded and does not imply the very possibility of such a collision, due to the absence of them (two world systems). Today, social and economic systems exist in various forms and configurations, but not in the form of capitalism, socialism, etc. Using the Marx methodology, we state: diverse forms of economic activity are organically integrated in modern economic systems at all levels. In a number of countries, economic systems have been formed and function (they are not ideal, which, in principle, do not exist) providing quite acceptable, decent living conditions for national communities. The movement of countries and peoples along this path is a permanent and long process, which is filled with contradictions and conflicts. However, this is the only possible, rational way of the implementation of public interests, the provision of progressive growth, the limitation of excessive social and economic differentiation and discrimination. Countries with market economies have successfully introduced and developed social development institutions. Socialist countries have introduced and mastered market institutions, having achieved the improvement of economic efficiency, the well-being of the population, the competitiveness of national economies in the global economy on this path. The realization of public interests, which is the function of the most effective, in social and economic terms, ensuring the process of reproduction of the life activity of society and its actors, acts as a dominant, priority goal of the social and economic development of civilization. The decisive criterion of the progressive importance of economic systems is their ability to economically ensure social development that corresponds to the modern level of civilization. The solution of this problem is possible only in economic systems that integrate and effectively implement the resources of a market economy, public administration and planning, and global development. The great Marx laid the foundations of current methodology and progressive sensemaking of the 21st century. In conclusion, we will quote the contemporary French politician, political scientist, economist, one of the leading theorists of globalization, the author of K. Marx biography, Jacques Attali: “(. . .) he had all the features all that constitute the essence of the modern Western man (. . .), he was the first to rationalize the world as a unity of political, economic, scientific and philosophical unity.” [7, p. 13]. REFERENCES 1. V chem Karl Marks okazalcya prav. Economist Ruslan Grinberg—o sbyvshikhcya I nesbyvshikhcya predskazaniyakh glavnogo ideologa kommunizma. [What Karl Marx

The Realia of the Progressive Development of Antagonistical Economic Systems    23 was right about. Economist Ruslan Greenberg–about the fufilled and unfulfilled predictions of the main ideologue of communism].Economics and business, May 4rd. http://tass.ru/ekonomika/5141260. (in Russian).Marx K., Engels F. Soch., t. 12 [Marx K., Engels F. Complete works, vol. 12]. (in Russian). 2. Lenin V. I. Poln. sobr. soch., t. 1. [Lenin V. I. Complete works, vol. 1]. (in Russian). 3. Buzgalin A. V., Kolganov A. I. Globalniy capital. V 2 tomakh. Tom 1. Metodologya: Po tu storonu pozitivizma, postmodernizma I economicheskogo imperializma. [Buzgalin A. V., Kolganov A. I. The Global Capital. In 2 volumes. Vol. 1. The methodology: On the other side of positivism, postmodernism and economic imperialism (Marx re-loaded)]. 3rd edition, revised and amended. Moscow: LENAND, 2015. (Reflecting on Marxism. No. 100; Library of the magazine “Alternatives” No. 50). (in Russian). 4. Vladislav Inozemtsev. Bezotvetnyy vopros. Otvet Alekseuy Tsvetkovu [Vladislav Inozemtsev. The unanswered question. The response to Alexey Tsvetkov]. Berlin, June 2nd, 2015. https://snob.ru/profile/25538/blog/93350. (in Russian). 5. Istoricheskie sud`by uchenia J. M. Keynes [The historical fate of the doctrine of J.  M. Keynes]: monograph / team of authors; by ed. of R.  M. Nureev, Y.  V. Latov. Moscow: KNORUS, 2019. (Monograph). (in Russian). 6. Attali J. Karl Marx. Mirovoy dukh. [Attali J. Karl Marx or the thought of the world]. Jacques Attali. Moscow: Molodaya gvardiya, 2018. (in Russian).

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CHAPTER 3

A NEW VIEW ON “THE CAPITAL” BY KARL MARX Petr Arefiev Financial University, Moscow, Russia Kirill Gorelikov Moscow State Institute of International Relations (MGIMO University), Moscow, Russia Alexey Komarov Financial University, Moscow, Russia

THE CONTRIBUTION TO SOLVING THE PROBLEM OF THE REALIZATION OF A SOCIAL PRODUCT Marxist school of political economy (the founders–Karl Marx and Friedrich Engels) is one of the most developed in terms of methodological schools of economic thought.[1] This is largely due to the fact that Marx and Engels began their scientific activities as followers of Hegel’s highly developed methodological dialectical logic. In many respects, it was precisely the use

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of the Hegelian method of “ascent from the abstract to the concrete,” the method of “filling the concrete with the abstract” as a method of exposition and gave K. Marx a powerful analytical and evidential force. Marx himself admitted the following: “Of course, the method of presentation cannot, on the formal side, be any different from the method of research. The study should become familiar with the material in detail, analyze the various forms of its development, and trace their internal connection. Only after this work is completed can the actual movement be properly depicted. Once it was possible, and the life of the material received its perfect reflection, it may seem that we have an a priori structure.”[2] Indeed, “The Capital” in general methodological terms is distinguished by clarity, severity of reasoning, consistency in reliance on empirical facts.[3] In contrast to classical political economy, Marx widely used historical and evolutionary methods in presenting and substantiating his doctrine, using the principle that has long become classical: “human anatomy is the key to monkey anatomy,” that is, considering economically more developed stage of society, you can get and reliable knowledge of the less developed economically stages. Other characteristic features of the economic methodology of Marxism include: “economic materialism (determinism)” in the problem of interaction between different spheres of society; a pronounced politicization of economic doctrine, the desire to put political economy at the service of a particular ideology (this can be regarded as the ideological ideal of Marxism;[4] modification of the goals of political economy–from the theory of economic efficiency, it turns into the theory of economic justice; the use of the basic labor theory of value and the essentialist concept connected with it that the phenomena inherent in capitalism inadequately reflect its essence. [5] As a first example, we can consider the problem of the realization of a social product in the works of K. Marx. Marx devoted the third section of the second volume of Capital to the problem of the realization of a social product:[6] Reproduction and circulation of all social capital. He singled out two types of reproduction: simple (there is no accumulation of capital) and expanded, implying the capitalization of part of the surplus value. Extended reproduction is characteristic of capitalism. There are two divisions in production: the first is the production of means of production, the second is the production of consumer goods. Accordingly, the social product consists of these two parts. In his analysis, Marx uses digital models. In a more general form of the scheme of reproduction of K. Marx can be represented as follows: (C1 + V1 + M1) = P1 (C2 + V2 + M2) = P2

A New View on “The Capital” by Karl Marx     27

where C 1 and C 2 are consumed means of production in both divisions; V 1 and V 2—the fund for the existence of workers in both divisions; M 1 and M 2—surplus value in the relevant units; P 1, P 2—products of the relevant units. The main thing that the author of “Capital” pays attention to is the problem of implementation. Conditions of realization with simple reproduction: (V 1 + M 1) = C 2; P 1 = (C 1 + C 2); P 2 = (V 1 + M 1 + V 2 + M 2) With extended reproduction: (V 1 + M 1 > C 2); P 1 > (C 1 + C 2); P 2 < (V 1 + M 1 + V 2 + M 2) (V 1 + M 1 + V 2 + M 2) in the model of Marx stands for a national income. With simple reproduction, it is all “eaten” by workers and capitalists, with an expanded reproduction—part of it (part M 1 and M 2) accumulates, providing economic growth. We give a digital model of Marx for the case of simple reproduction: 4,000 C + 1,000 V + 1,000 M = 6,000 in the means of production 2,000 C + 500 V + 500 M = 3,000 in commodities 6,000 C + 1,500 V + 1,500 M = 9000—the entire social product Despite the unarguable advantages, this model is so conditional that it is an unreliable tool for analyzing the real economy. It has significant drawbacks: • it allowed the summation of the intermediate product, which is here the product of the first division, and the final product; • the final product is less intermediate, which means production for the sake of production. The American economics scientist M.Blaug combined the scheme of formation of the price of production, which is quite logical, with the scheme of reproduction of K. Marx, having introduced the third division–the production of luxury goods. To the resulting system of three equations, two conditions of invariance should be added, introduced by K. Marx: • the sum of values (values) is equal to the sum of prices; • the sum of surplus values is equal to the total profit as an element of price.

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The solution of a system of five equations with four unknowns (the rate of return, the prices of the means of production, consumer goods and luxury goods) does not allow us to recognize both conditions of invariance as fair: if we recognize that the sum of values ​​is equal to the sum of prices, then the total surplus value is not equal to the sum of profit. And vice versa: the recognition of the second means the non-recognition of the first. Thus, the theory of K. Marx is full of internal contradictions. ”The trick that makes Marxist political economy so attractive, if perceived uncritically, is to apply a two-story proof: first you see it, but then you don`t. There is the first floor of the building, namely the visible world of prices, wage rates and profit margins, and there is the basement floor of this building–the unobservable world of labor value and surplus value. The point is not only that we observe the first floor, but we do not observe the basement; the economic agents who are on the ground floor do not know anything about the world that is located under them in the basement. The reception used by Karl Marx is aimed at moving the basement floor to the first floor and the first floor to the second floor, skillfully hinting that in a certain sense the first floor is more real than the second floor, and that the true criterion of science is under the cover of the apparent motivation of the workers and capitalists on the second floor to break through to the “essence” of the business on the first floor. This is nothing but a skillful juggling, through which more than one generation of readers have been fooled.[7] “He,” writes M. Blaug, “made logical mistakes, distorted facts, made unreasonable conclusions from historical data and almost deliberately closed his eyes on weak points in his research.”[8] CONTRADICTIONS IN THE LABOR THEORY OF VALUE. PRODUCTION WITHOUT CAPITALIST LABOR Most of all, the contradictions of the theory of K. Marx manifested themselves in the labor theory of value. According to the concept of Karl Marx, the capitalist is refused to be in production, which means that he who takes the place of worker V in the formula C + V + m, is not a worker in capitalism, he is someone else. But who? Abstract splitting allows you to see that each independent peasant or artisan combines in himself: the function of the capitalist, the function of the worker. They create a product, as a result of two functions. Elimination of one of the functions will exclude the very possibility of the production process and, consequently, its result. Well, it is impossible, after all, to cut off from the peasant, the artisan, the part that performs the function of capital. And how to measure this part for cutting? It is clear that the peasant himself and the artisan will perish. That is why suspicions have arisen: who nevertheless takes the place of V in the

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construction of “The Capital”? Abstract splitting, found together between the capitalist and the worker, confirms: independent peasant and artisan produce goods as a result of two functions. Further in the text the explanations of this provision will be given. But in capitalism, for some reason, the goods produced are the result of only one function. By labor, or the ability to work, we understand the totality of physical and spiritual abilities that an organism possesses the living personality of a person, and which are used by him whenever he produces any use-values. But in order for the owner of money to find labor as a commodity on the market, various conditions must be met. The exchange of goods, in itself, does not contain any other relationship of dependence, except for those that arise from its own nature. And if this is so, labor can appear on the market as a commodity only and when it is brought onto the market or sold by its own owner, that is, by the very person whose labor it is. In order for its owner to sell it as a commodity, he must be able to dispose of it, therefore, he must be the free owner of his ability to work, his personality. He and the owner of money meet on the market and enter into relations with each other as equal commodity owners, differing only in the fact that one is the buyer and the other is the seller, therefore both are legally equal. To maintain this relationship, it is required that the owner of the labor force sells it permanently only for a certain time, because if he sold it completely once and for all, he would sell himself at the same time, turn from a free person into a slave commodity owner in the goods. As an individual, he must constantly maintain his attitude to his labor as his property, and therefore to his own goods, and this is possible only as long as he always provides the buyer with the use of his labor or consume it only temporarily, only for a certain period. Therefore, since alienating labor, he does not give up ownership of it. [9]

Where is the real capitalism? It is there, where the product is the result of two functions of living labor, or where the product is the result of one function of living labor? The question relates to the conditions of capitalism. With an independent peasant and artisan sorted out. Total clarity: they are in the “position” of the capitalist and the workers for the future of capitalism. Of course, there are workers at the machine, but the engineers invent and improve the machines, and the capitalist organizes the process of efficient production. Together with the ability, the worker must sell and the person for the period of work.[10] Consequently, the sale of labor can be considered slavery for a period of work. Capitalism can be viewed as such limited slavery. But the conclusion of an employment contract can be considered as a rental workplace. In this case, capitalism is not slavery, but rent relations, or a partnership, a partnership of the owners of the means of labor, or production. What is the capitalism: slavery or partnership? The answer to this question depends on whether the manufactured product, a

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thing, the property of the entrepreneur, as Marx argues or not? What does a worker sell—labor itself, or a commodity made by labor? Is labor a commodity? Is there a market within the enterprise? This is a question about the relationship of people in society, the question about the essence of human society, about the ways of its development. The answer to these questions is given by the paradox of the turner, considered in the work of S. Yuferov.[11] The essence of the turner’s paradox is shown by the following question. What should an entrepreneur have to pay to an employee, a turner who machined a lathe on his instructions, any shaft, if this shaft itself, in accordance with the teachings of K. Marx, originally belongs to the entrepreneur? If the manufactured shaft is owned by an entrepreneur, then there is no point in buying his own shaft, paying for it. Marx says that you have to pay a turner for his labor. But why pay for labor, i.e., buy it, that’s what the entrepreneur doesn’t need, when he already has the shaft he needs? Pay for labor, i.e., buy it, too, it makes no sense. Before the manufacture of the shaft, the working power of labor has not yet ran out, and there is nothing to buy, and after the shaft has been manufactured, the working power of labor has already ran out, and power is no more, and there is nothing to buy either. There is a paradox of a turner. An employee, a turner, has no reason to receive payment for his work, neither for his labor, nor for labor, nor for the goods he has made. What does the turner paradox say? That production, in which the manufactured product does not belong to its manufacturer, the worker, simply cannot exist. The manufacturer loses his livelihood to continue working. The turner paradox arises as a direct consequence of K. Marx’s assertion that the shaft, any manufactured product, originally belongs to the entrepreneur. If we assume that the relationship between the worker and the entrepreneur is somewhat similar to the relationship that occurs between the tenant and the landlord, then this paradox can be resolved. Legally, the machine and the workpiece from which the shaft is made belong to the entrepreneur, but in fact uses the workpiece and the machine turner. Therefore, the workpiece and the machine satisfy the needs of the turner. “A commodity is first of all an external object, a thing which, thanks to its properties, satisfies any human needs.”[12] Here is fixed the generic attribute of the goods. But, we know that legally the dinner that you ate in the cafe belongs to the owner of this cafe until we paid the bill. Apartment under a rental agreement meets the needs of its tenant. Turner works on the lathe. The machine, as a commodity, satisfies the needs of the turner.

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The lathe has satisfied the needs of a turner who turned a shaft on it, and not the legal owner of the machine. A product that belongs to one person, but which another person eats, belongs to the first only legally. What does legally mean? This means that the cafe owner is legally entitled to pay for dinner from the person who ate the dinner. After all, the bill in the cafe is brought to you when you have already eaten dinner. In other words, the legal owner sold the dinner, and the actual owner must pay its price. Similarly, the relationship turner and the legal owner of the machine. Version of S. Yuferov of the difference of legal and actual ownership is confirmed by the system of piecework and time-based payment existing in enterprises. Time wage differs in that the employee is paid the time that he actually worked. Piece wages take into account the amount of products that the worker has manufactured. And with piecework, and time-based payment set the price for each manufactured product. Without knowledge of the price of the manufactured product, it is impossible to charge either time-based or piece-rate payment, which cannot exceed the selling price of the product. The existence of the price of the product, and the exchange of the price is the evidence of the exchange of the product, its sale.[13] Shaft, and like a shaft, every product, every detail made in a factory, has a price. The price belongs to the details. What does this price say? Every price says the same thing—for how much the product that belongs to a price is sold and purchased. Bought from whom, by whom? If K. Marx is right, and the shaft not only legally belongs, but actually satisfies the needs of the entrepreneur, then the hired worker really cannot sell anything except his labor force. Then society really has a class, antagonistic nature. If we recognize that the actual position of the worker is similar to that of the tenant, in this case the employee is the tenant of the equipment, and the same participant in market relations as the entrepreneur who has leased the equipment. In this case, society has no class nature. This is the case. The turner›s paradox is easy. Turner is a tenant of equipment. The entrepreneur, renting out the equipment, advances the turner. And payment for rent serves as the shaft made by the turner. Therefore, wage labor is categorically contraindicated in the labor market. Every carrier of hired labor, as an independent person, in a civilized society was given a capital inoculation against the sale of himself: everyone is free. There must also be an erroneous theory that justifies this production error. This error exposes the paradox of form and content. Marx argues that the only source of profit for an entrepreneur is the purchase and sale of labor, or the exploitation of labor by him is the only source. Consequently, if it is shown that there is another source of profit not related to the exploitation of labor, then all the accusations of K. Marx regarding the

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capitalist structure will turn out to be false. In accordance with the ideas of Karl Marx, each product has a cost, and there is a price. Price, according to Marx, is a form of value. Marx notes that the form may not be equal to the content—the price may not be equal to the cost. Consequently, the possibility of a quantitative discrepancy between price and value of value, or the possibility of price deviation from the height of value, is already contained in the form of price itself . . . the rule can make its way through the chaotic chaos only as the blind law of averages.[14]

Here Marx argues that the price may not be equal to the cost. Marx says that the reason that the value of the price may differ from the height of the value lies in the fact that there are circumstances that allow this possibility. But if circumstances make it possible to set the price of this quarter at £  3 or forced to reduce it to 1 p.st., it is obvious that 1 p.st. is too small, but 3 p. is too large for an expression of height of value—nevertheless, 1 p.st. and 3 p.st. are the essence of the price of wheat, because, firstly, they are its form of value. . . .[15]

THE DIFFERENCE IN PRICE AND COST We conclude. The value of the price and the value of the cost of the same product may vary. The question arises, what is the difference between price and value? Obviously, this is also value—surplus value, or profit. (If a wheat quarter has a value of 2 f.st. and is sold at a price of 3 f.st., then a difference of 1 fs. Is the profit of the owner of the wheat.) Consequently, surplus value or profit may arise in the sale process. This surplus value, or profit, arises in the sale process, as K. Marx says, during which circumstances arise that allow you to assign different prices. Consequently, the cost, or profit from the circumstances obtained not from the exploitation of labor, but in a different way, from the sale. “No matter how you look, but the fact remains: if equivalents are exchanged, no surplus value arises, and if non-equivalents are exchanged, no surplus value also arises. Handling, or barter, creates no value.[16] But Marx himself denies all his theoretical constructions with a single practical observation. ”But if circumstances make it possible to set the price of this quarter at £ 3.”[17] By profit, according to circumstances, K. Marx contradicts himself. The content of these circumstances is not important for us, it is important that they exist, and that it is in exchange that they create surplus value and

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profit. From the point of view of common sense, this difference in price and value should not be at all, as the logical difference between the form and content, the price (form) and the value (content) is impossible in general. But at the same time, this difference practically exists, and this is the profit that arises during the sale process. It is impossible to understand how the exchange of goods, the sale of goods, how the difference between price and value can create a profit within the framework of the Marxist theory. Cost, as the amount of labor costs refers not to the product, but to the consumed products. The difference between value and price, between the form and content of one labor, is not permissible. The difference between productive and consumer labor, between the cost and price of one labor, and the cost and price of another labor is quite acceptable. This difference is surplus labor, or surplus value—profit. Profit suggests that it is not possible to receive it in commodity production outside the exchange, out of sale. Consequently, the hiring of labor, and its work does not create added value. Labor power creates not a surplus value, but a product. Manufactured product can create added value. Whether the manufactured product becomes surplus, or not, whether the product creates surplus value, or not, it will only show the exchange and the profit. In the labor theory of Marx there is no concept of labor consumption. Marx has only one productive labor, using which he tries to determine the surplus value, dividing it into two, into abstract, and concrete labor. In his analysis of the goods, Marx makes two mistakes. The first mistake is that Marx calls the quantity of labor expended as the value of the goods produced. However, he does not explain where the consumed labor comes from, which is the source of the labor expended, the source of value. Obviously, the source of value, the source of labor expended, its energies are consumed products. Means the amount of labor expended, or cost, refers to the consumed products, and not to the manufactured product. The second mistake is that K. Marx calls the quantity of the consumed product the value of the produced product, without taking into account the usefulness of this produced product. Price becomes a form of value, a form that changes without changing the content. There is an incomprehensible difference between price and cost, between form and content. As a consequence of this, surplus value arises, which should not be. There is a dead end of the theory, the absurd. Labor is dual, but it is not abstract and concrete of one productive labor. Labor may be consumption. That explains everything. Both the origin of the surplus value, and its appearance, as the quantity of the surplus product, and the source of the surplus product, is the quantity of the consumed product. In this situation, exploitation arises as a disproportionate distribution of the surplus product. Such exploitation is fully regulated by the state.

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The turner’s paradox reveals another mistake of Marx. The turner’s paradox shows that the position of the turner is similar to that of the tenant. This means that the capitalist advances the turner by leasing the workplace. Marx asserts the exact opposite, asserting that the peculiarity of capitalist labor is that the worker always advances or credits the capitalist. “Thus, everywhere the worker advances to the capitalist the use-value of his labor power; it gives the buyer to consume his labor before the latter has paid its price, in a word–everywhere a worker credits the capitalist . . .”[18] It clearly follows from this that the entrepreneur does not pay the worker until the end of the labor process. Marx calls this capital lending. But is it? In order for the labor process to be perfected, the means of production are necessary—equipment, materials, tools, energy. All this is extremely difficult, costly. The question arises, why, having invested considerable funds in capital, does not pay for the work of the proletarian, but waits for the proletarian to credit it himself? “In all countries with a capitalist mode of production, labor is paid only after it has already been functioning during the period established by the contract when it is bought, for example, at the end of each week.”[19] It follows that capital always pays only when labor is already done, i.e., when the product is created. Marx sees in this fact the lending of the capitalist, on the part of the employee. This fact should be looked at differently. The fact of payment for work after its completion speaks not about crediting, but above all that the work is finished and that the goods are made. Payment for work after its completion means the fact of purchase of manufactured goods. Payment for work after its completion means that the capital has bought the goods for which it paid, and accordingly, the proletarian has sold it. Consequently, capital does not pay for labor, but for manufactured goods. This means that it is not an employee who lends capital, but on the contrary, capital loans an employee by leasing him a workplace. An employment contract is a lease for a workplace. For this lease, the employee does not need to have financial resources, since the rent is paid for the goods produced. Capital advances, leases a workplace, why not buy capital, neither labor nor its labor. The capital buys the goods already manufactured by the proletariat, the tenant. The employment contract is actually similar to the lease agreement. Under this contract, capital leases to the proletarian a workplace, with equipment, materials, tools, before paying for it, therefore, capital always advances the proletarian. It is the capital that advances the proletarian, and the goods manufactured by the proletariat are the means of payment for this rent, the remainder of which becomes the salary. The proletarian sells not labor, but the product he produces.

A New View on “The Capital” by Karl Marx     35

An employment contract is not a legal act of buying labor, but there is a lease contract. The political theory of Capital is based on the statement that the shaft made belongs to the entrepreneur. The idea of ​Karl Marx about the classes that sell and the classes that buy labor leads to the class structure of society. According to Karl Marx, each society consists of two classes that are in irreconcilable contradictions among themselves—in class antagonism. One of the main proofs of the existence of class antagonism, Marxists call exploitation, is the sharp division in the distribution of income between the owner of the enterprise and the hired worker. That it exists is not denied by anyone. But exploitation, its rate, as well as the amount of rent, is not proof of class antagonism. One of the main ideas of Capital is the need for revolution, the need to destroy private ownership of the means of production in order to create a just society. But there is another way to create such a society. Marxists are convinced that exploitation, a significant difference in income between an entrepreneur and hired workers cannot be eliminated within the framework of the capitalist system, that a revolution is needed to overthrow private ownership of the means of production. It is proposed to consider another option. Every dissatisfied worker can become an entrepreneur. There are no bans on business, income distribution in a capitalist society does not exist. Nowadays, more and more opportunities appear for business activities. The “Uber” application has made entrepreneurs of all the taxi drivers who have ever used it. Now, taxi drivers do not need to wait for commands from the operator. They themselves determine when they connect or disconnect this application. Thus, everyone who can afford to buy a car today (most of them) can become entrepreneurs. 3-D Printers, in turn, reduce the cost and individualize production. It should be noted that all these wonders of technology would not have appeared on the market without building a national innovation system (NIS), and building an effective NIS, in turn, implies the existence of basic elements of capitalist relations. It is an entrepreneur in a competitive environment that is interested in creating competitive products and forming new markets. Socialist enterprises have no need to form them, since under socialism there is no competitive driving force that would induce civilian production managers to implement the achievements of the NTP. The basic idea of ​​a well-functioning and functioning NIS is an economy that is overtaking self-adjusting modernization (and, as a cumulative result, innovative technological leaps) provided by the “learning society.” Since the late 60s of the 20th century, starting with the work of Robert Hutchins,[20] the phrase “learning society” began to denote a new type of society, where the acquisition of knowledge is neither limited by the walls of educational institutions (in space), nor the completion of primary education. In an increasingly complex world where

36    P. AREFIEV, K. GORELIKOV, and A. KOMAROV

it may be necessary for everyone to perform various tasks during their lives, it becomes necessary to continue their studies throughout their lives. At the same time that the notion of a learning society was being created, Peter Drucker noted the emergence in the world community of a knowledge society, where “learning to learn” is the most important thing. The innovation process is a unique process that combines science, technology, economics, entrepreneurship and management. It consists of obtaining an innovation and extends from the inception of an idea to its commercial realization, thus encompassing the whole complex of relations: production, exchange, and consumption. In the modern theory, the NIS is defined as “such a set of different institutions that, jointly and individually, contribute to the creation and dissemination of new technologies, forming the basis for governments to formulate and implement policies that affect the innovation process. As such, it is a system of interconnected institutions, designed to create, store and transfer knowledge, skills and artifacts that define new technologies. A non-free person can be educated, but only a free person has the incentive to realize their knowledge in a new civilian competitive product. In the USSR, there was no competition in the civil industry. Nevertheless, she remained in the military sphere. As a result, our tanks were fast, and civilian Soviet cars, unfortunately, did not show brilliant results on the racing tracks. Freedom in capitalism has guarantors: the subjective guarantor (subjective prerequisite) is the function of capital, the carrier of which is the living labor of the capitalist; objective guarantor (objective premise)—the market for the results of the production and service sectors. All of it is in the free world of exploitation, which as a category has, without triviality, a normal meaning: exploitation is the extraction by the participants of a relationship, useful property links from somebody, anything.[21] With common sense, a legally free person can exchange his freedom only for . . . freedom. Under capitalism, there is a social division of social labor of an “economictechnological ” nature, in contrast to the previously existing social division of labor of an economic-substantive nature.[22] The “technological” division of labor is caused by an objective requirement: budding off the functions of accumulation and the application of capital. This is the first in the sphere of the production process the social division of labor “according to technology” and the fourth in the series of the previous social division of labor “on the subject.”[23] The objective process is subjectivized in the capitalist. Since the XVI century, the function of capital takes over the capitalist for the execution of their living labor directly in production.[24] It is against this function of capital that the critique of Capital is directed. If a society creates a production scheme without a capitalist, then as a result he has to return to the division of labor of an “economic-objective” nature. The real possibility of depriving even limited freedom is an invisible chain that chains

A New View on “The Capital” by Karl Marx     37

everyone to economic relations. This reality is enshrined in the Constitution—the protection by the state of the socialist forms of ownership of the means of production and the Criminal Code. All at the same time deprived everyone of their liberty and in the name of the society retain this state. The function of capital outside production. In a sense, the analogy of pole points the historical vector of material production: in natural habitat–every person is not free because of the conditions, so to speak, of the global nature of “totalitarianism” from nature, which does not create tools for people; in an artificial environment—every person is not free, so to say, global totalitarianism by the economic system that works for on the basis of socialist forms of ownership of the means of production, and that is, the system does not create the necessary conditions for the function of capital. The organic capital structure does not change. Central abstraction is an assumption in the schemes of reproduction of K. Marx. Be present the capitalist in C + V + m, he would certainly not allow this. Because here his work is just a function of capital.[25] It is in the organic composition of capital that the living capitalist manifests itself, the goal of which, in order to live well both for him and for the worker, one must constantly ensure production “by the normal character of the material factors of labor.” From the foregoing, it can be concluded that a return to the capitalist system of production in countries in the post-Soviet space had rational motives. From myself, adding to them—these were certainly necessary, but, in my opinion, hasty changes. THE CONNECTION OF THE WORLDVIEW, EMBODIED IN THE WORKS OF KARL MARX, WITH THE PECULIARITIES OF BUILDING CAPITALISM IN THE POST-SOVIET SPACE. WAYS OF COMPLETION OF CAPITALISM Sustainable economic development primarily implies political stability. In the PRC, they were able to switch to the capitalist mode of production while maintaining external socialist attributes. It may seem a paradox to the fact that today in this country, corporate owners are being accepted into the Communist Party . However, it is no less paradoxical that in Russia, after the hasty privatization of the 1990s, many new owners of the means of production, brought up, unfortunately, on K. Marx’s “Capital” did not even think about the organic composition of capital. In the 1990s, the role of owners of the means of production in Russia was, in many ways, the same as K. Marx saw it, and those who were called oligarchs at that time, “ were just very rich co-operators. “ Nowadays, for Russians to look confidently into the future, it is advisable to take Henry Itskowitz’s concept as the basis for the further development of Russia.

38    P. AREFIEV, K. GORELIKOV, and A. KOMAROV

In his opinion, two key models dominate the world today: the administrative-command management model and the market model of state nonintervention (laisser-faire). Innovative development implies a third way— the Triple Helix model,[26] in which the mandatory participation of key actors (the state, enterprises, universities ) is foreseen, with the possibility of each of them taking leadership at a certain stage of development, and at the same time forming an “agreement space.” The source of development in this model is the University. One of the key functions of the University in the model of “triple helix”—conducting research and development, scientific activities. On the other hand, the university should be entrepreneurial–both in terms of the educational process, and in terms of regulations and management procedures. REFERENCES Agapova T. (2007) Marksistskaya sotsiologiya [Marxist Sociology], Russian Economic Journal, No. 10, 15–22 pp. (in Russian) Blaug M. (1997) Economic Theory in Retrospect, 5 th edn. Cambridge University Press Dunaevskaya R. (2011) Marksizm i svoboda [Marxism and freedom]. Praxis, Moscow, 323 pp. (in Russian) Etzkowitz Henry (2014) Troynaya spiral’ [Triple helix]. Universities-enterprises-state. Innovation in action “, Moscow, 39 pp. (in Russian) Hutchins, Robert (1968). The learning society. University of Chicago Press, 6 pp. Lenin VI (2012) Marksizm o gosudarstve [Marxism about the state], Moscow, 21 pp. (in Russian) Lenin VI Marx, Engels (1991) Marksizm [Marxism]. State publishing house of the olitical literature, Moscow, 97 pp. (in Russian) Marx K. (1960) Kapital [Capital]. Book I: The Marx K., Engels. Vol. 23. 2 ed. State publishing house of political literature, Moscow , 119 pp. (in Russian) Olsevich YA (1994) Transformatsiya khozyaystvennykh sistem [Transformation of economic systems]. Moscow. 21 pp. (in Russian) Potemkin G. G (1994) Anti-Kapital. V pamyat’ zhertvam kommunizma [Anti-Capital. In memory of the victim of communism]. Evangelist, Moscow, 26 pp. (in Russian) Schumpeter Joseph A. (2015) Capitalism, Socialism, and Democracy, 1 edition. Routledge. Yuferov, SV (2012) Kratkoye oproverzheniye «Kapitala» K. Marksa. Novaya teoriya truda i deneg [A Brief returns of the “Capital” Karl Marx. A new theory of labor and money]. Publishing House “Sputnik +.” Moscow, 5–12 pp. (in Russian) Yurkov, AM, VM Zepalov (1997) Spetsseminar po «Kapitalu» K.Marksa [Workshop on “Capital” Karl Marx]. Rostov-on-Don, 10 pp. (in Russian)

A New View on “The Capital” by Karl Marx     39

NOTES [1] Lenin V. I. Marxism about the state–Moscow, 2012. P. 21. [2] Marx K. Capital. Volume I. Book I: The process of production of capital // Marx K., Engels F. Op. T.23. 2–ed. M.: State Publishing House of Political Literature, 1960. P. 21. [3] Lenin V.  I. Marx, Engels, Marxism // State Publishing House of Political Literature–Moscow, 1991 . S. 97. [4] Agapova T. Marxist Sociology // Russian Economic Journal. 2007. No.  10. pp. 15–22. [5] Blaug M. Economic thought in retrospect. M., 1994. p. 264 [6] Marx K. Capital. Volume II. Book II: The process of capital circulation // Marx K., Engels F. Soch. V.24. - ed. M .: State Publishing House of Political Literature, 1961. P. 100–114. [7] Blaug M. Economic thought in retrospect. M., 1994. p. 265. [8] In the same place S. 265. [9] Marx K. Capital. Volume I. Book I: The process of production of capital // Marx K., Engels F. Op. T.23. 2–ed. M .: State Publishing House of Political Literature, 1960. S. 178. [10] In the same place S. 178. [11] Yuferov S.V. A brief refutation of the “Capital” of K. Marx. A new theory of labor and money. - M: Sputnik + publishing house, 2012. P. 5–12. [12] Marx K. Capital. Volume I. Book I: The process of production of capital // Marx K., Engels F. Op. T.23. 2–ed. M .: State Publishing House of Political Literature, 1960. P. 43. [13] Dunaevskaya Paradise Marxism and freedom; Praxis–Moscow, 2011. p. 323. [14] Marx K. Capital. Volume I. Book I: The process of production of capital // Marx K., Engels F. Op. T.23. 2–ed. M .: State publishing house of political literature, 1960. P. 119. [15] Ibid. P. 111. [16] Ibid. P. 174. [17] Ibid. P. 111. [18] Ibid. C. 185. [19] There is . C. 185 [20] Hutchins, Robert (1968). The learning society. University of Chicago Press, p. 6 [21] Yurkov A.M., Zepalov V.M. Special seminar on the “Capital” of Karl Marx. Rostov-on-Don, 1997. p. 10 [22] Olsevich Yu. Ya. Transformation of economic systems. M., 1994. S. 21. [23] Potyomkin G.G. Anti-”Capital.” In memory of the victims of communism. “ M Blagovestnik, 1994. P. 52. [24] Schumpeter J. Capitalism, socialism and democracy. M., 1995. p. 37. [25] Potyomkin G.G. Anti-”Capital.” In memory of the victims of communism. “ M Blagovestnik, 1994. p. 26. [26] Henry Itskovitz “Triple Helix.” Universities–enterprises–the state. Innovation in action,” M. 2014. S. 39.

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CHAPTER 4

THE CONCEPT OF TIME IN ECONOMICS AS A MODERN TREATMENT OF KARL MARX’S THEORY Elena G. Popkova Plekhanov Russian University of Economics, Moscow, Russia

For ensuring the completeness of the picture of the modern global economic system, it is necessary to supplement the spatial (structural) aspect, which has been studied and described in multiple scientific works and publications, with the time (dynamic) aspect of development of the global economy. In the context of starting the tendency of innovational development of economic systems, interests of the modern scientific community to the issues of innovations grew. However, the essence of novelty cannot be opened without comparing it to the existing process, knowledge, product, technology, etc. Therefore, the Theory of innovations should develop in connection to the Theory of time in economics, and innovations should be studied not separately but in comparison with traditions, retrospective, and routine phenomena and processes.

Marx and Modernity, pages 41–78 Copyright © 2019 by Information Age Publishing All rights of reproduction in any form reserved.

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42    E. G. POPKOVA

This explains the importance of time in economic analysis and actuality of studying the time aspects of development of economic systems, which is the purpose of this work. For achieving this goal, the authors solve the following tasks, which determined the parts of this scientific work: • the Law of time saving of Karl Marx as a foundation of the modern concept of time in economics; • Time machine in economics: the problem of co-existence of economic systems that are at different stages of development; • economic “vintage”: essence of the phenomenon and means of measuring; • time as the main category of the modern Theory of innovations. Innovations in comparison with traditions. KARL MARX’S LAW OF TIME SAVING AS THE FOUNDATION OF THE MODERN CONCEPT OF TIME IN ECONOMICS The law of time saving is described by Karl Marx in the book Zur Kritik der Politischen Ökonomie in 1859. It should be emphasized that the law was not a self-goal of the research and was derived in the process of studying the public production. The title of the book shows that the law is a continuation (or result of criticism in Karl Marx’s formulation) of the classical political economy and, in particular, the works of Adam Smith. That’s why the foundation of the law is the labor theory of value. We formulated the following main provisions of the Law of time saving by Karl Marx, which pose certain interest in the aspect of reflecting the factor of time in the macro-economic analysis, (Marx, 1859): • there are a lot of alternative means of using time in economics: this provision was taken by Karl Marx from Adam Smith, after that it was used in the works of Friedrich von Wieser, which reflects its high scientific value. In Marx’s treatment, its macro-economic aspect is viewed; it means that in the set period of time the socio-economic system can produce goods that are aimed at satisfaction of the initial needs of human (in Marx’s treatment, these are “production of wheat, cattle, etc.”) or goods aimed at satisfaction of the needs of a high level, including moral development of society. The scholar also gives the treatment of the micro-economic aspect of this provision, according to which human can conduct production activities or consumption of goods and, as an alternative, develop morally and spiritually;

The Concept of Time in Economics as a Modern Treatment of Karl Marx’s Theory    43

• effectiveness of usage of time determines the intensity of socioeconomic development of society: effectiveness of usage of time determines accessible combinations of alternative means of its usage. In micro-economic and macro-economic aspect, saving of time on production and consumption of goods leaves more time for moral development of a separate human and society on the whole. That’s why intensity (or “comprehensiveness” in Marx’s treatment) of socio-economic development of society depends on effectiveness of production and consumption of goods and, accordingly, on time that is left for spiritual development; • time—the most important economic resources, which is the key object of economy; time is defined by Karl Marx as “form and space for socio-economic development” of society. As any socio-economic activities depend on time, it is the most valuable resource. As time is the basis of all socio-economic phenomena and processes, “any saving is brought down to saving of time.” Works of Karl Marx, including his book “A Contribution to the Critique of Political Economy,” are a basis for conducting modern scientific studies, which include (Fulk, 2017), (Warren, 2017), (Economist Newspaper Ltd, 2017), (Smith, 2017), (Lewis, B. (2017), (Kangal, 2016), (Ince, 2016), (Shamis, 2016), (Simon, 2016), (Perović, 2016), (Baizakov et al., 2016), (Finelli, 2016), and (O’Hara, (2015). The theory of public production and its first law—the Law of time saving—is also popular in scientific economic circles and is the object of close attention of various scholars, as well as discussion and reconsideration in view of new experience of socio-economic development of economic systems. Examples of their usage are the following publications of modern authors: (Furlan, 2017), (Chambers, 2017), (Rotta and Teixeira, 2016), (Collins, 2016), (Foley, 2016), (Cotter, 2016), (Roberts, 2016), (Petri, 2015), and (Ouellet, 2015). Professor Oleg V. Inshakov shared views of Karl Marx on the issues of saving of time and wrote his fundamental works on evolutional economics and economic genetics on their basis (Inshakov, 2005a), (Inshakov, 2005b). Karl Marx formulated the Law of saving of time for the past and present time—which predetermined its static character. Scientific research in continuation of the works of Karl Marx allowed determining the dynamic aspect of this law, including future time into it. Based on the viewed provisions, the model of time saving in economics according to the Law of saving of time of Karl Marx and existing scientific supplements is seen in the following way (Figure 4.1). Figure 4.1 shows the connection between the past, the present, and the future in the Law of time saving of Karl Marx. This is ensured by the fact

44    E. G. POPKOVA

Figure 4.1  The model of time saving in economics according to the Law of time saving of Karl Marx. Source: Compiled by the authors.

that this law studies the whole life cycle of a product. As we see, the sum of past (previously materialized) labor, expressed in labor means, present (in Marx’s formulation—“live”) labor, and future labor, which is spent for consumption (in Marx’s formulation—for obtaining useful effect), determines aggregate expenditures of labor. KARL MARX’S LAW OF TIME SAVING SAYS THAT SAVING (REDUCTION) OF AGGREGATE LABOR EXPENDITURES PER TIME UNIT LEADS TO SAVING OF TIME In other words, growth of labor efficiency in the past, the present, and the future stimulates saving of time. Increase of labor efficiency is accompanied by reduction of the sum of expenditures of the past, live, and future labor for production and consumption of goods. Despite the obvious advantages of Marx’s Law of saving of time, related to precise and detailed fundamental description of the essence and peculiarities of the process of development of socio-economic systems, its drawback is its descriptive nature. That is, the law shows the necessity for saving of time and causal connections of this process, but does not offer methodological tools for its management. Understanding the advantages of saving of time does not stimulate the increase of efficiency—for this, as is noted in the Theory of saving

The Concept of Time in Economics as a Modern Treatment of Karl Marx’s Theory    45

of time of Adam Smith, it is possible to use the mechanism of labor division, specialization, and automatization. TIME MACHINE IN ECONOMICS: THE PROBLEM OF CO-EXISTENCE OF ECONOMIC SYSTEMS THAT ARE AT DIFFERENT STAGES OF DEVELOPMENT Present time is an instantaneous photo of the picture of reality. Looking at the photo, we can suppose what’s going on in a certain country or the whole world. But what if the photo is just an illusion of the present? What if it shows only general outlines, leaving multiple connections between various events and their future consequences outside of the picture . . .  Present Continuous is time that has already come but continues. It is a moment in the present that has strong connection to recent past and future; a moment in which everything could be changed if one tries to understand the essence of what’s going on in the photo. But how could this be done? It is necessary to cross the limit of time and objective reality and become a part of the photo! Let us start a marvelous journey in the instant photo of the modern global economy . . .  The key essence of “Present Continuous” consists in its continuity. Like human thought is developing, creating newer and more complex logical connections and conclusions (Christakou, 2014), there’s development of socio-economic systems, each moment of existence of which is unique, but is related to the previous and future moment (Aydemir, 2011). The first thing that we see in the photo is basketball players. Two players oppose each other, trying to win. However, they do not see that they are controlled from above. Obviously, the course of the game, behavior of players, and the winner will be determined by the hand that holds the basketball (Figure 4.2). From the scientific point of view, this picture could be explained in the following way: under the influence of intensive and comprehensive globalization, an integrated global economic system is formed (in Figure 4.2, we see only two players, but this is relative—as a matter of fact, whole teams could be hidden beyond them). However, expanded possibilities in the sphere of global economic cooperation, which ensure systemic character of interaction between economic systems (structural elements) in the global economic system, did not lead to their unification. On the contrary, competitive struggle increased, and the role of international organizations, which is symbolized by the hand in Figure 4.2, grew. From the scientific point of view, this picture could be explained in the following way: Under the influence of intensive and comprehensive globalization, a comprehensive global economic system has formed. However, expanded

46    E. G. POPKOVA

Figure 4.2  Instant photograph of the modern global economy.

capabilities in the sphere of global economic cooperation, which ensure systemic character of interaction between economic systems (structural elements) in the global economic system have not led to their unification. One of the features of globalization is reduction of time that is required for transactions. Therefore, if density of time is measured in time of the event, globalization accelerates time, including economic time. This means that growth of the level of internationalization of economic activities of socio-economic systems leads to acceleration of their economic time. This phenomenon shows increase of growth rate (annual growth) of GDP with growth of the value of the globalization index. Dynamics of these values in Russia in 1992–2017 is given in Table 4.1. Based on the data from Table 4.1, a regression curve is built, which reflects dependence of Russia’s GDP in constant prices on the value of the index of globalization (Figure 4.3). As is seen from Figure 4.3, acceleration of growth rate of Russia’s GDP is by 55% explained by growth of the values of the index of globalization. This shows acceleration of the course of economic time in Russia over the recent thirty years under the influence of the process of globalization. Specifics of various economic systems allow them to preserve competitive advantages in the global arena and are the reasons for structural disproportions in development of the modern global economy. Its systemic

The Concept of Time in Economics as a Modern Treatment of Karl Marx’s Theory    47 TABLE 4.1  Dynamics of Values of the Index of Globalization and GDP in Constant Prices in Russia in 1992–2017 Year

Index of Globalization

GDP in Constant Prices, RUB billion

Annual Growth of GDP, Percent

1992

51.26

43,246.072

—

1993

50.78

39,483.664

–8.70

1994

51.32

34,469.239

–12.70

1995

53.99

33,056.000

–4.10

1996

55.94

31,863.300

–3.61

1997

56.56

32,303.500

1.38

1998

58.79

30,576.800

–5.35

1999

60.73

32,518.900

6.35

2000

67.52

35,785.800

10.05

2001

67.42

37,607.400

5.09

2002

67.95

39,391.500

4.74

2003

69.59

42,286.400

7.35

2004

67.98

45,320.700

7.18

2005

68.56

48,210.400

6.38

2006

69.34

52,141.300

8.15

2007

70.01

56,591.600

8.54

2008

69.90

59,561.400

5.25

2009

70.22

54,903.100

–7.82

2010

69.02

57,375.800

4.50

2011

70.12

59,698.100

4.05

2012

70.55

61,798.300

3.52

2013

70.53

62,588.900

1.28

2014

70.47

63,038.400

0.72

2015

70.98

61,249.400

–2.84

2016

71.01

61,097.500

–0.25

2017

71.03

61,952.886

1.40

Source: compiled by the author based on: (KOF, 2018), (International Monetary Fund, 2018)

imbalance leads to high risk of global economic crises and the necessity for using large resources for overcoming it. The spatial (structural) aspect of the modern global economic system is has been studied and described in the existing scientific works, while the less elaborated time (dynamic) aspect of development of the global economy could pose even higher interest for the modern science, as it could allow finding answers to the questions that remain unanswered due to limitations of spatial (structural) aspect of studying the global economy.

48    E. G. POPKOVA

Figure 4.3  Regression curve that reflects dependence of Russia’s GDP in constant prices on the value of the index of globalization. Source: Compiled by the author.

This work offers a scientific hypothesis that the problem of co-existence of economic systems, which are at different stages of development, has deeper roots and performed stronger influence on the modern global economy than is reflected by spatial (structural) aspect of its research. Additional analysis of this problem from the positions of time (dynamic) aspect will allow for more precise measuring of differences in the level of socioeconomic development of various economic systems and for more precise forecasting (compilation of scenarios) of their further development. For clarifying the picture, let us use the help of the modern economic science. The aspect of time in the works of modern economists is viewed in the works that are devoted to the following parts of economic science: • the theory of economic cycles: within this part, cyclic fluctuations of economic systems are studied, as well as socio-eco-systems—in particular, within the energy economics (Mohammadi et al., 2018) • modeling of socio-economic processes with the help of time rows: within this part, dynamics of development of economies (Shahbaz et al., 2018), transformation processes (transitional periods) in economies (Güney et al., 2015), and time states of stock markets (Sarvan et al., 2014) are studied; • forecasting of development of socio-economic systems: within this part, causal connections are studied and future consequences of

The Concept of Time in Economics as a Modern Treatment of Karl Marx’s Theory    49

•

• • •

implementation of measures of state regulation in economies are forecasted (Jalles, 2017); extrapolation: within this part, transport and logistics schemes are developed (Pirker and Lichtenegger, 2018) and stages of production processes are studied (Mitrouli and Roupa, 2018); given indicators: within this part, investment design is conducted and net value of investment projects is calculated (Creemers, 2018); lost opportunities: within this part, alternative scenarios of development of socio-economic systems are studied (Stafford et al., 2011); the Theory of saving of live labor: within this part, the labor theory of value has formed and the modern labor economics is developing (Hecht, 2018), etc.

These theories are concerned with time in economics, in view of studying various economic phenomena and processes. The minimal interest to this aspect, which lasted for a long time, grew abruptly due to the global economic crisis. That’s why “economic time” is considered through the prism of crisis in the recent scientific publications. This is explained by the fact that density of time, which grows during the rise of economic cycle, and, accordingly, the speed of its flow in crisis slow down—which leads to a resonance. As a result of systematization of the existing scientific and economic studies and publications on the topic, we distinguished three main approaches to treatment of such phenomenon as change of density and speed of the flow of time in economy in a crisis. First Approach: Entrepreneurial Within this approach, reduction of density and slowdown of speed of the flow of time in economy in crisis are explained by reduction of the level of business activities. According to this approach, a group of scholars from Switzerland— Kuntz, A., Davidov, E. and Semyonov, M.—state that in crisis the economic conditions aggravate and international migration flows grow. This means the termination of a certain period of “economic time” (Kuntz et al., 2017). Polish scholars Raźniak, P., Dorocki, S. and Winiarczyk-Raźniak, A. state that in the conditions of the 2008–2012 global economic crisis, incomes of population and net profit of companies did not necessarily decrease. That’s why each country has its own “economic time” (Raźniak et al., 2018). “Economic time” is seen by scholars as change of the phases of economic cycle (rise and fall).

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Second Approach: Innovational Within this approach, reduction of density and slowdown of the speed of time flow in economy in crisis are explained by reduction of innovational activity in economy. Within this approach, Italian economists Castaldo, A., Fiorini, A., and Maggi, B. point out that “economic time is determined by the scientific and technical paradigm. Technological innovations have been always considered a stimulus for economic growth. High-speed Internet, provided due to development of broadband infrastructure, has been quickly developing since late 1990’s as is a technological determinant of acceleration of “economic time” of 23 countries of the OECD over recent 15 years. Overcoming of the 2008 global crisis requires activation of a new perspective technological innovation, for starting a new age of “economic time” (Castaldo et al., 2017). Stages of development of economic systems are studied in detail within the Evolutionary approach and described in multiple works of various authors. Russian experts Afanasev, A.A., Kasyanov, V.F., Lukmanova, I.G., and Silka, D.N. note that development of spatially organized systems has a cyclic character (Afanasev et al., 2015). Supporting this view, Albanian authors Kupina, Q. and Salko, D. Write that development of the banking system of Albania and Kosovo shows large growth with various intensity in different time periods (Kupina and Salko, 2015). Spanish scholars Gómez, M.A. and Neves Sequeira, T. B.E. point out that various industrial experiences of countries of the world, starting from innovations or education, could be explained not only by various structural parameters or state policy but also differences in the factors that influence them (Gómez and Neves Sequeira, T. B.E. (2014). Third Approach: Structural Within this approach, reduction of density and slowdown of speed of time flow in economy in a crisis are studied through the prism of differences of these indicators in different economic systems. Within this approach, the problem of co-existence of economic systems that are at different stages of development is acknowledged by the modern academic community and belongs to the most important global problems of modern times. It is formulated as a problem of differentiation of countries in the global economy or disproportions in development of the global economic system. This problem is studied in the works of the following researchers. Turkish experts Ari, I. and Sari, R. State that differentiation between developed and developing countries is one of the most important tasks for implementation of the Paris Agreement (Ari and Sari, 2017).

The Concept of Time in Economics as a Modern Treatment of Karl Marx’s Theory    51

The American scholar Syrquin, M. states that the modern economic growth is an age that is peculiar for wide application of science-driven technologies for production, which, starting from late 18th century, led to stable increase of incomes, number of population, and efficiency, as well as wide structural changes. However, a large part of humankind has not yet implemented the potential of economic growth, ensured by modern technologies, though GDP per capita of most countries is higher than in 19th and early 20th centuries (Syrquin, 2015). By the example of differences in the level of socio-economic development of Russia’s regions, Prof. Oleg V. Inshakov determined the features of regions’ belonging to various stages of economic development. The scholar’s views on this topic are given in his works (Inshakov, 2003; Inshakov et al., 2008a; Inshakov et al., 2008b; Inshakov and Mitrofanova, 2007a; Inshakov and Mitrofanova, 2007b; Inshakov et al., 2009a; Inshakov et al., 2009b). The performed overview of the existing scientific literature on the formulated scientific problem showed that despite the high level of elaboration of its certain components, the modern economic theory lacks a clear and common formulation of the problem of existence of “time machine” in economics and methodological tools for its measuring and solving. This predetermines the necessity for further scientific study of this problem. Methodology of this work is based on the methods of statistical and comparative analysis based on the materials of the official international statistics on socio-economic development of countries according to the International Monetary Fund, the UNDP, and the World Bank in dynamics for 2012–2022. Based on the collected and systematized statistical information, we determined large differences in the level of socio-economic development of developed and developing countries (Figures 4.4–4.9). As is seen from Figure 4.4, according to the level of GDP, developed countries are ahrad of developing countries. Moreover, developed countries show much higher growth rate of GDP, which leads to increase of the gap between the studied categories of countries with time. As is seen from Figure 4.5, developed countries are peculiar for higher level and growth rate of GDP per capita, which increases their progress, as compared to developing countries. As seen from Figure 4.6, the level of GDP (PPP) in developed countries is higher. They also increase export, while developing countries are peculair for reduction of export with time. As is seen from Figure 4.7, while developed countries are peculiar for reduction of inflation, developing countries are peculiar for its large increase with time. At the same time, developed countries increase import, while developing countries decrease it. Unemployment rate in developing countries is much higher than in developed countries.

52    E. G. POPKOVA

GDP in current prices, USD (billions) 1,600

Developed countries

1,400 1,200 1,000 800 600

Developing countries

400 200 0

2012

2017

2022

2012

2017

2022

Figure 4.4  Dynamics of GDP in current prices in developed and developing countries in 2012–2022. Source: calculated by the authors based on: (International Monetary Fund, 2017).

GDP per capita in current prices, USD 60,000 Developed countries 40,000

20,000

Developing countries

0

2012

2017

2022

2012

2017

2022

Figure 4.5  Dynamics of GDP per capita in current prices in developed and developing countries in 2012–2022. Source: calculated by the authors based on International Monetary Fund (2017).

The Concept of Time in Economics as a Modern Treatment of Karl Marx’s Theory    53

10.00 GDP (PPP), % of global GDP Export, %

8.00

8.61 7.34

6.00 Developed countries

4.00 2.00

Developing countries

5.74

3.35

2.92 1.69 1.14

1.06

0.97

0.38

0.40

0.43

2012

2017

2022

2012

2017

2022

0.00

Figure 4.6  Dynamics of GDP (PPP) and export in developed and developing countries in 2012–2022. Source: calculated by the authors based on International Monetary Fund (2017).

40

Developed countries

35

Developing countries

30 25 20 15 10 5 0

Inflation, % Import, % Unemployment rate, % of workforce

2012

2017

2022

2012

2017

2022

2.51 0.01 8.56

1.69 3.44 6.88

1.97 3.57 6.08

6.47 8.36 9.17

11.02 4.36 8.74

35.02 4.46 8.42

Figure 4.7  Dynamics of inflation, import, and unemployment in developed and developing countries in 2012–2022. Source: calculated by the authors based on International Monetary Fund (2017).

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Developed countries

Developing countries

40.00 35.00 30.00 25.00 20.00

Aggregate borrowings of the public sector, % of GDP Aggregate national debt, % of GDP

15.00 10.00 5.00 0 –5.00

1

2

3

4

5

6

–1.99 38.70

–0.80 34.18

–0.23 30.24

–1.37 26.40

–3.91 37.86

–2.50 38.20

Figure 4.8  Dynamics of borrowings and debt of state sector in developed and developing countries in 2012–2022. Source: calculated by the authors based on International Monetary Fund (2017).

As is seen from Figure 4.8, developed countries are peculiar for lower level of aggregate borrowings of state sector and national debt, as well as reduction of these indicators, while the situation in developing countries is opposite. As is seen from Figure 4.9, as to the value of the index of development of human potential and index of knowledge economy, developed countries are way ahead of developing countries. This shows underrun in time of developing countries from developed—i.e., these indicators mean time, which cannot be accumulated or compensate. According to the criterion of speed of economic time, modern economic science determines the quality of economic growth. Quality of economic growth is a system of sustainable (within a certain historical stage) features (structure of the factors of economic growth), which allows differentiating the type of economic growth in different space-time coordinates. A new quality of economic growth is present at all stages of economic development of the global economy, determined by the method of public production, and is achieved as a result of the system of transfers, which, in the process of evolution of the economic system, could change, disappear, or created new qualitative transfers from the old to a new means of public production. Differences in quality of economic growth of developed and developing countries show difference in their economic time. The performed analysis of the indicators of socio-economic development of developed and

The Concept of Time in Economics as a Modern Treatment of Karl Marx’s Theory    55

Developed countries

1.00

Developing countries

0.80 0.60

Index of development of human potential, points Index of knowledge economy, points

0.40

0.20 0.0

2012

2017

2022

2012

2017

2022

0.75 0.73

0.80 0.84

0.89 0.91

0.46 0.27

0.50 0.32

0.58 0.37

Figure 4.9  Dynamics of borrowings and debt of public sector in developed and developing countries in 2012–2022. Source: calculated by the authors based on United Nations Development Programme (2017) and The World Bank Group (2017).

developing countries showed that differences between them are so large that these countries are at different stages of development. We think that this proves existence of time machine in economic, which theoretical model is presented in Figure 4.10. Dotted lines in Figure 4.10 show difference in the trajectory of development of developed and developing countries, as compared to the global trajectory of development. Broken dotted line shows the trajectory of development of developed countries, and prick line with dots shows trajectories of development of developing countries. As is seen from Figure 4.10, according to the existing scientific economic paradigm, four stages of socio-economic development are distinguished: pre-industrial (before beginning of the 20th century), industrial (before mid–20th century), post-industrial (before late 20th century), and the stage of knowledge economy (from early 21st century until present time). The global trend of economic development envisages consecutive transition to these stages. Developed countries are a locomotive of the global economic system and are the first—even before the global trend—to go to new stages of socioeconomic development. At that, a lot of developing countries are behind the global trend, being slow in transition to new stages of development or staying at the same stage over certain time periods. They can also overcome

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Figure 4.10  Theoretical model of time machine in economics. Source: compiled by the authors.

the underrun (the phenomenon of “economic wonder”) and achieve the level of developed countries, overtaking the global trend. The phenomenon in the modern global economy, which is peculiar for simultaneous existence of economic systems that are at different stages of development, and the possibility of “lift” of economic system that allows them to “travel in time,” changing two and more stages of socio-economic development in one time period, is called time machine in economics. Simply speaking, time machine in economics is a possibility for transfer in different technological modes at the same time. That is, being in our photo, we can transfer to the pre-industrial type of production by flying to poorly developed countries. This is simultaneous existence of different economic modes. For entering the past or ancient model, it suffices to move in space to another continent or state. Thus, for example, in the countries of Africa (Egypt, Congo, Somalia, etc.) and Asia (China, India, etc.) income of average employees equals USD  100 per month, which is sufficient for purchasing a full “consumer basket,” which is necessary for human life. That is, the size of living wage1 in these countries is at the level of USD 100. At the same time, in the leading

The Concept of Time in Economics as a Modern Treatment of Karl Marx’s Theory    57

countries of Europe (Germany, France, and the UK) and America (the USA and Canada), living wage equals USD 100, and income of USD 100 does not allow purchasing even a half of necessary set of goods and services. The results of the performed research showed that large scatter of modern economic systems according to the level of socio-economic development leads not just to formation and establishment of the roles of leaders and outsiders but also to division of economic systems in the global economy as to the stages of socio-economic development. Developed countries (Italy, the UK, and the USA) change in time according to the global trend of economic development or exceed it. The highest scientific interest in the context of the economic theory of time belongs to developing countries, which are developing contrary to natural course of time—i.e., they show strong variations as to the global trend of economic development. These are South Africa, Algiers, North Korea, Kazakhstan, Belarus, and Russia. This phenomenon is called time machine in economics. The essence of this phenomenon is contradictory. On the one hand, it is a problem for the modern global economy on the whole and separate (primarily, developing) economic systems. High level of differentiation of countries, which have established positions in certain categories (developed and developing countries) decreases global indicators socio-economic development and slows down the development of the global economy on the whole. On the other hand, the existing time machines in economics allow each country selecting its target level and the optimal rate of socio-economic development. Thus, coming to our senses after a journey to one of many existing photos, we realize that the time has come! It’s high time to act in order to help new contenders, which we supported, and the teams that observed the game from aside. But how? Moving in time in our machine, we observed that the seeming peace and harmony hide tough struggle for leadership on the field of the global economy. Having taken a ride in the elevator of the time machine in the global economy, we realized that “people of lower floors” do not want to observe everything from the bottom, and “penthouse people” are ready to share, but do not yet know how exactly—they cannot give away their place! Formulating the thoughts in a strict scientific way, we can say that time machine in economies is a popular phenomenon, which deserves close attention from scholars and further scientific research. This work specifies the categorical tools of studying this phenomenon—a scientific term “time machine in economics” is offered. Deep study of the essence and causal connections of this phenomenon determines perspectives for further scientific research. In this regard, such phenomenon as economic “vintage” is especially interesting.

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ECONOMIC “VINTAGE”: ESSENCE OF THE PHENOMENON AND MEANS OF MEASURING Systematization of the existing scientific literature in the sphere of studying economic “vintage” allows us to classify approaches to studying it (Table 4.2). Let us view the approaches from Table 4.2 in detail. Within the traditional approach, economic “vintage” is seen as traditions that were set in the past and preserved until now. Economic “vintage” is measured via ratio of traditions and innovations in economy—i.e., the level of “vintage” of socio-economic system is determined. It is supposed that the more traditions dominate over innovations, the higher the “vintage” of the socioeconomic system is. Within this approach, the term “economic vintage” is replaced with the category “traditions,” and traditional (“vintage”) socio-economic systems, which are least susceptible to changes and are peculiar for strong public opposition to innovations, and opposed to innovational socio-economic systems, which develop dynamically and are peculiar for positive acceptance and public support. TABLE 4.2  Classification of Approaches to Treatment of the Essence and Methods of Measuring Economic “Vintage” Conceptual approach to studying economic “vintage”

Essence of economic “vintage” according to this approach

Offered methods of measuring economic “vintage”

Traditional approach

Economic “vintage” is traditions that were set in the past and preserved until now

Ratio of traditions and innovations in economics (level of “vintage” of socioeconomic system)

Bohner et al., 2017; Liao et al., 2016; Bolton et al., 2016; Takeuchi, 2016

Diversification approach

Economic “vintage” is the process of expansion (diversification) of the spheres of application of economic ideas

Level of diversification (diversity of spheres and methods of usage) of economic ideas

Hwang et al., 2018; Thanakijsombat & Kongtoranin, 2018; Desmarchelier et al., 2018; Garvey et al., 2017; Liu et al., 2017

Modernization approach

Economic “vintage” is the process of modernization of economic systems with preservation of their basic settings

level of correspondence of basic ideas to actual needs and possibilities of modern times

Busu & Busu, 2017; Andreeva et al., 2017; Bulatov, 2016; Kyrchaniv, 2016; Zheng et al., 2016

Source: compiled by the authors.

Representatives of this approach

The Concept of Time in Economics as a Modern Treatment of Karl Marx’s Theory    59

Prominent representatives and founders of this approach are Laperche, B., Galbraith, J.K., Uzunidis, D., who in the book “Innovation, evolution and economic change: New ideas in the tradition of Galbraith“ studied the phenomenon of economic “vintage” by the example of the ideas of Galbraith. The group of French-American authors studies the process of evolution of capitalism. In view of changes in general economic climate since appearance of Galbraith’s ideas, the scholars have been describing new ideas, which “create fertile soil for new research.” The experts came to the conclusion that capitalism is a concept that lies in the basis of functioning and development of dynamically developing modern economic systems and defined it as economic “vintage.” Representatives of the diversification approach define economic “vintage” as a process of expansion (diversification 2) of the spheres of application of economic ideas. They focus on entrepreneurship, which creates and implements various business ideas. Within this approach, emphasis is made on creation of patents that set the right for original ideas and further transfer of these rights with various methods, which leads to diversification of usage of ideas. The method of measuring of economic “vintage” is evaluation of the level of diversification (variety of spheres and methods of usage) of economic ideas. Speaking of representatives of this approach, it is necessary to note the contribution of the American scholar who is a representative of the International Monetary Fund—O.E.G.Johnson. In the book “Economic Diversification and Growth in Africa: Critical Policy Making Issues,” he proved that economic “vintage” is peculiar for developing countries. The author focused on the issues of development of policy in the three most important spheres in the context of Africa: creation of potential for mobilizing internal resources; regional integration in Africa and intraregional trade; diversification of export of certain African countries. The expert showed that developing countries of Africa can improve their strategies of development of policy for diversification of economy and acceleration of socio-economic development—but the basic concepts of their growth and development remain unchanged, being economic “vintage” (Johnson, 2016). From the positions of the modernized approach, economic “vintage” is considered as a process of modernization 3 of economic systems with preservation of their basic settings. That is, representatives of this approach study macro-economic objects—whole socio-economic systems, analyzing the process of their modernization. At that, “vintage” socio-economic systems are those which preserve—in the process of modernization—the foundation on the basic concepts, adapting them to new economic conditions.

60    E. G. POPKOVA

One of the most prominent representatives of this approach is D. Coletto, who, in the book The Informal Economy and Employment in Brazil: Latin America, Modernization, and Social Changes, studied the phenomenon of economic “vintage” by the example of shadow economy. In this book, the scholar analyzed certain details of shadow economic activities in Brazil. Using the ethnographic approach, the author studied social and economic processes, which allow reproducing informal economy, opening complex and heterogeneous relations between formal and informal parts of economy. The scholar came to the conclusion that shadow economy is “economic vintage,” which remains unchanged in the process of economy’s modernization (Coletto, 2010). Professor Oleg V. Inshakov substantiated the necessity for studying the evolution of socio-economic systems. Succession of economic development is emphasized in his works on economic genetic and economic institutionalism. The process of modernization of socio-economic systems, described in the works of Oleg V. Inshakov, stimulate the development of fundamental provisions of the modernization approach. His ideas are described in (Inshakov & Frolov, 2010; Inshakov, 2007a; Inshakov et al., 2009; Inshakov & Yalovlev, 2009; Inshakov, 2007b). During measuring of economic “vintage” within this approach, the level of correspondence of the basic ideas to actual needs and possibilities of modern times is determined. That is, representatives of this approach take into account not only activity of usage of past concepts but also their applicability to modern conditions. According to this, they differentiate developing and effective “vintage” socio-economic systems and the systems that are “hostages” to their “vintage”—i.e., have no opportunity for and unable for innovational development, when it is necessary. The results of the performed analysis showed that despite the diversity of approaches to treatment of the essence of economic “vintage” and means of its measuring, these methods are peculiar for low precision and usage if qualitative indicators. We think that these approaches should not be viewed as alternative, as they reflect various features of economic “vintage.” Unifying the main ideas of the existing approaches, we offer a new complex approach to studying economic “vintage,” which takes into account all its features. Let us view these features by the most vivid examples of the modern economic reality. The first feature of economic “vintage”: return to the origins—past economic concept—and its application in the present. For example, when the world was at the threshold of the first industrial revolution in the 19th century, there were supporters of voluntary refusal from new technologies who were afraid of their possible harm to humanity. In the 20th century, large-scale scientific inventions raised interest to this concept, causing not only separate protests and oppositions to development of new technologies

The Concept of Time in Economics as a Modern Treatment of Karl Marx’s Theory    61

but also official global ban on cloning and nuclear tests—due to danger of biological crisis. Another example is transport vehicles, which are an inseparable part of any person’s life. Leonardo da Vinci in the 15th century said that people would fly in the future and predicted tank, airplane, and other things that are used nowadays. Despite the precise and detailed schemes of the scholar, his ideas were not implemented due to imperfection of technologies of the time. Modern improved technologies allowed restoring his ideas, which similarity to modern transport vehicles is amazing. Another example of this feature of economic “vintage” is reconsideration of industrial development through the prism of ecological costs, as a result of which the modern humanity selected the model of ecologically safe economic development as an ideal. Like agrarian (pre-industrial) socio-economic systems of that time were in the harmony with the nature, the modern high-tech (industrial and post-industrial) systems, being at the brink of an ecological crisis, strive for establishment of the balance of interests of development of society of consumption and minimization of ecological damage in the interests of preservation of favorable environment. Similarly, in the 21st century, under the influence of the global recession, economic systems had to abandon the concept of freetrading and use the protectionist measures. Despite the fact that these measures were not of the radical character—as in the 18th—19th centuries—and did not fully exclude foreign competition, they limited it and provided large preferences to domestic companies. The second feature of economic “vintage”: new application or new interpretation of the past economic concept. For example, the modern shadow economy is rooted in slavery. Bereaving person of labor rights and assigning him with unlimited responsibilities, shadow economy turns him into a slave. Without official employment, worker does not have any social guarantees, and the system of “work in debt” puts him into dependence on the job. The concept of slavery has another interpretation. Like people at slave markets were treated as commodity, the modern labor market considers labor (or human resources) as a commodity. Of course, the initial concept is interpreted differently, though preserving the basic idea “human as commodity.” Let us consider another example of this feature of economic “vintage.” The modern technolohies of wireless charging of mobile devices (smartphones, tablets, etc.) existed and were successfully used back in the 19th century. Thus, Nikola Tesla in 1894 lighted a phosphorous electric bulb at a distance by means of inertia of the electromagnetic field. This technology was invented and patented two centuries ago. However, after Tesla’s experiments, interest to this technology dropped—due to negative side effects in the form of negative influence on human body and

62    E. G. POPKOVA

limitations in the form of high energy intensity of the technology and small distance at which it could be used (a mobile technical device has to be very close to the energy source for charging, for it to be expedient from the practical point of view). At present, this technology is further developed and is successfully applied. The third feature of economic “vintage”: complication of the basic economic concept in the process of its modernization in new economic conditions. As an example, let us study the economic concept of struggle for energy resources. Invention of metallurgy led to mass labor migration to Siberia for iron ore, which was equaled to gold. At present, oil is called “black gold,” and there’s struggle for the opportunity to use nuclear energy. Interest to sources of energy was present during the whole history of humankind, and new technologies always led to gradual modernization of the energy concept. A similar example is geographical inventions. In the Age of Discovery (15th—17th centuries), ships were as valuable as gold, and seas (water space) were an object of struggle. At present, space is actively explored. Sea ships have been replaced by space ships. Space journeys lead to new inventions and allow compiling more detailed maps of the Universe; despite the fact that technologies that allow making other planets for human have not yet been invented, space territories are actively claimed by people. These features are the basis of the proprietary definition of economic “vintage.” Repeated usage of economic concepts in different periods of time with a possibility of their new interpretation or new application, as well as modernization in new economic conditions, is economic “vintage” According to the offered definition, we developed a conceptual model of economic “vintage,” which is presented in Figure 4.11. As is seen from Figure 4.11, economic “vintage” could be presented in the form of spiral stairs, as the bottom of which is ancient past, when the original (new at the time) idea was created. With the flow of time and movement of the wheel of history, this concept is changed and transformed into economic “vintage,” becoming a phenomenon of the past in the present. An important component of the process of emergence of economic “vintage” is overcoming the moral ageing of the original concept, for in the opposite case it would lose its actuality and would not be further used and developed. In this regard, economic “vintage” is based on scientific research and innovational activity of entrepreneurs. It could be expressed at the level of micro-structures—companies that implemented “vintage” ideas into their activities and at the level of macro-structures—socio-economic systems (countries).

The Concept of Time in Economics as a Modern Treatment of Karl Marx’s Theory    63

Figure 4.11  Conceptual model of economic “vintage.” Source: compiled by the authors.

Thus, following the movement of the wheel of economic history, we saw that a famous saying is true—“there’s nothing new under the sun.” Through the prism of economics, it is possible to rephrase this saying in the following way—modern is past, which is popular at present and with a new interpreration. Thus, certain economic concepts could not be implemented in the economic practice of the past due to absence of interest to them or necessary conditions, others were successfully implemented, but experienced failure, and others were popular but were lost, etc. Economic “vintage” allows returning to the past concepts and finding a new application for them, or improving or modernizing them in the present for obtaining well-known or hidden advantages. Scientific and practical interest to economic “vintage” is increased by crises of economic systems. Making impossible or inexpedient the continuation of the set course of socio-economic development, crises require reconsideration of the theoretical concept that lies in its basis. The search for a new concept sometimes requires too much time or resources, and so economic “vintage” is sometimes an attractive alternative. The offered concept of economic “vintage” allows determining it as ideas of the past, which acquired wider scale and are used in the present. At that, original ideas may be created in the past, but used only in the present,

64    E. G. POPKOVA

or attract new interest with a new interpretation, or be used continuously, with gradual evolution. Developing this concept, it is possible to conclude that if there’s demand, there should be something new. Obviously, not all economic phenomena and processes are vintage. Their opposition is innovations. This notion also needs to be reconsidered from positions of the economic Theory of time, as it should be tied to the existing base and be compared to it. That’s why it is necessary to consider time as a category of the modern Theory of innovations. TIME AS THE MAIN CATEGORY OF THE MODERN THEORY OF INNOVATIONS. INNOVATIONS IN COMPARISON TO TRADITIONS. The time aspect of the modern Theory of innovations is studied in a lot of works of modern authors. We performed their classification in Table 4.3. TABLE 4.3  Classification and Description of the Existing Approaches to Study of the Time Aspect of the Modern Theory of Innovations

Approach

Used time criterion for classification Classification of innovations of innovations as to the time criterion

Representatives of the approach

Attitude approach

novelty and modernity of innovations

• true innovations; • false innovations; • economic “vintage.”

Coen, 1998; Gaynor, 2017)

Cyclic approach

phase of economic cycle at which innovations are created and implemented

• innovations in period of stability; • innovations in period of crisis.

Ramella, 2017; Ausloos et al., 2017; Squire, 2017; Breitung et al., 2016; Li, 2017

Consumer approach

demand for innovations in different time in economics

• innovations in countries with developed and developing economies; • innovations in innovational economy (knowledge economy); • innovations in traditional and innovations-oriented economy, etc.

Asimakou, 2017; Rao-Nicholson et al., 2017; Crowley & McCann, 2017; Neubert et al., 2017

Transformation form of innovations • innovations in the form of approach in time new ideas; • innovations in the form of useful ideas and test models; • innovations in the form of innovational products, etc.

Ortiz-Villajos, 2017; Kumar et al., 2017; Wang & Hu, 2017; Velpandian, 2017; Hall et al., 2016

Source: compiled by the authors.

The Concept of Time in Economics as a Modern Treatment of Karl Marx’s Theory    65

Let us consider the described (Table 4.3) approaches to studying the time aspect of the modern Theory of innovations in detail. The attitude approach is so called because its application envisages strong influence of the subjective (strong) attitude of researcher to innovations. Within this approach, such time criterion as novelty and modernity is used for classification of innovations, and following are distinguished: • true innovations (completely new, modern economic concepts); • false innovations (economic traditions, old concepts); • economic “vintage” (modernized concepts of the past, actual in the past—i.e., adapted to modern times). Within this approach, a research has been performed and 2016 saw the book of C.J. Bausch “Toward true regulatory reform: How to make EU governance innovation fit. Revolutionizing EU Innovation Policy: Pioneering the Future“. The scholar noted that the European Union is a complex adaptive system, consisting of a lot of various members with different political tasks and interests. That’s why the central goal of managing the EU consists in coordination and connection of this difference and development of compromises for the common European good. This could be dome only with true (new) innovations (Bausch, 2016). The cyclic approach envisages classification of innovations depending on the phase of the economic cycle at which they are created and implemented and distinguishing innovations in the period of stability and innovations in the period of crisis. The essence and logic of this approach are given in detail in the work of I. Bazhal “The Political Economy of Innovation Development: Breaking the Vicious Cycle of Economic Theory,” published in 2017. The author writes that R&D and technological innovations in the country are not result but factor of sustainable economic growth. I. Bazhal develops the theory of Schumpeter and states that true economic growth— especially, in the countries with transitional and developing economy, is possible only due to innovations. Innovations ensure effective functioning of market economy and are required in the period of crisis, as they allow for quicker overcoming of its consequences and restoration of economic growth (Bazhal, 2017). A representative of the cyclic approach is Professor Oleg V. Inshakov. He substantiated the necessity for initiating the innovational activity in modern economic systems for their quick overcoming of consequences of the global economic crisis. A perspective direction of innovational development of these systems, according to Prof. Inshakov, should be nano-industry. His ideas on this issue are described in (Inshakov & Inshakova, 2016; Inshakov

66    E. G. POPKOVA

et al., 2015; Inshakov & Kryukova, 2015; Inshakov & Inshakova, 2015; Inshakov & Fesyun, 2014a; Inshakov & Fesyun, 2014b; Inshakov et al., 2014). According to the consumer approach, the time criterion for classification of innovations is their popularity in different time in economy; there are innovations in countries with developed and developing economy, innovations in innovational economy (knowledge economy), innovations in traditional and innovations-oriented economy, etc. In other words, depending on the type of economic system and its socio-economic mode, determined by time, innovations can perform different roles and have different values for development of the economic system. A representative of this approach is H. Rahman—the author of the chapter “Open innovation in small and medium enterprises: Perspectives of developing and transitional economies” of the book Human Development and Interaction in the Age of Ubiquitous Technology, which was published in 2016. The book states that despite the wide recognition of corporate business entities in the world, adaptation of modern strategies and concepts, created by open and innovational entrepreneurship, to peculiarities of the countries of the East, West, South, or North, is necessary primarily for obtaining mass public acknowledgment and covering a wide layer of consumers. In economies that are at the same time level (stage of development), innovations could be more popular, and in economies that are at other levels there could be no demand for them at all. The transformation approach envisages using as the time criterion of classification of innovations their form in time and distinguishing innovations in the form of new ideas, innovations in the form of useful models and test models, innovations in the form of innovational products, etc. According to this approach, it is considered that innovations transform in time. At earlier stages of development of socio-economic systems, simpler forms of innovations are used that are not formalized and protected from the point of view of rights for intellectual property. With further development of economic systems, innovations acquire a more complex form and become more protected from the normative and legal point of view. This approach is presented in the chapter “Innovation processes in logically constrained time series” of the book Advances in Directional and Linear Statistics: A Festschrift for Sreenivasa Rao Jammalamadaka (C. Möller, S. T. Rachev, Y. S.Kim, & F. J. Fabozzi, 2011). This group of authors states that during analysis of the innovational process it is necessary to take into account connection between this process and its mathematical consequences. The normative and legal foundations of innovational activities and the social environment in which they are conducted play a decisive role in selection of the form of innovations and means of their practical application.

The Concept of Time in Economics as a Modern Treatment of Karl Marx’s Theory    67 TABLE 4.4  Comparative Analysis of Traditions and Innovations From the Point of View of the Time Aspect Criteria of comparison Belonging to time Actuality in present

Traditions

Innovations

past time

present time

low

high

Accessibility and mass character of usage at present

multiple mass routine phenomena and processes

prototypes, test versions as single items

Susceptibility to changes with time

low

high

Possibilities for usage in the future

low, large modernization required

high, modernization may not be necessary

economic “vintage”

modern times

Interpretation of successful adaptation to requirements and possibilities of the present Source: compiled by the author.

The performed overview and content analysis of the existing scientific literature in the sphere of studying the time aspect of the modern Theory of innovations showed close connection between traditions and innovations, as well as essential importance of their differentiation. Their comparative analysis from the point of view of the time aspect is given in Table 4.4. As is seen from Table 4.4, traditions belong to the past (past time) and innovations—to the present. Traditions are less topical in present time, as they were created in the past and are oriented at satisfaction of old needs with the usage of the possibilities of the past. As compared to them, innovations are more actual in the present time, as they are oriented at satisfaction of current needs and usage of new opportunities of modern time. Traditions are very popular, being in free access; they turned into mass routine (usual, recurring) phenomena and processes. On the contrary, innovations are less accessible—they have not become popular; they are just prototypes and test models. Traditions are less susceptible to changes in time, as they are old, and innovations are more susceptible to changes in time, as they are to become traditions. In view of low actuality of traditions in the present, the possibilities of their usage in the future are low—for this will require their modernization. At that, possibilities of using innovations in future are wider—a lot of innovations are even oriented at the future and are not applied in the present—so their modernization may not be necessary or be of a larger character. In case of successful adaptation to requirements and opportunities of the present, traditions are interpreted as economic “vintage,” and innovations—as modernity.

68    E. G. POPKOVA

Based on the above, we distinguish the following main features of innovations from the point of view of the time aspect: • • • •

Relativity in time: novelty as to traditions and the past. Connection to time: actuality in the present or future time. Foundation on time: usage of opportunities of time. Change in time: ageing of innovations.

Let us view these features in detail. The first feature of innovations: relativity in time. For determining innovations, it is necessary to compared them to traditions. The larger the difference between new concepts and traditions, the higher the level of their novelty and their belonging to innovations. That is, traditions are a basis for determining innovations. Without knowledge of traditions, it is impossible to understand whether innovations are true (really new) or false (traditions that are presented as innovations) or they are economic “vintage.” The second feature of innovations: connection to time. According to the modern Theory of innovations, they have to have a good goal—i.e., be practice-oriented. Even random inventions require analysis of created innovations from the positions of human-oriented approach—i.e., assessment for potential usefulness and danger for humanity. Innovations should stimulate better satisfaction of human needs of modern times. If innovator has not found a perspective direction of practical application of created innovations or if innovations are potentially dangerous and require society’s preparation for their implementation, they should be postponed to the appropriate time in the future. That is, innovations are tied to time—present or future. The third feature of innovations: founding on time. Firstly, innovations do not appear out of nowhere—they are always based on traditions. For creating something new, an innovator has to possess knowledge of the existing concepts in the sphere. This is necessary for avoiding the repeated inventions. Absence of knowledge of traditions may lead to vain efforts in the elaborated directions—in which innovations are impossible. Secondly, this feature is expressed in the fact that innovations use the opportunities of the present time. Innovator has to know and use the needs and opportunities of the present time for their implementation in created innovations. This is required for innovations to become popular in present and to have the existing potential of modern times. If this potential is not opened in full, this leads to lost profit, related to slow growth rate of economy and its innovational development. Therefore, during creation of innovations, innovator has to use experience of the past (traditions) and needs and opportunities of the present time.

The Concept of Time in Economics as a Modern Treatment of Karl Marx’s Theory    69

The fourth feature of innovations: change in time. Novelty cannot be eternal. Innovations preserve their novelty over a short period of time after their creation. Innovativeness is a feature of economic concepts, phenomena, and processes until they become popular and usual for people, as well as accessible for usage by a lot of economic subjects. Duration of preservation of novelty of innovations in time depends on the normative and legal foundations of protection of patent law and duration of patents. According to Article 1363 of the Civil Code of the RF (part IV) dated December 18, 2006, No. 230-FZ, duration of patent for an industrial item is give years, useful model—ten years, and invention—twenty years. This term could be extended by five years according to the patent holder’s claim, but not more than twenty-five years (State Duma of the RF, 2006). Other countries have other terms of patent duration. However, the global duration of patents is within the range 5–25 years. For obtaining a patent for innovations, it is necessary to file application to a corresponding body of public authorities. For example, in Russia it is Rospatent, in the USD– United States Patent and Trademark Office. In the global economy, patent law is regulated by the activities of international organizations—the World Intellectual Property Organization, the World Trade Organizations, etc. Therefore, until the termination of the patent, the innovation remains innovational. After termination of the patent, it becomes accessible for free usage by a lot of economic subjects and mass distribution. At that, there could be a situation when during the patent’s duration the innovation was not used and, therefore, preserved its novelty. In this case, time frames of innovation’s novelty are not precise. Thus, time is an initial point during determination of innovations. Time assigns innovations with certain features and offers criteria for definition of innovations. We offer the following definition of innovations from the point of view of the time aspect: From the point of view of the time aspect, innovations are economic concepts, phenomena, and processes that are based on the existing economic traditions but possess a high share of novelty as compared to the, are developed and used in view of needs and opportunities of the present time, and are actual in the present or future time, and subject to ageing with time, turning into traditions or economic “vintage” in future. The model of innovations from the point of view of the time aspect, according to the offered definition of innovations and their distinguished features, is presented in Figure 4.12. As is seen in Figure 4.12, the difference between tradition and innovations is blurred. However, it is clearly seen that with time the face of old mechanical clock acquires a modern electronic form. The solid line in

70    E. G. POPKOVA

traditions or * economic “vintage”

Perspective (future time) change in time

Modernity (present time) * innovations

connection to time

relativity to time

* traditions

foundations on time

Past (previous time)

Figure 4.12  The model of innovations from the point of view of the time aspect. Source: compiled by the authors.

Figure 4.12 shows the flow time, and dotted line shows connection between innovations and time: past, present, and future. The presented model vividly shows the above features of innovations from the point of view of the time aspect and shows that innovations are based on traditions, are actual in the present time, and will become traditions or economic “vintage.” Thus, in the modern Theory of innovations time is the main category, as it is from the point of view of the time aspect that it is possible and necessary to distinguish traditions and innovations that form the basis of categorical tools and are the key objects of studying this theory. From the point of view of the time aspect, innovations have the following features: relativity in time, connection to time, foundation on time, and change in time. The proved presence and fundamental role of the time aspect in the modern Theory of innovations is a basis for the supposition on important value of the factor of time in other economic theories and macro-economic analysis.

CONCLUSIONS Thus, it is possible to conclude that time is an important economic category: it is connected to specific economic phenomena and processes—time

The Concept of Time in Economics as a Modern Treatment of Karl Marx’s Theory    71

machine in economics and economic “vintage,” and it plays an important role in defining and measuring innovations. The Law of saving of time of Karl Marx set foundations for defining and measuring time in economics. Based on this law, the concept of time formed in economics—which is a modern treatment of the theory of Karl Marx. The modern concept of time in economics goes beyond labor economics and studies time as a characteristic of all socio-economic phenomena and processes. NOTES 1. Living wage is the minimum income necessary for a worker to meet their basic needs. 2. Diversification of the spheres of idea application is increase of diversity of directions of idea application, which leads to reduction of risks, related to its implementation, and maximization of economic profit. 3. Modernization of economy is the process of formation of modern economy, aimed at overcoming or preventing its underrun from other, more developed, economies.

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The Concept of Time in Economics as a Modern Treatment of Karl Marx’s Theory    77 Roberts, J.M. (2016). Co-creative prosumer labor, financial knowledge capitalism, and Marxist value theory. Information Society, 32(1), 28–39. Rotta, T.N., Teixeira, R.A. (2016). The autonomisation of abstract wealth: New insights on the labour theory of value. Cambridge Journal of Economics, 40(4), 1185–1201. Sarvan, D., Stratimirović, D., Blesić, S., & Miljković, V. (2014). Scaling analysis of time series of daily prices from stock markets of transitional economies in the Western Balkans. European Physical Journal B, 87(12). Shahbaz, M., Shahzad, S. J. H., Mahalik, M. K., & Sadorsky, P. (2018). How strong is the causal relationship between globalization and energy consumption in developed economies? A country-specific time-series and panel analysis. Applied Economics, 50(13), 1479–1494. Shamis, A. (2016). The Industrialists of Philosophy: Karl Marx, Friedrich Engels, and the Discourse Network of 1840. Media History, 22(1), 67–84. Simon, J. (2016). A conversation with Karl Marx (1818–1883) on why there is no socialism in the United States. The Return of the Theorists: Dialogues with Great Thinkers in International Relations (pp. 134–142). London, England: Palgrave Macmillan. Smith, K. (2017). The discovery of surplus value: Karl Marx and Senior’s ‘last hour’. Journal of Classical Sociology, 17(1), 10–23. Squire, K. (2017). Innovation in times of uncertainty. On the Horizon, 25(4), 293–308. Stafford, M. B. R., Reilly, T., Grove, S. J., . . . , Bhandari, R., Copeland, J. (2011). The evolution of services advertising in a services-driven national economy: An analysis of progress and missed opportunities. Journal of Advertising Research, 51(SUPPL. 1), 136–152. State Duma of the Russian Federation. (2006). Civil Code of the RF (part IV) dated December 18, 2006, No. 230-FZ. Retrieved from http://www.consultant.ru/ document/cons_doc_LAW_64629/9e7ee220e4fac9a5158bb4406a5cb4e224e 5122e/ Syrquin, M. (2015). Resources, industrial transformation and the structure of the world economy. Resources, Production and Structural Dynamics, pp. 323–345. Takeuchi, M. (2016). Tradition and innovation in business of 450 years. Journal of the Japan Research Association for Textile End-Uses, 57(6), 4–5. Thanakijsombat, T., & Kongtoranin, T. (2018). Performance and diversification benefits of foreign-equity ETFs in emerging markets. Applied Economics Letters, 25(2), 125–129. The World Bank Group. (2017). KEI and KI Indexes. Retrieved from http://www. worldbank.org/kam Tsybikdorzhiyeva, O. M., & Belomestnov, V. G. (2015). The problems of import phaseout in the process of formation of a new economic development policy in the Russian regions. Indian Journal of Science and Technology, 8(Special issue 10). United Nations Development Programme. (2017). Human development index. Retrieved from http://hdr.undp.org Velpandian, T. (2017). Research for innovation: Time for adapting the changes. Indian Journal of Physiology and Pharmacology, 61(2), 86–87. Wang, R.-K., & Hu, D. (2017). Time-cost substitutability, earlycutting threat, and innovation timing. Economics Letters, 156, 88–91.

78    E. G. POPKOVA Warren, P. (2017). Karl Marx and Wilt Chamberlain, or: Luck Egalitarianism, Exploitation, and the Clean Path to Capitalism Argument. Res Publica, 23(4), 453–473. Zheng, J., Wang, L., & Tang, K. (2016). China’s road to modernization: Chinese Culture and China’s Model of Economic Development: A Special Issue from The 4th World Conference on Sinology. Journal of Chinese Economic and Business Studies, 14(1), 1–8.

CHAPTER 5

HOW KARL MARX DEALT WITH THE “CLASSICAL” AND “VULGAR” POLITICAL ECONOMY RESEARCH PARADIGM CONCERNING BOTH THEORETICAL AND METHODOLOGICAL BASES Ya. S. Yadgarov Financial University under the Government of the Russian Federation, Moscow, Russia

WHY DID THE HEADLINE OF K. MARX’ MAIN WORK CONSIST OF TWO PHRASES? The theoretical heritage’ scale of the K. Marx, outstanding German economist and philosopher of the second half of the 19th century, is used to be associated in the scientific community with the considerable innovations concluding his main work—Capital published in the format of the Marx and Modernity, pages 79–88 Copyright © 2019 by Information Age Publishing All rights of reproduction in any form reserved.

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three-volume book. But, anticipating the thinking about the significance of this Marxist work for the following development of economic science, it is important to remind that the exact title of this three-volume book, published in 1867–1894, consists not of one word but two separated by a single phrase and so it sounds—“Capital. Criticism of political economy.” From our point of view, non-routine reason provided this book’s title. The main driver, which caused such kind of the book’s title, was set beyond the theoretical innovations of K. Marx. The author “Capital. Criticism of political economy” introduced into the scientific discussion the conceptual description of the two alternative theoretical “bourgeois” research paradigms (as the result of the ideological struggle between adopts and opponents of the mercantile research paradigm). And the title and essential aspects of each of them, Marx argued reasonably in a strictly defined time sequence, emphasizing that first formed the paradigm of “classical political economy,” which then, due to a number of objective circumstances, ousted the paradigm of “vulgar political economy.” We should pay attention to the fact that many times before the author of “Capital” in the book “Treatise of Political Economy” (1615), the French mercantilist A. Montchretien, who for the first time used the word combination “political economy” in wide range, became the harbinger of the first economic science research paradigm in the history, which is commonly called “mercantilism.” In accordance with the evaluation of this dominant in the 16th and 17th centuries, based on the principles of the protectionist economic conception. This paradigm in the late 17th and early 18th centuries was actively opposed by the liberal economists, predetermined the appearance of the new approach, which caused the repression of mercantilism by the paradigm of the “classical” political economy. However, later in the early 19th century, Marx believed, a new metamorphosis took place. It showed that after the D. Ricardo’s theoretic conceptions (Ricardo was called the “last” leader of classical political economy), the research paradigm of “classical” political economy was replaced by the paradigm of “vulgar” political economy. In particular, in the afterword to the second, London edition of Volume I of «Capital», dated the 24th of January 1873, K. Marx on the metamorphosis that occurred at the beginning of the nineteenth century, which led to the paradigm shift from the “classical” to the “vulgar” political economy made the following judgments [4, p. 14]: The last great representative of the English classical political economy, Ricardo, finally consciously took the antithesis of class interests, wages and profit, profit and land rent, as the starting point of his research, naively considering this antithesis as the natural law of social life. Along with this, bourgeois economics has reached its last, unpromising preface . . . The subsequent period, 1820–1830, is characterized in England by a scientific revival in the

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field of political economy. This was a period of vulgarization and spread of Ricardian theory and at the same time of its struggle with the old school [italics added]. Taking into account these Marxist judgments, it is appropriate to add to this that the wide popularity and certain mutual closeness of the theoretical heritage of the representatives of both paradigms mentioned before is explained in the economic literature in the context of their adherence to the principles of economic liberalism (laissez faire) and the enduring values​​ inherent in model of a self-regulating market system. K. MARX ON THE RESEARCH PARADIGM OF BOURGEOIS CLASSICAL POLITICAL ECONOMY According to Marx, the research paradigm of “classical political economy,” especially concerning with the works of the “last” best classical old school economists—A. Smith [6] and D. Ricardo [5]—allows us reflect essential points of “scientific” conception and “bourgeois” classical political economy at the same time. The last stood against mercantilism and based on the principles of economic liberalism. Keeping this theoretical position Marx wrote in the first chapter of “Capital”s the 1st Volume, published in 1867: “I will note once and for the futher that I recognize classical political economy as all kind of political economy, starting with the works of W. Petty, which explores the internal influence of the bourgeois production relations” [4, p. 91, italics added]. K. Marx is absolutely convinced that speaking about the bourgeois character of the classical political economy and the “bourgeois view” of its adepts is the original inherent feature of this research paradigm. A clear confirmation of this point is made when Marx kept following this judgement through the variety of statements the 1st Volume of “Capital.” For example, at the end of Chapter XVII, where he stated: “Classical political economy approaches very closely to the true state of things, but does not formulate it consciously. It is impossible until it dropped its bourgeois skin” [4, p. 552, italics added]. Some kind of this thesis is revealed in the 3rd section of Chapter XXII of the same volume, when the author recognize, that “the accumulation for the sake of accumulation, production for the sake of production–by means of this formula classical political economy expressed the historical duty of the bourgeois period” [4, p. 608, italics added]. And even 6 years later, in the afterword from 1873 to the second edition of the 1st Volume of “Capital,” the considered idea expression left [4, p. 14]: Since political economy is bourgeois, that is, since it regards the capitalist system not as a historically transitory stage of development, seems as the absolute,

82    Y. S. YADGAROV final form of social production, it can remain scientific only as long as the class struggle is still in the latent state or appears only in single manifestations. [italics added]

However, Marx perhaps had another principal claim for adherents of the “bourgeois” classical political economy. The author of “Capital” considered that almost all liberal economists were not be able to learn the essence of surplus value and the nature of its emergence through the prism their “bourgeois horizon.” From Marx’ point of view adoption of this new term was impossible for the liberal economists because they intend to vary capital between fixed and working capital—the analytical inventory of A. Smith and D. Ricardo. But Marx was the first who propose new approach—to allocate capital into “constant” and “variable” for the analytical purpose. K. Marx gave remarkable comment, in the 5th section of the 22nd Chapter: “I will remind the reader here that the categories of variable capital and constant capital are introduced by me for the first time. The Political economy since the time of A. Smith used to mix the definitions of fixed and working capital, generated by the process of circulation” [4, p. 625, italics added]. If we take into account the absolute reflections proposed by the author of “Capital,” the theoretical and methodological strengths of the classical political economy’ research paradigm (both in comparison with the mercantile stage of political economy and in with the stage of the succession of the “classics” “vulgar bourgeois” political economists) consist in further facts concerning with the approach [10, p. 73–78]: • did not adopt neither apologetics nor undetermined analysis on the surface of economic phenomena, contributing to the acquisition of the features of a truly scientific discipline by political economy; • rejected protectionism in the economic policy of the state and focused on the problems of the production sphere from the standpoint of the class approach, being committed to the observed “laws of production” and other “independent economic laws” independent of the will; • tried to comprehend (examining the problems of economic growth and improving the economic welfare) the dynamism and equilibrium of the state of the economy of the country manifested in the process of reproduction; • preferred, following a causal approach, to classify economic categories into “primary” and “secondary,” and considered politics and the state as secondary phenomena in relation to socioeconomic institutions; • revealed the goods pricing mechanism and fluctuations in the market price level, not in connection with the “essential mean” of

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money and their quantity in the country, but adhering to the concept of the amount of labour expended (labor theory of value); • recognized money as a commodity evidently selected commodity’s variety, which cannot be “canceled” by any agreements between people; • were close to a scientific understanding of the nature the “law of surplus value” roots. Therefore, from the heights of today’s economics, it is reasonable to adopt the contribution of Marx’s theoretic approach to the integrated research paradigm of classical political economy which was based on liberal theoretical and methodological research. This helped to recognize Marx as one of the most considerable figures in economic science. K. MARX ON THE RESEARCH PARADIGM OF BOURGEOIS VULGAR POLITICAL ECONOMY Concerning another research paradigm introduced by K. Marx into the scientific revolution in “Capital” called “vulgar political economy,” then, he believed, the theoretical and methodological foundations of the latter deliberately predetermine what is going on in the research of “vulgar” political economists “sliding along the surface of economic phenomena” and the corresponding analytic omissions that should be avoided by researchers in the present and future. On his opinion, the classical political economy that preceded it until its end at the beginning of the nineteenth century by the works of A. Smith and D. Ricardo never sought, from an apologetic standpoint, to conceal the class contradictions of capitalism, was close to understanding the antagonistic, that is, unsolvable, character of these contradictions. But after these finalists of classical political economy, K. Marx assured, such researchers as J.B. Say, T. Malthus, J. McCulloch, N. Senior, F. Bastia, J.S. Mill and others, who usually called themselves, as their students or followers and popularizers of Smith’s artistic heritage, Ricardo, initiated the era of “vulgar” bourgeois political economy. Characterizing the research paradigm of bourgeois vulgar economy, K. Marx very critically assessed various aspects of the theoretical and methodological foundations of this stage of economic thought. He revealed, for example, that, every adept of bourgeois vulgar political economy, “in spite of a complete lack of understanding of what is value, whenever one tries to consider the phenomenon in its pure form, suggests that demand and are completely balanced—finally mutually deteriorated “[4, p. 169]. At the same time, he considered it was important not to lose sight of the fact that the vulgar economist, as an “apologist of capitalism” seeks to conceal the

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exploitative essence in the relations of appropriation of capital by the capital created by the working class of surplus value “. . .  here, as everywhere, the appearance of phenomena as opposed to the law of phenomena “[4 p. 317]. And evidence appeared, according to Marx, when “the bourgeois economist simply states that the examination of the machine itself can not be more convincingly proves that all these obvious contradictions are merely the outward appearance of banal reality, bah, and therefore in theory they do not exist at all” [4, p. 452]. Among the numerous examples by which the author of “Capital” illustrated the antiscientific and apologetic essence of vulgar bourgeois political economy, the Marxian allegory that the inherent research paradigm is similar to some “flat plain” on which “every hummock seems to be a hill.” This explains why, Marx sums up, why “the plane of modern bourgeois thought is best measured by the caliber of its “great economists”“ [4, p. 527]. And in the context of this Marxian allegory, such vulgar, in his opinion, liteconomy, as J. McCulloch and J.B. Sei, felt on themselves, in particular, that the first of them “misfortune” befalls “with the vulgarization of Ricardo,” and the second—“with the vulgarization of A. Smith” [4, p. 531]. But, in the final analysis, according to the logic of K. Marx, the scientific disputes of the “classics” with vulgar economists contributed to the fact that “classical political economy became entangled . . . in insoluble contradictions,” while at the same time giving “a solid operational basis for vulgar political economy, fundamentally recognizing only one external appearance of phenomena” [4, p. 549]. Finally, taking into account the harmful impact of her vulgarizers on the fate of the economic science and taking into account the numerous examples of well-founded and brilliant criticism in the “Capital” by K. Marx concerning the most odious “vulgar” political economists, it is worth to note that most often in the scientific economic literature, N. Senior, perhaps is mentioned. About the “slip” of this rather popular English professor-political economist of the middle of the 19th century “on the surface of economic phenomena” M. Blaug, prominent historian of modern economic thought, considered to contribute Karl Marx’s fair criticism of N. Senior’s vulgar maxims, laid out in his book “Economic thought in retrospect” the following judgments [1, p. 250]: The 7nd Chapter and the 3rd Section contains Marx’s well-known attacks on the theory of the last hour put forward by Senior, a magnificent example of the polemic grant of Marx. But even without criticism from Marx, the Senior’s book would long ago have been forgotten. She came across a unanimous condemnation of her by all economists, Seniors’ contemporaries. They objected to the unrealistic numerical calculations on which his conclusions were based. By his numerical example, Senior was in fact unable to prove that all the net profit was made during the “last hour.” By his own admission,

“Classical” and “Vulgar” Political Economy Research Paradigm    85 he just showed that reducing the working day by one hour with the constant hourly productivity of one person-hour would lead to a decrease in the rate of profit from 10 to 8%. Marx considered the numerical examples of Senior, but he did not notice the indicated moment.

THE ROLE OF MARX’S RESEARCH PARADIGMS CONCERNING “CLASSICAL” AND “VULGAR” POLITICAL ECONOMY IN THE HISTORY The role of the research paradigms concerning “classical” and “vulgar” political economy introduced into the scientific revolution by K. Marx can be hardly overestimated, since their adherents in ideological disputes with each other have touched upon the complex evolution of economic science in the post-Smith period. But, as “Capital” revealed, Karl Marx did not lose focus of the fact that, adhering to very close theoretical and methodological positions, the keepers of each of these paradigms brought to political economy many a priori negative sentiments conditioned by the use of primarily causal (causal), deductive and inductive methodological methods of research, including logical abstraction. In particular, both of them, unreservedly adhering to the “laws of production” and other “economic laws,” have freed themselves from doubts about the fact that the predictions obtained with the help of logical abstraction and deduction should have been subjected to an experimental test. And the opposition of the spheres of production and circulation to each other has led to an underestimation of the natural interrelation between the economic entities of these spheres, the reverse influence on the sphere of production of monetary, credit and financial factors and other elements of the sphere of circulation. Meanwhile, reflecting beyond the classical and vulgar political economy, Marx revealed himself, in fact, a harbinger of the future economic science, in which there will be no rival between adherents of its “classical” (scientific) and “vulgar” (unscientific ) component. However, their adepts, he was sure, were close to each other in their main omission—the convnience that the liberal market system of management, “capitalism” seemed to keep unchanging character. It seems obvious that, according to Marx, the strengths of the former and the weaknesses of the latter should guide future generations of researchers for tools of a systemic and interdisciplinary approach in the analysis, while also not forgetting about such essential values in ​​ the creative work of both, as priority of private property, priority of free competition, priority of free pricing. The Marxian research paradigms of the “classical” and “vulgar” political economy are useful and vital for modern economic science by the fact that,

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surveying them, like the author of “Capital,” one can find out that mentality, morals, collective psychology and the “economic laws of capitalism” in the historical context can not considered as unchanging and perpetuating. The substantive aspects of these paradigms (models), using approach of Marx, allow one to come closer to the understanding that the liberal, non-regulated market economy while the “capitalist” productive forces and production relations evolve, has variety alternatives, that from the point of predictable permanent crisis’ view, would invariably be replaced by a synthesized socially-oriented market economy. Through the prism of the research paradigms of the “classical” and “vulgar” political economy, Marx convincingly argued the scientific propositions and even “predictions” about the transient nature of the “laws” of capitalism, inevitable under the conditions of the economy of free competition. But the clue is that permanent crises lead to capitalism’ self-destruction. Therefore, mainly taking into account these circumstances in modern economic literature, one can find positive and approving assessments of the Mark’s research heritage, and in particular such as: • Marx distinguished himself from modern economists precisely with the understanding of economic evolution as a special one, conditioned by the economic system of the process itself (J. Schumpeter) [9, p. 53]. • Marx created the basic scheme (the paradigm—Ya.Ya.), describing the relationship between industries that produce means of production and commodities (V. Leontiev) [3, p. 105]. • We will not make rapid conclusions from the fact that Marx did not prove the doom of capitalism. Economic systems can be erased not only due to the theorists’ forecasts (F.A. Hayek) [7, p. 176]. • And yet, we must pay tribute to the courage of the Marxian predictions. No economist of that epoch considered the tendency to crises–we would call them fluctuations in business activity–an essential feature of the capitalist system, but the following events fully confirmed the prophecy of Marx about the constant shifts of ups and downs (R. Heilbroner) [8, p. 211]. • Even if we reject the fundamental Marxist scheme (para-digm.-Ya. Ya.) And most of its main conclusions (if not all of them), it must nevertheless be recognized that the three volumes of “Capital,” and especially the last two, with -there are many remarkable examples of analysis, of which modern economists can learn much more (M. Blaug) [2, p. 203]. Thus, K. Marx’s Capital, which absorbed the most concentrated and completed form of the results of methodological and theoretical research in the

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field of research paradigms of “classical” and “vulgar” political economy, is a composition that clears the fundamental prerequisites for the formation, qualitative updating of the theoretical and methodological foundations of these historically opposing alternative paradigms. Economic science owing to Marx acquired brilliant argument of the sentiments that, despite the exploratory paradigm of “classical” political economy already completed by the works of the “latest classics” of A. Smith and D. Ricardo, the same scenario of further development is actual for the “Vulgar” political economy. There is no doubt that, the author of “Capital” clearly showed that the adherents of the latter, calling themselves the convinced successors of the creative heritage of Smith-Ricardo based on the principles of economic liberalism, remain faithful to them in the same incipient creativity of the “classics,” the main omission–the misunderstanding of the previous character as the economic “laws” of capitalism, and, in fact, the “capitalist” social formation. At the same time, Marx did not limit his research to analyzing the realities of the modern economy and the introduction of new economic terms (including such as “classical” and “vulgar” political economy, “surplus value” and “law capitalist accumulation “and others), as well as the development of related economic theories. He actually solved the scientific goal set before himself, conceptually substantiating the hypothesis of inherent in the economy of an unlimited free competition immanent shortcomings, which determine the transient nature of modern “capitalism.” Thus, we can reasonably concluded thar K. Marx, being an witness of the liberal self-regulating market system leadership in his modern political economy, has made his scientific innovations a determining contribution to an unbiased interpretation of the pros and cons of the “classical” and “vulgar” research paradigms of political economy. The conclusions contained in “Capital” can be claimed in the forthcoming scientific research aimed at substantiating the theoretical and methodological foundations of the research paradigm of the socially-oriented market system that is currently forming. The process of Marx’s legacy application during the 20th and present 21st centuries is accompanied, on the one hand, by various socio-economic reform transformations, which testify to the changing model of a liberal, unregulated market economy by alternative models of a socially oriented market economy. On the other hand, scientific research is adequate to the newly emerging models of the synthesized research paradigm of economic science. REFERENCES 1. Blaug M. Ekonomicheskaya mysl’ v retrospektive [Economic thought in retrospect]. M.: «Delo Ltd», 1994. (in Russian).

88    Y. S. YADGAROV 2. Blaug M. 100 velikikh ekonomistov do Keynsa / Per. s angl. pod red. A. A. Fofonova [100 great economists before Keynes / Trans. with English. Ed. A. A. Fofonov]. SPb.: Ekonomicheskaya shkola, 2005. (in Russian). 3. Leont’yev V. Ekonomicheskiye esse. Teorii, issledovaniya, fakty i politika [Theories, research, facts and policy]. M.: Politizdat, 1990. (in Russian). 4. Marks K. Kapital. T.1. [Capital. T.1] // Marks K., Engel’s F. Soch. 2-e izd.– M.: Gospolitizdat, 1961. T. 23. (in Russian). 5. Rikardo D. Nachala politicheskoy ekonomii i nalogovogo oblozheniya [The beginning of political economy and taxation] // Antologiya ekonomicheskoy klassiki. Predisloviye I.A. Stolyarova. T.1.—M.: MP «EKONOV», «KLYUCH», 1993. (in Russian). 6. Smit A. Issledovaniye o prirode i prichinakh bogatstva narodov. Kn. 1–2 [Research on the nature and causes of the wealth of peoples. Book. 1–2] // Antologiya ekonomicheskoy klassiki. Predisloviye I.A. Stolyarova. T.1.—M.: MP «EKONOV», «KLYUCH», 1993. (in Russian). 7. Khayek F.A. Doroga k rabstvu [The road to slavery]. M.: Ekonomika, 1992. (in Russian). 8. Khaylbroner R.L. Ekonomicheskaya teoriya kak universal’naya nauka [Economic theory as a universal science] // THESIS. T.I. Vyp.1. Zima 1993. (in Russian). 9. Shumpeter Y. Teoriya ekonomicheskogo razvitiya (Issledovaniye predprinimatel’skoy pribyli, kapitala, kredita, protsenta i tsikla kon”yunktury) [The theory of economic development (study of entrepreneurial profit, capital, credit, interest and the cycle of conjuncture)]. M.: Progress, 1982. (in Russian). 10. Yadgarov Ya.S. Istoriya ekonomicheskikh ucheniy: Uchebnik [History of economic doctrines: Textbook]—4-e izd., pererab. i dop. – M.: INFRA-M, 2003. (in Russian).

CHAPTER 6

JOSEPH ALOIS SCHUMPTER AND MARXIST DOCTRINE Comprehension of the Method Elena Kukina Volgograd State Medical University, Volgograd, Russia Irina Koroleva Financial University under the Government of the Russian Federation, Moscow, Russia Nadezhda Solovykh Financial University under the Government of the Russian Federation, Moscow, Russia

SCIENTIFIC SOCIALISM AS MORAL AND ETHICAL BASIS OF MARXISM J. Schumpeter’s scientific and cognitive interest to the “Marxist doctrine” was determined by many reasons of both objective and subjective nature. It should be noted that for J. Schumpeter the “Marxist doctrine” had an

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enormous intellectual appeal in terms of the vision of destiny, history and logic of capitalism, ways of society socialization. Moreover there were several milestones of his biography, which led to an interest in Marxist heritage. Firstly, J. Schumpeter was a student of E.Böhm-Bawerk, the most consistent critic of K. Marx’s economic theory. J. Schumpeter became acquainted with the works of Karl Marx in the University of Vienna at the Law Faculty at the seminar, devoted to the theoretical problems of socialism, held by his teacher. Secondly, the collapse of three empires as a result of the First World War (Russia, Germany, Austria-Hungary) was the reason for Socialists and Communists coming to power. Thus, theoretical disputes and foresights took more specific forms. Thirdly, J. Schumpeter had a short period of practical work in the Socialization Commission in Germany and as Minister of finance in the Austrian Socialist Government (1918–1919). There he got “(. . .) more opportunities to observe socialist experiments than researchers of a non-socialist direction usually have, and evaluated what he saw according to not generally accepted standards [6, p. 363]. “ Fourthly, in the beginning of the 1930s, after moving to the USA, at Harvard, he held courses on economic theory, conjuncture theory, history of economic analysis, and the theory of socialism. In the introduction to the first edition of his work, “Capitalism, socialism and democracy” J. Schumpeter wrote: ““In the first part, I explain in a fairly simple language my point of view on the content of the Marxist doctrine—a subject that I taught for several decades.”“ [6, p. 363]. During his more than four decades creative period J. Schumpeter constantly turned to the heritage of K. Marx. His view on the Marxist doctrine is reflected in his following works: “The theory of economic development” (1912), the “crisis of the State, based on taxes” (beg. 1920s), “Business cycles” (1939), “Capitalism, socialism and democracy” (1942), “History of economic analysis (published after the author’s death in 1954), an unfinished manuscript” Movement to socialism “. In our view, the most systematic assessment of K. Marx’s heritage is presented in J. Schumpeter’s “Capitalism, socialism and democracy “, where the author’s point of view on the content of the Marxist doctrine is outlined. J. Schumpeter emphasizes that the aim of this presentation is to giive “(. . .) proof of the nonMarxist idea that this doctrine has a unique meaning–a meaning that is completely independent of whether you acknowledge it or not”[6, p. 363]. The book contains five self-contained parts, five central themes, where the first part, called “Marxist doctrine” predetermines subsequent presentation. The chapters of the first part of Schumpeter’s works are arranged in accordance with the principles of logical and epistemological analysis: Marx-a prophet; Marx- a sociologist, Marx-an economist; Marx -a teacher.

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Even in the prologue to the first part of its work, J. Schumpeter recognized the greatness of Marx’s teachings, that do not depend on “(. . .) our love or hate (. . .),” which is able to “regenerate, (. . .) relive the decadence and revive (. . .) in its own individual appearance, with its own specific features . . .” [6, p. 375]. According to J. Schumpeter Marxist system, erected into a doctrine, canonized in the practice of building communism in Soviet Russia, may in a certain sense be a religion. It is not only the system of ultimate goals, defining the meaning of life and absolute criteria for assessing events and actions, but also a guide to the implementation of the goals, the path to salvation and the determination of the evil from which mankind should be saved. J. Schumpeter also points to religious properties of Marxism in relation to opponents. For the Orthodox Marxist “(. . .)” the opponent is not just wrong, he is sinful.” Dissent is condemned not only from intellectual positions, but from moral ones . . .” [6, p. 377]. J. Schumpeter calls Marx a prophet, but in regard of the time he created his system, the time of “(. . .) the highest point of self-actualization of the bourgeoisie and the lowest point of the bourgeois civilization, mechanistic materialism (. . .) cultural environment, where (. . .) there were embryos of (. . .) a new way of life “[6, c. 378]. He stressed that Marxism is a product of bourgeois positivist mentality where the passionate feelings of all those who lived poorly are expressed and where, at the same time, a rational justification of socialism is proclaimed. Schumpeter protects the figure of K. Marx from both “utopian socialism” and “vulgar socialists,” arguing that “he did not shed sentimental tears about the beauty of the socialist idea, (. . .) he was absolutely free from the tendency to slink in front of the working class characteristic of his weaker followers, (. . .) he never preached his own ideals . . . .” [6, p. 379]. For Marx socialism was not an idée fixe that generates contempt for other civilizations. Schumpeter stressed that “Marx claimed only to talk about the logic of the dialectical process of historical development (. . .) He clearly understood the meaning of civilization (. . .) recognizing the historical need for capitalism and its achievement” [6, p. 379–380]. All these qualities together, according to J. Schumpeter, “really deserved the title of scientific socialism” [6, p. 380]. ECONOMIC INTERPRETATION OF MARX’S HISTORY AS THE GREATEST DISCOVERY OF MODERNITY According J. Schumpeter’s assessment, the sociological concept of K. Marx is the most fruitful and sufficiently independent part of an extensive whole.

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J. Schumpeter considered Marxist economic interpretation of history to be the greatest discovery of modern sociology, the toolkit of which lay in the author’s mastering of historical and modern factual material in the form of illustrations with “large-scale frescoes” and reliable details. In this regard, Schumpeter wrote: «“Marx’s view, encompassing these facts at once, penetrated through the random irregularity of surface phenomena and rushed into the depths–towards the grand logic of the historical process.. Here the passion combined with analytical breakthrough” [6, p. 382]. Considering K. Marx as a neo-Hegelian, J. Schumpeter, nevertheless, argues that Marx’s argumentation is not metaphysical, but relies on facts of social reality and on initial preconditions, none of which is proper philosophical. Each of these preconditions “does not alter the positive science,” and its historical theory “(. . .) is no more materialistic than any other attempt to explain the historical process by the means at the disposal of the empirical sciences” J. Schumpeter partially agrees with Marx’s economic interpretation of history and reduces it to two provisions: . . . (1) the forms or conditions of production are the basic determinants of social structures, which, in turn, determine people’s assessments, their behavior, types of civilizations . . . .  (2)The forms of production themselves have their own development logic, i.e., they change in accordance with their inherent need, so that what comes after them is exclusively a consequence of their own functioning. [6, p. 384]

Considering that both provisions undoubtedly contain a significant amount of truth, Schumpeter points out that Marx’s emphasizing of the importance of the technological element is brought to dangerous limits. At the same time, he recognizes that “(. . .)” our everyday work shapes our consciousness; our place in the production process is exactly what defines (. . .) the social environment, in which in which each of us lives “[6, p. 384]. J.Schumpeter also emphasizes that social structures are very resistant in relation to dominant forms of the production process, and the degree of interaction between the sphere of production and other spheres of public life is ambiguous. J. Schumpeter considered explanation of the role and mechanism of non-economic motives and analysis of how social reality is reflected in the individual mind, as an essential element of Marxist theory, one of its most important achievements. Indeed, religion, philosophy, different art direction, ethical ideas and political aspirations cannot be reduced to economic motives. K. Marx’s achievement is that he only sought to reveal economic conditions that generate non-economic motives. According to Schumpeter “(. . .) ideas and values for him were not the main engine of social process,

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he did not consider them worthless(. . .) in his social machine, they play the role of driving belts [6, p. 383]. J. Schumpeter’s attitude towards Marx’s “special theory of social classes” is very contradictory: regarding it as a “wretched sister of the economic interpretation of history,” he at the same time highly appreciated its scientific significance as a whole and the internal system function that it performs. J. Schumpeter believed that in a pure economic theory the question about the phenomenon of social classes significance remains unresolved and is important both from the point of view of practical life, and of broader aspects of social process in general. Marx’s thesis that the history of society is a history of class struggle is considered a strong exaggeration, but Schumpeter does not deny the fact of explaining historical events from the standpoint of class interests. J. Schumpeter acknowledged that existing class structures are important as a factor of historical interpretation and “(. . .) We’ll still have different interpretations depending on the definition of class interest and the idea of how class actions themselves are expressed” [6, p. 387]. J. Schumpeter’s criticism of Marx’s theory of social classes is more like a search for a methodology and an assessment of scientific approaches that existed at the time of writing. The combination of his criticisms can be summarized as follows: • Marx never consistently worked on what that clearly was one of the central points of his theory. He didn’t feel the need of a precise definition of the concept of classes; • oversimplified, purely economic interpretation of the phenomenon of classes. Property is a constituent characteristic of a social class. Marx’s definition of classes was based on private ownership of the production means (the existence of haves and have-nots), while all other principles of class division were ignored and underestimated; • the social structure for all non-socialist times was determined in terms of two classes, which are a direct continuation of the logic of capitalist production system development ; • ill-explained initial accumulation of capital. Marx rejects mental abilities and energy as factors of an industrial enterprise foundation, and he derives initial accumulation from feudalism as a kingdom of violence, in which the subordination and exploitation of the masses were an accomplished fact; • Marx overlooked the crucial moment concerning the formation of a social class—the continuous movement of individual families to upper layers and simultaneous continuous withdrawal of other families from them.

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• Marx acknowledged deep antagonism of class interests (class struggle), denying the possibility of classes cooperation. Thoughtfully and with a high degree of cognitive empathy J. Schumpeter interprets the significance of Marx’s theory of classes, calling it the analytical tool which, linking the economic interpretation of history with the concept of profit-based economy, defines all social events, consolidates all phenomena. Class theory is the intrasystem cross-cutting theme of entire Marx’s system, designed to show how: . . . sociological categories class, class interest, class behavior, exchange between classes manifest through the economic categories–values, profits, wages, investments, etc.—and how they generate such an economic process, which ultimately destroys its own institutional structure and at the same time creates the conditions for the emergence of a different social order. [6, p. 394]

Schumpeter acknowledged that Marx’s analysis demanded recognition of class struggle as a decisive factor of historical development and a means of approaching the Socialist classless future and “(. . .) if only these two classes were supposed to exist, their relationship must be antagonistic in principle, otherwise his theory of social dynamics would lose its power “[6, p. 394]. CRITICISM OF MARX’S LABOR PARADIGM The third chapter of the work contains a critical analysis of K. Marx’s economic legacy. J. Schumpeter markedly diminished the importance of Marx’s economic theory. Let’s consider J. Schumpeter’s main critical positions: • the fundamental concept of the economic process as a whole Marx borrowed from Quesnay; • theory of value, as the cornerstone of the entire theoretical structure is Ricardian. Marx’s system contains a discrepancy between the labor theory of value and ordinary facts of economic reality (establishment of a single rate of profit, deviation of the relative prices of goods from their values expressed in labor costs). Value theory divorced from price theory; • labor theory of value as a tool for positive analysis is unsuitable, since it does not work outside the conditions of perfect competition, and labor of various types and quality is not the only factor of production. J. Schumpeter contrasts it to theory of marginal utility, which succeeded Marx’s one and is outdated too;

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at the level of the conventional theory of a stationary economic process, the theory of surplus value is untenable, since an equilibrium characterized by perfect competition cannot exist in conditions when “(. . .) employerscapitalists receive profits from exploitation (. . .), each of them will strive to expand production and it will result in an inevitable tendency to increase wages and reduce their income to zero “[6, p. 403]; • Marx misunderstood the nature and mechanism of accumulation, linking together the theory of accumulation and the theory of exploitation. “He did not have an adequate theory of entrepreneurship, and the inability to distinguish an entrepreneur from a capitalist, together with an erroneous theoretical methodology, is the source of many mistakes and illogical conclusions” [6, p. 408]. But at the same time, J. Schumpeter recognized the accumulation logic connected with the tendency of the capitalist production process to increase the size of industrial enterprises and to form control centers, i.e., concentration, as Marx’s scientific achievement of that time; • Marx’s theory of impoverishment is based on Ricardo’s theory of “industrial reserve army”; • Marx deduced an explanation of crises from the theory of underconsumption, close to the teachings of Sismondi and Rodbertus. Crises in the only way were understood as symptoms of the deadly disease of capitalism leading to its collapse; • Marx recognized cyclicity and “this is enough to give him a high rank among the founding fathers of the modern theory of this issue.” [6, p. 418]. • the idea of capitalist institutions overgrow their limits is devalued by the illogical conclusion embedded in the proof of the inevitable increase in poverty, but “(. . .) his conclusion that capitalist evolution destroys the foundations of capitalist society is true and I do not consider it an exaggeration to call this vision expressed (. . .) in 1847as deep” [6, s. 420]. It should be noted that an in-depth political and economic analysis of the views of J. Schumpeter on the paradigm of Karl Marx is contained in the works of V.Avtonomov V. Cherkovec [2], J. Elliott [3; 4], P. Patnaik [5], who considered that Schumpeter was extremely controversial in his assessment of Marx’s theory.

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THE FUTURE OF MARXIST SYNTHESIS In the fourth chapter, J. Schumpeter considers the advantages and disadvantages of Marxist synthesis “as a way to solve all problems,” where “a useful economic theorem, due to its sociological metamorphosis, can bring an error instead of enriching the content, and equally vice versa” [6, p. 423]. J. Schumpeter believed that Marxist version of such synthesis easily leads to deterioration of both economic and sociological argumentation. However, everything at Marx “(. . .) is covered by a single, unifying scheme” [6, p. 423]. According to J. Schumpeter, Marx subordinates historical events, social institutions, politics, the labor movement, etc. to explanation process based on economic analysis, but not in the form of factors or initial data, but in the form of variables, conductors of economic effects. Schumpeter takes “two important examples” as the subject area for his critical arguments: the neo-Marxist theory of imperialism and the idea of the inevitability of socialism. Schumpeter distinguishes four elements of neo-Marxist theory of imperialism: • the export of capital, accompanied by the political subordination of the underdeveloped country and, as a result, the war between rival groups of the bourgeoisie; • imperialism is the last stage of capitalism; • politics of protectionism; • the war for independence of the colonies. J. Schumpeter’s counter-arguments of are built around the proposition that neo-Marxist have given a deeper meaning to observable and wellknown facts of the time, incorporating them into the theory of classes and the theory of accumulation Schumpeter considers verification with the help of “(. . .) at first glance confirming, but not analyzed in detail facts” [6, p. 430] a “deceptive” but “particularly successful experience.” Schumpeter believes that the idea of the inevitable collapse of capitalism does not necessarily need to follow the untenable preconditions of the inevitable increase in poverty and oppression. There are various ways of socializing society and they do not have to be revolutionary. Bolshevism is one of many possibilities. The justification of socialism or revolution can be obtained on the basis of any scientific theory; but any scientific theory does not necessarily imply such conclusions. In this regard, Schumpeter gives an example of Schmoller’s scientific prediction, according to which the socialization process is represented in the form of progressive bureaucratization and nationalization, culminating in the onset of state socialism. In this regard, Schumpeter wrote: “Marx himself wisely avoided a detailed description of socialist society,

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focusing only on the conditions for its emergence: the presence of (. . .) giant formations exercising control in industry, and the existence of (. . .) disciplined, (. . .) and organized proletariat”[6, p. 436]. In the view of J. Schumpeter, the evolutionary approach of Karl Marx implied that evolution was the cause of socialism for him. Schumpeter supports the idea of Marx that the evolution of capitalism leads to the collapse of the institutions of capitalist society or its overgrowth of its limits. J. Schumpeter argues that Marx “was too imbued with a sense of the inner logic of social development to believe that revolution could replace any part of the work of evolution” [6, p. 437]. Schumpeter considers Marxism to be a conservative doctrine and does not see anything specifically socialist in the labor theory of value, the theory of exploitation, and “(. . .) the existence of a surplus product is an inevitable condition of all that we combine in the term of” civilization “. [6, p. 438]. But at the same time, according to Schumpeter, Marx could not escape the networks of revolutionary ideology and phraseology. Schumpeter appreciates the contribution of Marx in the methodology of economic science, namely, the synthesis of economic theory and historical analysis that generates, in turn, the phenomenon of Marxist sociological system. The essence of Marx’s evolutionary approach, besides all that has been said, is defined by Schumpeter as the “economic theory of the future.” This theory is built on the development of the economic process, driven by its own energy, in the conditions of historical time, which generates at any given moment a state that itself determines what will follow it. It should be noted that each of these great scientists undoubtedly enriched evolutionary theory, incorporating economic history, sociology, statistics into the fundamental areas of economic analysis. Both thinkers are characterized by a broad gnoseological and methodological study of the stated aspects, emotionalism and passion of style. From the position of the modern view on the truly grandiose scientific heritage of both K. Marx and J. Schumpeter, who created with more than half a century of difference, one can realize that the magnitude of the depth of knowledge of capitalist civilization as a socio-cultural context of a market system brings them closer together, rather than separates or contrasts. The common denominator of their theoretical works is their object of study: a capitalist system developing according to its own evolutionary laws. But in Schumpeter’s view, the internal logic of the development (evolution) of capitalism is not the class struggle of the proletariat against the bourgeoisie and the contradiction between the social nature of production and the private capitalist form of appropriating its results, but the abrupt creative destruction of the capitalist economy. Its dynamic imbalance produces an intermittent stream of innovations in the form of new combinations of

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production factors, new processes and organizational forms application, new sources of raw materials and new markets discovery. J. Schumpeter implies an emergence of a new actor of socio-economic changes: the figure of an entrepreneur–innovator. He contrasts his irrational innovative activity involving risk and uncertainty, to a traditional activity of a manager. Schumpeter believes that innovations generate a natural element of economic development: an effective monopoly of a new product as the core of a new type of competition. Schumpeter attributed the inevitable decline of capitalism to the fact that the mission of an entrepreneur-innovator is shifting to large corporations, there is a depersonalization of innovation, bureaucratic spirit finally defeats the entrepreneurial spirit. With the disappearance of the figure of an entrepreneur the possibility of economic development also disappears. In this regard, it is necessary to recognize that the prophecies of Marx and Schumpeter at the turn of the 20th—the beginning of the 21st centuries did not fully come true. Socialism as a centralized control with socialized means of production is not now seen as an alternative to a social market economy, and entrepreneurial spirit is alive in large enterprises. Venture capital small innovation enterprises coexist and compete with innovative units of large corporations. REFERENCES 1. Avtonomov V. Shumpeter i ego knigi. Y. A. Shumpeter Teoriya ekonomicheskogo razvitiya. Kapitalizm, sotsializm i demokratiya. [Schumpeter and his books. J. A. Schumpeter Theory of economic development. Capitalism, socialism and democracy]. Moscow, EKSMO, 2008, 864 p. (in Russian). 2. Cherkovets V. Y. Shumpeter i trudovaya paradigma. [J. Schumpeter and labor paradigm]. Economist, 2007, no. 12, pp. 35–52 (in Russian). 3. Elliott, John E. (1980) Marx and Schumpeter on capitalism’s creative destruction: a comparative restatement. The Quarterly Journal of Economics, 95(1), 45–68. 4. Elliott, John E. (1983) Schumpeter and Marx on capitalist transformation. The Quarterly Journal of Economics, 98(2), 333–336. 5. Prabhat Patnaik (1983) Marx, Marshall and Schumpeter. Social Scientist, 11(9), 47–58. 6. Shumpeter Y. A. Teoriya ekonomicheskogo razvitiya. Kapitalizm, sotsializm i demokratiya [Theory of economic development. Capitalism, socialism and democracy]. Moscow, EKSMO, 2008, 864 p. (in Russian).

CHAPTER 7

SYSTEMS AND REPRODUCTION METHODOLOGY AS A BASIS OF THE RELATIONSHIP OF ECONOMIC RESEARCH Marina Kosolapova Financial University under the Government of the Russian Federation, Moscow, Russia

In the conditions of market economy development, it is necessary to provide a scientific basis for ongoing transformations, which can be implemented on the basis of methodology of a systems study of socio-economic processes. Systems approach, being a set of principles and techniques for analyzing a complex phenomenon, methods for solving a complex problem, is a methodological basis of research and the practical application of research methods. In the systems approach, it is crucial to maintain integrity in the study of an object, its structure analysis, interrelations and interactions of elements; nature of changes occurring in the system under the influence of changes in its individual links and external conditions consideration; basic conditions of the most favorable mode of system operation determination and

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the development of options for its transfer to a rational mode of operation on this basis. Socio-economic systems are a broad concept; they are connected with the life of society and function in the form of the national economy, its branches, enterprises, urban and rural socio-territorial entities, social types, family. Socio-economic systems are also administrative-territorial entities (republic, region, city, district, village etc.). Socio-economic systems are characterized by complex interrelated features. 1. different state, level of development of system elements. The best results are achieved at the optimal level of development and the ratio of functional and organizational subsystems. This provision can be considered as practically realizable only ideally, but the efforts of the organizational subsystems heads should be directed to this. The development of functional subsystems is constantly going on, their correlation is changing and determines the need to improve functional and organizational subsystems. 2. the presence of an objective system of functioning objectives. Any socio-economic system has a system of functioning and development objectives (exogenous, endogenous), the degree of achievement of which characterizes the efficiency of its functioning. The general objective of socio-economic system specifies causal relationships of its elements (subsystems). At the same time, subsystems have a relative autonomy and specific goals consistent with the goal of the system as a whole. The overall goal of all socio-economic systems is to reproduce itself on an extended basis, which is concretized and finds expression in a system of goals reflecting a system of economic interests. At the enterprise level, the system of goals reflects national, collective and individual economic interests, which determines the need to optimize the subsystems of the economic system. Let’s consider a description of the economic system subsystems content: • technological subsystem—aggregation of resource potential, technology and organization of production (provision of services, work), ensuring the transformation of resources into a certain result (products, work, services). • social subsystem—elements of a socio-territorial community (urban, rural): social types, family, social infrastructure and staff, ensuring its functioning.

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As applied to a certain organization (enterprise), the social subsystem is enterprise team, social infrastructure, and corresponding staffing. In addition to the production of goods (services), the company provides a certain number of jobs, i.e., solves a very important social problem. • ecological subsystem—aggregation of elements of the land and natural potential and resources of nature conservation and restoration activities, ensuring the preservation and development of the natural environment. The quantity and quality of resources for environmental activities is determined by the tasks of preserving natural environment. • economic subsystem—aggregation of elements of the economic mechanism of management, aimed at ensuring the optimal functioning and development of technological, social and environmental subsystems. The best results are achieved when the conditions for an expanded reproduction of the technological, social and ecological subsystems are ensured. • organizational and management subsystem is a form of functioning (ownership, management and organization of activities) of technological, social, environmental and economic subsystems. The selection of a specific organizational form of management is determined by an actual state and needs for optimal functioning of technological, social, environmental and economic subsystems, the possibility of production management. The HAC Passport of the specialty 08.00.05 consists of two parts–the Specialty Formula (0.5 p.) and the Research Area. (35 p.). The specialty formula defines a single subject and object of research for all Research Areas of a given specialty. The subject of study: “The subject of study of this specialty are managerial relations arising in the process of formation, development (stabilization) and destruction of economic systems” (1): the process of formation and development of economic systems is expanded reproduction, stabilization is simple reproduction, destruction of economic systems is narrowed reproduction of economic systems in the form of capital turnover. The object of study: “Within the framework of this specialty, economic systems, their genesis, formation, development, forecasting are investigated are studied . . . Economic objects of different scale, level, spheres of action, forms of ownership can serve as the object of study” (1) The content of the research and the object of study are given for each Research Area. The content of Research Area expands and gives more details to the subject of study given in the specialty Formula. The object of study both expands and specifies the content of the economic system given in the Formula specialty.

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Thus, the subject of study are the problems of functioning and development of functional subsystems of this system, and the object of study is the system of economic management All economic studies in the specialty 08.00.05 of Passport of HAC specialties (economic sciences) “Economics and management of the national economy” (1), which are grouped into 15 Fields of research are relative, which follows from the Formula of this specialty: a single subject of the study is reproduction process management in the form of capital circulation, a single object of study—the economic system and its parts. The same follows from the theory of systems economy (developed by a corresponding member of RAS, prof. Kleiner G.), in accordance with which management elements consist of economic systems that reflect the process of reproduction management: “. . . economic systems, i.e., systems. the creation and operation of which is ensured by the processes of production, distribution, exchange and consumption of goods . . .“(2). In aggregate, the essence of the categories of economic system and reproduction of an object of study determine (constitute) the essence and content of the system-reproduction methodology. The key categories of system-reproduction methodology are the categories of economic system and reproduction of the object of study. Economic system is a target aggregation of interconnected economic relations in the process of production, distribution, exchange and consumption of material and non-material goods and services. The term “economic system” reflects the fact that the object of study is a complex socio-economic system and consists of a set of functional (technological, social, environmental) and organizational-economic (economic, organizational and managerial) subsystems (activities) (3). Reproduction of an object of study (enterprise) is a social and economic process of reproduction of products, social infrastructure, ecological environment, productive forces and production relations. The term “reproduction of an enterprise” reflects the purpose of the object of study functioning—expanded reproduction. The system-reproduction methodology is built on the basis of theoretical and methodological provisions of the systems economy and methodological provisions of the HAC passport of specialties (economic sciences). The essence and content of the system-reproduction methodology result from interrelation of four categories: general systems theory, system of economic interests, systems economy, economic system (2). The general systems theory (systems approach) is a research principle in which the system is considered as a whole, and not as its individual subsystems. Its task is to optimize the system as a whole, not to improve the efficiency of its subsystems.

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Economic interests reflect the system of content, manifestations of economic relations connected with meeting the needs of the system of economic interests: person, collective, society Personal interests are primary for the employee, as they are most tangible. Systems economy is a theoretical category that accumulates the theoretical principles of the general systems theory and economic theory. Prof. Kleiner G. regards systems economy as “. . . a platform for creation, interaction, transformation and liquidation of economic systems of various nature, level, structure and purpose” (2). Systems economy is an organic unity of the four key functions of economic management: • economic theory (substantiation, preparation of decisions); • economic policy (discussion and coordination of decisions); • economic management (detalization, specification and bringing decisions to performers); • economic practice (implementation of management decisions). Prof. Kleiner G. destinguish four subsystems of systems economy: • • • •

Systems economic theory; Systems economic policy; Systems management; Systems implementation of management practices.

Systems economic theory formulates theoretical position of economic system functioning and development (“how to develop”). Systems economic policy determines economic system possible development (“how it is possible to develop”); systems management is an economic mechanism; systems economic practice is maximization and rational use of gross (net) added value. There are three main interrelated levels of management: economic level (microeconomics), regional level (meso-economy), national level (macroeconomics) and, accordingly, research is carried out in relation to these levels. In agriculture, the following levels of management are distinguished, which determines the specificity of solving methodological, methodical and practical issues when considering the process of managing their development: microeconomics—an enterprise (individual reproduction)—the level of management of individual subjects of a market economy—the improvement of intraeconomic relations; meso-microeconomics—district level of management: technology and organizational management;

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mesoeconomy—regional level of management: organizational and economic management; meso-macroeconomics—district level of management: socio-economic management macroeconomics—the federal level of management (social reproduction)–the level of management of the national economy as a whole and by industry According to theoretical provisions of prof. Kleiner G., an enterprise is an object system and, accordingly, its activity is not limited in time, but limited in space (occupied territory). Non-limiting in time corresponds to the principle (“assumption”) of accounting, “the continuity of the organization’s activity,” according to which “. . . the organization will continue its activities in the foreseeable future and has no intention to liquidate or substantially reduce activities . . .” (4). Economic system—“. . . in systems economy, the role of the main unit of analysis is played by a relatively autonomous socio-economic system . . . The number of economic systems . . . includes . . . enterprises, industries, regions, countries . . .” (2)

Study on a specialty 08.00.05 are directly related to the control process: “Specialty 08.00.05 includes theoretical and methodological principles, methods and ways of managing these systems, as well as the institutional and infrastructural aspects of economic systems development.” (1). Management relations constitute the content organizational and management subsystem and at the level of a production organization reflect the content of the capital turnover, i.e., the content of an enterprise as an economic system, which is manifested in the implementation of administrative and economic functions—technological, social, environmental and economic processes management. Economic relations, reflecting primarily inter-enterprise, market relations, a consequence of management relations, which are primary and take the form of management decisions (planning, forecasting, analysis, accounting, control, decision-making, etc.). So, for the sale of products, obtaining a loan, management functions are carried out first—analysis, forecasting, planning—and on this basis a decision is made, which then is implemented in the form of economic mechanism elements(price, credit). Functional subsystems reflect the essence, purpose of the organization, organizational and economic subsystem ensures their functioning and development, intra-enterprise and inter-enterprise relations.

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This is applied to all Research Areas of specialty 08.00.05. For each Research Area, economic system and a subject of study reflect the form and essence of the content and manifestations of this research area. Consider this in relation to “AIC and agriculture” research area. Section HAC Passport 08.00.05, research area 1.2. “AIC and agriculture” consists of two parts. The first part reveals the content of this research area and lists the objects of study, the second part describes scientific problems. The subject of study, which is disclosed in the form of “Content of research,” is represented by economic relations in the field of agro-industrial complex and its industries. Economic relations express the system of personal, collective and state interests, reflecting the goal of the participants in the production process (family → collective → society)—expanded reproduction. Economic relations form a complex system of reproduction process management by functional subsystems: • technological subsystem (reproduction of products); • social subsystem (reproduction of human capital, solving social issues); • ecological subsystem (reproduction of natural resources); • economic subsystem (optimization of the combination of consumption and accumulation funds). The unity of the object of study (form) and the subject of study (content) constitute the essence and content of the system-reproduction methodology for the study of socio-economic processes of economic system functioning and development. Functional subsystems express the content of economic systems, organizational and economic subsystem–the form of their functioning The research areas of specialty 08.00.05 are divided into two groups: 1. sectoral sciences—industry, agribusiness and agriculture, construction, transport, communications and information, services, recreation and tourism. 2. functional sciences (in terms of management)—innovation management, logistics, labor economy, population and demography economy, environmental economy, business economy, marketing, management, pricing, economic security, standardization and product quality management, land management, their combination (regional economy). There is a wide range of studies in the specialty 08.00.05, but they all reflect the content of the process of reproduction of economic systems and

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their elements. Each functional science is devoted to the study of separate issues of sectoral economic systems reproduction process, reflecting a certain part of the reproduction process, capital turnover, which determines their interrelation and the need (inevitability) of coordination. Each research area has its own conceptual apparatus, its own “language,” specific ways of applying research methods, but they are all “relatives” in this specialty (relatives, cousins, . . .).” All economic research is devoted to reproduction process of products, resources, production relations and their components functioning and development consideration. It reminds the Russian alphabet: only 33 letters and an infinite variety of words, their combinations. Kinship in the economy is manifested (detected) in a combination of the same elements (gross output, profit, production cost, etc.) when building various systems of indicators to determine economic processes functioning and development. Sectoral economic systems (group 1) consist of a set of studies of functional subsystems of capital circulation (technological, social, environmental, economic), group 2 reflects individual issues of managing the operation and development of these subsystems. This indicates the interrelation of each branch of research (group 1) with the subject of research (group 2). Thus, the research in the area “.2. Management of innovations” (group 2) is a continuation of the research “1.2.40 Innovations and scientific and technical progress in the agro-industrial complex and agriculture” (group 1). Economic sciences consider technological and environmental subsystems from the perspective of production relations improvement to ensure the effective use of the resource potential, recommended technologies, organization and management of production, preservation of natural environment. The effectiveness of the social subsystem is assessed in terms of recommended living standards achievement. The effectiveness of the organizational and economic subsystem, management relations is determined by the effectiveness of functional subsystems. Systems economy determines the content of the process of capital turnover (human, natural, basic, circulating), relationships and dynamics of economic system elements and, accordingly, the relationship of economic research (Table 7.1). Taken together, theoretical and methodological provisions of systems economy and the HAC Passport (economic sciences) are the methodological basis for economic research coordination. Accounting is a financial model of the economic system, the process of circulation of capital is reflected in accounting. It forms an information base of economic research. On this basis, it is possible to determine the relationship of research of capital circulation elements (Table 7.2).

Systems and Reproduction Methodology    107 TABLE 7.1  The Content of the Study of the Economic System Development Subsystems of systems economy

Economic system development tasks (in relation to the level of management)

Systems economic theory

Theoretical questions of combination of consumption and accumulation funds

Systems economic policy

Determination of a rational optimal combination of consumption and accumulation funds

Systems economic management

Distribution of gross value added to consumption and accumulation funds

Systems economic practice

Rational use of gross value added in the economy

TABLE 7.2  Content of the Process of Capital Circulation Management Systems economy: systems economic theory, systems economic policy, systems management, systems economic practice Production relations in the process of capital circulation

Spheres of activity (subsystems of the economic system)

1 Resources Procurement D

2 Production, implementation of works and services T

3 Realization of production, formation and distribution of income D*

1. technological resource potential, technology, production organization

1.1 Basic and circulating funds, human resources, information resources of production

1.2.1 Consumption of means of production and labor 1.2.2 Natural forms of products

1.3.1 Value forms of products and income; 1.3.2 Production and insurance funds formation

2.1 Basic and 2.  Social circulating funds, organization team, labor resources in social infrastructure the social sphere and serving staff

2.3 Social 2.2.1 Delivery of development services source formation 2.2.2 Material interest, conditions and labor protection

3.1 Basic and circulat3.  Environmental ing funds, human land and natural resources, inforresources, resources mation resources conservation of production in activities: environmental sphere

3.2 Environmental Improvement, production of ecologically clean products

3.3 Implementation of environmental programs source formation

4.  Economic socio-economic relations

4.1  Elements of the economic mechanism 4.2  Accumulation and consumption funds, their ratio 4.3  Financial results (profit, profitability) 4.4  Financial condition (financial sustainability, solvency)

5.  Organization and management

5.1  Forms of ownership 5.2  Forms of economy 5.3  Forms of management

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All studies are interconnected, devoted to the process of reproduction, which follows from the formula D – T – D*: dynamics functional subsystems cycle are reflected horizontally, their ratio in the process of circulation of capital, which is the basis of their coordination, is reflected vertically. An essential element of the system-reproduction methodology is the account of the major components of the analyzed process, interrelations of factors that determines the necessity of using four-tier structure of the system economy. It is necessary to develop a system of interrelated organizational and economic models for economic systems development at all management levels as a basis for economic research coordination. REFERENCES 1. Pasport spetsialnostey Vyschty Attestatsionnoy Komissii (ekonomicheskie nayki) [Passport specialties of the Higher Attestation Commission (economic science) ], Ministry of education and science of the Russian Federation, HAC, M. 2011) p. 6 (in Russian). 2. Kleiner G. Nauchnye perspektivy i gorizonty menedgmenta ekonomicheskich sistem [ Research perspectives and management horizons of systems economy].// Management Science. 2015 # 4 (17) (p. 7–21) (in Russian). 3. Kosolapova M., Svobodin V. Kompleksniy ekonomitseskiy analiz hoziaystvennoy deyatelnosti ( uchebnik) [Comprehensive economic analysis of economic activity (course book) ]. -M. «Dashkov and co», 2016. (in Russian). 4. [Vaskin F., Kosolapova M. Teoriya bychgalterskogo uchota [Accounting Theory (course book) ].–M. “KOLOS,” 2000 (in Russian).

CHAPTER 8

THE USE OF POLITICAL ECONOMY APPROACH IN MODERN TEACHING OF ECONOMIC THEORY Iskander G. Tursunmuhamedov Financial University Under the Government of the Russian Federation, Kaluga Branch, Kaluga, Russia Natalia Y. Trutneva Financial University Under the Government of the Russian Federation, Kaluga Branch, Kaluga, Russia Natalia N. Gubernatorova Financial University Under the Government of the Russian Federation, Kaluga Branch, Kaluga, Russia

EMERGENCE OF THE SUBJECT AND POLITICAL ECONOMY APPROACHES IN THE ECONOMIC THEORY Among the subjects studied today in almost all areas, the economic theory has a special place. The main explanation is that the course, taught already Marx and Modernity, pages 109–118 Copyright © 2019 by Information Age Publishing All rights of reproduction in any form reserved.

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in the first year, reveals to the students the basic patterns of economic behavior of economic actors given the limited resources and unequal access to information. The degree to which the students will correctly understand the economic system of the world around them will influence the success of their chosen career and the achievement by society of the most important milestones of its development. It is here, while reaching the indicated goals, that it is necessary to decide which approach should be used while teaching future specialists the entire knowledge system of economic theory. The definition of the political economy approach in the teaching of the discipline “Economic theory” is based on the very subject of the science. The emergence of the “Economics” scientific subject has been going on for a long time. It is the rational use of natural resources that the ancient thinkers and statesmen have as their research subject. It was most clearly expressed in mercantilist movement, defined as an activity connected with the exchange and trade among people and countries. Relations that mediate exchange and trade are built on the basis of aspiration for wealth: in early mercantilism, via precious metals and stones, in the later version—money derived from the export of finished products from the metropolis to the colony. In classical political economy, the subject of study is wealth and the ways to achieve it in material production. A. Smith argued that wealth can only be acquired by productive labor. Physiocrats, headed by F. Quesnay, claimed that wealth can only be achieved in agricultural production. Marxist political economy determines the subject of economic science as the production relations emerging in the process of production, distribution, exchange and consumption of vital goods. Thus, according to F. Engels, “Political economy, in its broadest sense, is the science of laws governing the production and exchange of material welfare in human society” [4, 150]. Modern economic theory in defining its subject appeal to the following main areas: Keysianism, neoclassical synthesis and institutional-sociological. As early as 1890, A. Marshall wrote “. . . the subject of its research is mainly those motives that most strongly and most consistently affect the behavior of a person in the economic sphere of his life” [5, 69]. In Keysianism, the subject of economic theory is the mechanisms of the functioning of the national economy as a whole. Neoclassical synthesis sees the goal of research in the forms and incentives of human behavior on the path to wealth. Modern institutionalism sees the subject of research in institutional changes. The statement about the subject of the economic theory, made by the Russian scientist V. S. Feldblum is of interest: “Interdisciplinary general economic theory is the science of labor and the ways of its motivation, the

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most general laws of production and distribution of material wealth, of social and economic formations in the history of mankind” 11, p. 12]. The use of the political economy approach as a tool of scientific generalization and analysis is quite widespread in the scientific community. Moreover, its application can be found in studies, both scientific and practical, from the theoretical explanation of political economic problems to the use of the political economy approach in the study of power structures. For example, the works of K.A. Hubiev represent “an attempt to theoretically, first of all from the point of political economy, rethink the current trends of global and national level” [12, 64]. The article by E.E. Nikolaeva considers the cognitive possibilities of the political and economic approach to the study of distributive relations that distinguish it from other methodological principles, as well as the actualization of applying this approach to solve the problems of Russian economy modernization. [6, 121]. V. V. Sedov uses political economy approach to elaborate the concept of sustainable development, which “. . . is considered from the point of view of political economy on the productive forces, the basis and the superstructure as the main elements of society which condition determines its ecological, economic and social stability” [7, 7]. The political and economic approach occupies a certain place in the studies on the state building. For example, D.B. Tev uses a «political economy approach to study the power structure, focus on the conditions and processes of emergence and functioning of municipal authority coalitions that consist of public and private actors” [9, 28]. G. A. Cherednichenko states that this method is used in the analysis of objective prerequisites “for state intervention in economic processes associated with “market failures” [13, 59]. The studies of criticism of contemporary social realities occupy a certain place in the use of the political economy approach. For example, A.  V. Buzgalin and A. I. Kolganov define the modern political economy approach as an eco-socio-humanitarian expansion into economic theory as an alternative to economic imperialism [1, 7]. Having considered the various definitions of the subject of political economy, as well as the ways of using the political economy approach in certain spheres of scientific research, it is necessary to turn to the main issue of the study. It concerns the application of this approach in the modern teaching of the economic theory as a discipline. Here, in our opinion, it will be important, first of all, to provide a comprehensive presentation of the entire variety of considered problems of the course through the prism of the views of the founders of classical political economy on the main goals of society development. Even Adam Smith spoke about the natural development of well-being through the prudent use of the main factors of production—labor and

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capital [8, 2]. Moreover, such a reasonable use of labor and capital resources should lead to an increase in well-being of the main actors in the economy, both in agriculture and industry , i.e., labor force. In today’s interpretation, this is the major part of the population of modern states. TAKING INTO ACCOUNT THE FEATURES OF THE NATIONAL ECONOMY If it concerns the teaching of the “Economic Theory” in Russia, then, certainly, it is necessary to proceed from the national development factors of our country. The task of determining the factors of national welfare growth is now the corner stone, where the efforts of most countries of the world economy are concentrated in search of a new paradigm of sustainable development in the 21st century. This can be fully applied to Russia’s interests, natural, intellectual and human resources of which were used with different historical expediency at various periods of its development. Therefore, the purpose of this work will be to examine, on the basis of a comprehensive analysis of the available information and analytical base, the sources of improving the national welfare of our country. A special attention was paid to theoretical development of issues of national welfare and the factors that determine it, the philosophical, economic and managerial thought throughout almost the entire stage of civilized development of mankind. And the main thing here was always the definition of wealth sources of the nation and the problems of their effective use. The era before the market economy shows that for many centuries the sources of economic development and growth have been associated with the direct use of two basic resources–land and labor. This is reflected in Karl Marx’s formation theory, W. Rostow’s concept of the stages of economic growth, and Russian enlighteners’ S. E. Desnitsky and L. I. Mechnikov theory of periodization of economic history. The development of the Russian state was accompanied by the application of various managerial methods, both economic and, to a greater extent, non-economic, which allowed to move deeper into the modern territory of the country. Again, land and labor remain the main factors of growth. Its skillful use in the 18th century, and especially in the late 19th century, brought Russia to a level of development comparable to the leading industrial countries of the time. State and economic reforms by Sergey Witte and Petr Stolypin and several others were subordinated to the tasks of developing the land market and the appearance of a free worker. Finally, the road to effective use of domestic and foreign industrial and financial capital in the Russian economy was laid out. This, on the verge of the next century, strengthened in our country the correctness of the use of

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theoretical theses of political economy about the need for effective combination of three factors of production in the state building process. Transformations of the country in the twentieth century, accompanied with disastrous political and military events, somehow or other, became the foundation for creating the economic basis that Russia now possesses. How we use the resources, available labor and industrial capital at our disposal as a result of proper use of market methods of management will determine the achievement of a high level of national welfare. The welfare of society is mainly determined by the achievement of a certain amount of social product per capita, valuation of non-market activities and the quality of life, the obligatory element of which is the availability of people’s leisure time. Studies of the problems of the growth of the national welfare are devoted to the works of a number of domestic specialists who point to it as the most important resource of an innovation-oriented type of economic development. The conditions for such development now depend firstly on the use of available and increasing innovative factors of production; secondly, on the acceleration of the construction of market institutions; thirdly, on the improvement of the effectiveness of the applied methods of economic policy. The intensification of the use of economic factors of production by the countries of the world and, of course, by Russia, determines their economic growth and reduction of the adverse consequences of cyclical development. For our country, unfortunately, the extraction of resources remains the sector of the economy that determines its place in the international division of labor as well as opportunities for development. However, building investment opportunities, both here and in related sectors of processing and services, should be a factor not only to increase the country’s GNP, but also to develop its territories. Paraphrasing Mikhail Lomonosov that Russia will grow by Siberia, we can say that it must grow by the labor and intellectual potential of its regions. Institutional changes in the Russian economy are far from being completed. Despite the fact that such market elements as the banking system, stock and currency exchange, real estate trade, including land, have been created, their socio-economic efficiency is not high due to the underdeveloped institutions and, mainly, the institution of free and protected entrepreneurship. And this serves as a favorable environment for both economic corruption and high stratification in income among the population. The economic strategy of government at all levels should be based on the stability of the ongoing market transformation. Measures to improve the efficiency of all available resources, traditionally the basis for Russia’s development, should be aimed at increasing the investment attractiveness of domestic economy and business.

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The components of well-being growth of Russian society should be taken into account in the political economy approach when studying the “Economic Theory». The second point in using the political economy approach in the modern teaching of the “Economic theory” should be the mandatory application of interdisciplinary methods. The use of interdisciplinary connections in the teaching of the “Economic Theory” makes it possible to increase the interest of students, to stimulate their progress in various subjects, and to raise the quality of education. INTERDISCIPLINARY CONNECTIONS IN THE TEACHING OF “ECONOMIC THEORY” The study of particular subjects of the “Economic theory» discipline, which is the basis for all subsequent economic knowledge, should be carried out by opening the sides of their interpenetration. Interdisciplinary method makes it possible to bring to the economy ideas and approaches that proved successful in other scientific disciplines, and to reveal more clearly the problems that other science has not encountered. A horizontal approach to disclosing the interdisciplinary links of the “Economic Theory” with other disciplines can be uncovered on the basis of the consideration of the following interrelations: economic theory and semiotics; economic theory and linguistics; economic theory and logic; economic theory and mathematics; economic theory and psychology; economic theory and political science; economic theory and jurisprudence; economic theory and history. If we consider the need for the interaction of sciences to develop an interdisciplinary general economic theory, numerous examples of a profound analogy between natural and social processes come to mind [3, 23]. Even the famous Francois Quesnay repeatedly pointed out that the economic life of society is subject to the effect of natural laws. Karl Marx in Capital compared the concepts of gravity and cost, and before that he drew an analogy between the exchange value of the commodity and the chemical equivalent. Thus, Marx introduced the concept of an economic equivalent, by analogy with the chemical equivalent. Friedrich Engels also paid attention to this topic: “History, as it was moving so far, flows like a natural process and is subordinated, in essence, to the same laws of motion.” In “Anti-Duhring” Engels used the term “chemical monetary goods.” Alfred Marshall focused on “many features of profound similarity” between human society and the “natural organization of higher animals.” Considering the mutual influence of various production factors, Marshall compared them to the balls in the bowl that regulate each other’s position.

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This, as he put it, “parallel from the field of physics” deserves that someday physicists, mathematicians and economists share this interesting analogy, just as chemists use a mechanical, hydrodynamic or mathematical analogy to study the speed of chemical reactions. Soon after the October Revolution of 1917, Russia published the first articles on the problem of the analogy between economic and natural processes. In 1923, V. A. Bazarov in his article on monetary emission noted that “the equations that formulate the emission laws are identical with the equations of ideal gases.” According to Bazarov, the money supply in circulation acts similarly to the pressure of gas, and the ruble’s exchange rate is similar to the volume of gas. The capacity of the market characterizes the “energy level of the system” and is aligned with the product of the physical Clapeyron constant at absolute temperature. Bazarov likens the income from the emission to the operation of gas during expansion. He emphasizes: “This is not an accidental analogy, not a curious coincidence, but one of countless examples of real unity or, more precisely, identity of the organizational structure in phenomena that are completely different in terms of their material composition.” Bold and fruitful ideas on the interaction of social sciences with natural sciences were advanced by academician N. D. Kondratiev. As early as 1924, he made a presentation “On the question of the concepts of economic statics, dynamics and conjuncture” at the Institute of Economics of the First Moscow State University. In this report, Kondratiev analyses the possibility of transferring physical and chemical concepts to the field of economics. He comes to a conclusion that the difference in the object of study of these sciences “cannot serve as an obstacle to the expansion of this concept before applying it to social and economic phenomena. In other words, we can regard the concept of reversible and irreversible processes in the economy as a special case of a more general understanding of them “[2, 38]. Mathematical economics and mathematical psychology have penetrated in the humanities. It is becoming increasingly clear that there are no fundamentally non-mathematical disciplines at all. Mathematics is one of the bridges that unite humanitarian and natural scientific thinking. With the help of mathematics spiritual values, accumulated experience and scientific culture move from one sphere of intellectual activity to another. The application of mathematical methods together with economic analysis opens up new opportunities for economic science and practice. After all, any economic research always involves the unification of theory (economic model) and practice (statistical data). Theoretical models are used to describe and explain the observed processes, and statistical data for the empirical construction and validation of models. The Russian researcher V. Feldblum came to the idea of ​​the possibility of transferring the physical apparatus of physical chemistry to economics

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when he discovered the analogy between the human influence with the help of various means of labor on the substance of nature in the process of material production and the action of the catalyst on the substance during the catalytic chemical reaction. An amazingly deep similarity was found between the generalized labor process and a reversible chemical reaction taking place in the presence of a catalyst. This phenomenal analogy opened a unique opportunity to apply strict scientific methods of natural science and mathematics to study socio-economic processes. Hardly anyone doubts that there is a close connection between economic science and history. In this respect, of course, the history of economic doctrines is not an exception; moreover, it takes part in giving the economic theory of a global evolutionary species in the most distinct form. The award of the Nobel Prize for Economics in 1978 to G. Simon (for innovative research of decision making within economic enterprises), and in 2002 to D. Kahneman (for integrating the results of psychological research into economic science, primarily in the field of judgments and decisionmaking in conditions of uncertainty) was a very vivid confirmation of the rarely contested provision on the importance of psychology for economic science. Thus, many researchers believe that psychology should be included in the economy. Interdisciplinary method in the teaching and study of the “Economic Theory” is clearly traced in the vertical relationship with the economic disciplines concerning curriculum. The interrelation of the “Economic theory” with the disciplines of modules emphasizes the need to achieve the goals of a competent approach in education. An integrated approach to the study of complex processes and phenomena requires the highest degree of integration of scientific knowledge. This is true in general, and for political economy—especially. Today there is no such corner in the multifaceted life and activities of a person and the whole society that would not be affected by this important science. That is why the interdisciplinary general economic theory comes to replace the traditional political economy. Vasily Leontiev is quite right by stating that “in order to deepen the foundation of our analytical system, it is necessary to go beyond the economic phenomena that we have confined to now without hesitation” [3, 14]. Currently, the disclosure of common economic patterns becomes an urgent necessity, because it allows us to consider social development as a single world process. Here an interdisciplinary approach to the teaching of economic theory is an important means of expanding the outlook of students in studying economic disciplines in the chosen direction and profile [10, 345].

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Thus, having considered certain positions when using the political economy approach in the modern teaching of the discipline “Economic theory,” the following conclusions should be drawn: • Firstly, the political economy approach in teaching this course is based on the very subject of political economy as a science; • Secondly, the political economy approach has a compulsory national configuration, which in Russia implies consideration in the teaching of the “Economic Theory” of the topics studied based on the use of domestic factors of production; • Thirdly, the application of this approach should be based on the interdisciplinary nature of scientific knowledge. REFERENCES 1. Buzgalin A.V., Kolganov A.I. Otkrytost’ polit·ekonomii i imperializm mainstream’a: economics kak proshloye [Openness of Political Economy and Imperialism of Mainstream: Outdated Economics]. Horizons of the Economy. 2012. No. 2. pp. 3–22. (in Russian). 2. Kondratiev N.D. Problemy ekonomicheskoy dinamiki [Problems of Economic Dynamics}.–Moscow: The Economics, 1989 (in Russian). 3. Leontiev V. Ekonomicheskiye esse. Teoriya, issledovaniya, fakty i politika [Economic Essays. Theory, Research, Facts and Politics].–Moscow: Politizdat, 1990 (in Russian). 4. Marx K., Engels F. Sochineniya [Works], 2nd edition vol.20. (in Russian). 5. Marshall A. Printsipy politicheskoy ekonomii [Principles of Political Economy].– Moscow: Progress, Vol. 1, 1983; Vol. 2, 1984; Vol. 3, 1984. (in Russian). 6. Nikolaeva E.E. Polit·ekonomicheskiy podkhod k issledovaniyu raspredelitel’nykh otnosheniy kak ob”yektivnaya osnova dlya resheniya problem modernizatsii ekonomicheskoy sistemy strany [Political Economy Approach to the Study of Distributive Relations as an Objective Basis for Solving the Problems of Modernization of the Country’s Economic system].–Bulletin of the Dagestan State University, Series 2: Social Sciences. Publisher: Dagestan State University (Makhachkala). pp. 121–127. (in Russian). 7. Sedov V. V. Kontseptsiya ustoychivogo razvitiya: polit·ekonomicheskiy podkhod [The Concept of Sustainable Development: the Political Economy Approach]. Bulletin of the Chelyabinsk State University, 2012, No. 8 (262). The Economics. Edition 36. pp. 5–14. (in Russian). 8. Smith A. “Issledovaniye o prirode i prichinakh bogatstva narodov.” Kniga 3 «O razvitii blagosostoyaniya u raznykh narodov» “An Inquiry into the Nature and Causes of the Wealth of Nations.” Book 3 “Of the Different Progress of Opulence in Different Nations.” M .: Eksmo, 2016. (in Russian). 9. Tev D.B. Polit·ekonomicheskiy podkhod v analize mestnoy vlasti k voprosu o koalitsii, pravyashchey v Sankt-Peterburge [Political Economy Approach in the Analysis of

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10.

11. 12.

13.

Local Authorities on the Question of the Coalition Governance in St. Petersburg]. POLITEX journal, 2006, N 2. pp. 26–34. (in Russian). Tursunmuhamedov I.G. Primeneniye mezhdistsiplinarnogo podkhoda v protsesse izucheniya «Ekonomicheskoy teorii»[Application of the Interdisciplinary Approach in the Process of studying the “Economic Theory”]. Theses Collection of Reports and Speeches of the Participants of the MK “XIIIY Kondratiev Readings” Socio-economic Problems of the Present: In Search for Interdisciplinary Solutions “. Moscow: Institute of Economics, 2016. pp. 341–346. (in Russian). Feldblum V.S. Mezhdistsiplinarnaya obshcheekonomicheskaya teoriya v deystvii [Interdisciplinary General Economic Theory in Action].–Yaroslavl: Publishing house “Indigo,” 2015. 304 p. (in Russian). Khubiev K.A. Sovremennyye tendentsii mirovogo ekonomicheskogo razvitiya: polit·ekonomicheskiy podkhod [Modern Trends in World Economic Development: the Political Economy Approach]. Journal of Problems of Modern Economics 2017. pp. 62–66. (in Russian). Cherednichenko G. A. Polit·ekonomicheskiy i institutsional’nyy podkhody k analizu roli gosudarstva v perekhodnoy ekonomike [Political economy and Institutional approaches to the Analysis of the Role of the State in the Transitional Economy] // Naukovyi visnik. Odesky Sovereign University of Economics. Allukrainian Association of Young Scientists.–Science: Economics, Political Science, History.–2007.–No. 10. pp. 58–67 (in Russian).

CHAPTER 9

POLITICAL ECONOMY TODAY Did M. I. Tugan-Baranovsky’s Prophecy Come True? Galina A. Rodina Yaroslavl Branch of the Financial University under the Government of the Russian Federation, Yaroslavl Vitaly A. Nekludov Yaroslavl Branch of the Financial University under the Government of the Russian Federation, Yaroslavl Dmitry V. Tumanov Yaroslavl Branch of the Financial University under the Government of the Russian Federation, Yaroslavl

A hundred years ago, M.  I. Tugan-Baranovsky formulated an interesting prediction about the fate of political economy: “Political economy will partly become the theory of economic policy, and partly it will become a segment of a more general science of society—sociology” (Tugan-Baranovsky 1917, p. 20).

Marx and Modernity, pages 119–131 Copyright © 2019 by Information Age Publishing All rights of reproduction in any form reserved.

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Political economy is distinguished from other social sciences since it designates the economic field as the main one among different areas of social life, and in the latter, the basic element is considered to be the relations of production. Neither the technical production component, nor the superstructure elements can be included in the economic analysis as independent ones. Political economy is the science of industrial society, with its primacy of mass industrial production, the material sphere, and spatial expansion. Post-industrial / informational / digital society / society of the new economy (we prefer to use the rather extensive, but the most accurate definition: industrial and informational, socialized, incorporated into the world economic system, the society of the fifth technological order, naturally passing to the sixth one) changes the ratio between material and non-material, real and virtual, space and time, production and exchange. Intangible benefits begin to control the world of cars–the world of reality. Political economy in its traditional form needs certain additions. A series of crisis phenomena in the global economy has aroused interest in political economy, as the bearer of an endoteric, level approach, without which it is impossible to understand the transforming economy of the 21st century as a whole. However, answering the question if political economy on its own is ready to respond to contemporary challenges, we give a negative answer, and the justification of this is the subject-matter of our article. METHODS Today, any social problem has a certain “culturological taste,” so to paraphrase M. Friedman’s long—standing statement about the popularity of Keynesianism (“today we are all a little bit of Keynesians”), we can say: today we are all economists, philosophers, philologists, historians, sociologists, geographers, jurists, etc.—a little bit of culturologists. The traditional political-economic interpretation (the culture of the people is formed and functions depending, first of all, on economic and political circumstances), is undergoing a paradigm shift, which in the mathematical formulation will look like this: from the formula C = f (E, P) we pass to the formula EP = f (C) (where C = culture; E = economy; P = policy; f = function, indicating the nature of the interdependence of these values). Culture, once formed, begins to act as a relatively independent variable among the factors of social life. On the one hand, social experience and, on the other hand, apparently, the archetypes of this culture formed during the survival of the ethnic group, people, family, etc. are the reference points. Now the system of archetypes can be characterized as an immune

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system, a protective layer of a particular culture, preserving its identity, defining national identity. Therefore, the most urgent task of reforming the Russian state and society is not only modernizing technical and technological achievements— they must be accompanied by the assimilation of the relevant social values and institutions. The recipes for overcoming the crisis from the standpoint of political economy are different—they are based on the mass renewal of capital. We believe that the most promising researches are conducted in line with the “metamorphosis” of the ratio “economic—spiritual” into the ratio “spiritual-economic.” This road was paved by E. Bernstein, M. Weber, S. Bulgakov, V. Zombart and other representatives of German historical schools, as well as M.I. Tugan-Baranovsky with his “ethical socialism” and the primacy of universal values—the most outstanding, according to Y. Schumpeter, of Marx’s “semi-Marxist” critics, and the most prominent Russian economist of his time [Schumpeter 2004]. Later, this path was taken by the supporters of institutionalism. The world of economic life was proposed to be interpreted as a multifactorial education, where psychological, social, axiological, transcendent, institutional factors act on an equal basis with the economic component. As a result, we find ourselves in the border area between political economy, economic theory, history, law, sociology, cultural studies, philosophy. The closest to this synthesized subject area modern varieties of institutional and sociological direction is neoinstitutionalism R. Coase, D. North and the new political economy of J. Buchanan, G. Tulloc. Application of the presented methodology made it possible to trace the evolution of the theoretical economy, indentifying several stages. RESULTS OF THE STUDY The scheme of the economic thought development fits into the widely known triad. First, a specific historical time determines the dynamics and state of the society economic texture (this is the subject of the economic history), which forms the tasks of economic development. Economic science produces a corresponding bilateral response to the challenges of the time: (a) methodological (the research method specific); (b) theoretical (subject of research, theory).

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That is, both methodology and theories arise at a certain time, starting at a certain place to solve specific current problems of economic development and remain relevant as long as they have predictive power. Secondly, economic science, as a humanitarian science, should be correlated with political realities. Significant are those schools that receive political patronage (it is appropriate to recall about the social demand). Third, economic science has its own internal logic of development. Therefore, its “ups and downs” can be both ahead of practices, anticipating them, and lag behind them, not to mention the fact that even in the case of coincidence with historical time, theoretical economists are unlikely to develop unambiguous answers to its challenges. “Grand Theories” The first “legal” scientific school was the classical political economy. It opened the era of “Grand Theories” (the so-called “great” social theories), looking for answers to the main questions of the corresponding historical epochs, namely, what kind of society it is and where it goes. What are the answers to the challenges offered by the classic political economists? (a) Methodological—moving of the research from the sphere of circulation to the sphere of production. As capitalism was examined at the stage of progressive development, it was possible not to bother with ideological masking of its negative features (contradictions), which opened up space for real scientific analysis. Both Smith and Ricardo used the method of natural order, which suggested treating the phenomenon under study as an objective process: the development of society has its natural, universal laws for all countries, and they are independent of people. This approach allowed us to use the method of abstraction based on the endothermic (deep, essential) approach. On the other hand, capitalism was interpreted as a natural, eternal system corresponding to the nature of man, which made it impossible to follow its historical time limits. Thus, Ricardo believed that the stick in the hand of the savage, which he used to get bananas from the palm-tree, is an example of the first capital bringing the income. (b) Theoretical—the answer to the question what constitutes capitalism is materialized in: –– the labor theory of value; –– the doctrine of profit (the main contribution belongs to Ricardo), which, according to Marx, is the theoretical pinnacle of classical

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political economy, despite the widespread opinion in the modern economic consciousness about the primacy of the labor theory of value (we think we should agree here with Marx, because Smith left unresolved the paradox of water and diamond); –– the doctrine of competition (Smith’s “invisible hand”) and division of labor, including Ricardo’s theory of comparative advantage in international exchange; –– solving the problems of reproduction (Quesnay tables). In order that the doctrine could be included into the “Grand Theories,” theory and practice must be a syncretic unity—non-dismemberment, the initial unity of such heterogeneous principles as “pure theory” and “art.” We see this unity in the following form (see Figure 9.1). If we turn to the great classical political economists’ legacy, we can find the confirmation: the issues of the economic policy in their works are considered from the syncretic point of view. So, say, Ricardo advocated the abolition of “bread laws” not because he was an expert on this particular issue, but for the reason that he saw in them the main obstacle to the development of the country. Breaking the Syncretism of Theory and Practice The first theory and practice syncretism destroyer became J. S. Mill, who distinguished “science” and”art” of political economy: • on the one hand—science is a “collection of abstract truths,” involving only the main reasons of people economic behavior; • on the other hand—art is a “set of behavior rules,” taking into account all the individual circumstances in a particular case. Syncretic Unity Endoteric (esoteric) Approach

Exoteric Approach

Essence

Phenomenon

Content

Form

Economy as a whole + long-term Trajectories of its Development

Figure 9.1  The structure of the classical political economy approach.

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Bifurcation of the theoretical economics, that previously absorbed endothermic and exoteric approaches, led to the independent development of each of them. Schematically, the separation of endothermic and exoteric approaches is presented in Figure 9.2. Endoteric approach focused on identifying underlying essence of the economic reality, some “cells,” the initial relations and the whole multi-level economic relations system was gradually formed of them. It was a metaphysical approach aimed at exploring the original nature of economic reality; it sought an answer to the question “whose interest is it in?” It is metaphysics that is engaged in the study of the world and existence as such, in the search for the causes, the source of the origins, the beginning of the starts. Depending on what exactly stood out in the form of a “cell,” different concepts were developed, which led to the birth of different new economic schools and directions. Marxism relied on discovered by K. Marx cell of the capitalist mode of production—a commodity as the simplest form of capitalism economic relations. On the basis of these initial relationships the sale and purchase of work force emerges, the latter is under the command of the buyer, the owner of the means of production. It constitutes the main production relation

Figure 9.2  Separation of endoteric and exoteric approaches in the development of economic science.

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of capitalism: “Two characteristics from the beginning distinguish the capitalist mode of production. First, it produces its products as commodities. Not the very fact of production of commodities distinguishes it from other methods of production, but the fact that for its products their existence as commodities is a state and defining feature . . . The second, which is a specific difference of the capitalist mode of production, is the production of surplus value as a direct goal and determining the motive of production” (Marx, Engels 1975, pp. 51–53). Commodity relation, thus, is a mandatory characteristic of the capitalist relation. The capitalist relation is impossible to imagine outside the commodity relationship. This makes the commodity relation not only the initial, but also the universal relation of capitalist production. Its development leads to the formation of both the basic relation and the main contradiction of the capitalist mode of production, which both were analyzed by Marx. Everyone knows what conclusions he came to (Chapter 24, Volume I, Capital). Marx failed to realize his gigantic creative idea to the end. Of all the “undisclosures” left by Marx to future researchers, we would like to draw attention to the formation approach that linked economic development with the historical change of qualitatively different stages of economy, or production methods. In Marx’s teaching, the connection of production relations with the productive forces and the social superstructure was recognized, but only as a secondary (which resulted from the subordinate nature of the superstructure); the system of inverse relations was practically not taken into account. However, Marx admitted that the same economic basis in different countries can act as a set of variations, which can be analyzed only with regard to the combination of specific circumstances. But if “one and the same basis” gives rise to “economic miracle” in one country, and another dooms to stagnation, then, probably, a stumbling block, i.e., the decisive circumstance becomes terra incognito—“combination of specific circumstances,” falling out of the formational approach fundamental elements. The time to look at this mysterious “combination of specific circumstances” will come later (for more details see: Rodina 2012). If Marxism allocated directly production (putting forward the known statement of its primacy) in the system of production relations, the Austrian school, in an effort to “reduce the complex phenomena of the human economy to their simplest elements,” proceeded from personal consumption, seeing need as the initial position of its analysis: “The leading idea of the entire economic activity of people is perhaps the complete satisfaction of their needs,” said K. Menger “ . . . a man with his needs and his power over the means of satisfaction of the latter is the starting and final point of any human economy” (Menger 2008). From this initial relation, the

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General theory of value was “grown” on the basis of assumptions that are completely opposite to the assumptions of the Marxist school. The development of the exoteric approach was due to the fact that by the middle of the 19th century capitalism gained its own physical infrastructure, having made an industrial revolution and having moved to the machine production. The problems of economic development have changed: on the one hand, answering the question what capitalism is was not enough–it was necessary to organize industrial production rationally, and this in turn required giving up the essential approach in favor of a more superficial, functional one. It was a planar, positivist approach aimed at exploring the original nature of economic reality; it was trying to answer the question “Which way is more effective?” Positivism is known to recognize empirical research of special Sciences as the only source of true knowledge. The claim of economic science to possess the General knowledge was dispelled by A. Marshall. He divided economic science into two parts: 1. fundamental (at the same time, the fundamental component of economic science was identified with the development of analytical tools, it made impossible to form a theoretical picture of economic reality, to comprehend new facts); 2. applied (it was considered as a truly meaningful scientific research). “Economic science embodies only the work of common sense, supplemented by methods of organized analysis and General reasoning, which facilitates the task of collecting, systematizing specific facts and formulating conclusions on their basis,” notes Marshall in the Principles of economic science. “Despite the fact that the scope of its studies is always limited, that its research without the help of common sense is fruitless, it nevertheless allows common sense to solve difficult problems that it would not be able to solve without it” (Marshall 1993). Approving of Marshall’s teachings as a mainstream of Economics has had far-reaching consequences. On the one hand: • development of economic analysis methods has become a specialized area of research and has expanded this area using these methods to study a variety of markets; • a kind of relations “inversion” between fundamental and applied science led to the birth of many ideas and methods put forward by non-economists in interdisciplinary applied projects, but later they

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promoted economic science. We are talking primarily about J. von Neumann, G. Simon, and D. Nash. From the other side: • the turn towards the instrumental theory was established, as a result the economic theory narrowed thematically, became an “aspect,” fragmented science, and actually lost the economy as its subject; • the marginalization of alternative research platforms occurred, and this fact had also impoverished the theoretical economy; • the questions such as “where does society(economy) move?” fell out of the scope of economic study(they had to be picked up by historiansempiricists); theoretical Outlook has narrowed, compared with the classical perception of the holistic nature of economic phenomena. As a result, the formalization (mathematization) of economic theory aggravated the structural imbalances of economic science and limited its growth potential. At the same time, there were objective conditions for the wide use of the exoteric approach: a relatively balanced development of the developed countries economies in the second half of the last century, “when purely functional approaches gave fairly well formalized, mathematized and practically effective answers to the questions about how the elements of the system interact, regardless of the fact to what extent the essence of the system and its elements is studied. The formula of this approach: we don’t know what it is, but we know how it works in the situations that we are aware of and we can practically use it” (Gritsenko 2012, p. 45). It is obvious that the boundaries of the effective application of this approach are determined by the society development dynamics, during which both the essential components of the socio-economic system and external manifestation are subject to changes. DISCUSSION OF RESULTS The development of the Marxist approach in the Soviet economic science in the last century led to the allocation of sustainability as a cell of socialist production: “. . . the authors of the “Course” [referring to the famous “Course of political economy” by N.A. Tsagolov—clarification G. R.] did not have the reason for reviewing their position, namely, regarding the sustainability not only as a universal but also as an initial relation, and hence as the initial category of the current socialist production system” (Tsagolov 1973, p. 27).

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In the twenty-first century endoterical approach was enriched by the search for the new “cells.” So, V.I. Martsinkevich (IMEMO RAS) offers a new “economic cell” of reproduction—human: “In the modern world the processes of socio-economic development going beyond the value relations are increasing . . .  On this objective basis, it is possible to follow the transformation of a political economy of commodities to a political economy of human at the science primary categories level” (Ekonomicheskaya teoriya 2006, p. 271). T. N. Yudina (Moscow state University named after M. V. Lomonosov) focused on the Russian specific features, which resulted in the allocation of the truth as a”cell” of a harmonious, self-sufficient economic system (Yudina 2009). We suppose that the development of information in the form of a cell in a post-industrial, information society is extremely promising. Such attempts are being made in our country and abroad. In due time M. I. Skarzhinsky (Kostroma state University named after N.A. Nekrasov) identified information as the subject of a new political economy. However, we are still far from the creating of a holistic concept that analyzes the modern economic structure and predicts its possible changes. G.N. Tsagolov, starting from the convergence process, separates out the bi-polar two-cell base, where the market plays the role of the gas pedal, and the sustainability is a steering wheel and brakes. We believe that this is not just a re-animation of the old convergent concept, but an attempt to master a new problem field of political economy on the border of the market and the non-market. On the one hand, some non-market goods begin to function as market commodities, acquiring a monetary equivalent, thanks to the universal role of the monetary economy. On the other hand, due to social constraints a lot of market products cease to be commodities and fall out of normal market functioning; for example, public goods with their “quasimarket.” It is necessary to agree with M.I. Voeykov that “all these issues are a subject-matter of a political economy, differing from the classical one, which is best described as postclassical . . .  and roots in Marxism” (Voeykov 2012, p. 37). The twentieth century accepted and XXI continued the gap of syncretism, which occurred in the nineteenth century. As a result the development of economic science went in two not intersecting trajectories: endoteric and exoteric. Is there a need for “great” theories today? Is the intersecting (or merging) of two approaches possible? Some researchers give a negative answer: “the economic basis of the society is examined by political economists in two dimensions—in the planar endoteric approach, when we study the essential, internal relations, and from the standpoint of exoteric approach, when surface economic

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forms are investigated . . .  Accordingly there are two series of concepts, economic ideas, which are expressed with the help of categories and laws” (Babaev 2010, p. 41). The development of theoretical economy within the framework of this attitude is associated with the heterogeneity of the economic categories nature. Some categories differ as essence and manifestation, e.g., cost (essence) and price (manifestation). But in both cases we mean the same relation. Other categories express modification of the essential relations, and even their distortion. Then on the surface of socioeconomic relations the essence acts in a transformed form. For example, the price of production is a transformed form of the commodities value; it looks like a derivative of the costs and profits, but not the abstract social work outputs. The third categories express the emergence of new production relations, and they act in relation to the former categories neither as a manifestation nor as their modification. But at the same time they do not go beyond the basic relationship. The categories of this kind include monopoly super-profit: despite the fact that its main source is the surplus value, and the former is genetically related to it, nevertheless, it is not a modification of the surplus value. For its appearance, it is necessary to change the free competition by the rule of monopolies that interfere in the laws of capitalist competition. Other economists consider the system scientific-theoretical knowledge creation from conglomerate of unorthodox theoretical projects to be a promising task: “By the end of 20th century, many scientists have recognized that the analysis of different economic systems requires to build up a unified science, that would unite the main ideas of the various heterodox schools of thought” (O’Hara 2009, p. 38). We believe that is possible on the basis of post-non-classical methodology focused on the study of self-organizing systems, whose “human dimension” (V.S. Stepin) is the most suitable for integral (unifying) paradigms with their inherent complex research programs of interdisciplinary type, which theoretical and experimental studies, applied and fundamental knowledge are combined in. The prospects of the theoretical economy structure transformation can be judged by the ongoing changes both on the part of the subject and methodology. 1. There is a simultaneous expansion of the subject field (due to the emergence of new sections of the theoretical economy that were not previously included in the subject of economic science, such as socio-economics, genetic economics, economic physics, calculation economics, experimental economics, political economy of development, political economy of space, political economy of terrorism, political economy of hunger, feminist, environmental, structuralist, constitutional, unorthodox political economy, political economy of

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power, etc.).), and its narrowing (part of the problems is increasingly studied by other social sciences; for example, the phenomenon of fiat money, based on the declared authority of the state power, became the subject of Political Science), that leads to both positive and negative consequences: –– on the one hand, it means the enrichment of theoretical economics with inter-disciplinary research; –– on the other hand, this leads to the danger of diffusion of a science special subject and its loss (according to the apt expression of O. Ananyin, the economic science “tree” turns out “a garden of stones”). 2. Pluralism in methodology is being formed but this process is assessed controversially: –– on the one hand, it is a kind of a return to multilevel; –– on the other hand, there is a risk of mechanical interconnection of qualitatively heterogeneous methodological platforms. CONCLUSION We came to the conclusion that the processes taking place in the domestic and (to an even greater extent) in foreign economics were predicted a hundred years ago by M. I. Tugan-Baranovsky. Understanding the problems of the transforming economy, that we formulated in the Introduction, allows us to come to the conclusion that this is hardly possible within the boundaries of positivist scientific standards with their absolutization of the verification principle, which cannot assess new facts and phenomena characterizing the points of economic systems growth due to the fragmentary nature of disciplinary knowledge about the socio-economic reality. Without the restoration of the “abandoned areas” of the research front, it is impossible to study the formation of a new economic reality, i.e., to return to the “great” economic theories, the demand for which is determined by the ongoing transformations (for more information see: Rodina 2014). REFERENCES Babaev D.B. O predmete politicheskoy ekonomii [On the subject of political economy]. Bulletin of Ivanovo state University. Series Natural and social Sciences. Economy, 2010, no. 3, pp. 41–42 (in Russian). Ekonomicheskaya teoriya: istoki i perspektivy [Economic theory: origins and prospects]. Moscow, Publishing House of TEIS, 2006, 999 p. (in Russian).

Political Economy Today    131 Gritsenko A.A. Fundamental’nye i aktual’nye osnovaniya obnovleniya klassicheskoy politicheskoy ekonomii [Fundamental and actual bases of renewal of classical political economy]. Economic horizons, 2012, no. 2, pp. 45–57 (in Russian). Marshall A. Printsipy ekonomicheskoy nauki [Principles of economics]. Moscow, Publishing House of Progress-Univers, 1993, 994 p. (in Russian). Marx K., Engels F. Sochineniya [Writings]. Vol. 2. Part 2. 2nd ed. Moscow, Publishing House of Politizdat, 1975 (in Russian). Menger K. Osnovaniya politicheskoy ekonomii [The foundation of political economy]. Moscow, Publishing House of Territory of the future, 2008, 434 p. (in Russian). O’Hara F. Sovremennye printsipy neortodoksal’noy politicheskoy ekonomii [The Modern principles of unorthodox political economy]. Economic issues, 2009, no. 12 (in Russian). Rodina G.A. Politicheskaya ekonomiya XXI veka: vostrebovana ili spisana v arkhiv? [Political economy of the XXI century: demand or written off in the archive?]. In Ekonomicheskaya sistema sovremennoy Rossii: puti i tseli razvitiya [Economic system of modern Russia: ways and purposes of development]. In Khubiev K.A., Bryalina G.I., Kurilenko Zh.F. (Comp.). Moscow, 2014 (in Russian). Rodina G.A. Struktura teoreticheskoy ekonomiki: evolyutsiya vzglyadov [Structure of theoretical economics: evolution of views]. Theoretical economy: electronic periodical, 2012, no. 5. URL: http://www.theoreticaleconomy.info (in Russian). Rodina G.A. Vyhod za predmetnye oblasti ekonomicheskoy nauki—otvet na vyzovy XXI veka [Going beyond the subject areas of economic science–the answer to the challenges of the XXI century]. Bulletin of Ivanovo state University. Series Natural and social Sciences. Economy, 2014, no. 2, pp. 78–82 (in Russian). Schumpeter J. Istoriya ekonomicheskogo analiza [History of economic analysis]. In 3 vol. 3. Saint-Petersburg, Publishing House of Economic school, 2004, 688 p. (in Russian). Tsagolov N.A. Kurs politicheskoy ekonomii [Political economy course]. In 2 vol. 1. 3d ed., reprocessing and DOP. Moscow, Publishing House of Economica, 1973, 831 p. (in Russian). Tugan-Baranovsky M.I. Osnovy politicheskoy ekonomii [Fundamentals of political economy]. 4th ed. Petrograd, 1917, 540 p. (in Russian). Voeykov M.I. Politicheskaya ekonomiya kak samosoznanie burzshuaznogo obshchestva [Political economy as self-consciousness of bourgeois society]. Economic horizons, 2012, no. 2, pp. 23–38 (in Russian). Yudina T.N. Evolyutsiya ucheniya o domostroitel’stve v kontekste formirovaniya ekonomicheskoy sistemy Rossii: vtoraya polovina IX—nachalo XX vv.: Dissertatsiya . . . doktora ekon. nauk [Evolution of the doctrine of housing construction in the context of the economic system of Russia: the second half of IX-beginning of XX centuries: dissertation. .. doctor of economics]. Moscow, 2009, 324 p. (in Russian).

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CHAPTER 10

OLD–NEW POLITICAL ECONOMY POTENTIAL OF RESEARCH OF MODERN ECONOMY Ludmila Karaseva Tver State University, Tver, Russia Alexey Zinatulin Methodological Workshop “Method of Structural Levels” Tver, Russia

POLITICAL ECONOMY POTENTIAL OF ECONOMIC RESEARCH: TREASURE UNDER GLASS How to overcome the diverse and complex problems of the modern Russian economy systematically? How to fix the errors of the state governance and the defects of legal regulation? In search of answers to these problematic questions, there is an increasing focus of research on economic forms, in which economic laws are manifested in direct economic practice. In this case, as rightly pointed out by Professor O. Yu. Mamedov, “. . . application specialists,

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profusely represented in all fields of knowledge, especially solidary stood up against the theory and methodology of social cognition, knowing very well that this kills the scientific studies” [Mamedov, 2016, p. 9]. However, the accumulated methodological background of political economy can serve as a reliable base in the study of new qualitative changes in the economic structure of the real life of the modern economy. Especially supplemented—not formally, but reasonably—by the inclusion of organizational, economic and institutional approaches. The political economy potential of the research of the modern economy is fully revealed when it is necessary to study the socio-economic nature of economic relations, their economic essence and inconsistency, the mechanism of the institutionalization of economic interests. This is also true for the formation of new theoretical and methodological foundations of socioeconomic design and program management of innovative type. First of all, political economy allows us to distinguish in economic life sustainable (essential, dictating its necessity) and accidental. As it is known, the essential always predetermines, and accidental affects. The evidence of the relevance of this methodological nuance is the discussion about the relationship between the institutional and economic systems of the economy. In this discussion a number of authors consider that institutions as the main cementing force of society, “in which the economic system is only a dependent subsystem with its known elements” [Lemeshchenko, 2015]. Moreover, there are economic-theoretical studies, where empirical knowledge is decisive, not initial in understanding the essence of the founded out paradoxes and problems of economic life. We do not deny the importance of studying the external and superficial relationships and dependencies existing in economic practice. They are necessary, but as the first step in understanding the qualitative changes in the economy, in working out its movement strategy. It seems that for modern researchers who absolutize empirical (actually economic) or institutional aspects of the analysis, this remark is extremely acute and controversial. The highlighting of technological, organizational, institutional, psychological aspects is the choice of one of the facets of the problem (for example, according to the principle of relevance). But is the aspect approach sufficient in the study of complex problems of the economic system, because they have a system nature? Developing an integrative approach, let’s pay attention to the possibilities of the method of structural levels. In our opinion, the method contains a great potential, which gives new opportunities in the research of the modern economic system. It is possible to discuss the levels themselves, their internal content, but such an approach allows to integrate aspects of the study as much as possible in their interconnection and integrity.

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SUBJECTIVE APPROACH IN THE METHODOLOGY OF STRUCTURAL LEVELS Structural and functional analysis as a methodological technique were not known during the life of Karl Marx. However, a deep study of the heritage of the great scientist leads to the conclusion that the idea of the structural levels of industrial relations, both in the development and functional aspects, is one of the important methodological basis of the capitalist industrial relations study. Professor A.A. Sergeev was the first who drew attention to this while studying the structure of production relations of socialism [Sergeev, 1979]. Let’s show it on the simplest examples. The capitalism development stages are represented by the levels of development of industrial relations from simple cooperation to the manufacture and to the capitalist factory. The study of the large-scale machine industry stage, that is within the same level of development, is carried out with the help of different categories: profit, average profit, trade profit, business income, loan interest, land rent. But if Marx analyzes the development of the mechanism of functioning of capitalism industrial relations, the profit is a category of one level, the average profit is from the second level and trade profit, business income, loan interest and land rent represent the third one. It should be stressed that each of the levels can be deployed to the certain sublevels. These are the levels of mediation of production relations between the subjects of production and society. In “Capital” it is a distinction of relations between classes, within classes, within a capitalist enterprise, between separate economic entities. It characterizes the degree (increase) of mediation and the growth of the roles of exchange and distribution in the interaction of production and consumption. The question of the application of the structural levels method is important not only for the study of certain units in the development of industrial relations, but also in relation to their functioning within the same development stage. One of the authors of this chapter has clarified and proposed the following levels of economic system: techno-economic, socio-economic and business. The first two levels form the economic subsystem as the core of the economic whole. To study the institutionalization of economic interests it was necessary to deploy and describe the following different sublevels within the business level: organizational-economic, institutional, essentially business [Karaseva, 2011]. The analysis of the economic system functioning mechanism through the deployment of socio-economic essence of the structural levels gives a “vertical cut” of the economic relations implementation mechanism. This means that without mediation of organizational, economic, institutional and

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essentially business relations they cannot be realized. Moreover, the mechanism under consideration expresses the predetermination of the norms of economic sublevels by the socio-economic nature of the economic system. The opposite of the objective mechanism of economic relations is the existing subjective economic mechanism. The study of their interaction allows to reveal the nature and mechanism of connection of economic theory with the practice of economic management, since economic relations can be realized only through the economic activities of economic entities following their economic interests. As for objective and subjective in economic theory analysis they are often discussed. For example, Professor V.T. Ryazanov draws attention to this methodological provision. He emphasizes: “while studying crises it is necessary to take into account both objective and subjective causes, and their combination complements the characteristics of their nature and largely explains the scale of a recession, as well as the features of the carried-out anti-crisis policy” [Ryazanov, 2016, p. 116]. The ratio of objective and subjective is also important in the economic entities behavior theories in the subjective approach. It means the deployment and clarification of the essence of economic relations through the mechanism of mediating the actions of economic entities with a special interest in social activity. Subjective-behavioral may be both subject-objective and subject-subjective. Within the framework of the business sublevel of the economic system, it is actualized a subjective perception of existing organizational-economic and institutional norms and institutions, socio-economic roles and status by economic entities. On this methodological basis, there is a real opportunity to reveal the mechanisms of interaction between economic entities and the external environment, the processes of modification, deformation, the emergence of irrational and imaginary forms of economic relations, while avoiding a number of methodological inaccuracies and errors. NEW PRODUCTION: ILLUSION OF DECEPTION? In the discussion of structural changes in the Russian economy the central place is occupied by the problem of the formation of a new quality of material production as a way of refusing from the raw material export dependence to a new technological breakthrough, as well as the issues of the systemic introduction of advanced technological solutions, socio-economic institutions and relations. What kind of accents in this discussion can be pointed out by the old new political economy researcher?

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In our opinion, a change in the production quality as a characteristic of qualitatively different stages in the development of productive forces means also a change in its functional mechanism: socio-economic, organizationaleconomic, institutional forms and norms of implementation. Functional mechanism in this sense is an objective regulatory support for a new stage in the development of productive forces. However, the mechanism will not start “to work” without the activities of the economic system entities, who are subjectively aware of their place in social production, their interests, institutional and organizational conditions of their economic activities. Then it is necessary to clarify the understanding of the functional mechanism as an object of direct socially conscious purposeful influence. Subjectively established set of economic forms and norms (institutional, organizational-economic, business) forms a subjective functional mechanism for the formation and implementation of a new quality of production. Gradually it levels the socio-economic and business forms and norms that do not contribute to the realization of the goal and objectives, corrects the remaining forms and norms that stimulate the formation of a new quality of production, develops and introduces new ones. While forming a subjective mechanism of new quality of production, on the one hand, it is important to clearly understand its objective mechanism of implementation. On the other hand, it is necessary to thoroughly analyze and systematize the problems of the Russian economy from the point of view of moving towards this goal. Without this the subjective mechanism of formation cannot be developed. We emphasize, that here we mean not aspects of formation, but namely a system of economic forms and norms (institutional, organizational-economic, business), gradually deploying old production on a new way. Finally, it’s necessary to point out the importance of the formation of the organizational-economic and institutional mechanism for the implementation of this goal. The government cannot directly influence either the productive forces or the socio-economic relations or the economic interests. The existing productive forces objectively predetermine the structure and functioning of social and economic relations, which determine certain organizational-economic forms and norms of their functioning, as well as the right of ownership as a legal expression of economic necessity. The latter forms the structure of the institutional system and generates economic interests of the participants of social production. These interests encourage people to economic activities, to certain behavior and to interactions aimed at productive forces. That is why it is so important to clearly understand the objective mechanism of economic relations in the formation of their subjective mechanism of implementation.

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Thus, the management system that is inadequate to the achievements of scientific and technological progress, to the existing socio-economic structure of the economic system, as well as to the structure of economic interests, is transforming from a development management system into a system of braking, degradation. For the current situation in Russia this is convincingly shown by Professor Y. N. Shorokhov: “the loss of compliance of the management concept with the achievements of scientific and technological progress and the state of the environment leads to the emergence of peculiar barriers and structural crises on the way of development” [Shorokhov, 2017, pp. 95–96]. As the technological processes and the corresponding them economic structures become more complicated, a contradiction arises within the organizational-economic relations. This reveals in the incompatibility of rigid programming of management with the necessity of flexibility, sensitivity to changing conditions of functioning. In terms of qualitative structural changes, all participants of the management system (the creator of standards for performers, the holder of a common norm for the implementation of the goal, the performers of the given norms) should be distinctly motivated for achieving a common goal. However, according to the well-known aphorism of Einstein, it is impossible to solve the problem at the same level at which it arose. Therefore, the proposed solutions only within the organizational-economic level are not only ineffective, but also unrealizable. The correct analysis within one aspect of the problem of new quality of production, ignoring at the same time the socio-economic relations and without the inclusion of the institutional level of functioning of economic relations, makes the transformation illusory. On the one hand, without changing anything in the management system that implements outdated organizational and economic relations, the managing elite creates additional problems in the implementation of the set goal. On the other hand, the complexity of the structure of economic interests and the necessity of their appropriate institutionalization are in conflict with the current functioning institutional structure, which is still focused on short-term targets and serves the economic interests of the dominant managerial elite. Innovative development of the economy will remain an illusion for a long time without “innovation in the main attitude.” But this does not mean that there is no need to set a goal to develop an economy based on innovation. Justifying the tendencies of modern economic development, Professor K. A. Khubiyev notes that, to the extent that the economy based on innovation will progress to that extent “the wage-form labour will increasingly obvious reveal its archaic and inefficient nature” [Khubiyev, 2017, p. 134]. The fact is that the stability of the economic organization of society, predetermined by its economic essence, which carries the “genetic code” of the economic

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system, on the one hand, and its variability as an economic phenomenon, on the other hand, determine the real life of the economy each time. RUSSIAN MATRIX OF ECONOMIC BEHAVIOR In case of inadequacy of institutions to their socio-economic nature and structure of the existing economic interests, new economic behavioral norms arise spontaneously. Spontaneous economic behavior patterns, being reproduced again and again reproduced, gradually become alternative institutions, thus forming a kind of structure, which we have called the institutional matrix of behavior of economic entities. Why “matrix”? Rigidity and linearity of reproduction as characteristics of spontaneously arising institutional norms form this matrix structure, that can be considered as a global institutional trap of the Russian economic system. The matrix patterns of economic behavior in the Russian economy include: • meeting the requirements of institutional norms and institutions only formally, but not in substance; • irrational action of rather rational managerial elite; • imaginary behavior and interaction of economic entities as a way of their rational existence in the economy. However, the neoinstitutional theory of economic agents’ relations, fixing these new forms of temporary resolution of the contradiction of wage labour in innovation activity, remains within the institutional layer of economic relations and is not able to offer measures to remove these contradictions. As we wrote above, the essential always predetermines, and the accidental affects. The institutional system is a factor influencing a particular reproduction of the economic system. Or another example: the growing contradiction between the subjectively established institutional structure of the world economy, which supports the interests and “shadow power” of globalists, and the objective socioeconomic nature of the globalization process, which requires taking into account national and state interests. The reproduction of the institutional matrix in the Russian economic system indicates the growth of institutions’ alienation from the main part of economic entities as a form of confrontation between them and the statebureaucratic system that implements the economic interests of a narrow oligarchic group. Through institutions and institutional norms, oligarchic structures ensure the reproduction of their dominance in the economy, mastering the subjective economic mechanism, redistributing national wealth in their favor.

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In the matrix concept and the economic policy pursued on its basis the main is the state, and the members of society are considered as a means of ensuring economic growth, as well as maintenance and prosperity of the state. Socium is positioned as something slave, that requires guardianship, rationing of activities and constant control. But in such conditions it is impossible to create either a qualitatively new production or a digital economy. The political economy view makes it obvious that the roots of institutional alienation lie in the socio-economic nature of the current economic system. This will be an objective political economy conclusion. REFERENCES Alpidovsaya, M. L., Gryaznova A. G., & Sokolov D. P. Regress Economy vs Progress Economy: “Alternatives of Senses” // The Impact of Information on Modern Humans / Advances in Intelligent Systems and Computing, Volume 622/ Editor Elena G. Popkova.–Switzerland: Springer International Publishing AG, part of Springer Nature 2018, 638–646. Karaseva, L. A. Metod strukturnykh urovney v poznanii ekonomicheskikh otnosheniy [The method of structural levels in the knowledge of economic relations]. Tver, Tver State University, 2011, 170 p. (in Russian). Khubiyev, K. A. Tendentsii i perspektivy sovremennogo ekonomicheskogo razvitiya: integrativnyy trend? Gelbreyt: vozvrashcheniye [Trends and prospects of modern economic development: is it a trend? Galbraith: the return] Moscow, Cultural revolution, 2017, pp. 114–156. (in Russian). Lemeshchenko, P. S. Institutsional’naya ekonomika: teoriya, politika, praktika. [Institutional Economics: theory, policy, practice] Minsk, Misana, 2015, 692 p. (in Russian). Mamedov, O. YU. (2016). V poiskakh “vneekonomicheskogo” proizvodstva [In search of “non-economic” production] TERRA ECONOMICUS, 14(1), 6–17. (in Russian). Ryazanov, V. T. (Ne)Real’nyy kapitalizm. Polit·ekonomiya krizisa i ego posledstviya dlya mirovogo khozyaystva i Rossii [(Not) Real capitalism. Political economy of the crisis and its consequences for the world economy and Russia] Moscow, Economics, 2016, 695 p. (in Russian). Sergeyev, A. A. Struktura proizvodstvennykh otnosheniy sotsializma [The structure of the production relations of socialism] Moscow, Science, 1979, 240 p. (in Russian). Shorokhov, YU. N. Rukotvornyye bar’yery na puti razvitiya organizatsiy i sposoby ikh preodoleniya [Man-made barriers to the development of organizations and ways to overcome them] Bulletin of Tver State University. Series: Economics and management, 2017, No. 4, pp. 87–100. (in Russian).

PART II THE DIALECTICS OF THE MODERN MARXIST STUDIES

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CHAPTER 11

HISTORICAL DESTINY OF CAPITALISM Keynes Versus Marx E. Naydenova Financial University under the Government of the Russian Federation, Moscow, Russia

The bicentennial anniversary of K. Marx is an excellent opportunity to see how ideas of his central work “Capital” have influenced the development of the economic thought. It is of particular interest to analyse the impact of Marx’s ideas on the views of non-Marxist economists. The most prominent representative of this trend is John Maynard Keynes, who was born in the year 1883, the year Marx passed away. There are few reasons why Keynes’s theory is chosen as the object of this study. The first reason is obvious. In the history of the economic thought there are only two scientists whose theories are not only well known in academic circles but their names are quite popular even now. Therefore, many researchers have been trying to find similarities in the theories of these

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scientists (Haikin et al., 2013; Hein, 2015; Henry, 2009, 2011; Naydenova, 2018; Piketty, 2016; Sardoni, 2005, 2011, 2015; Shestakov, 2015). The second reason also lies on the surface: the practical application of the theories. Marx’s theory provided the base for an attempt of creating a new social and economic system in a certain country, namely Russia. Keynes theory was converted to economic policies of the developed countries in the first two decades after World War II. There is no saying that both experiments have turned out to be successful, especially since one of them has been over, though hardly did K. Marx’s theory bear responsibility for the Soviet project failure. As far as the organization of the economic role of the government according to Keynes’s theory project is concerned, it is still in process, though in a highly modified and even distorted form, which greatly impoverish the theoretical foundations of the project (Minsky, 2017). The third reason is that only Karl Marx and John Maynard Keynes have made a revolution in the economic science (each in his own way) and have had quite a comparable impact on its development (Shestakov, 2015). Marx’s name is known to all academic economists and his “Capital” is one of the most widely read economic works. Marxism as a school of thought has a lot of followers (Buzgalin and Kolganov, 2015). But even those theoreticians who did not belong to this school have experienced the influence of “Capital.” And Keynes was no exception. Of course, as a theorist Keynes was not formed under the influence of the ideas of Marx: he had completely different teachers. Attempts to present Keynes as a scientist who continued and developed the ideas of Karl Marx (Haikin et al., 2013) misrepresent the truth. Keynes in his book had completely different objects and tasks and has come to conclusions totally opposite to Marx’s ones, especially about the historical prospects for capitalism. This subject will be observed in the final section. And yet, have you carefully read Keynes’s work you can discover the indisputable influence of “Capital” on “The General Theory of Employment, Interest and Money.” MARX’S “CAPITAL”—A SECRET SOURCE OF INSPIRATION FOR J. M. KEYNES There is an assumption, that Keynes’s trip to Soviet Russia in 1925 has awakened his interest in K. Marx (Naydenova, 2018). Anyway, the researchers of Keynes’ works claim that Keynes started making statements about Marx not earlier that in 1925 (Sardoni, 2005, Henry, 2009).

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In 1935 in a letter to B. Shaw, Keynes wrote that in the book, on which he worked at the time, ‘the Ricardian foundations of Marxism will be knocked away’ (Sardoni, 2005, p. 206). It is clear which book was kept in mind: Keynes was working on “The General Theory of Employment, Interest and Money,” which appeared a year later. This raises a few questions. The first question. Keynes is believed to have been poorly familiar with Marx’s “Capital.” Joan Robinson was a person to play an important role in the creation of such an opinion about Keynes. According to Claudio Sardoni ‘she was convinced that Keynes ‘had never managed to read Marx’ (. . .) and that, in any case, ‘he would have never made head or tail of Marx’ (Sardoni, 2005, p. 196). In one of his letters to B. Shaw in 1934 Keynes wrote that he ‘looked into’ “Capital” (Sardoni, 2005, p. 196). Where did Keynes get the idea about ‘the Ricardian foundations of Marxism,’ had he just have ‘looked into’ “Capital”? The second question. How could Keynes, a prominent and world-class academic, write about a book he had failed to read that it was ‘not only scientifically erroneous but without interest or application for the modern world’ (Sardoni, 2005, p. 197)? But there is another one, the third, and perhaps the main question. Why Keynes mentioned Marx at all? In the first chapter of “The General Theory,” which has only a few lines, Keynes, explaining the title of his book, wrote: ‘The object of such a title is to contrast the character of my arguments and conclusions with those of the classical theory of the subject, upon which I was brought up and which dominates the economic thought, both practical and theoretical, of the governing and academic classes of this generation, as it has for a hundred years past’ (Keynes, 2007, p. 42). In that tiny chapter clarifying the term ‘classical theory’ he found it appropriate to give a reference to Marx (Keynes, 2007, p. 42), who in the first volume of “Capital” had given a clear opinion on whom he considered classics (Marx, 1960, p. 91). Why was this link to “Capital” necessary, especially as the author of “The General Theory” quite often instead of the term ‘classical theory’ used the term ‘orthodox theory,’ ‘traditional theory’? In addition, he expanded the list of economists-classics, and unlike Marx he referred A. Smith only to ‘the forerunner of the classical school’ (Keynes, 2007, p. 324). The core part of the Keynes’ theory is an effective demand principle. In the third chapter of “The General Theory” he criticized economists-classics for the complete disregard of this principle that led, according to Keynes, to ‘the lack of correspondence between the results of their theory and the facts of observation’ (Keynes, 2007, p. 65). Keynes was able to detect ‘The

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great puzzle of effective demand’ in the works of all three economists after Malthus, including ‘below the surface, in the underworlds of Karl Marx’ (Keynes, 2007, p. 65). Could a person who was unfamiliar with “Capital” get into ‘the underworlds’ of Marx’s theory? The only explanation could be given: Keynes has read “Capital,” and has read it carefully, as evidenced by the work of John F. Henry (2009) and E. Hein (2015), but for some reason did not want to publicly admit it to his ‘fellow economists’ (Keynes, 2007, p. 39), who represented a target audience of the book. Keynes in “The General Theory” has mentioned the name of Marx just three times and did not openly polemicize with the author of “Capital,” but a lot signs indicate that some of the ideas Keynes formulated can be ascribed to Marx’s theory. As it is well-known, the methodology of Keynesian analysis is based on aggregate approach, which allowed Keynes to create a new branch of economic theory known as macroeconomics. That particular approach was already used by Marx in the first volume of “Capital,” in particular, while analysing the organic structure of social capital (Marx, 1960, pp. 623–624, 644, 647–648). In the fourth chapter of “The General Theory,” devoted to the characteristic ‘of the units of quantity appropriate to the problems of the economic system as a whole’ (Keynes, 2007, p. 67), Keynes outlined the solution of the problem of reduction of labour with a view to measuring the level of employment (the main subject of his research) in homogeneous units. He proposed the following: ‘the quantity of employment can be sufficiently defined for our purpose by taking an hour’s employment of ordinary labour as our unit and weighting an hour’s employment of special labour in proportion to its remuneration’ (Keynes, 2007, pp. 70–71). On the basis of labour reduction Keynes identified one of the fundamental categories of his theory. He came up with the idea: “We shall call the unit in which the quantity of employment is measured the labour-unit; and the money-wage of a labour-unit we shall call the wage-unit” (Keynes, 2007, p. 71, emphasis added). It is in these wage-units Keynes suggested measuring real income, and other real variables. Keynes’s approach to the reduction of labour is very consistent with the approach of Marx (Marx, 1960, p. 53). And Keynes’s ‘wage-unit’ is very similar to Marx’s ‘price of labour’ (Marx, 1960, pp. 554–555), although he avoided even mentioning the labour theory of value upon which Marx deduced from this category. In the twenty-third chapter, dedicated to mercantilism, Keynes considered Bernard Mandeville’s criticism of thrift. Mandeville was an author of the scandalous “Fable of the Bees” (1723) which satirically demonstrated a dampening impact of thrift on the economy (Keynes, 2007, pp. 323–325).

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It is a striking match, but in the first volume of “Capital” Karl Marx described the statements of the same fable of the same author. He called Mandeville ‘an honest, clear-headed man’ (Marx, 1960, p. 629), for the author candidly admitted, ‘that, in a free nation, where slaves are not allowed of, the surest wealth consists in a multitude of laborious poor’ (Marx, 1960, p. 629). Thus, in the same fable both Keynes and Marx saw the same problem, representing the main mystery of the capitalist economy: the process of capital accumulation, but regarded it from different positions. In the fable of Mandeville Marx has seen a proof ‘that the mechanism of the process of accumulation itself increases, along with the capital, the mass of ‘labouring poor’, i.e., the wage labourers, who turned their labour power into an increasing power of self-expansion of the growing capital (. . . )’ (Marx, 1960, p. 629). Keynes has seen a confirmation of one of his main ideas: thrift reduces consumption, followed by the decrease of the effective demand and the volume of national production. This impedes the achievement of full employment of the working-class, which, as Marx admitted, is badly affected by being exploited by the capitalists, but much stronger is affected when cannot be an object to exploitation, i.e., in ‘insufficient employment’ conditions (Marx, 1960, pp. 556, 650). And finally, ‘animal spirits’, that is a calling card of Keynes. To paraphrase the poet, we say Keynes meaning ‘animal spirits’, say ‘animal spirits’ meaning Keynes. But it turns out that Keynes is not the original: Karl Marx used this metaphor in the first volume of “Capital” almost 70 years before Keynes. Analysing the production of relative surplus value, Marx demonstrated that the capital not only exploits labour by appropriating the surplus product of a worker and the very productive force of workers. He emphasized: ‘Apart from the new power that arises from the fusion of many forces into one single force, mere social contact begets in most industries an emulation and a stimulation of the animal spirits that heighten the efficiency of each individual workman’ (Marx, 1960, p. 337, emphasis added). It turns out that 70 years before Keynes Marx observed behavioural aspects of capitalist economy, and, according to Marx an ‘individual workman’ was a host’ of ‘animal spirits’. It’s hard to believe that Keynes has failed to read it, as it’s hard to believe that the emergence of this metaphor in “The General Theory” (three times!) was a coincidence: ‘Most, probably, of our decisions to do something positive, the full consequences of which will be drawn out over many days to come, can only be taken as a result of animal spirits—of a spontaneous urge to action rather than inaction, and not as the outcome of a weighted average of quantitative benefits multiplied by quantitative probabilities’ (Keynes, 2007, p. 168)]. It is clear from the continuation of his thought who is the host of Keynes’s ‘animal spirits’: ‘Thus if the animal spirits are dimmed and the spontaneous optimism falters,

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leaving us to depend on nothing but a mathematical expectation, enterprise will fade and die’ (Keynes, 2007, p. 168, emphasis added). For Keynes it was very important to choose other than Marx’s ‘animal spirits’ host, since it allowed him to formulate the true, as he thought, threat of capitalist accumulation. He has written about the ways of easing this threat in the final chapter of his book. Given quotes prove that Keynes studied Marx’s “Capital,” however, one can hardly agree with the statement that Keynes ‘incorporated some central aspects of Marx’s theory into his own work’ (Henry, 2009, p. 2). After all, the ‘central aspect’ of Marx’s theory is the labour theory of value, and Keynes did not even mention it. It also appears doubtful that Marx was a supporter of an effective demand principle (Hein, 2015). Karl Marx deserves full credit for creating the endogenous theory of an economic cycle. Keynes, like Marx, saw the link between the cycle and the investment process, i.e., the process of capital accumulation, thus trying to create his own endogenous theory of economic cycle (Naydenova, 2018). This approach is almost an exception in non-Marxist literature and has some similarities with Marx’s interpretation of the cycle in the second and third volumes of “Capital” (Sardoni 2015). However, there are significant differences. Although Keynes, like Marx, recognized objective conditionality of capitalist economy cyclicality, he, unlike Marx, tried to find a way to smooth cyclic manifestations and, in particular, its most acute phase–crisis. KEYNESIAN IDEA OF THE REAL ECONOMY AND MONETARY SECTOR UNITY AS A RESULT OF UNDERSTANDING OF MARX’S INTERPRETATION OF THE COMMODITIES AND MONEY UNITY In accordance with the neoclassical tradition the monetary sector, functioning of which in accordance with the classical dichotomy and resultant quantitative theory of money determines the overall price level, is not related to the processes of real economy. Keynes, abandoning the classical dichotomy, revealed a link between monetary and real sector. He proved that changes in the monetary sphere affect the commodities market, i.e., the real economy, through the interest rate as the price of money. Many economists, including representatives of the neoclassical synthesis, regarded it as an opportunity to affect the real economy using instruments of monetary policy. But Keynes saw it differently. Moreover, having advanced the idea of the interrelationships of the monetary sector and real economy, he was very sceptical about the possibilities of the monetary policy in achieving full employment (Keynes, 2007, pp. 170, 336). It seems that Keynes perceived the idea of Marx about the

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unity of commodities and money. His perception was different from that of Marx, and he understood it not through the analysis of the value and the two-fold character of the labour embodied in commodities, but through the analysis of interest rates. In the seventeenth chapter he even tried to show that the interest rate can be expressed through relationships of any commodities (Keynes, 2007, pp. 215–220). Particularity of monetary interest rates, in his view, was determined by liquidity, which distinguishes money from any other commodities and makes it ‘the standard of value’ (Keynes, 2007, p. 227). This idea was close enough to recognition of the essence of money as a universal equivalent (Marx, 1960, p. 76). However Keynes did not come through, nor could he do it for obvious reasons For the same reasons, Keynes, criticizing a quantitative theory of money, which stands as one of the three pillars of the neo-classical understanding of the economy as a whole did not totally decline it. Some researchers of works of Marx and Keynes, looking for similarities in their theories pay attention to the fact that both of them rejected the Say’s law and a quantitative money theory (Sardoni, 2005; Hein, 2015). However, unlike Marx, who criticized the quantitative theory from the position of labour value, Keynes stressed that quantitative theory was applicable but only in certain cases, namely in conditions of full employment. Before full employment is reached, increasing money supply may stimulate expansion of aggregate production, and hence the expansion of aggregate income and employment, for increasing money supply may lead to lower interest rates and, therefore, may stimulate the expansion of investment demand, which in turn contributes to the expansion of effective demand in general. And Keynes’s money market theory finally couldn’t do without quantitative theory as his liquidity-preference theory partially is underpinned by the interpretation of the transaction demand for money. On the other hand, his analysis of the speculative demand for money, which Keynes considered the most important component of total demand for money, allowed Keynes to identify the link between money and real economy. Equilibrium rate of interest, affecting the level of real investment demand, in Keynes’s view acts as the result of the interaction of the money demand and the money supply. The relationship and interaction of the monetary sector and the real economy are established through this interaction. Thus, Marx’s idea of unity of commodities and money was accepted by Keynes, but transformed into the idea of the unity of the real and monetary sectors of the unified economic system. In this regard, the opinion that an important similarity of Keynes’s and Marx’s theories is that both authors, unlike the classics studied ‘monetary economy’ (Henry, 2009, p. 4; Hein 2015, p. 2) is fully correct.

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CONCLUSIONS The climactic problem both in the first volume of “Capital” and “The General Theory of Employment, Interest and Money” is the accumulation of capital. Keynes was perhaps the only of all the non-Marxist economists, who directly admitted: ‘The outstanding faults of the economic society in which we live are its failure to provide for full employment and its arbitrary and inequitable distribution of wealth and incomes’ (Keynes, 2007, p. 332). Characteristically, these words open the final, twenty-fourth chapter of “The General Theory.” In this chapter Keynes predicted historical destiny of capitalism. But in the end of the first volume of “Capital” Marx almost 70 years before Keynes had introduced his forecast. He argued that the historical tendency of capitalism is its death, because its development, being inherently capitalist accumulation, inevitably and naturally leads to such an aggravation of its internal contradictions, that ‘capitalist integument (. . .) is burst asunder. The knell of capitalist private property sounds. The expropriators are expropriated’ (Marx, 1960, p. 773). Keynes, as well as Marx, saw a threat to capitalism in the process of capital accumulation. However, Keynes, unlike Marx, consumed and interpreted a problem of capital accumulation as a problem of investment. He was sure when capitalism evolves it encounters serious obstacles, especially the weakening of the inducement to invest. Keynes considered increasing economic uncertainty to be the main reason for it, and particularly the uncertainty concerning the expectations of future profits from investments in fixed capital. Keynes saw in it the most important contradiction of capitalist accumulation. On the one hand, capital must expand by investment to ensure the increasing employment in the economy (and the increasing consumption of goods produced). On the other hand, the richer a society is, the less intensive inducement to invest is, the more intense uncertainty in the expectations of investors is, each of whom is concerned not about reaching the maximum employment but about an achievement of maximum profit. Keynes saw that contradiction and thoroughly researched it. He emphasized that the escalation of uncertainty parallel to capitalist wealth accumulation is exacerbated by the increasing role of financial markets, making the investment process ‘a byproduct of the activities of a casino’ (Keynes, 2007, p. 166). However, Keynes, unlike Marx, tried to find ways to resolve the contradictions of capitalist accumulation inside the capitalist system: in his view, government should become the organizer and subject of the accumulation process in the interests of a society as a whole, and particularly in order to ensure full employment. It is increasing government’s role in the investment process that Keynes considered the historical tendency of capitalist

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accumulation. He put his hopes on government: ‘I conceive, therefore, that a somewhat comprehensive socialization of investment will prove the only means of securing an approximation to full employment’ (Keynes, 2007, p. 336). He believed that government could weaken the inherent capitalist uncertainty and to go beyond the narrow limits of the inducement to invest, which is a limit to private investors. In the twenty-fourth chapter of “The General Theory,” Keynes has repeatedly highlighted ‘the vital importance of establishing certain central controls’ (Keynes, 2007, pp. 336, 338) to achieve full employment, emphasizing at the same time the need to preserve ‘the traditional advantages of individualism’ (Keynes, 2007, p. 338). He defended ‘the enlargement of the functions of government (. . .) both as the only practicable means of avoiding the destruction of existing economic forms in their entirety and as the condition of the successful functioning of individual initiative’ (Keynes, 2007, p. 338). Thus, we think for Keynes the super-objective in “The General Theory of Employment, Interest and Money,” was an attempt to refute Marx’s prediction about the imminent death of capitalism arising from the intensification of the contradictions of capitalist accumulation. Keynes introduced his vision of these contradictions and outlined the ways of their settling within the capitalist economic system. REFERENCES Buzgalin, A. V., & Kolganov A. I. (2015). Global’nyy kapitalizm V 2-kh tt. T1. [Global Capitalism. In 2 vv. V.1]. M.: LENAND, 640 p. (in Russian). Haikin, R. M., Derunetz A. S., & Evdokimova A. V. (2013). Marks i Keyns. Sopostavleniye, vzaimosvyaz’ i predposylka k analizu [Marx and Keynes. Comparison, relationship and motivation to analisis]. // Uspehy v himii i himicheskoy tehnologii. Vol. XXVII, no. 8, pp. 46–51 (in Russian). Hein, Eckhard (2015) : The principle of effective demand: Marx, Kalecki, Keynes and beyond, Working Paper, Institute for International Political Economy Berlin, No. 60/2015, Inst. for International Political Economy, Berlin. PP. 1–28. Downloaded on 2018 07 31 from http://www.ipe-berlin.org/fileadmin/ downloads/working_paper/ipe_working_paper_60.pdf Henry J. F. (2009). Precursors of Keynes: Marx, Veblen, and Sismondi. Buffalo. PP. 1–24. Downloaded on 2018 07 31 from http://faculty.buffalostate.edu/joth/ pk2009/Site/program_files/Henry.pdf Henry, J. F. (2011). “Sismondi, Marx, and Veblen: Precursors of Keynes.” In Heterodox Analysis of Financial Crisis and Reform, edited by J. J. Leclaire, T.-H. Jo, and J. E. Knodell, 72–83. Northampton: Edward Elgar. Keynes, John Maynard (2007). Obshchaya teoriya zanyatosti, protsenta i deneg. Izbrannoye [The General Theory of Employment, Interest and Money. The Selected works].—M.: Eksmo, 960 p. (in Russian).

152    E. NAYDENOVA Marx, K. (1960). Kapital. T.1 [Capital. V. I]. // Marx, K., Engels, F. Works. 2-d ed. V. 23. Moscow. 908 p. (in Russian). Marx, K. (1961). Kapital. T.III [Capital. V. III] // Marx, K., Engels, F. Works. 2-d ed. V. 25, p. I. Moscow. 546 p. (in Russian). Minsky, H. (2017). Stabiliziruya nestabil’nuyu ekonomiku [Stabilizing an Unstable Economy]. M.; SPb: Izd-vo Instituta Gaidara, Fakultet svobodnych iskusstv i nauk SPbGU, 624 p. (in Russian). Naydenova, E. M. (2018). Istoricheskaya tendentsiya kapitalisticheskogo nakopleniya: Keyns VS Marks. (K 200-letnemu yubileyu K.Marksa) [Historical tendency of capital accumulation: Keynes VS Marx. (For the 200th anniversary of Karl Marx)]. // VESTNIK TVGU. Series: Economics and Management, no. 1, pp. 251–257 (in Russian). Piketty, T. (2016). Kapital v XXI veke [Capital in the Twenty-First Century]. Moscow: Ad Marginem Press. 592 p. (in Russian). Sardoni, C. (2005). Keynes and Marx // A ‘Second Edition’ of the General theory. Volume 2. Edited by G.C.Harcourt and P.A.Riach. Taylor & Francis e-Library. PP. 191–208. Retrieved from http://fcaib.edu.ng/books/AEM/%5BG.c._ Harcourt%5D_Second_Edition_Of_General_Theory_(BookFi.org).pdf Sardoni, Claudio (2011). Unemployment, Recession and Effective Demand: The Contributions of Marx, Keynes and Kalecki. Edward Elgar. Cheltenham, UK • Northampton, MA, USA. 192 p. Retrieved from http://b-ok.org/book/2459533/42573e Sardoni, C. (2015). Is a Marxist explanation of the current crisis possible? // Published: 1 April 2015 by Edward Elgar Publishing in Review of Keynesian Economics, Vol. 3. PP. 143–157. Retrieved from https://www.elgaronline .com/view/journals/roke/3-2/roke.2015.02.01.xml Shestakov, V. P. (2015). Dzhon Meynard Keyns i sud’ba evropeyskogo intellektualizma [John Maynard Keynes and the fate of the European intellectualism]. SPb.: Aleteja,. 210 p. (in Russian).

CHAPTER 12

LAND AND RENTAL RELATIONS From Classics to Modernity Nelli V. Tskhadadze Financial University under the Government of the Russian Federation, Moscow, Russia Aza D. Ioseliani Financial University under the Government of the Russian Federation, Moscow, Russia

THE DEVELOPMENT OF LAND AND RENTAL RELATIONS The theory of land rent was developed by the representatives of the classical school in the period of formation and development of capitalism. Adam Smith does not have a harmonious theory of land rent, although he devoted a very extensive chapter to it in his main work. But his views on land rent can be described by the phrase that it is “. . . the work of nature which remains after deducting or compensating everything which can be regarded as the work of man” [Smith, 1993; 138].

Marx and Modernity, pages 153–164 Copyright © 2019 by Information Age Publishing All rights of reproduction in any form reserved.

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J. Mill, K. Marx, K. Menger, J. H. von Thünen made a great contribution to the development of the theory of land rent. However, in this respect, works of D.Ricardo and A.Marshall stand out, as they gave fundamental provisions of the theory of land rent and land and rental relations. [Marx, 1960; Marshall, 1984; Ricardo, 1991]. The economic theory, where the concept of economic rent in its broad sense currently dominates, pays insufficient attention to land rent itself. The emergence of the phenomenon of rent beyond the boundaries of agriculture and the extractive industry contributed to the erosion of the concept itself and depersonalization of land rent as an economic category. Therefore, there is a need for a comprehensive and in-depth consideration of the nature of land rent with a clear distinction of its limits. It is necessary to reconsider the very approach to the study of land rent and economic relations associated with it, to overstep the barrier of its understanding solely as monetary income, to pay attention to the fact that land rent is, first of all, a tangible product or a product taken from a natural storeroom, or grown on fertile land. Primary land rent is a life-supporting product, an irreplaceable and especially valuable product, the initial element of the reproduction process. A look at land rent from this standpoint can be the basis for rethinking its economic nature, organizing the system and developing a mechanism for the effective functioning of land and rental relations in a country’s economy. The basis for understanding the nature of land rent is not to limit it to the point of view of the economic realization of land ownership, but to see in the formation of rent a manifestation of the creative ability of the land, creating a product by invested labour (and often without it) with relatively less content of the share of labour having its own characteristics of market circulation than in other industries. Land rent has two levels of being: initial, so called in kind and money market level. The product of land obtained in agriculture does not always find a corresponding market value in terms of money due to the nature of the demand for it and market and structural characteristics of circulation. It violates the exchange in regards to labour equivalent and prevents the formation of rent in monetary terms. Outwardly, it is reflected in the fact that in market conditions, monetary rent formation in the agricultural sector is very unstable and constantly undergoing fluctuations. Since rent-based land product is its primary factor in any industry, fluctuations in rent formation in various industries are reflected in value ratios in the economic system: they can change them so that exchange proportions become too heavy; first of all, for agriculture, where, from the beginning of market reforms, production began to decline. This is reflected in the efficiency of social production as a whole and it leads to its decline.

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According to D.Ricardo, high rental payments are not the cause of high prices, but their result. Prices for products that may increase for various reasons, are of primary importance but the main one is the increase in population, and hence the demand for food. On the one hand, D. Ricardo’s land rent is the share of the land product paid for using the original and non-destructible forces of the soil. On the other hand, rent is not the result of the abundant fertility of the land, but a consequence of its scarcity, which is expressed in the lack of highly fertile land and the need to cultivate plots of poor fertility (Ricardo, 1991; 308). Addressing land rent, A. Marshall pursues the same basic purpose as the representatives of the classical school–which part of the earnings should be considered as the rent itself and how it should be taxed. A. Marschall noted: “Lack of land in the absence of uneven fertility gives rise to the emergence of rent” [Marshal, 1984; 118]. In principle, there is nothing new in this comment and anyone dealing with the problem of land rent proceeds from it. But another remark of A. Marschall, “.. from the point of view of an individual producer, land is only a special form of capital” [Marshall, 1984; 121], is quite representative and is not in line with his own point of view. When a person owns a farm, there is less land that other people can own. The area of agricultural land is quantitatively constant for a given society, capital (means of production) is variable in the long run. Although D.Ricardo noted that the cost of land in a densely populated area is many times higher than the cost of improving it, but A. Marshall uses this phenomenon in a different way and introduces the concept of social value of land. It allows A. Marshall to carry out the mentioned division of the annual value of land into three parts. The first part stems from both natural qualities of soil and geographical and climatic location. This “annual initial and inalienable” cost must be paid in the form of tax (in favor of the society) by an owner, or by a tenant [Marshall, 1984; 126]. The part of this value may be the result of people’s activities, although not the activities of the owner or the tenant. It may appear due to the intensive settlement of the area, the formation of nearby industrially developed agglomeration. In this case, the value of land increases, despite the fact that the owner did not make improvements and did not invest capital. A. Marshall called this increase in the value of land due to intensive human activity the social value and considered it a relevant part of the land rent. According to A. Marshall, it generates the social value of land (public value), raising its price as a whole, occasionally many times over. The sum of the initial cost and the value generated from the activities of people, not the owner and the tenant, but activities that are social in nature, represents the annual social value of land or “real rent” [Marshall, 1984, 138]. The part of the growth of the (annual) value of land, i.e., rent

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comes from the “labour and other costs of individual landowners”; according to A. Marshall, this is the “private value” of land. It does not refer to rent, it is the share of labour and capital of the owner of the land or its tenant. Taxation of the first part (social value) does not discourage land users from cultivating it. It does not affect (or, perhaps, it has little effect) on the supply of agricultural products, and therefore, on its price. Regarding the “private value,” A. Marshall proceeds from the fact that in the course of production use of land, the choice is made as to how to use it. If the landowner (tenant) sees that high profits received from new methods of cultivating land are taxed, he can refrain from these new methods of cultivating. Genuine taxed rent, the basis of which is natural properties of land, is “averaged out” for users of land and independent of the specific user. The landowner bears the tax burden on this part of the value of land, and it is not passed on to the consumer of the land product. A. Marshall introduces the concept of quasi-rent which is a temporary surplus of income over the costs of the current use of the resource [Marshall, 1984; 135]. This is an income, the change of which does not affect the supply of a given resource (good) today, but may affect it in the future. Therefore, it may disappear over time. What can be accepted from A. Marshall unconditionally? This is the concept of public (annual) value and private value of land. The idea is fruitful and valuable in all aspects of land and rental relations. Also, this is the concept of quasi-rents, which explains a lot in land and rental relations, which other concepts are not able to do. Regarding the practical significance of the theory of land rent, A. Marshall’s comment on D. Ricardo’s theory of taxes is of great importance: “. . . in the country . . . it is very easy to adjust taxes on tillage and create such obstacles to its improvement, which temporarily enriches landowners and brings the rest of the population to poverty” [Marshall, 1984; 300]. Further, we will follow and analyze the obstacles that arise and are created and make the cultivation of land meaningless for a producer working for the market; we will see whom they enrich and whom they rob. Most likely, these are not only and not so much about taxes, as many different absurdities of the value system of a market economy, which enrich some people much more than taxes do and also lead to the poverty of others. But there are a number of provisions in the rental theory of A. Marshall that must be applied with caution with reference to land rent. First of all, this is universality that A. Marshall gave to the category of rent, starting with the remark that “. . . even land rent is by no means an isolated category, but a leading species of a large kind” [Marshall, 1984, 192]. Subsequently, the concept of “economic rent” was introduced, which now often replaces the category of land rent. Thus, the latter became leveled, impersonal, and very

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often its essence and economic nature are interpreted in an incorrectly and one-sided way. The next moment is the identification of land with capital. Although A. Marshall’s identification is implicit, it is a question of approach from the standpoint of a private producer, but, nevertheless, the precedent turned out to be very attractive. Land is not always considered as the most important production resource, and land rent, if it is mentioned, is spoken of very briefly. The modern leading school of economic theory (neoclassical economics) in the interpretation of the functions of production factors, including land, is based on maximizing benefits that are derived from the use of resources and their operational transferability from industry to industry. In a market economy, costs are based on the values that the market detects. If production resources generate less income than the income offered by the best possible alternative ways of using them, then we can assume that this way of using resources does not cover costs; then resources are transferred to another industry. Neoclassicists study the use of land with the best possible advantage so that this use gives the greatest profit. The very interpretation of rent is limited for them by income, cash receipts for the use or payments of the user to the owner of the land. The analysis of this economic school assumes full mobility of land in an economic sense: land passes from hand to hand, from the production of one product to the production of another one, from one industry to another one. In this sense, the approach of A. Smith is quite distinctive: He proposes to consider land as a variable factor, referring to the fact that for a farmer, land often turned out to be a more variable factor than the supply of labour (Smith, 1993; 383). An example is given that a farmer who starts cultivating land, focuses on the number family members who are available for work, that is, he proceeds from the amount of land, but from the amount of labour. Another characteristic of the approach, which is associated with the previous ones, implies freedom and competition for the use of land. As a result, it becomes clear what is required of the land user to keep it for himself, how much to pay, who will get these payments and how they pay off. The source of rent, the product of the land, remains ignored by the authors. Thus, the approach is limited to considering the results of work of market forces, that is, the size of the rent which some people pay and others receive. Without any doubt, the influence of D. Ricardo is obvious here. [Ricardo, 1991]. The interpretation of rent comes from the prevalence of market forces that shape the price of the land product, which is reflected in rental payments for a user and in income for an owner of the land. However, in general, this approach does not seem as Ricardian. Rent as a whole, not land rent is considered specifically.

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Classics of economic theory noted the difficulties in determining the amount of rent. A. Smith offers the following options for determining rent [Smith, 1993; 359]: (a) payments by an entrepreneur for certain factors of production; (b) part of business payments paid to certain factors of production; (c) income received by owners of production resources; (d) part of the income received by the owners of certain production resources. All variants of his definition of rent bear the stamp of a modernized approach to this concept. Significantly, the four options for rendering treat land rent as either company payments or owner income. Why is it impossible to determine the rent clearly, and why is it possible for the land? It is impossible because A. Smith implicitly means a certain general economic concept by this term relating to all factors of production, and not just a specific factor, that is the land with its fertility. In our opinion, without denying the importance of studying payments and income and market movement of land, its resources in conditions of free competition, it is preferable to choose a different starting point, another direction for research. This new direction is not the sum of money received from the use of the land, but the product that land gives, that is, the beginning of understanding brought by A. Smith. The basis of the life of society is an annual product of land plus what is created by labour of people of this society. This provision can not be cancelled or can not even be shaken by someone. The product of land is the material basis of land and rental relations, taking into account conditions of use and production use. It is obvious that the main conditions determining the formation and use of land rent are: (a) the emergence of an effectively working owner of land; (b) adequate exchange proportions, providing equivalent exchange and inter-branch overflow of land rent. Moreover, exchange proportions are primary, and an effective owner appears only when they are acceptable for a given economic system. Reforms began in the reverse order in the Russian agricultural sector. In the romantic period of the beginning of reforms in the late 1980s–early 1990s, a movement, that could be called “For Farming,” emerged in certain circles. Its’ initiators hoped to solve the agrarian problem by introducing farming, followed by a complete transition of the agrarian sector to this type of management. The results of this movement are known: farming in Russia has not become widely popular. Given the exchangeable proportions that emerged after the liberalization of prices in 1992, such a failure was predetermined. But this is not the only reason. There is a number of other reasons originating in the peculiarities of the functioning of agricultural farms in the conditions of the modern market, which determine their position in the system of competitive and value relations.

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MODERN LAND AND RENTAL RELATIONS Modern agricultural farms work in different conditions than the similar economy of the XIX–first half of the XX centuries. They tend to produce a small amount of products for their own consumption. These farms, which operate mainly for the market with all the ensuing consequences, function in conditions of the business society and the money economy. It is extremely difficult for a small farm and a small peasant household to stay afloat, to work at least without losses. The number of farmers is steadily declining even in developed market countries, for example, in the US and EU countries. This is despite the fact that extremely favorable conditions have been created there for the work of agrarian farms, partly by nature, and for the most part by the state. [Log J., 1991]. The reduction of the number of farmers means that their place is occupied by larger farms. A farmer as such, a “family farmer” with a relatively small farm is being forced out of the business world, and small farms, whose owners receive a large share of income in other spheres, become “hobby farms.” Now, if we consider, for instance, the agricultural sector of the United States, we are essentially talking not about millions of farms, but about 180 thousand large enterprises that produce 75% of the industry’s marketable products. Large agricultural farms receive most of the state aid. The share of 60% of small farms accounts for only 5% of the total amount of subsidies. This is due to the fact that subsidies issued to large farms are used with greater efficiency than those given to small farms. [Casl, 1992; 97. Market transformation of agricultural enterprises, 2000; 75]. But it is difficult to work profitably in the market conditions even for large agricultural holdings. The experience of the US agrarian sector proves this idea. The U.S. Government spent 428 billion dollars on support of producers of sixteen main types of agricultural products in 1980–1996 [Large and small business in agriculture, 2006; 97]. Agrarian farms, which produce mainly food commodities, have practically no opportunity to raise prices, because the production of many thousands of farms, not to mention the products of foreign producers, is traded on the national market. The market for raw materials of agricultural enterprises of the country is extremely small-element on the supply side. The society is faced with the fact that food commodities, being life-supporting products, do not receive the conditions necessary for normal reproduction in a free market. This can be considered a sign of products that modern economic theory refers to the group of “public goods,” for which there is no private market demand. There is a private market demand for the products of the agrarian industry, but it is not sufficient for the normal reproduction process due to the scarcity of monetary expression. Monetary

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valuation of the market does not reflect the fact that a full-fledged product with an excess, that is rent, is received from the land and consumed. The agricultural sector, the producer of raw materials, gets only a small part of the total aggregate added value of food ready for consumption. [Tskhadadze, 2018]. Accordingly, it is impossible to restrict ourselves to the concept of “regulation” with respect both to the agrarian sector as a whole, and the market for its products. Government purchases of agricultural products which are unsystematic and organized from time to time for acute need, or, conversely, commodity interventions do not solve anything. It is necessary to create a market for this product, where conditions for the equivalent exchange, competitive relations, and the normal reproduction process would be created for its producer. To do this, it is advisable to use all the mechanisms and factors for creating and regulating the market of agricultural products and supporting agricultural holdings. These mechanisms are: the establishment of guaranteed prices; government purchases for the purpose of raising the prices for grain, vegetables, meat, milk and other products; regulation of the use of acreage; reimbursement of the difference between market and target prices to farms; direct subsidies for the restoration and increase of fixed capital; export subsidies; restriction of imports of agricultural products and others. In general, everything must be done to ensure that the ratio of price on products of agricultural farms, products of industry and energy provides an equivalent exchange. Only in this case, the agrarian sector, already working in an extreme situation by the initial natural and geographical conditions of reproduction, can find owners who are interested and efficient and who are capable of ensuring the normal functioning of the industry [Tskhadadze, 2017]. There was an opinion that was, probably, dominant at a certain period: the state of the agricultural sector of production depends on the ownership of land, on the dominant form of its ownership. It is impossible to underestimate the role of ownership in agriculture because land can be bought up and become a subject of speculation, what is unacceptable. There is also a threat of the formation of latifundia, which can become an obstacle in agricultural production, because a large landowner does not cultivate land, but leases it. It can simply become an extra parasitic link between society and a producer. Therefore, the rational organization of land ownership is very important[Tskhadadze, 2016]. Forms and powers of land ownership play an important role in land and rental relations. Unlike the general economic conditions of market structures, consumer assessment of the product and other market-based natural factors, property is an institutional sphere. The state can provide the owner of the land with full authority, and can introduce almost any restrictions

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that it considers useful for production and for the welfare of society as a whole. [Tskhadadze, 2017]. In the neoclassical economy, they proceed from the fact that, the land as a factor of production, possessing limitations and rarity, being involved in property relations, cannot but participate in pricing. If, however, we translate it into the language of classical political economy, land, owned and used for production purposes, cannot but affect the exchange ratio of goods, and therefore directly affect the exchange value. The view of the land, which is typical of some Western economists, who evaluate land rent as a payment for retaining and preserving land in this industry, goes well with this. It is obvious that here we are talking about cases when the owner himself produces on the land belonging to him, and about cases of various forms of land lease. The alternative use of land and the cost of lost opportunities are additional arguments in favor of the fact that value of land is a full-fledged participant in the pricing of a product and land has a share in the product value. Moreover, these two points are interrelated and interdependent. Indeed, it can be assumed that if the owner of land cultivates it himself and receives a certain amount of income per hectare when growing grain on it and every year the plot is cultivated for grain, this most likely means that the alternative and more profitable occupation on this plot does not exist. [Tskhadadze, 2017]. One must not forget a crucial point in land and rental relations. Rent formation in the agrarian sector, on agricultural lands, if we are talking about its monetary form (the market recognizes only the monetary form), does not occur by itself, apart from other sectors and industries in a capitalist industrial economy, but in interaction and mutual influence and in competition with them. The formation of land rent and its distribution should be considered as the result of competition of agricultural products, farms and industry. In agriculture, the start of production and its cessation cannot fully obey the rational principles of the market. They are entirely related to the biological conditions of the life cycle of the product produced. An agricultural producer cannot stop or suspend production, focusing on market conditions. Also, it is much more difficult for him to resume the suspended production than for an industrial producer. In addition, market circulation and conditions of land use in the agricultural sector have peculiarities. The demand for agricultural land, as well as for other resources, is derived. According to the usual patterns of the markets of production factors, it is subordinated to the demand for products manufactured with the use of land. In addition, the demand for agricultural land depends on the endowment of resources and on their availability: we mean labour resources, basic equipment, agricultural equipment, energy carriers,

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fertilizers, means of combating plant diseases and their pests, as well as loan capital. At the same time, the production factors’ supply in agriculture cannot be formed according to the usual principles of their market with a decentralized market economy. For an agricultural producer, they come as if from another system, where price ratios are formed according to different principles. If pricing is institutional in the agricultural sector, then, in the industrial sectors, prices are formed by the market. The production itself is subject to the principles of rationality in the industry as a whole. These principles are crucial, because goods with prices, which are formed in the market and industrial sphere, come for exchange to the agricultural sector, where pricing is subject to other laws. As a result, price ratios, that make equivalent exchange impossible, are formed. Machinery, equipment, energy carriers, fertilizers, etc. may become inaccessible to an agricultural producer at market prices, which is equivalent to a lack of supply. Significantly, it is usually a question of providing an agricultural producer with a “target,” that is, a normal, average rate of profit in the agrarian policy of both the European Union and the USA. [Log J., 1991]. Land rent cannot be involved in the redistribution process. At least, the withdrawal of that part of it, which, according to A. Marshall’s classification, is called the public (annual) value of land, cannot have a negative impact on production. Secondly, if the economic organism of the society is full-fledged, then all internal relations there are interconnected and interdependent. Land rent interacts and has a powerful influence on value relations, on the exchange proportions of goods of all groups, on the movement and usage of productive resources, on education and income distribution, and on the efficiency of social production in general. At the same time, land and rental relations themselves are also strongly influenced by these factors. Land rent plays a crucial role in these interrelated and interdependent relationships. Land rent plays a key role in the relations in economic systems, where the potential of land and natural resources is high. Therefore, land and rental relations, ownership of land and its products, education, distribution, production and social use of land rent should always be under the scrutiny of the state economic policy[Tskhadadze, 2017]. REFERENCES Agrarnaya ekonomicheskaya nauka na rubezhe vekov: metodologiya, traditsii, perspektivy razvitiya [Agricultural economics at the turn of the century: methodology, traditions, prospects of development]. M .: Encyclopedia of Russian villages, 1999. (in Russian). Il’in, S. S. Formirovaniye rynka i predprinimatel’stva v agrarnoy sere sovremennoy Rossii. Kn.Rossiya: uroki reform [Formation of the market and entrepreneurship in

Land and Rental Relations    163 the agricultural sector of modern Russia. Reading Russia: lessons of reforms]. M.: Institute of International Law and Economics named after A.S. Griboedov, 2008. (in Russian). Kasl, E., Bekker M., & Nikol’son A. Effektivnost’ sel’skogo khozyaystva. Per. s angl.[The efficiency of agriculture. Translated from English]. M .: Agropromizdat, 1992. (in Russian). Keyns, Dzh. M. Obshchaya teoriya zanyatosti, protsenta i deneg [The General Theory of Employment, Interest and Money]. М.: Economics, 1948. (in Russian). Kondrat’yev, N. D. Agrarnyy vopros o zemle i zemel’nykh poryadkakh [The matter of land and land regulations]. M.: Publishing house “Universal Library,” 1917. (in Russian). Kondrat’yev N.D. Izmeneniye mirovogo i russkogo sel’skogo khozyaystva za vremya i posle voyny i osnovnyye zadachi nashey sel’skokhozyaystvennoy politiki //Vestnik sel’skogo khozyaystva [The change in world and Russian agriculture during and after the war, and the main tasks of our agricultural policy // Agricultural Reporter ]. 1922, No. 6–7. (in Russian). Krupnyy i melkiy biznes v sel’skom khozyaystve: tendentsii razvitiya, problemy, perspektivy [Large and small business in agriculture: development trends, problems, prospects]. M .: Russian Institute of Agrarian Problems and Informatics named after A. A. Nikonov, ERD, 2006. (in Russian). Log Dzh. Kollektivnaya sobstvennost’ rabotnikov (obzor amerikanskogo opyta) // SSHA: ekonomika politika, ideologiya [Collective property of workers (review of the American experience) // USA: economics, politics, ideology]. 1991. No. 10. (in Russian). Marks, K. Kapital //Marks K., Engel’s F. Soch. 2-ye izd. T.23,24. [Capital // Marx K., Engels F. Complete works, 2nd edition. Vol. 23, 24.]. (in Russian). Marshall, A. Printsipy politicheskoy ekonomii: v 3-kh tomakh [Principles of political economy: in 3 volumes]. М.: Progress, 1983–1984. (in Russian). Rikardo, D. Nachalo politicheskoy ekonomii i nalogooblozheniya. Antologiya ekonomicheskoy klassiki. T.2. [On the Principles of Political Economy and Taxation. Anthology of economic classics.]. M., 1991. (in Russian). Rynochnaya transformatsiya sel’skogo khozyaystva: desyatiletniy opyt i perspektivy [Market transformation of agriculture: ten years of experience and prospects].- M .: Encyclopedia of Russian villages, 2000. (in Russian). Samul’son, P. Ekonomika. Per.s ang.T.1 [Economics. Translated from English, vol. 1. ]. M.: Algon, 1992. (in Russian). Smit, A. Issledovaniye o prirode i prichinakh bogatstva naroda. Antologiya ekonomicheskoy klassiki. V 2 t., T.1 [An Inquiry into the Nature and Causes of the Wealth of Nations. Anthology of economic classics. In 2 volumes, vol.1.]. M.: Economics, 1993. (in Russian). Tskhadadze, N. V. Evolyutsiya mirovoy ekonomicheskoy mysli ot istokov do nashikh dney. Monografiya [The evolution of world economic thought from the beginnings to the present day. Monograph]. M.: Ru-Science, 2018. (in Russian). Tskhadadze, N. V. Sovremennyye tendentsii razvitiya agrarnogo sektora v Rossii// Fenomen rynochnogo khozyaystva: ot istokov do nashikh dney. Monografiya / Pod red. Sidorova V.A., Yadgarova YA.S., Chapli V.V.[Modern trends in the development of the agricultural sector in Russia // Phenomenon of the market economy: from

164    N. V. TSKHADADZE and A. D. IOSELIANI the beginnings to the present day. Monograph / Ed. Sidorova V.A., Yadgarova Y.S., Chapli V.V.]. Krasnodar, 2016.- P. 316–327. (in Russian). Tskhadadze, N. V. Effektivnyy mekhanizm gosudarstvennogo regulirovaniya agrarnogo sektora // Razvitiye predprinimatel’stva i biznesa v sovremennykh usloviyakh/ Kollektivnaya monografii/ Pod obshey redaktsiyey M.A.Ekindarova [Effective mechanism of state regulation of the agricultural sector // Development of entrepreneurship and business in modern conditions / Collective monographs / Under the general editorship of M.A. Ekindarov]. M., 2017. (in Russian). Tskhadadze, N. V. Transformatsiya instituta zemel’noy sobstvennosti v agrarnom sektore //Problem sovremennoy ekonomiki i institutsional’naya teoriya/ Sbornik dokladov / Pod red. R.M.Nureyeva [Transformation of the Institute of Land Ownership in the Agrarian Sector // Problems of the Modern Economy and Institutional Theory / Collection of Reports / Ed. R.M. Nureyev]. M .: Financial University, 2016.- P. 150–157. (in Russian).

CHAPTER 13

LABOR AS THE MAIN FACTOR OF DEVELOPMENT AND ITS EVOLUTION IN THE FIRST VOLUME OF “CAPITAL” BY KARL MARX AND IN THE MODERN CONDITIONS Elena E. Nikolaeva Ivanovo State University, Ivanovo, Russia

The role of labour occupies an important position in the writings of marxists. Various aspects represented in this line of economic thought could be distinguished. K. Marx and F. Engels indicated that labour created man himself; established a doctrine of the dual nature of labour defining the dual nature of a product and revealing the mystery of surplus value. Also, they justified the theory of exploitation of labour by capital from the perspective of labour theory of value and theory of surplus value. Labour as the key category of Marxism is represented both in the structure of productive forces and in the system of production relations as relations between people Marx and Modernity, pages 165–174 Copyright © 2019 by Information Age Publishing All rights of reproduction in any form reserved.

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which are formed in the process of public production and movement of social product through the stages of social reproduction (from production to consumption) and which also express the attitude of people through their attitude to the means of production, i.e., ownership relations. K. Marx showed the evolution of labour as the factor of economic and social development, change of place and role of the labouring man in the capitalist society in the first volume of Capital which 150th anniversary of publication was celebrated in 2017. Nowadays, these ideas are also relevant. They provide understanding of the current position of labour in the system of productive forces and production relations. Moreover, they acquire new features themselves. THE INTERACTION OF HUMANS AND NATURE AS THE BASIS OF SOCIAL DEVELOPMENT In the Marxist theory labour is considered to be the key and fundamental need of the mankind. It is commonly known that biological needs appear to be initial and primary incentives of human activities (food gathering, shelter fit-out, clothing manufacture, etc.). Later people acquire new, more complicated social and spiritual needs which depend on material production, though its reverse impact seems to be less intense. Some needs which have social and economic connotation could be identified in the structure of individual human needs (in contrast to A. Maslow hierarchy of needs). There are: (a) employment and its characteristics such as the content and conditions of work, capital-labour ratio and such); (b) earned and unearned income; (c) household goods, their market size, structure, the degree of population endowment with the essential elements of household goods; (d) housing, its quality, the level of comfort, etc.; (e) transport services for population. The particular aspect of needs is connected with the environment [Berendeeva, Nikolaeva; 21]. In respect of employment as a human need, labour as a key constituent of human life and society. In his essay The Part Played by Labour in the Transition from Ape to Man F. Engels for the first time ever proposed a concept of the evolution of the individual in the society in the process of the labour activities development identifying three major factors of human evolution: labour, social organization (collective way of life) and articulate speech [Engels]. K. Marx shows the evolution of the elements of productive forces, change of place and role of human labour in product creation using the example of England in the first volume of Capital. In Chapter 5 Marx gives the following definition to labour: “Labour is, in the first place, a process in which both man and Nature participate, and in which man of his own accord

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starts, regulates, and controls the material re-actions between himself and Nature. (. . .) he sets in motion arms and legs, head and hands, the natural forces of his body. By thus acting on the external world and changing it, he at the same time changes his own nature. He develops his slumbering powers and compels them to act in obedience to his sway. [Marx. Capital; 189]. Marx indicates that “the soil (and this, economically speaking, includes water) in the virgin state in which it supplies man with necessaries or the means of subsistence ready to hand, exists independently of him, and is the universal subject of human labour. (. . .) As the earth is his original larder, so too it is his original tool house. It supplies him, for instance, with stones for throwing, grinding, pressing, cutting, etc. The earth itself is an instrument of labour, but when used as such in agriculture implies a whole series of other instruments and a comparatively high development of labour [Marx. Capital; 189,190]. Thus, one could speak of natural productive forces (wind and sun provide drying of objects, rain implements irrigation, etc.). From long ago people actively use nature in their activities as some costless resource. For instance, a ship drifts, fair wind sets windmill wings in motion, solar energy warms the earth, etc. The task for people is to intensify costless natural forces, bearing in mind their interests. K. Marx pointed out that “Nature is just as much the source of use values (and it is surely of such that material wealth consists!) as labour, which itself is only the manifestation of a force of nature, human labour power . . .” [Marx. Critique . . . ;  13]. Nowadays people also use such properties of nature as friction, movements of substances, combustion, cooling, rotting, reproduction, adaptation, mimicry, adjustment and such to satisfy their needs. The man himself as a living part of nature has natural productive forces (physical, intellectual and spiritual) and, therefore, he appears as an element of natural productive forces. LABOUR PROCESS AND TRANSFORMATION OF NATURAL PROCESSES INTO ECONOMIC ONES As the man evolves, natural processes transform into economic ones. It becomes possible only when the man as a performer, organizer, supervisor occurs ( natural processes themselves are spontaneous and uncontrollable), when means of labour created by people and objects of labour filtered by human labour are widely used, economic interests are being developed and advanced incentives to labour combined with responsibility are being formed. A man forms “the second nature,” the world of artificial items, instruments of labour. As Marx states in the first volume of Capital, “It is not the articles made, but how they are made, and by what instruments, that

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enables us to distinguish different economic epochs. Instruments of labour not only supply a standard of the degree of development to which human labour has attained, but they are also indicators of the social conditions under which that labour is carried on” [Marx. Capital; 191]. The result of transformation of natural processes into economic ones is the formation of anthropogenous productive forces which are created by the man and in which he takes central stage. While considering capitalist production, K. Marx states that its starting point is labour cooperation (where the quantitative effect of the labour used matters) which is based on the division of labour and takes on its classic form in the manufactory (the period from the middle of the XVIth century to the last third of the XVIII century in England) [Marx. Capital; 348]. A collective labourer who consists of partial workers is formed within the manufactory, productive force of labour increases which is connected both with the growth of skills and virtuosity of a worker and with the improvement of instruments of labour. The manufactory develops workers’ hierarchy depending on the complexity of labour and the educational level which leads to differences in salary scales. The place and role of human labour in economic processes change while the division of labour in the society deepens, the means of labour are being developed, the scope of scientific knowledge increases and social relations become more complex. If the workforce appears to be the starting point of economic progress and revolution in the way of production in the manufactory, then in large-scale industry it is connected with the emergence of new means of labour, i.e., machines created by people. A machine consists of three parts: an engine, a transfer device and a working mechanism. K. Marx considers these constituent parts in the first volume of Capital [Marx. Capital; 384, 387]. Machines, which start the industrial revolution, replace the labour of people. A worker serves a machine. Though, as K. Marx states, “the machine does not free the labourer from work, but deprives the work of all interest” [Marx. Capital; 434]. The negative process of labour degradation takes place; especially it is connected with the introduction of conveying machines. This issue is fairly well-known. Also, one should point out the process of replacement of human labour by machines. As a result, from the one hand, it produces redundancy in the labour force which could be used in other spheres. From the other hand, total expenses for a production unit are reduced while simultaneous structural shift takes place when there is a relative fall in the spending on living labour in the product cost and the increase in the spending on machine labour. K. Marx emphasizes that “So soon as machinery sets free a part of the workmen employed in a given branch of industry, the reserve men may become absorbed in other branches” [Marx. Capital; 452]. The world experience confirms this notion. Thus, there is a reduction in the number

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of people employed in the industrial and agricultural sectors, that is in the branches of material production, and the number of people employed in the services sector increases due to the improvement of the instruments of labour in the developed countries in 20th century. Scientific and technological progress strengthens capacities and effectiveness of human organs, therefore, it has an anthropogenic character. The microscope and telescope improve vision, power working machines, vehicles increase and even replace the strength of arms and legs, etc. New types of human activities are continuously formed on the basis of the synthesis of nature and economy. It appears as a result of the deeper penetration of the man into the world of things (nanotechnology, biotechnology, the exploration of outer space and the oceans, etc.). At the same time, one can speak of the problem of humanizing labour in connection with the achievements of the scientific and technological revolution of the 1950s and the technological revolution of the 1980s from the Marxist political economy perspective. In the strict political economy sense, the labour humanization means the elimination of the alienation of labour from property, from participation in governance, the liberation of labour from the domination of materialized labour. In the broad sense, the labour humanization implies the improvement of working conditions, the enrichment of the content of labour, the expansion of creativity in labour activities of the man. Since the labour theory of value distinguishes the man and his labour as the main factor of production, the labour conditions, the social position of a worker here are not overshadowed, but are the main focus. As A. B. Berendeeva states, “economic laws operate in a way that gradually increases the need for highly educated, well-rounded workers. The humanistic transformation of public life will become an economic necessity and will provide opportunities for the free development of human capabilities and the interrelated needs” [Berendeeva; 41]. Within this context, the topic of wages is relevant. Marxism considers the cost of labour as the objective basis of the wage of an employee. It could be treated as a general economic concept. Marx considered the employee primarily from the perspective of the reproduction of his labour force. The cost of labour force should appear as a component of the aggregate social product intended for the reproduction of labour. “The minimum limit of the value of labour-power is determined by the value of the commodities, without the daily supply of which the labourer cannot renew his vital energy, consequently by the value of those means of subsistence that are physically indispensable” [Marx. Capital; 181, 182, 183–184]. The labour force must reproduce itself in order to function constantly. Marx singled out three elements in the reproduction of the labour force: funds that are used to meet the needs of the employee, his family (primarily the maintenance and upbringing of children) and to improve his skills.

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From the perspective of modern economic theory, the value of the labour force implies the support of workforce reproduction of the employee and his family, including moments of the element formation of social functions (social funds) and the moments associated with the elements of saving the population. Therefore, in the theoretical aspect the cost of labour should include five elements: 1. cost of the necessary product for the reproduction of the employee himself; 2. cost of the necessary product for the reproduction of his family; 3. cost of education and training courses; 4. social costs for the formation of social funds of the family; 5. savings as prospective needs (for the purchase of durable goods in the future such as furniture, a computer, a mobile phone, a car, a garage; for the purchase of housing for one’s own money or by getting a loan; for the education of children; for obtaining quality health services on a fee basis; for the maintenance of consumption of the employee at a sufficient level after retirement). THE TRANSFORMATION OF ECONOMIC PROCESSES INTO SOCIAL ONES. THE INNOVATIVE AND INFORMATION MAN As science and technology develop, the fourth generation of machines, i.e., a cybernetic machine performing control functions appears. Human labour remains in the field of control over operations of machines (automated devices). Transformational processes raise the issue of limits and the future of living labour, its place in social reproduction. In fact, living labour is replaced not only in material production, but also in intellectual activities and non-material production. This is a philosophical issue. However, labour itself as a combination of physical and mental abilities is a condition for the preservation of the man as a biological species, as a rational being. In modern conditions, the position of the employee in the system of social production changes due to the fact that “avant-garde detachment,” i.e., intellectual labour as a combination of education and science (“the intellect of the nation”) could be distinguished in the “army of labour.” Thus, not just labour, but innovative labour becomes the driving force (it is said about the “innovative man” in the literature) [Islamutdinov, Shangaraev; Shangaraev]. In this context, the factors of innovation activation at the microlevel (enterprise level) are: “creative freedom (delegation of the part of managerial powers to personnel, increasing responsibility), professional and psychological readiness for change (subjective quality of a person:

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adaptability, receptivity to innovation), the collective nature of work (adversary character and mutual assistance, mentoring), initiative leadership (the presence of feedback between management and staff), the humanization of working conditions and relationships,” etc. [Shangaraev; 16–17]. Noticeable changes in public life have led to the emergence of an information man, which is characterized by the presence of an increasing information need and certain dependence on information [Orlova. Information . . . ; 212–215]. The development of information technologies and networks transforms the existing business and financial world ( ecommerce, electronic trading platforms and stores, electronic money and securities appear). In the sphere of labour relations: “1) there is a new recruitment system, i.e., the electronic labour exchange; 2) the model of a professional career undergoes changes: the possibility of working from home; 3) such a phenomenon as a virtual worker—a virtual employer appears” [Orlova. Positive and negative factors . . . ; 350], new professions are emerging, labour productivity and competence of employees are growing. At the same time, there is a number of risks: the increasing complexity of production tasks, deepening of the differentiation of people and society as a whole (information elitism), the standardization of life; the growth of structural unemployment, the disappearance of many traditional occupations, new requirements for the mobility and qualification of personnel arise, the boundaries between work time and leisure time are blurred. Another problem is that the development of information technologies is now much faster than the development of our ethical ideas about what can be done and what can not be done. By now there are machines that understand the instructions they contain and that are even able to change them (“artificial intelligence”). Penetration into the micro- and macro world opens unlimited prospects for mankind, but it also entails certain risks. Scientific and technological progress takes place under conditions of high uncertainty when the consequences of the introduction and use of certain scientific and technical achievements are not clear or are not immediately apparent. The transformation of economic processes into social ones, the change in the nature of labour as a factor of development, presupposes the consideration of the economy as a moral one. The theme of the moral economy was put forward by the academician D. S. Lvov [Lvov]. In our view, the moral economy includes the following points. Firstly, economic and other decisions are made taking into account the humanistic component. Secondly, today’s generation takes full care of future generations (environmental, material, financial and other aspects). Thirdly, both environmental education and environmental behaviour are of great importance (the formation of an “environmental person”). Fourthly, the moral moment is the attitude of a person to labour, to an understanding of its role and significance not

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only in the personal life of an individual, but also in social practice. Within this context, the subject of discussion could be the question of the compulsoriness of labour in the conditions of Russia, although this would seem to contradict liberal values. However, from the perspective of the state, expediency is evident. Fifthly, a “moral personality” is formed in the society when it comes to a person with the developed moral and moral traits (qualities). Sixthly, an essential criterion of the morality of the man and society is the attitude of people to other nations, the state of interethnic communication. The moral economy is, apparently, the future society, to which one should strive and form its foundations. In the process of the transformation of economic processes into social ones, each party, being economically isolated, is forced to join the socialized world at the same time, therefore the problem of its interactions with other parties acquires a fundamental character and addresses the topic of harmonizing the interests of participants, coordinating individual interests with public interest. CONCLUSION Over the past 25 years, the Russian economy faced a disruption in the relationship between income in the form of wages and labour contribution of workers, increased differentiation of the population by income under the influence of a whole range of causes. It has led to a number of adverse consequences in the world of work, in assessing its role in economic development [For more details, see Nikolaeva; 336–356]. Firstly, the importance of professional activities began to be assessed depending on the level of income, which acts as a factor of job satisfaction. Secondly, as a rule, young people do not consider work in the context of meeting spiritual or social needs but see it only as a means of earning money. The present young generation sees the concept of labour as something shameful. The labouring man as a character has now disappeared from both literature and cinema. Thirdly, there is a discrepancy between the importance of labour and its payment, an underestimation of human labour and the worker himself in the sphere of education, health care, agriculture and a number of other branches of the economy that satisfy the basic human needs [Nikolaeva;353]. According to O. Netrebsky, “the economy is trapped in cheap labour. While it remains the most inexpensive resource, the employer is simply not interested in updating the means of production, since overexploitation of cheap labour is more profitable than the expenditure for modernization. The use of labour migrants, when domestic labour resources are available, leads to deformations in the labour market resulting from

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the dumping of labour costs. It is important that a person should be interested in his work, in the operation of his enterprise. This is achievable only if there is a fair distribution of the results of labour” [Netrebsky; 5]. Fourthly, a lower level of satisfaction with work in Russia than in most European countries is reported in studies on the formation of motivation for effective work due to poor quality of jobs, lower standards of living, a threat of unemployment, etc. Deformation of the motivational sphere increases the probability of de-professionalization and marginalization of workers and specialists. Fifthly, emigration of scientific and highly qualified personnel in the 1990s caused an enormous damage to the economy of the country. The generational gap has led to staff shortage in science and education. The scientist, teacher, doctor, engineer, agronomist and many other professional groups of the intellectuals have become the “working poor” because of low wages, material, social and moral evaluation of their work. Thus, there is a huge contradiction between the needs of the country’s innovative and cultural development and the loss of a significant part of intellectual abilities in the Russian society. In fact, modern innovative processes in industry presuppose the elevation of personality in relations with nature, cognition and use of its potential. Referring to the writings of K. Marx, whose 200th anniversary was celebrated in May 2018, it is worth remembering the importance of restoration of good old values which are traditional both for Russia and for the developed countries: the priority of the labour lifestyle, equal pay for equal work of equal value and social justice. In modern Russia, the idea of social justice in the distribution of income seems much more productive than the idea of positivity of stratification into the rich and the poor. The payment should be considered a fair one, if its level corresponds to the level of prices for goods and services, provides the employee and his family with normal reproductive consumption and accumulation, stimulates more effective labor efforts. REFERENCES Berendeeva, A. B. Sotsial’nyye svoystva ekonomiki: teoretiko-metodologicheskiye aspekty [Social aspects of the economy: theoretical and methodological aspects]. Ivanovo: Ivanovo State University, 2006, 300 p. (in Russian). Berendeeva, A. B., & Nikolaeva E. E. Blagosostoyaniye naseleniya regiona: indikatory, tendentsii, perspektivy [The welfare of the population of the region: indicators, trends, prospects]. Ivanovo: Ivanovo State University, 2006, 291 p. (in Russian). Islamutdinov, V. F., & Shangaraev, R. G. K voprosu o kontseptsii innovatsionnogo cheloveka [To the issue of the innovative person concept]. Issues of innovative

174    E. E. NIKOLAEVA economy. 2011, no. 4 (4), pp. 3–12. URL: http://bgscience.ru/lib/8934/ (accessed: 25.08.2018) (in Russian). Lvov, D. Ekonomika dolzhna byt’ nravstvennoy [Economics should be moral]. URL: http://inductor1.ucoz.ru/publ/8-1-0-3 (accessed: 15.01.2018) (in Russian). Marx, K. Kapital. T. 1. Kn. 1. Protsess proizvodstva kapitala [Capital. Vol. 1. Book 1. The Process of Capital Production]. Ed. by F. Engels. Moscow: Politizdat Publ, 1983, 905 p. (in Russian). Marx, K. Kritika Gotskoy programmy [Critique of the Gotha Programme] Marx K., Engels F. Complete works, 2nd edition, vol. 19, pp. 9–32 (in Russian). Netrebsky, O. Nasha ekonomika v lovushke deshevogo truda [Our economy is trapped in cheap labour] Man and labour, 2008, no. 7, pp. 4–10 (in Russian). Nikolaeva, E. E. Raspredelitel’nyye otnosheniya i ikh deformatsii v usloviyakh sovremennoy rossiyskoy ekonomiki: aspekt politicheskoy ekonomii: monografiya. [Distribution relations and their deformations in the conditions of the modern Russian economy: the aspect of political economy: monograph]. Moscow: The publishing house of Moscow State University of Economics, Statistics, and Informatics, 2011, 456 p. (in Russian). Orlova, T. V. Informatsionnyy chelovek v sovremennom obshchestve [Information man in modern society] Public reproduction as a multi-level process: issues of theory and practice: collection of scientific works. Ed. by B. D. Babaev. Ivanovo: Ivanovo State University, 2010, 356 pp. (in Russian). Orlova, T. V. Pozitivnyye i negativnyye faktory vliyaniya informatizatsii na funktsionirovaniye cheloveka v sovremennom obshchestve [Positive and negative factors of the influence of informatization on human functioning in modern society]. Multi-level social reproduction: issues of theory and practice: collection of scientific works. Ed. by B. D. Babaev. Ivanovo: Ivanovo State University, 2011, Issue 1. 498 p. (in Russian). Shangaraev, R. G. Sovremennyye vyzovy i formirovaniye cheloveka innovatsionnogo tipa: avtoreferat dis . . . kandidata ekonomicheskikh nauk: 08.00.01 [Modern challenges and the formation of an innovative type of a person: author’s thesis of the Candidate of Economic Sciences: 08.00.01]. Ivanovo, 2013, 23 p. (in Russian). Engels, F. Rol’ truda v protsesse prevrashchenii obez’yany v cheloveka [The Part Played by Labour in the Transition from Ape to Man] Marx K., Engels F. Complete works, 2nd edition. Vol. 20, pp. 486–499 (in Russian).

CHAPTER 14

THE WORKING FORCE IN THE THEORY OF KARL MARX AND THE PRESENT A System Approach Elena V. Ivanova Financial University under the Government of the Russian Federation, Moscow, Russia Irina A. Smirnova Financial University under the Government of the Russian Federation, Moscow, Russia

Currently, interest in the theory of Marx is increasing markedly. Marxism is a theory demanded in a theoretical and practical aspect. At the same time, in order to preserve Marxism as an existing doctrine, it is necessary to rethink and develop, update a number of its provisions and conclusions taking into account modern realities, since in century and a half deep technological, socio-economic, and institutional changes have taken place in society. This fully corresponds to the idea of ​​Marx that practice is the ultimate criterion Marx and Modernity, pages 175–184 Copyright © 2019 by Information Age Publishing All rights of reproduction in any form reserved.

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of truth. Thus, in the study of the essence of modern labor relations, the Marx methodology can be used under the condition of the development of a categorical apparatus, a reflection of new trends. This concerns, for example, the need to develop the theory of “human capital,” which Marx did not directly consider. IS LABOR FORCE A COMMODITY IN MODERN CONDITIONS? A feature of Marx’s methodology is the sequential movement from concrete to abstract. An analysis of the process of transforming labor power into a special kind of goods allowed Marx to explain, at the level of deep abstraction, the mechanism of production and appropriation of surplus value under conditions of equivalent exchange. Behind the form of hiring an employee is the underlying essence: the sale to the owner of the means of production is not labor as such, not the results of labor activity, but the ability to work, i.e., labor, which, combined with the means of production, produces a product that carries in itself surplus value. This is a newly created value, exceeding the value of the means necessary for the reproduction of a commodity labor. Comprehending these statements of Marx, tracing a clear logical sequence of analysis, one cannot ignore the historical aspect: in those far times unskilled labor dominated industrial production, therefore Marx analyzed hiring a simple labor force, abstracting from the qualitative differences between workers. The pervasiveness of machine production has completed the process of real subordination of labor to capital. At the same time, it is impossible not to take into account that the need for skilled labor in the field of process control has increased over time. If at first the production was managed by the capitalist himself, then, more and more often, management services began to be bought. Hiring both unskilled labor and managers was carried out in the form of a contract of employment. But in the second case, in essence, it was not the cost of labor that was paid, but the cost equivalent of managerial labor, since it was not labor that was acquired, but a management service vital for the work of the factory. So, behind the relationship of hiring there are different entities hiding. Although in modern production, simple labor is still quite massively used, but the share of labor of qualified and highly qualified specialists and managers has significantly increased. Their labor services are paid at full cost and above. Following Marx’s methodology, it can be argued that an employee has no other means of survival than selling his labor power or ability to work if the following two prerequisites are observed: first, the employee must be free personally, and, secondly, the employee should be free from the means

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of production. These conditions were typical for the historical period of writing “Capital.” Early capitalism arose as a result of primitive accumulation of capital, accompanied by monstrous forms of exploitation: transcendent working hours, meager wages, the lack of state regulation of working conditions and any social protection of wage workers. The widespread distribution of machine production led to the real subordination of unskilled labor to capital. Skilled worker, engineering, managerial work required an analysis of the intangible wealth embodied in man, that is, in essence, the study of the economic nature of human capital. Such a special kind of capital, as intellect, did not become a subject of special consideration for Marx. The latter in the works of Marx is not paid attention, perhaps, on the one hand, due to the fact that in the 19th century this type of labor was a small share in its total volume. On the other hand, Marx put labor and capital antagonism at the forefront of his concept. The direct object of the analysis was the relationship of capital exploitation to the impoverished unskilled working class. Skilled workers were seen as a working aristocracy, fed up with capital in order to split the working class, and the engineers and managers of the production process as assistants to capital. Marx’s ideas of the growing proletarianization of the population and the impoverishment of the proletariat did not find confirmation in reality already at the end of the 19th century. Under the influence of the labor movement in developed countries, institutions and mechanisms to protect the interests of employees were formed. Subsequently, these ideas of Marx came into conflict with the objective processes of the transformation of man into a carrier of intellectual capital. True, it seems that Marx to some extent approached the theory of human capital by analyzing complex labor, capable of producing more value per unit of time due to the fact that labor has special skills and knowledge. Currently, the situation in developed countries has changed radically. The share of skilled and highly skilled labor everywhere, constantly and significantly increased in the conditions of transition to advanced technological structures. In countries with developed market economies, a significant part of the economically active population is educated. It has substantial intangible resources that make up a significant part of the means of production. Representatives of the growing middle class in developed countries are actively investing in human capital, due to which they have the necessary knowledge and competencies in modern conditions. They are holders of securities, have financial resources in the form of savings, actively use the services of insurance companies. This means that the second prerequisite for transforming labor into a commodity with respect to these employees is not fulfilled. They have the freedom to choose, because they have economic resources and have the ability to provide themselves with the necessary funds without

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selling their ability to work. The segment of skilled self-employed workers is expanding, using significant intangible resources with a minimum of its own tangible capital. The effectiveness of small businesses is also largely due to the use of high technology. Consequently, labor in the modern conditions is not a product in full, or not in the understanding in which Marx imagined it. CAPITAL IN THE THEORY OF MARX AND THE HUMAN CAPITAL Let us ask ourselves a rhetorical question: what is common and what are the differences in the understanding of capital by Marx and in modern ideas about human capital? Capital in the theory of Marx and human capital in modern theories are close in form: these are investments that bring in money or self-increasing value. Human capital can be characterized as an income-generating investment, as a kind of self-increasing value. Funds are purposefully diverted by economic entities from current consumption and are invested primarily in education, training in order to obtain benefits in a long period. At the same time, the economic nature of capital, in the sense of Marx, presupposes the relations of exploitation of wage labor, producing surplus value, whereas human capital does not express exploitation relations, since the worker himself is the carrier of it. The income of scientists, engineers, managers is not exploitative in nature, but depends on the functions performed by them both in the sphere of production and non-production sphere. This income may be higher than the cost of labor. In modern conditions, in all places, and, above all, in countries with developed market economies, large-scale investments are being made to ensure highly qualified labor. The objects of investment are science, education, health, culture. Increasing funds to ensure the qualification level of workers, adequate to the current stage of development of scientific and technological revolution, are invested by the workers themselves, firms, allocated from state budgets. The transition to an innovative development path in Russia requires a radical revision of economic and social policies. The work of highly qualified specialists should be paid with dignity, providing the motivation to improve the qualifications, obtain and implement new knowledge throughout the active life. THE RELATIONSHIP OF LABOR AND CAPITAL: ANTAGONISM OR PARTNERSHIP? Marx’s theory of surplus value, in general, is distinguished by a clear logical sequence, a phased movement from deep levels of abstraction to more

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superficial, to some extent transformed forms. At the same time, a detailed, thorough analysis of each such transition to a new level of abstraction raises a complex of questions, since it reveals certain gaps and even contradictions. They become especially obvious when considering Marx’s theory from the point of view of new trends in the modern economy, which are becoming more complex with the realities of economic life. So, it is possible to cast doubt on the idea of the antagonism of labor and capital in relation to modern conditions. This idea runs from the beginning to the end through the whole Capital of Marx. We are talking about the irreconcilable absolute opposite of the interests of labor and capital. The capitalist is interested in increasing the rate of surplus value by increasing the exploitation of wage workers, because he is interested in increasing the return on variable capital. This interest is revealed by Marx at a deep level of abstraction. Further movement from the abstract to the concrete shows the direct interest of the capitalist in increasing the return on all capital, that is, striving to increase the rate of profit. It should be borne in mind that the rate of profit may increase not only with a growing, but also with a constant and even decreasing rate of surplus value. It is also possible undesirable for the capitalist situation of reducing the rate of profit with the growing rate of surplus value. It turns out that the contradiction between the interests of labor and capital is not absolute and takes place only under certain conditions. There is a zone of no complete incompatibility of the interests of labor and capital, outlined by the conditions for the growth of the rate of profit with a decreasing rate of surplus value. The early stage of development of capitalism, analyzed in Capital, was characterized by an increase in the production of primarily absolute surplus value. There was a monstrous increase in the exploitation of hired labor, including child labor, by intensifying it and lengthening working time. As machine production develops and spreads, the center of gravity in the mechanism of exploitation of wage labor is increasingly shifting to the plane of production of relative surplus value. This happens as a result of the growth of labor productivity in industries producing goods necessary for the reproduction of labor power. The cost of these goods and, consequently, the cost of labor decreased. The improvement in labor legislation at that time, caused by the pressure of the labor movement, also significantly reduced the possibilities for producing absolute surplus value. In fact, there was a reduction in the range and sharpness of the contradictions between labor and capital. At the same time, the sphere of relative consistency in the interests of wage workers and capitalists expanded, within which there was a shift of focus from absolute to relative impoverishment of the proletariat, suggesting the possibility of increasing its absolute well-being.

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In the future, as technical and technological improvements in production, expansion of the non-production sphere, the emergence of new institutions and forms of state regulation of the labor market, the movement towards a post-industrial type society, tendencies emerged in those far times have undergone significant qualitative and quantitative transformations. THE DYNAMICS OF LABOR COSTS AND THE RATE OF SURPLUS VALUE Let us turn to Marx’s theory concerning the dynamics of the value of labor and the rate of surplus value, the possibility of its application in modern conditions. Marx’s position is well known, according to which as labor productivity grows, there is a multidirectional movement of labor cost and the rate of surplus value: the first of the categories under consideration decreases, and the second increases. As a result: under the influence of the growth of the organic composition of capital, the rate of profit decreases. Marx logically deduces the law of the tendency of the rate of profit to fall. Here a question arises concerning the argumentation and scientific confirmation of this provision, since it was not supported by statistical data by Marx. The objective process of increasing social needs counteracts the decline in the value of the goods necessary for the reproduction of labor power. There is a development of the needs of workers, which increases the cost of labor. In Marx’s theory, there is recognition of the historical and social components in determining the value of labor power, but they, rather, correct the decline, rather than determine its overall dynamics. In the post-industrial era, it is becoming more and more difficult to talk about reducing the cost of labor and raising the rate of surplus value in spite of the rapid development of the productive forces of society. It is possible to analyze two interrelated and opposing trends in the dynamics of a given value, which are based on the formation and development of human capital. The process of reproducing labor has become much more complicated. Employees, employers and the state themselves participate in the formation and development of human capital diversely and in different ways. These processes require detailed, painstaking, systematic and comprehensive analysis in various planes, both at the micro level and, more importantly, at the macro level. And the specificity and historical stage of development of the economy of a particular country or group of countries must be taken into account. The trends under consideration are manifested differently in countries with a developed market economy, in developing countries, and also in countries of the former post-Soviet space. The rise in the cost of labor, in general, can be viewed as a global trend, whereas the dynamics of the

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rate of surplus value may decrease or increase depending on the level of a country’s socio-economic development and the stage of development it experiences. In the underdeveloped countries with a low proportion of the middle class, the degree of exploitation is high, the rate of surplus value, especially in times of crisis, may increase, the absolute and relative impoverishment of wage earners are intertwined. The internal mechanisms of exploitation and the trends related to them are in many ways similar to the mechanisms of early capitalism described in Capital. At the same time, with reference to countries with developed market economies, it is possible, in general, to follow the long-term trend of a decrease in the degree of exploitation. In these countries, the share of wages in the gross product increases, the proportion of the middle class increases. The Scandinavian model of market economy is especially indicative. Employers are increasingly resorting to compromise solutions in relations with employees, while the latter are finding new forms of protecting their rights, the state regulates the sphere of relations with civilized methods. In explicit or veiled forms, exploitation is present in the relationship between labor and capital. At the same time, the more developed a country’s socio-economic relationship is, the more stable the economy, the stronger its social orientation, the more clearly the possibility and reality of expanding the range of partnership interaction between labor and capital will appear. It appears that this range will continue to expand. This is facilitated, in particular, by qualitative changes in property relations, primarily associated with the large-scale and ubiquitous development of joint-stock ownership. It is often accompanied by “spraying” the ownership of large companies between small shareholders and a relative decrease in the size of the controlling interest, which allows for real management. Workers become sohozyaevami, and their labor ceases to be only a commodity. Accordingly, the more actively workers participate in the incorporation, the more they are co-owners, the less their labor can be considered as a commodity. More and more workers are involved in the sphere of subjects of property relations, not only through the shareholding system, but also through the system of management relations. Managers involved in the management process, organization of production also perform the economic functions of the owner, although from a legal point of view they are not. It turns out that the amount of remuneration depends not only on the cost of their labor, but also on the fulfillment of the functions of the owner. In the sphere of property relations, qualitative changes are taking place that gradually lead to a weakening of the opposition of the interests of labor and capital. At the same time, the complete identity of these interests is unattainable.

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THE MAGNITUDE OF THE COST OF LABOR: A SYSTEMATIC APPROACH After all the above arguments, let us return again to the problem of determining the value of the cost of labor and we will express another hypothesis. So, according to Marx’s interpretation, the owner of the means of production buys labor power at a cost in order for the worker to produce a product whose value exceeds the cost of its production. This product is also sold at cost. As a result, surplus value is produced and realized in the conditions of the law of value. The logic of analysis is built, at first glance, with mathematical precision. But the question arises: if labor in the interpretation of Marx is a special kind of goods, then why is its value determined in this interpretation just like the value of any other commodity, i.e., labor costs, socially necessary for the reproduction of this tovara? This product creates value, including surplus value, producing other goods. The qualitative characteristics of this product, which fundamentally distinguish it from all other goods, require a systematic approach to determining its value, corresponding to the special role of labor in the reproduction process. It seems that the need to reproduce labor determines the lower limit of its value, whereas the higher limit is formed by the value of the goods and services that this labor is capable of producing and actually producing. In this range, fluctuations in the cost of labor occur. The more technologically advanced goods, services, and, accordingly, the more difficult and skilled the work of the employee, the wider the range under consideration. Taking into account the general tendency of complicating labor and raising its qualifications, especially in the digital economy, we can conclude about the prospects for increasing the upper bound of labor cost and expanding the corresponding range of fluctuations in its value. These boundaries, as well as fluctuations in the cost of labor within them, are dynamic. They depend on the historical, geographical and socio-economic conditions of development of countries and peoples. In particular, they are influenced by the multifaceted cyclical development of a market economy. In crises, there is, accordingly, a downward trend, and in a rising environment–upward. Thus, the Marxist theory requires further analysis, reflection, taking into account global trends and the characteristics of the socio-economic development of individual national economies. It requires an in-depth interpretation of key Marxian categories, allowing them to adapt to modern conditions, as well as enriching this area with new concepts and patterns of economic development. In other words, Marxism requires development and a practical orientation towards solving key problems, both globally and in the domestic economy. The vitality of Marxism can be ensured by its transformation under the sign of a shift in emphasis towards the evolutionary

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development of a market economy. The power of developing Marxism is in its multivariate in the temporal and spatial dimensions. REFERENCES 1. Belykh, A. A., & Mau V. A. Marx–XXI [Marx–XXI]. Questions of economy, 2018, no. 8, pp. 57–87 (in Russian). 2. Bogatskaya, K. A. Marksistskaya teoriya i model’ migratsii “chelovecheskogo kapitala” [Marxist theory and model of migration of “human capital”]. Innovations and investments, 2018, no. 2, pp. 61–66 (in Russian). 3. Buzgalin, A. V., & Kolganov, A. I. “Kapital” K. Marksa i sovremennaya sistema kapitalisticheskikh proizvodstvennykh otnosheniy: opyt voskhozhdeniya ot abstraktnogo k konkretnomu [“Capital” of K. Marx and the modern system of capitalist production relations: the experience of ascent from the abstract to the concrete]. Moscow University Bulletin, series 6, Economics. 2016, no. 2, pp. 3–25 (in Russian). 4. Buzgalin, A. V. Zakat neoliberalizma (k 200-letiyu so dnya rozhdeniya Karla Marksa) [Dawn of neoliberalism (on the 200th anniversary of the birth of Karl Marx)]. Economics issues, 2018, no. 2, pp. 122–141 (in Russian). 5. Buzgalin, A. V., & Kolganov, A. I. Teoriya predel’noy poleznosti kak sledstviye trudovoy teorii stoimosti? [The theory of marginal utility as a consequence of the labor theory of value]. Bulletin of Moscow University, series 6, Economics, 2011, no. 6, pp. 3–20 (in Russian). 6. Vasil’yev, V. A. Tvorcheskaya evolyutsiya vzglyadov K. Marksa (k 200-letiyu so dnya rozhdeniya) [Creative evolution of the views of Karl Marx (on the 200th anniversary of his birth)]. Socio-humanitarian knowledge, 2018, no. 4, pp. 7–19 (in Russian). 7. Goncharov, V. Aktual’nost’ “Kapitala” K.Marksa v XXI veke [Actuality of “Capital” of K. Marx in the XXI Century]. Problems of Management Theory and Practice, 2012, no. 4, pp. 113–126; 2012, no. 7, pp. 180–190; 2012, no. 9–10, pp. 179–190 (in Russian). 8. Gotnog, A. V. Politekonomiya K.Marksa: perezhitok proshlogo ili nauka budushchego? [Political economy of Karl Marx: a relic of the past or a science of the future?]. Philosophy and society, 2011, no. 4, pp. 70—86 (in Russian). 9. Dyatel, E. P. K. Marks: vozmozhnosti i predely klassovogo i vosproizvodstvennogo podkhodov [K. Marx: the possibilities and limits of the class and reproduction approaches]. Journal of Economic Theory, 2018, no. 1 pp. 107–119 (in Russian). 10. Eliseeva, I. I., & Dmitriev, A. L. “Matematicheskiye rukopisi” Karla Marksa [“Mathematical manuscripts” by Karl Marx]. Questions of economy, 2018, no. 8, pp. 88–101 (in Russian). 11. Knyazev, YU. O zakone stoimosti i stoimostnykh kategoriyakh kapitalizma [On the law of value and cost categories of capitalism]. Society and Economics, 2011, no. 4–5, pp. 37—47 (in Russian). 12. Koroleva, I. V. K voprosu ob aktual’nosti ucheniya K. Marksa v prepodavanii sovremennoy ekonomicheskoy teorii [On the question of the relevance of the teachings

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of K. Marx in the teaching of modern economic theory]. Scientific Almanac, 2018, no. 5, h.1, pp. 69—72 (in Russian). Krasin, YU. A. Marksizm: vzglyad iz XXI veka [Marxism: A View from the 21st Century]. Sociological Studies, 2018, no. 5, pp. 45–55 (in Russian). Kropin, YU. A. K voprosu ob “obosnovannosti” marksistskoy teorii trudovoy stoimosti [On the question of the “validity” of the Marxist theory of labor value]. Finance: Theory and Practice, 2017, no. 4, pp. 22–29 (in Russian). Malova, T. A. Kapitalizatsiya po Marksu i tsifrovaya ekonomika (k 150-letiyu vykhoda v svet pervogo toma “Kapitala”) [Capitalization according to Marx and the digital economy (on the 150th anniversary of the publication of the first volume of “Capital”)]. Insurance Business, 2017, no. 10, pp. 47–54 (in Russian). Matskulyak, I. D. Teorii kapitala [Capital Theories]. Financial Economics, 2017, no. 2, pp. 71–90 (in Russian). Nureyev, R. M. Rossiya: plyusy i minusy rannego rasprostraneniya idey marksizma vshir’ [Russia: pros and cons of the early spread of Marxist ideas in breadth]. Journal of Institutional Studies (JOURNAL OF INSTITUTIONAL STUDIES), 2013, vol.5, no. 3, pp. 14–57 (in Russian). Orlov, A. Ot trudovoy teorii stoimosti Marksa k novoy ekonomicheskoy kontseptsii, ili o prirodnoy osnove zakonov ekonomiki [From Marx’s labor theory of value to a new economic concept, or about the natural basis of economic laws]. Society and Economics, 2012, no. 3–4, pp. 101–116 (in Russian). Petukhov, V. A. Pribyl’ i trudovaya teoriya stoimosti [Profit and labor theory of value]. Economy and Finance, 2010, no. 5, pp. 59—63 (in Russian). Plyays, YA. P. Ob istoricheskikh sud’bakh ucheniya K.Marksa: Materialy zasedaniya Professorskogo kluba (27 iyunya 2017 g.) [On the historical fate of the teachings of Karl Marx: Proceedings of the meeting of the Professor Club (June 27, 2017)]. R.N. Nureyev made a speech, Financier, 2017, no. 174, p. 11 (in Russian). Rol’ izucheniya “Kapitala” Marksa v formirovanii rossiyskikh ekonomi-stov: Kruglyy stol v MGU im. M.V. Lomonosova [The role of the study of “Capital” of Marx in the formation of Russian economists: Round table at Moscow State University of M.V. Lomonosov] // Questions of Economics, 2018, no. 8, pp. 102–117 (in Russian). Eysen, N. Razvitiye ekonomicheskoy teorii K.Marksa i eye konvergentsiya s upravleniyem sistemoy “nauka-proizvodstvo-potrebleniye” [The development of the economic theory of Karl Marx and its convergence with the management of the “science-production-consumption” system]. Investments in Russia, 2015, no. 4, pp. 17–21; 2015 , no. 5, pp. 13–22 (in Russian).

CHAPTER 15

MARXISM AND CAPITALISM Struggle and Unity of Oppositions in the Context of Social Time Galina G. Sillaste Financial University under the Government of the Russian Federation, Moscow, Russia

ON MARX AND SOCIAL TIME The 200th anniversary of Karl Marx, regardless of the opposing views and assessments of the role of Marxism in society and the global world system development history, served as a powerful catalyst and resonator of scientific and public discussions on the laws and accidents in the process of social development, the role of personality in history and science, unity and opposites of objective and subjective in social order formation. In this context, I will turn to the ideas and the heritage of Karl Marx in a dichotomous vector of sociological approach—Marxism, and capitalism: the struggle and unity of opposites in the context of social time. In this formulation, the problem will focus on three analytical subjects: Capitalism as a social macrosystem and Marxism as a methodology for its study and analysis, the struggle and unity of opposites as a dialectical path of development of

Marx and Modernity, pages 185–198 Copyright © 2019 by Information Age Publishing All rights of reproduction in any form reserved.

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country capitalism; social dynamics of the capitalist development as a world-system. A social lesson of Russia for Western opponents. Social time paradigm, according to which all processes and phenomena of social life develop into a certain social space in three inseparably interconnected time moduses: the past, present, and future provide a methodological basis for the analysis. These moduses basically determine social and ideological corrections, rejection or recognition of the effectiveness of one or another macro-theory, which introduces certain corrections into specific social conditions in the present social time. Moreover, according to this theory, social time is reversible, historically recurring in its fundamental laws. The theory of social time does not recognize emotional reactions in the assessments of social dynamics, expressed categorically-emotional “NEVER.” Whether it is Yeltsin’s “there will never be a return to the past, we will never allow communism (socialism) to be reborn,” “Communism will not pass . . .,” etc. Or it is seemingly unshakable in Soviet times “there can never be a return of capitalism in the country of the victorious October Revolution . . .” Unfortunately, using the example of Russia, history clearly and convincingly proved that social time is reversible and recognizes the logic of returnable social action and process, although with newly updated content and other consequences. The first subject will start with the modus of the past social time: Capitalism as a social macrosystem and Marxism as a methodology for its study and analysis. Years, decades and even centuries pass. But still, the world of science and practice wonders what is Marxism, what is the essence of Marx’s ideas, the reason for the strength of Marxist theory? These questions still awake scientific thought and remain in the focus of scientific, political, philosophical and historical discussions. Over the past 150 years, in addition to the universally recognizable combination of “Karl Marx,” the history added this surname to its chronicle five times: from the German historian, music theorist and composer (Adolf Bernhard Marx), the Russian publisher of the Niva magazine (Adolf Fedorovich Marx) and German sculptor (Gerhard Marx) to the chairman of the South African Communist Party, John Marx, and even the name of the city (Marx, from 1918) and a similar dock on the Volga. However, there is an iconic figure who does not need any proof of the greatness of its contribution to the development of the theory and methodology of thought, which became Marxist, recognized by scientific communism theory and historical materialism methodologists. This figure is Karl Heinrich Marx Personality who became the leader of the international proletariat, the founder of dialectical and historical materialism, proletarian

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political economy, the developer of the theory and tactics of international proletariat class struggle, a person who proved the historical inevitability of the socialist revolution. The brilliant ideas of Karl Marx were developed in the works of F. Engels and V. I. Lenin, became widespread as a theory of Marxism-Leninism as a scientific system of philosophical, economic and socio-political views that formed the worldview of the working class. How today, 200 years after the birth of Karl Marx, the essence of Marxism can be defined? Very respectable Western sources define it as follows: “Marxism is an ideology, based on the ideas of Marx”[Giddens; 684]. This is a primitive simplicity, hiding the need for a scientific explanation of the essence of Marxism. Each era adds something new for a particular stage of development to Marxism essence definition. It depends on the social time factor. In the middle of the 19th century, Marxism arose as a generalization of an experience of a certain historical period, when contradictions inherent in capitalism in the advanced countries of Western Europe aggravated and the working class emerged on a scene. Lenin perceived dialectical and historical materialism, political economy and scientific communism (theory of socialism essentially) as theoretical sources of Marxism, its constituent parts. At the same time, society was understood as an integral organism, in the structure of which productive forces and production relations determined all other aspects of public life: politics and the state, law, and morality; philosophy, art, and science, as well as religion. Their unity and interaction represent a society at a certain stage of its development. Marxism, on the other hand, is regarded as a methodology of study and analysis for designating mutual antagonistic social tendencies. Have the years changed the essence of this definition? Details, content–certainly, not the essence. As well as the recognition of Marx’s and Engels’s contribution as the founders of the Marxism theory. 150 years have passed since the publication of the first volume of “Capital” in 1867 (and in Russian, in 1872), which I consider to be the most sociological one. You can also recall that the 4th edition of “Capital” in the edition of Engels F. saw the light in 1890, and its Russian translated from German equivalent–in 1937. However, research and political interest in the capital scientific work, which Marx called “the work of all his life,” has not faded even now. I think that it will not fade away as long as capitalism exists, which over 150 years have transformed from the country version into the World System (using the words of I. Wallerstein, the author of globalization theory). How can “capitalism” can be regarded? It can be regarded as a system, mode, way of life and formation, as a social and economic activity in the

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country’s economic markets, or as a specific methodology and worldview. Marx wrote his brilliant work 150 years ago and, answering the question about the essence of capitalism, defined the subject of his scientific research as “the capitalist mode of production and the corresponding relations of production and exchange.” At that time, the world did not know any form of development other than the capitalist one, which was essentially a world mono-system with a developed mechanism of capitalist exploitation and differences in territorial and country specifics. The victory of socialism in a single country, the USSR, which demonstrated the real socialist system, which was fundamentally new to history and unique to the world order, (Marx wrote about its prototype) split the existing political-economic mono-system into two opposing world-systems: socialist and capitalist ones, two historical world systems competitors. These are competitors, continuously developing in an uncompromising competitive struggle in all areas of their life. In all without exception. With the difference, however, that the capitalist world-system is underpinned by almost 500 years of experience in its evolutionary development and transformation. While the socialist world-system, a historical phenomenon that first appeared in world history, was formed by trial and error, having no economic and political points of comparison, experience and reliance on the lessons of the past and with no count on the global support of its capitalist antipode. This new world-system was initially doomed to fight for its statehood and political-economic independence, for which it needed to mobilize all its resources- human, intellectual, social and industrial, spiritual and natural–to uphold the right to strengthen the system, creating the allied camp relying on the working class, its ideology and solidarity. As a result, the world witnessed an unprecedented historical fact, which proved the viability of Marx’s ideas and positions set forth in “Capital”– the formation of a socialist world-system. In a Soviet Union in just 75 years (of which at least eight years are military, and another five were spent on restoration of the destroyed national economy) it created a new socialist economic formation, new social, political, economic, military, ideological and cultural institutions of solidarity and consolidation with countries of socialist orientation. But the subject of this analysis is the question of what caused the socialist world-system collapse. Part of it is still developing, evolving into a new country and political-economic forms. At the same time, the global expansion of capitalism after the destruction of the USSR, which was a bastion of the world socialist system, contributed to the strengthening of capitalism as a world-system of the era of imperialism and greatly changed its geographical and geopolitical map. Sociologically speaking, Russia has demonstrated the effect of the pair dichotomous social process and the law of the struggle of opposites. The

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capitalist development, whether it is evolutionary (as in Western Europe) or counter-revolutionary (as in Russia at the beginning of the 1990s), is an extremely complex, contradictory process, built on the brutal conflict and clash of social interests. Moreover, this process is multilinear as the most complex, characterized by a large simultaneous variety of forms of development and protection of these interests and with long-term social consequences. In order to better understand the strikes of the social pulsation of this process, it is necessary to study its contradictions and the country’s diversity of social disintegration and emergency forms , guided by the methodology “from the general to the particular” to continue Marx’s provisions summarized in “Capital” in the analysis of Lenin’s “Development of Capitalism in Russia” in 1896–9999; published as a separate book five years after Engels published the third volume of Marx’s “Capital.” I consider this scientific work of Lenin to be a logical development of Marx’s ideas on the example of capitalism in Russia at the beginning of the twentieth century. Lenin revealed general ideas and laws of capitalism formation on the example of one of the weakest links of capitalism of that time—Russia. It is not by chance that the author begins his analysis of Russian capitalism with a description of the capitalist evolution not in the industry (it was still weak in Russia), but in agriculture and the destruction of the peasantry. Marx studied this analysis with a particular interest. On the basis of a huge amount of factual material, V. Lenin gave a complete picture of Russian reality as a defined system of production relations. He carried out an analysis of the stages and forms of capitalism evolution of in the industry of post-reform Russia. At the same time, he irrefutably proved that socio-economic relations in the Russian countryside after the reform of 1861 were characterized by the presence and development of the contradictions that are characteristic of commodity economy and capitalism as a whole. At the same time, Lenin comes to the conclusion that a great popular revolution is going to be unleashed, headed by the proletariat, which has a powerful ally—a multimillion peasantry; and this revolution will not be limited to the overthrow of the monarchy. The proletariat will go on to the overthrow of capitalism, to the victory of socialism. The scientific and analytical symbiosis of two fundamental works (“Capital” and “Development of Capitalism in Russia”) reflected the evolution of political economy of capitalism and provided scientists (especially sociologists) with the richest field of social comparison of two types of capitalism with its single political economy basis, but different development trajectories. Let us turn to the laconic Marxist definition of capitalism as “an economic system based on market exchange, in which” capital “means wealth or money invested in the market for the purpose of making a profit.” Time

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and technology have greatly changed money. In “Capital” Marx analyzed “money as money and money as capital” (chapter four “Turning money into capital”), which “at first differ from each other only in an unequal form of circulation.” I want to emphasize- at first. Today, in addition to paper money, there are electronic, virtual, the world money, and cyber currency . . . However, money, in the words of Marx “as a measure of costs and as a scale of prices” [Marx; 107] did not cease being a measure of values and did not change the needs of investments for profit. If we consider that in the XXI century almost all industrial societies are capitalist, then they are united (Marx’s words) by “economic systems based on free enterprise and economic competition” of capitalism concepts, among which there is a contradiction, neo-imperialism as the dominance of some states over others due to unequal conditions of economic exchange; historical materialism as a Marxist interpretation of social change, similar in something to evolutionary theories. In both theories, it is assumed that interaction with a material environment is the basis of change. According to Marx, each society is based on an economic basis or infrastructure, the changes of which entail corresponding changes in the superstructure–in political, cultural and legislative institutions. The entire process of capitalist restoration in Russia in the 1990s confirms this position of Marx. What positions of Marx, set forth in “Capital,” do I find particularly interesting as a sociologist? Of course, those where the economy of capitalism is analyzed through the human factor. These are the reflections of Marx “on the struggle between the worker and the machine” (today it has a special social sound in connection with the development of a digital economy), chapters on labor, its division and compensation, on the working day and the productive force of labor, “on wages,” “on increasing production in connection with overpopulation, on the industrial reserve army,” on Marx’s universal “law of capitalist accumulation.” And what he describes as “the secret of primitive accumulation,” bringing the reader to the “historical tendency of capitalist accumulation” and offering an “illustration of the universal law of capitalist accumulation” [Marx 663–668]. When you re-read these chapters, you involuntarily ask yourself a question: “Isn’t this your story?” (De te Fabula narrator!). Such a question Marx poses before readers [Marx; 6] In this regard, I cannot help recalling Yuri Luzhkov and his book entitled “The Development of Capitalism in Russia. 100 years later” and a further clarification: “The dispute with the Government on social policy.” In this book, Luzhkov tried to answer the question: what kind of capitalism is now in Russia? The book was published in 2005. and begins with the head of “A specter is haunting Russia” [Marx; 7]. This position of the author caused the desire to integrate the theoretical premises of Marx and Luzhkov’s bold idea in the subsequent subject.

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Subject 2—Modus of the present social time: the struggle and unity of opposites as the dialectical path of development of specific country capitalism. Or, how many capitalist periods have already been in Russia and maybe in history? So, there is the question of how many capitalist instorations were there in Russia and which kind of capitalism is in it today? What did we learn or teach by example? Russia has historically and practically proved the justification of social time reversibility. Who among the readers who were born in the USSR ever thought that the country of his or her birth, where he or she lived for 40–50–70 years, would cease to exist and would be erased from the world map, as well as socialist system, socialist ideals, and prospects? But . . . the time turned backward. History of the past and the present knows no analogs that would demonstrate such a cardinal illogical historical and ideological maneuver. History does not know such examples. I would say that if “Capital” is a kind of music notes of capitalism theory, today we have the right to judge the originality of their performance in Russia. Let us put the question more specifically: how many capitalisms were there in Russia? In other words, how many times did Russia begin to build its own, Russian capitalism? Some researchers [Kravchenko; 16] claim that there are three: before 1917, return to NEP in the 20th year and a spurt of 1991–1992, which I define as: «Back! To the victory of capitalism! “. By the way, for the first time I saw a picture with such a title at an exhibition in the French Louvre in 1987, thinking then: what a nonsense! But . . .  “Never say never” . . .  Is there a starting point for the current “tertiary” capitalism in Russia? Guided by Marx’s criterion regarding productive forces and relations, exploitation and hired workers, one can define the year of 2000 as such a starting point. Why? Since 2000 by the structure of its economy, Russia has been out of the dominant state ownership and distribution of employment in enterprises framework (see Table 15.1). If in 1992, at the initial stage of the “tertiary capitalism” at the state sector enterprises there was a majority of workers of the state sector of the economy, by 2000 the situation changed dramatically. In 2000, 24.3 million remained from 49.7 million workers in enterprises of the state sector of the economy. But the number of people employed in enterprises and organizations in the property sector of ownership rose from 13.8 million in 1992 up to 29.8 million in 2000. In other words, at the end of the second millennium, 83 years after the Great October Socialist revolution, the new government has restructured the Russian economy from public to private. Most of the workers concentrated on enterprises and organizations of the private sector of the economy [Borisov, 99–100]. The borderline of the

192    G. G. SILLASTE TABLE 15.1  The Dynamics of the Distribution of Employment in Russian Enterprises Depending on the Form of Ownership (%) 1992 In the economy, by forms of ownership

2000

2005

2010*

2018* number of enterprises and organizations*

employed in enterprises

State and municipal

69.1

37.8

33.7

30.4

2.2 4.3

Private

19.3

46.1

54.1

58.6

86.3

Public and religious organizations Mixed Russian Foreign joint with Russia Total

3.1 10.5

12.6

7.8

5.8

0.3

2.7

3.8

5.0

4.1 100

Source: Russia in figures, 2018 Note: since 2012, data on the distribution of people employed in Russian enterprises by ownership form are not provided by Rosstat but are limited to the distribution of the number of enterprises and organizations by ownership form. [Russia in numbers]

socio-economic structure was overcome. The new Russian “criminal capitalism” of the 90s won its positions. I want to remind that in the USSR already in 1936 there was neither a state-capitalist structure nor a private-economic or patriarchal one, while the socialist economy forms accounted for 98.7% of the total amount of the means of production. As a result of a successful fulfillment of the second five-year plan, in the USSR all exploiting classes were eliminated and a socialist society was basically built. So, since 2000, at the turn of the centuries, Russia took its modest capitalist place in the end of the rating of countries with traditional capitalism, paying millions of lives for returning to capitalism (death rate amounted to almost 800 thousand deaths annually) and in early 1991 rolling back by 50–57 points in terms of production and living standards. 60 years after its absence unemployment not only returned to society but also caused a drastic impoverishment of the population, increasing the gap between the poorest and richest by 36 times. I will not comment on this data. Readers understand the point. The year 2000 clearly marked the point of return of Russia to the capitalist economy and clearly showed how Marx’s “Capital” lives and enriches itself. After 120 years, the Marxist theory of capital once again harshly and vividly demonstrated the universality of social and economic laws governing the development of capitalist production. Recognizing historical justice, it should be noted that the question “about the fate of capitalism in Russia” is not new. Once, it caused a struggle between revolutionary Marxists, on the one hand, and liberal populists and “legal

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Marxists,” on the other. This question arose in the Russian history in the early twentieth century and became the most important question of revolutionary struggle theory and practice; the question of which class is called to can carry out a radical reorganization of society, which class revolutionaries should orient themselves on. It was a question about the prospects for the development of Russia, about the fate of the revolution and the conditions for its victory. That was exactly the way Lenin posed this question in “The Development of Capitalism in Russia” [Lenin, 467]. Modern Russian history, a cardinal pivot of our country from a “developed socialism” to a “primitive and predatory” capitalism of the 90s and the beginning of the 2000s, once again brought this issue to the agenda of political and economic discussions. AT WHAT STAGE IS THE DEVELOPMENT OF CAPITALISM IN RUSSIA TODAY? We can say that since 2001 the fourth species stage of capitalism building in Russia began; one of state monopoly capitalism or as it is called—state capitalism. Its essence as a form of socio-economic structure according to Marx and Lenin is that in a transitional period the largest monopolies, already established and expanding their influence in Russia, overmaster bourgeois state apparatus and use it to obtain monopoly high profits, to strengthen their economic and political domination or to ensure their influence and pressure. In his works, V.Lenin showed that the bourgeois state acting in the interests of enriching monopolies, firstly, turns certain enterprises (banks, entire industries) into state ownership, and secondly, carries out various forms of economic control, the possession of former state property. These are the main forms of state—monopoly capitalism. It should be noted that state capitalism existed in the Soviet Union during the transition from capitalism to socialism when there were five different socio-economic structures in the economy, and state capitalism was one of them. But “state capitalism in bourgeois society and in a society of emerging socialism are completely different phenomena. In one case, state capitalism is recognized and controlled by the state for the benefit of the bourgeoisie, for its enrichment, and in the other case—for the benefit of the working class and the working people in order to stand against the still strong bourgeoisie”[Lenin, 467]. How Does State Capitalist Ownership Emerge in Modern Russia? In a similar way as it arose and developed in bourgeois society according to the Marxist theory. On the one (main) hand—through nationalization.

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In Russia in the 1990s, on the opposite hand—through denationalization, in other words, through privatization of individual state-owned enterprises, mines, and entire industries. Privatization was the main financial instrument for an accelerated formation of a class of owners in Russia in the 1990s. The class of exploited employees who lost their means of production, who did not receive payment for their work for months and years, expanded. The classic capitalist dichotomy: the class of capitalist exploiters (in whose hands and on whose accounts the bulk of the entire public domain is concentrated) and impoverished workers and peasants as real producers of market products. Another illustration of Marxist theory in action. As a result, today in Russia representatives of an absolute minority own an absolute majority of national resources and revenues. I want to emphasize that state ownership under capitalism does not affect or attenuate the exploitative essence of the bourgeois system. Workers remain hired workers, and bourgeois nationalization and Russian privatization remain important sources of monopolies enrichment. Who’s to say that the Russian state bourgeois apparatus does not control the activities of enterprises, does not interfere in the activities of agricultural enterprises? It is important not to forget that state-monopoly capitalism does not eliminate crises, an anarchy of production (recalling the default, its sources, and consequences), does not liquidate the disproportion between different sectors of the economy, inflation, and unemployment. However, monopolies receive incomes and I think, everyone in Russia is convinced in this. Russia has become the only country in the modern capitalist world-system, possessing, not only in theory but also in dynamic social practice, the evidence of social time reversibility. Russian society, having changed the trajectory of its economic structure three times, as well as leading property institution, socio-economic formation and political regime, by the will of history (and the role of personality in it) became that particular part of the world-system that played the role of a historical political and economic testing ground, where dichotomous ideas and models- Marxism and socialism on the one historical extreme and capitalism on the other—have been tested. Socio-political and economic reverses in Russia’s development reflect the search for hybrid forms of Russian monopoly capitalism at the stage of transitive development of Russian economy. In the light of this struggle of opposites, a comparison of the construction of capitalism in Russia with a certain historical protracted construction comes to mind. On the one hand, the countries of the former “socialist camp” who joined this process, expanded the boundaries of this unique political and economic practice, confirming the patterns of development of productive forces and relations capitalist system. On the other hand, they reflect new

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specific forms of country capitalism in the era of post-industrial imperialism and economic modernism. Capitalism, improving its forms, steadily, without any Russian rushing back and forth, continues its nearly 500-year evolutionary development. The development, which is sustainably accumulative in nature, relies on a huge historical and country experience, on the continuous improvement and rational use of its resources with the constant pragmatic-egoistic exploitation of others. While recognizing the only form of cooperation with the former countries of the socialist world-system—domination. Subject 3—modus of future social time: social dynamics of capitalist development as a world-system and Russian social lesson for political opponents. Russia in the modus of social time constantly proves its experimental nature and its accompanying survival under extreme conditions (including those often created by itself). This is without exaggeration the world-historical phenomenon that the West, the countries of traditional capitalism can not understand at the level of individual and mass consciousness and national mentality, while they do not like to use historical memory in relation with Russia. Therefore, with an unexpectedly rapid consolidation of capitalism as a world-system due to the unexpected collapse of the USSR and Western European “socialist camp,” the capitalist world-system followed the path of confrontation with the national interests of heavily weakened former socialist competitors, their economic suppression and political subordination. In such disproportionate social conditions and disparate relations similar to a game of unequal partners, the Russian economy is to experience increasing economic pressure from the part of the countries of traditional capitalism that have strengthened their positions (primarily the United States), the capitalist world-system as a whole. This is portrayed by anti-Russian sanctions, which have become a traditional instrument of suppression (if not the destruction) of a competitor in the history of relations between Russia and the West. Russia has repeatedly shattered overestimations of an unconditional strength of economic sanctions that were developed among the countries of European and American capitalism as a means of exerting pressure on an undesirable country and a measure of forceful “educational” economic practice of the Western oligarchy against uncomplying vassals. However, it should be recognized that Russia is a country with the richest experience of world-systems (capitalism and socialism) convergence. But, unfortunately, it still doesn’t draw social lessons from its own history. We, by our example, have not only confirmed the basic ideas of the Marxist theory of capitalism but also brought a lot of new to the human development, demonstrating models of extreme social, economic and political survival and adaptation of the nation and economy.

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Russia’s experience in the embodiment of the ideas of Marxism and the development of country (specific) capitalism and more than 75 years of socialism is unique. This experience is not yet fully generalized in the interests of the optimal development of Russia itself in the new conditions of the domination of capitalism as a world-system. This experience, with its deep socio-critical analysis, allows us not to be limited to a momentary conclusion but to formulate a social lesson for further development and management of the system. That does social lesson mean? The author’s position on this issue is presented in detail in a number of articles, including “Life or survival in crisis: social lessons,” [Life or . . . ; 176] “Crises in the moduses of time and their social lessons” [Sillaste]. The social lesson is a conclusion for social management practice, made on the basis of generalizing the past (primarily negative) life experience and the development of society (or the system), achieved positive and negative results to minimize the destructive impact of processes in real time. But if previous chapters were dedicated to social lessons for Russia, in this case, I’ll turn the question in the opposite vector: about the Russian social lesson for Western opponents, the countries of traditional capitalism. This social lesson stems from the behavioral reactions of Russia under conditions of consolidated force sanctions application against it, most often of economic nature. The method of impact on an undesirable competitor is inherently simple: to force to retreat, to submit, and ultimately leave the field of competitive interests, submitting only to the interests of the winning competitor, his behavior patterns in detriment of national interests, economic and political independence. History shows that the results of the sanctions of the capitalist leaders (from the Entente to Nazi Germany) did not teach them anything, and relations with Russia from a position of strength (especially when it grows stronger) inevitably captivate Western opponents and inconsistent partners. Is there an explanation for such historical perseverance? We can assume the arguments of Western opponents: if everywhere and always the policy of political and economic containment brought victory to world capitalism, then why could it not work just as well in case of Russia? But as the proverb says, “You should not repeat the mistakes of others in order to gain your own experience.” It seems that Russia at the current stage of its development can “Give” to the world community a social lesson proven by time: • not to retreat under pressure of the economic partner, but to be able to use the sanctions regime of the capitalist coalition to mobilize the capacities of its own producer, strengthen economic independence, increase technological and intellectual power of the

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state, supporting national pride, patriotism and faith in one’s own forces and the state. Russia for the first time in 27 year return to capitalism demonstrates to the whole world- system an example of a positive consolidation of society, the ability not to retreat, but to seek the direction of a rational way out of the extreme political-economic situation without losing national dignity and mobilizing its own reserves. In the history of the capitalist world-system, this fact can become an example of a new model of state behavior: an offensive constructivism model. Its development makes it possible to finish the analysis on an optimistic note with the words of a song known in Russia . . . “We are beaten, but we fly . . . higher and higher.” . . . Although Russia gets it at a high price. How can the world-system of capitalism and socialism develop in the future? Some Russian scientists, such as A. Subetto, a member of the Noosphere Public Academy of Sciences, believe that at the turn of the twentieth and twentieth centuries the history of human development takes on a new dimension—the noospheric one, the conceptual basis of which is noospherism. As it is well-known, the author of the scientific noosphere theory is V. Vernadsky, the founder of the Russian noospheric scientific school. However, speaking of the prospects for the development of global imperialism and capitalism as a world-system, this is not about noosphere, but about noospherism as a new worldview and theoretical basis of a noospheric socialist revolution of the XXI century. I am not ready to enter into discussion or express unequivocal support to the author of this term, the head of the scientific school of noosphericism, Professor A.Subetto, who introduced this category into scientific circulation in the early ’90s and consistently develops this theory in his works. According to his definition, noosphericism is a theoretical system of philosophical, scientific, sociological, scientific and economic views, revealing laws and regularities, principles and imperatives of the formation of socio-natural harmony on the basis of social intelligence and education society [Subetto]. I think the proposed theory, as one of the trajectories of future development of a dichotomous world-system (capitalist and socialist), is worthy of a constructive sociological analysis in the modus of the future social time. REFERENCES 1. Giddens A. Sociology / Russ.ed.: M. Editorial Urss-1999, p 684. 2. Marx K. Capital. Critique of political economy/ Russ.ed. vol. 1., 1983, Politizdat. translated from German, 4-th ed., 1890, p. 6.

198    G. G. SILLASTE 3. Luzhkov Y. Development of capitalism in Russia 100 years later. The dispute with the Government on social policy, M OAO Moscow coursebooks, and Cartolithography -2005 -112 p. 4. Kravchenko A. Three of capitalisms in Russia. Socis, 1999, p 16 5. Russia in figures 2010. Rosstat. p 99–100, Russia in figures 2018 p. 208 6. Borisov Y. State capitalism// To assist the political self-education 1957, no. 3 7. Lenin V. The development of capitalism in Russia. Complete Edition, vol. 32. s. 467. 8. Life or survival in crises: social lessons//Humanitarian, socio-economic and social sciences, 2015, p 176 9. Sillaste G. Crises in moduses of time and their social classes.//Humanitarian of southern Russia -2016. No. 1 p. 47–61 10. Subetto A. From the teachings of Karl Marx to noospherism of the 21st century.-Spb, Asterion, 2017, c. 30

CHAPTER 16

KARL MARX’S HERITAGE “Humanization” of Relationship Between the Natural and Human World Olga Nikolaichuk Financial University under the Government of the Russian Federation, Moscow, Russia Galina Terskaya Financial University under the Government of the Russian Federation, Moscow, Russia Larisa Cherednichenko Plekhanov Russian University of Economics, Moscow, Russia

K. MARX ON “HUMANIZATION” OF RELATIONSHIP BETWEEN THE NATURAL AND HUMAN WORLD In 2018, the scientific world celebrated the bicentenary of Karl Heinrich Marx’s birth. J.Schumpeter wrote in his essay about Marx: “We have witnessed the most interesting revival of Marx’s theory lately.”

Marx and Modernity, pages 199–213 Copyright © 2019 by Information Age Publishing All rights of reproduction in any form reserved.

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Determining the subject of his research in “Capital,” Marx writes about communication: “A capitalistic mode of production and the corresponding relations of production and relations of communication are the subject of my research (Verkehrsverhältnisse)” [Schälike, 2009, p. 170]. Unfortunately, according to the famous historian W.Schälike, Verkehrsverhältnisse was mistranslated into the Russian language as “exchange” [Marx, V.23, p. 6]. “The verb verkehren means distorting, as well,” writes W.Schälike. People create the distorted world themselves, by way of distorting not only their production, but communication, society and the world in general, as well, by distorting the relations with the world as such—it is both the natural world and the human world. People are in the distorted world (verkehrte Welt)—the distorted natural world and distorted human world, through the distorted, dehumanized Verkehr (communication). The problem of alienation, distortion holds a valuable place in K. Marx’s theory, who distinguished four special forms of displaying alienation in the society in “Economic and Philosophic Manuscripts of 1844”: alienation of the worker from the product he produces; alienation of the worker from the production process; alienation of the worker from himself; alienation of the worker from other human beings. Marx argued that “objectification serves as a loss of the object and enslavement by the object . . . the worker treats the object of his labor as an alien object . . . What is peculiar to an animal becomes a human condition, and what is human becomes something peculiar to an animal” [Marx, V.42, pp. 86–95]. Development of public relations among people got through a number of stages which were studied by K. Marx in the original version of “Capital.” First, those relations are a natural dependence; under capitalism, for the first time in history, universal public relations between the members of society are created; and with liquidation of private property the movement towards “a real social community” begins. [Marx, V.23, p. 208]. According to K. Marx, a transfer to that “real social community” means eliminating the basic forms of labor alienation studied by him. Researchers consider three levels of social reality and three levels of social agency: personal (the individual is the subject of social relations), collective (the group is the subject), impersonal (institution) [Bychenkov, 1999]. People’s pursuance of increasing rationalization of the society results in submission of all the social spheres of life to the social mind, which is realized in the state. Is the modern society closer to the real social community or has the alienation of economic entities from the ownership of capital goods and from solving production and economic and social questions remained considerably? The answer is obvious, since the idea of collectivity and cohesion is based on impersonal agency. A more objective evaluation of the development of collectivity relations can be obtained by analyzing the following features:

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• the level of collectivist self-determination in the group, which is defined by the number of individuals guided by the goals and tasks of activity accepted in the group, as well as by the ways and methods of implementing them, listed among the total number of the group; • the statistics of causes of conflicts, their length and degree of external forces interference in liquidating conflicts; • the level of dependence of individual results on the results of the group as a whole; • the number of group members having a special status or prestige in the total number of members of the group under study: the larger the number of persons with a special status or prestige, the higher the general status of the group; • the referential preference—determination of a status structure (who is who in the group), mutuality of preferences or its absence, the leader’s preferences (the person whose right to undertake the most responsible decisions affecting their interests and determining the lines and character of the whole group’s activities is recognized by the rest of the group); • the existence of community identification—cohesion as a valueorientational unity, objectiveness in placing and taking over the responsibilities for success and results, as well as for failures in joint activities; • the cohesion index—a characteristic of the system of intra-group contacts showing the degree of agreement of estimations, attitudes and standpoints in regard to the objects (persons, tasks, ideas, events) which are most important for the group as a whole; the frequency of these estimations and standpoints agreement serves as the cohesion index. Institutional alienation in the modern society has its own peculiarities, taking new shapes: if the classicist described negative forms of alienation, then now institutional alienation can be expressed by positive, but not negative emotions—when the state, party, etc. is worshipped. Many factors speak for growing problems in the society, such as growing trust deficit in the society; opportunist behavior of economic operators; conflict of interests, unstable social intercourse, growing social strain; worse staff morale at enterprises; growing transaction expenses. The existence of different forms of opportunist behavior in the society speaks for the fact that people do not always play a subordinate role in relation to establishments-institutions, i.e., they can (though within certain limits, due to the powers possessed) engage in actions on behalf of the institutions for their own, probably vested, interests.

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The so-called closed social capital (characterized by interaction in favor of these or those groups, limited by a narrow circle of family and friends) can serve as a negative factor of social development due to the fact that individual social groups will implement their own interests contradicting the society’s interests. In some cases, such activity turns corruptive. Worse investment climate is a negative result of low-quality social capital in Russia, including because of a low level of potential investors’ confidence in business and government agencies representatives. Institutional alienation can only be overcome on condition of transforming the institution from a self-sufficient subject into an object of social-economic relations. That said, the right of certain individuals or groups (collectives), as the basic subjects of the society and economy, should be expanded. It was reflected in theory and practice in the latter half of the 20th century, for example, in concepts of “people’s capitalism,” in creating “employee-owned companies,” in expanding “workers’ property.” Western scholars developed and introduced in practice the theory of “human relations,” or the “theory Z” (in papers by W.Ouchi and other authors). Jacob Levi Moreno showed the role of collective relations for the economy and society in his well-known work “Sociometry, or the Science of Society” [Moreno, 1958]. Reformation of institutions can be successful only on condition of forming new habits, norms and rules of relations of people and groups in the society; in order to be fulfilled, it requires a lot of joint efforts of society members. Democratization of the society implies participation of contemporary business representatives, regional leaders and participants of professional communities in managing economy, developing new institutional rules, since it is these groups that the opportunities for sustainable economic growth depend on. A political-economic study of the American sociologist Francis Fukuyama “Trust: The Social Virtues and the Creation of Prosperity” [Fukuyama, 2004] discusses the idea of the fact that economic well-being can be achieved only on condition of a high level of public trust. It characterizes three basic institutions of democracy: the state (capable of rendering services such as health care and education, creating infrastructure, maintaining law and order); the rule of law, which limits the state’s ability to infringe certain individuals; democratic accountability, which means at least that people can change their leaders. Besides, it suggests broad public participation in forming and formulating the policy of the state. SPATIAL DEVELOPMENT: THEORETICAL APPROACHES The considered triad of notions “production”—“communication”— “society” was used by K.Marx and F.Engels as the key to perceiving the

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reality as it is. When studying problems of Russian economy under current conditions, we consider it necessary to study any human activity, as well as any economic process, in certain space and time. There are branches in economic theory: microeconomics, macroeconomics, mesoeconomics, international economics. Economists are sure that there are some universal forms, models, and methods which operate at any level of economy. Regional, spatial differences are considered as particularities which are, as a rule, given for convincing reasoning, but are not always taken into account [Rat, 2012, p. 114]. O.Ananyin wrote that, if we represent human activity as a contradictory unity of abstract, concrete and humanizing components, then objective development of each corresponds to its own special economic reality, which is translated into value (labor theory of value), utility (the theories of marginal utility, production factors, and price) and social-institutional paradigms [Ananyin, 2005]. The generally accepted distinguishing of nano-, micro-, meso-, macro-, and megaeconomic levels should be characterized by a serious spatial “peg.” A new scientific discipline “Spatial Economics,” which appeared relatively recently, leads to forming a specific spatial view of economic reality within the framework of economic theory. Spatial properties always determine development of both an individual separately and the society as a whole. The components of spatial development are always motion (intercourse, communication, according to K.Marx) of a human and society. And the purpose of such motion, the motive, is important here. “Prioritizing”—is the motive, reason for every motion in space. It is easy to transfer A.Maslow’s hierarchy to spatial prioritizing. All the human priorities are figuratively divided into four categories or groups: biological, social, economic, political. It is clear that none of the groups exists in pure form; as a rule, these are borderline cases, but one can distinguish spatial priorities of “biological human,” “social human,” “economic human,” and “political human.” Natural conditions are priority directions of movement for the “biological human.” Natural conditions of life for the “biological human” change rarely if ever. The “social human” regards the previously created infrastructure as his priority. In our opinion, it is quite obvious that achieving any serious positive results is hardly possible without people’s coordinated joint efforts. As early as in last mid-century great attention in science and practice was paid to management based on the principles of cohesion and collectivity, on “human” relations, and most contemporary researchers, advocates of new management concepts point out that nothing significant can be achieved without joint collective efforts. Collectivity relations are relations of a social community among people emerging as a result of voluntary associations of workers for joint activities of producing goods (services).

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It should be noted that existence of social capital plays a significant role in economic development of the society, the quality of which (of the capital) is irregular at municipal and regional levels in the territory of Russia, and it has been going down in most regions lately. In order to develop social intercourse in the society, it is necessary to improve the degree of government transparency at different levels; to create opportunities of continuous communication among population, business representatives and bodies of government on the basis of developing social networks; to discuss in public important social problems and participation of all the society actors in solving them; to rebuild relationships between business and legal authorities for the sake of improving business representatives’ confidence in the government; to develop the social sphere: pension reform, health care, education, housing market, social guarantees; political competition; to solve the problem of corruption, to improve the court system, to cut red tape etc. [Ivanova, 2015, pp. 120–133]. The “economic human” places demand on the places of residence with a higher level of income. It is the classical interpretation of economic interests the movement of which, according to K.Marx’s fair statement, underlie the development of any society. When determining the subject-matter of personal and public interests, one cannot but take into account a number of factors peculiar to different groups of people in different combinations, which gives rise to contradictions necessary for society movement. Relations among social groups in any economic ages and formations arise as a result of a difference, opposition or contradiction in the level of living conditions. In this context ways and methods of achieving a higher level of living are compared and one’s own approach to movement in the given society is elaborated. The aggregate of people’s movement in the society represents an objective process. K.Marx’s economic theory is based on classical views of English political economy representatives. The “economic human” (“Homo Economicus”) is one of the key notions in A.Smith’s economic system. The main motive of behavior of “Homo Economicus” is his own benefit, egoism, i.e., “constant and persistent pursuit of improving one’s position, common to all people.” Pursuance of self-interest is realized in commodity-money exchange in the context of economic freedom and economic liberalism. The contemporary papers contain just criticism of the classical approach (reflected in “An Inquiry of the Nature and Causes of the Wealth of Nations”) to the human as a calculating “rationalizer.” However, there is dualism in A.Smith’s concept. If we consider his earlier work—“The Theory of Moral Sentiments, or the Experience of Studying Laws Managing Our Judgements, First of Other People’s Actions, then of Ours” (1759)—a conclusion can be made that, according to A.Smith, selfish interest of people has serious restraints. In his work the classicist tried to answer the two basic ethical questions: how a

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virtue should be understood, and what abilities of the soul make us prefer decent behavior. A person’s public relations include sympathy, which was characterized by Smith as the basis of moral behavior. Human egoism is compensated for by the feeling of sympathy for others, which raises when one tries to put oneself in somebody else’s position. Of course, personal interest might be stronger, but, in Smith’s opinion, sympathy “is enough for establishing harmony in the society and for maintaining a possible contact between an unhappy person and the person seeing him suffer . . . the nature teaches a stranger how to imagine oneself in the miserable person’s place, and the latter to imagine oneself in the witness’s position. They constantly project themselves in each other’s position . . .” (Smith . . . www). Another category considered by A.Smith in “The Theory of Moral Sentiments” is an “impartial spectator,” or a “bystander”: “We try to look at our behavior in a way that, in our opinion, an impartial and fair person would look at it” . . .  “We imagine ourselves as witnesses of our own actions and try to feel the impression they would make on us in such case. It is the only mirror with the help of which we can judge on the propriety of our own actions” (Smith . . . www). Thus, according to A.Smith’s theory, human behavior is guided by the ability to put oneself in other person’s position and by the desire to earn approval of the inner “impartial spectator.” The “political human’s” spatial priority consists in possessing natural resources, obtaining rental incomes [Nikolaichuk, 2003, p. 67]. There is good reason that on the cusp of the XIX and XX centuries economic theory specifies the subject of research taking into account the scarcity of natural resources, dependence of human civilization development on the quantity and quality of natural resources. It was those particular years that the problem of an ecological component of economic reality arises, consequently, environmental protection, which cannot but affect the subject of economic theory. That is why the states and regions where spatial priorities, and consequently, needs and directions of movement (intercourse—according to Marx) of the “biological,” “social,” “economic,” and “political” human are headed in one direction, not contradicting each other, have the most favorable opportunities for development. There are only benefits from such interaction, economic resources are used effectively, the economic system gets the mechanism of “fine tuning,” or, according to A.Smith, of the “invisible hand.” If there is asynchrony of spatial priorities, then manual tuning of the regulating mechanism is required, which results in higher transaction expenses and slowdown in economic growth. The “political human” should take care of the environment, using natural resources and obtaining natural rent. In its turn, on the one hand, skillfully established protection of native ecology promotes progressive economic development, security and

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independence of any state. And on the other hand, it cannot but result in limited resources in the country’s economy because of the necessity to make payments for harmful emissions into the atmosphere, recreational use of forests, parks, health resorts zones and other natural sites. ECOLOGICAL PROBLEMS AND SUSTAINABLE DEVELOPMENT: EXPERIENCE OF RUSSIA AND THE WORLD The contemporary economic science pays great attention to bringing the dehumanized Verkehr (communication) of people (contorted natural world and contorted human world—verkehrte Welt) to a normal non-contorted state. In our opinion, it can be achieved largely by solving ecological problems. Wide spreading of the ideas of ecological, social, and economic components is determined by the fact that such approach takes into account actual ecological conditions of economic entities’ activities in the market environment which require their serious solving. There are some ecological problems in all the branches of any economy, but the energy problem is one of the most important and significant ones, damaging the environment most of all, both in Russia and abroad. The search for alternative (renewable) energy sources is going on, and it can change our “contorted” world like no other. Aggravation of ecological problems in the context of raw materials crisis and changes in the demographic situation in the world in 1970s resulted in the necessity of applying a new conceptual approach to solving global problems, in developing a concept of sustainable development. For that purpose, in 1980, “The World Strategy of Environmental Protection” was adopted, where sustainable development was understood as development not accompanied by natural resources depletion, making it possible to use them by the future generations, too. Next steps in that direction were as follows: establishing the world Committee of Environmental Protection, which published the report “Our Common Future” in 1987, where the strategy of sustainable development was considered as a condition of mankind salvation; adoption of the sustainable development plan “Agenda 21” by the UNO in 1992, which outlined main actions on preventing the global catastrophe; elaboration of “Agenda 21 for Tourism Industry” by the World Tourism Organization (UNWTO), World Travel and Tourism Council (WTTC), and the Earth Council in 1995, the document which emphasized the necessity of replacing consumer attitude towards nature by smart growth culture; adoption of “10-year Framework Program for Sustainable Consumption and Production” (10YFP) by the UNO in 2012.

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In 2015, the UNO, with the participation of the UNESCO, adopted the Sustainable Development Program until 2030, where 17 goals for transforming our world were stated, which represent a universal program of actions by “nations, formulated by nations and in the interests of nations” (Goals for sustainable development . . . www). Accomplishment of most of the goals set by the international community (end poverty; end hunger; good health and well-being; pure water and sanitation; cheap and clean energy; sustainable cities and localities; responsible consumption and production; combating climate change; preserving marine ecosystems; preserving terrestrial ecosystems and others) requires solving ecological problems in the first place. Possessing energy is the necessary condition not only for survival of mankind, but for its prosperity, as well. Energy industry is based on fuel reserves of crude hydrocarbons (coal, oil, and gas) which give us about 90% of energy [Martynov, 2015, p. 134]. Analysis of foreign countries experience plays a very important role in solving this problem. Thus, in 2015, China ranked the first in the world in the GDP volume, which means that it is the most energy-consuming country which cannot but be concerned about self-sufficiency in energy resources. Since 2012, China has been the leader in the sphere, with production capacity of 63 mln. kW, with increasing wind-driven generating capacities up to 100 mln. kW in 2015, and the third of all the wind-driven generating capacities launched in the world is accounted for by the People’s Republic of China. The potential of another alternative energy, the solar one, attracted serious attention of Chinese government seven years ago. Thus, in the process of implementing the program “Golden Sun,” the government began using vast desert areas in western, central and northern China. By 2012, China had the lead in the world in producing solar arrays, producing 40% of solar arrays in the world. During the past decade they increased generation of energy based on renewable energy sources (RES) in Germany, the share of which increased from 1.9 to 12.5% (in the final energy consumption). Renewable sources of energy account for 20.3% in the total amount of the generated energy. Thus, 48% of renewable energy sources are used in heat production, 41%–in electric power generation, 11%–in the use of different types of fuel [Shuvalova, 2012, p. 626]. Unlike Russia, they hardly ever use geothermal energy sources and tidal energy in Germany. At the same time, rates of electric power generation are increasing due to processing of biogas, using solid biofuel, processing of biogenic wastes and biogenic substances (liquids, sewage gas and garbage dumps). Efforts are made in the USA for creating a new technology involving application of hydrogen as the main energy source.

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The anticipated scenario of opportunities (opportunities precisely) of the world energy development states that in 2020, approximately 20% of all the world’s commercial energy requirements will be satisfied due to renewable energy sources (RES). In comparison, note that nowadays only 2% of all the world’s energy sources requirements are covered by means of RES [Shevtsova, 2010, p. 52]. Now it is common practice that any self-respecting country implements the State Program of Developing RES—renewable energy sources. Owing to the implementation of such program, the state succeeds in fulfilling scientific and technological, energy, ecological, social and educational tasks. The tasks in hand are solved with the help of privileged taxation; government economic support by means of soft lending; creation of information networks; improvement of the career development system in the form of internship; introduction of high technologies; creation of new jobs in industries; transformation of public opinion by means of ecological education of the younger generation. During the last 10–15 years there has been a tendency in the global energy balance of wider application of more extensive use of natural gas among the available and applicable energy sources. The expenditures for more advanced and, consequently, more expensive extractive technologies, account for the main part of increasing expenditures. 27% of the world natural gas reserves, 10% of oil, 20% of coal, 14% of uranium, 11% of the world water reserves are concentrated in Russia [Bozhyev, 2014, p. 47]. According to researchers, Russia can produce 5.5 mln. tons of rape-seed oil every year (0.5 mln. tons are enough for Russian population, about 2 mln. tons can be sold abroad in the form of methyl-ether, and the rest can be used for producing biological fuel in the country) [Bozhyev, 2014, p. 45]. The output volume of bioenergy resources makes it possible to replace consumption of crude hydrocarbons equivalently in Russia, and the use of alternative energy sources will definitely result in improvement of the environment. The development of Russian bioenergy fuel industry is hindered by the lack of special legislation regulating the relations of production, processing, turnover and consumption of biological fuel from wastes of different industries: agricultural, forest, forest-industry, wood-working complexes. Bioenergy industry in Russia is not developed enough, although its products in the form of biological fuel are quite competitive. It is sufficient to state figures from “The Basic Guidelines of Government Policy in the Sphere of Energy Efficiency Improvement on the Basis of Using Renewable Energy Sources for the Period till 2024,” where the following targeted values of output volume and consumption of electric power with the use of renewable energy sources are given: in 2010–1.5%; in 2015–2.5%; in 2024–4.5% [Order of the RF Government, 2009]. These indicators show restricted participation of the government in developing bioenergetic industry.

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Although biological fuel is recognized as an alternative energy source, it is rather expensive, and it is more expensive than traditional energy sources, which means that its common usage is impossible at this stage of development. Use of biological fuel in European countries is determined by the appropriate attitude of states and by the choice of ecological policy directions, approved by the country’s population. A number of researchers predict independence on oil and gas in the near future owing to the combination of sunlight and high technologies with the use of solar energy. Enthusiastic researchers work continuously on new inventions, in addition, maximum use of the available intellectual potential of the country will make it possible to create new technical means and technologies, and to ensure energy, ecological and national security in the long run. Food security is one of the main indicators of social-economic development. Food security is defined by the 1996 World Food Summit as the state when all people of a certain country at all times have physical, social and economic access to sufficient, safe and nutritious food to meet their dietary needs and food preferences for an active and healthy life. The food security index measures the policy of states and their establishments operational efficiency on the basis of analyzing three basic groups of food security indicators of the countries worldwide: the level of affordability and consumption of foodstuffs; availability and sufficiency of foodstuffs; the level of quality and safety of foodstuffs. In 2016, Russia ranked 43rd with the index amounting to 63.8 in the rating of countries in terms of food security level (see Table 16.1). The rating was led by: the USA (index value 89.0), Singapore (88.2), and Ireland (85.4). European countries, Australia (83.8), Japan (77.4) ranked high (Humanitarian technologies . . . www). Nowadays, the system for assessing safety of genetically modified products in Russia is considered one of the strictest in the world. It comprises a wider range of research than in other countries (in the USA and European Union), and includes long-term toxicological studies in animals—180 days (90 days in the European Union), and application of modern analysis methods, such as determination of genotoxicity, genome and proteomic analyses, assessment of allergenic capacity on model systems and consideration of many other additional factors guaranteeing the safety of the registered food products derived from GMO. The Council of the Eurasian Economic Committee (EEC is the permanent regulatory body of the Eurasian Economic Union consisting of Russia, Belarus, Kazakhstan, Armenia and Kirghizia) made a resolution about the compulsory marking on food packaging of products manufactured with the use of genetically modified organisms (GMO). The corresponding change was recorded in the technical regulations of the Eurasian Economic Union

210    O. NIKOLAICHUK, G. TERSKAYA, and L. CHEREDNICHENKO TABLE 16.1  The Economist Intelligence Unit: The Global Food Security Index 2016 Rating

Economy

Index

1

The United States of America

89.0

2

Singapore

88.2

3

Ireland

85.4

4

Austria

85.1

5

The Netherlands

85.0

6

Switzerland

84.4

7

Canada

84.2

8

Germany

83.9

9

Australia

83.8

9

France

83.8

Japan

77.4

42

China

64.2

43

Russia

63.8

Burundi

25.1

 . . .  21  . . . 

 . . .  109

Source: Humanitarian technologies. Analytical portal. The Global Food Security Index. Available from: https://gtmarket.ru/ratings/ global-food-security-index/info.

(EAEU) “Food Products in Part of Their Marking.” Food products containing more than 0.9% of GMO will get the “GMO” sign in the late 2018. Since July 4, 2016, the Federal Law “On Introduction into RF Legislative Acts of Changes in Part of Improving Government Control in the Sphere of Genetical Engineering.” The law toughened the use of genetically modified plants and animals for production of foodstuffs in Russia. Now the use of GMO is possible only for scientific purposes. Russia cannot give up on GMO completely because of the WTO rules, that is why it was decided to prohibit growing genetically modified plants and breeding animals, but to leave the possibility of importing foodstuffs with GMO. At the same time, the mechanisms of government control of genetically modified products market used internationally are not studied enough, and only some of them are applied in our country. That is why it is very important for Russia to improve government policy in the sphere of regulating the market of GMP. Both developed and developing countries protect their domestic agroindustrial complex and their manufacturers. The USA, the Netherlands, Spain, New Zealand are the major exporters among developed countries;

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China, Turkey, Brazil—among developing countries. One of the modern tendencies gaining momentum consists of organic agriculture, which suggests minimum interference in growing crop by means of chemical additives. The given trend can be considered by Russia as an opportunity to ramp up production of food products due to expanding croplands and offering ecologically safe products in the market, the demand for which is likely to increase. Positive tendencies in Russian export volume of vegetables, meat and meat products are worth noting individually, which speaks for attaining a competitive advantage that Russian manufacturers obtained due to the depreciation of the rouble. Russia’s position in the context of food import embargo is contradictory. Traditionally, Russia was a food importing country, and export flows of food products, meat products in particular, were directed at it from the countries imposing and supporting Russian sanctions. On the one hand, western sanctions had a positive impact on the growth rate of the agrarian sector (3.2% in 2016), on the other hand, there are tendencies of changing consumer strategies of Russians and loss of Russian consumers as a result of growing prices. Industrialization and integration of the agro-industrial complex is a necessary condition for import substitution, from the point of view of food security. The impact of food import embargo on the economies of the countries applying sanctions is controversial, too, because these countries lose a part of their markets. Export switch to the countries of Asian and Middle-Eastern regions takes place. Imposition of anti-Russian sanctions and Russian countersanctions resulted in the necessity for European manufacturers to search for alternative markets for selling their products. Russian-American commercial conflict has shifted to a new stage. Russia imposed retaliatory duties worth about half a billion dollars against American import in response to higher duties on the part of Washington. By analysts’ estimations, western countries have lost 8.3 bln. dollars because of Russian food import embargo, the restrictions are prolonged until the late 2019. Negative effects of trade wars are known: reduction of market outlets, decrease in investment volume due to the increase of uncertainty, reduction of employment. It would be better to rely on civilized methods of resolving disputable situations. To sum up, it should be said that humanization of relationship between the natural and human world, described in the papers by the representatives of the classical economic science, requires joint efforts of the global community. It involves development of social interactions, elimination of different forms of institutional alienation, solving ecological problems: use of alternative energy sources, application of new approaches to economic security. In our opinion, people can make the world better only by way of humanizing their communication (Verkehr).

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REFERENCES Anan’in, O. Structura economico-teoretichescogo znanya: Metodologicheskiy analiz [(Structure of economic and theoretical knowledge: Methodological analysis].–Moscow: IE RAS. 2005 (in Russian). Bozhyev, D. O. Rynok al’ternativnykh istochnikov energii v Rossii [The market of alternative energy sources in Russia] //Journal of Russian New University. Series: Man and Society. 2014, no 2, pp. 44–48 (in Russian). Bychenkov, V. M. Sotsial’nyye instituty v sisteme sub”yekt-sub”yektnykh otnosheniy [Social Institutions in the System of Subject-Subject Relations]. Abstract for the degree of Doctor of Philosophy.–M.,1999 (in Russian). Ismagilov, I. F. Razvitiye al’ternativnykh istochnikov energii—osnova obespecheniya ekonomicheskoy i natsional’noy bezopasnosti Rossii v 21 veke [Development of alternative energy sources–the basis of ensuring the economic and national security of Russia in XXI century] //Problems of modern economy, 2009, no 4, pp. 78–80 (in Russian). Ivanova, L. N., & Terskaya, G. A. Tochki rosta i drayvery rosta: k voprosu o soderzhanii ponyatiy [Growth points and drivers of growth: to the question of the content of concepts] // Journal of Institutional Studies, 2015, Vol. 7, no. 2, pp. 120–133 (in Russian). Fukuyama, F. Doveriye: sotsial’nyye dobrodeteli i put’ k protsvetaniyu [Confidence: social virtues and the path to prosperity]: Trans. from the English / F. Fukuyama.– M.: OOO “Publishing house ACT”: ZAO NPP “Ermak,” 2004 (in Russian). Gumanitarnyye tekhnologii. Analiticheskiy portal. Indeks Prodovol’’stvennoy Bezopasnosti Stran Mira [Humanitarian technologies. Analytical portal. The Global Food Security Index]. URL: https://gtmarket.ru/ratings/global-food-security-index/info (accessed 20.09.2018) (in Russian). Tseli v oblasti ustoychivogo razvitiya [Goals for sustainable development]. URL: https://www.un.org/sustainabledevelopment/ru/about/development-agenda/ (accessed 21.09.2018) (in Russian). Krasyuk, I. A., Kobeleva, A. A., Mikhailushkin, P. V., Terskaya, G. A., & Chuvakhina, L. G. Economic interests focusing as a basis of the formation of investment policy // Revista ESPACIOS, 2018, Vol. 39 (# 31), Page 19: URL: http//: www. revistaespacios.com/a18v39n31/18393119.html. Martynov, V. L. Rossiyskaya sotsial’no-ekonomicheskaya geografiya: sovremennoye sostoyaniye, osnovnyye problemy i perspektivy razvitiya [Russian socio-economic geography: the current state of the main problems and prospects of development] // Baltic region, 2015, no 2 (24), pp. 109–126 (in Russian). Marx, K. Kapital. Kritika politicheskoy ekonomii [The Capital. Criticism of political economy] Volume one.–Book I.–Marx K., Engels F. // Writ.-2 nd ed. T.23. C.1–784 (in Russian). Marx, K. Ekonomichesko-filosofskiye rukopisi 1844 goda [Economical and Philosophical Manuscripts of 1844]–Marx K., Engels F. // Writ.-2 nd ed. T.42. Pp. 41–174 (in Russian). Moreno, J. L. Sotsiometriya. Eksperimental’nyy metod i nauka ob obshchestve [Sociometry. Experimental method and the science of society].–Moscow: Foreign Literature, 1958 (in Russian).

Karl Marx’s Heritage    213 Nikolaichuk, O. A. Proshloye i nastoyashcheye rentnykh otnosheniy v Rossii [The Past and Present of rent relations in Russia] // Bulletin of St. Petersburg State University. Series 5. Ekonomika, 2003, no 3 (21), pp. 67–76 (in Russian). Ob osnovnykh napravleniyakh gosudarstvennoy politiki v sfere povysheniya energeticheskoy effektivnosti elektroenergetiki na osnove ispol’zovaniya vozobnovlyayemykh istochnikov energii na period do 2024 goda [On the main directions of the state policy in the field of improving energy efficiency and renewable energy electric power through the use of the period until 2024]. Order of the RF Government of 08.01.2009 N 1-P (ed. by 05.05.2016) The document has not been published. Access from legal reference system “Consultant” (in Russian). Ouchi, U. Metody organizatsii proizvodstva. Teoriya «Zet». Yaponskiy i amerikanskiy podkhody [Methods of organization of production. The theory of “Z.” Japanese and American approaches].–Moscow: Economics, 1984 (in Russian). Pogodina, T. V., Terskaya, G. A., & Chuvakhina, L. G. Razvitiye innovatsionnoy sfery ekonomiki: rossiyskiy i zarubezhnyy opyt [Development of innovative sphere of economy: Russian and foreign experience].–Moscow: Publishing house “Pero,” 2017 (in Russian). Rat, G. I., & Mordinova, M. A. Razvitiye al’ternativnykh istochnikov energii v reshenii global’nykh energeticheskikh problem [Development of alternative sources of energy in solving global energy problems] //Bulletin of the Baikal State University, 2012, no 2, pp. 132–136 (in Russian). Shelike W. Nuzhen li nam Marks? [Do we need Marx?] //Free Standing thought, 2009, no 12 (1607), pp. 163–174 (in Russian). Shevtsova S. V., & Zholud D. S. Analiz zarubezhnogo opyta ispol’zovaniya al’ternativnykh vidov energii [The analysis of foreign experience in the use of alternative energy sources] // Energy saving. Energy. Energy audit, 2010, no 6 (76), pp. 49–53 (in Russian). Shuvalova, O. V. Osobennosti razvitiya al’ternativnoy energetiki Germanii [Features of the development of alternative energy in Germany] // Modern problems of science and education, 2012, no 6, pp. 623 (in Russian). Smith, A. Teoriya nravstvennykh chuvstv ili Opyt issledovaniya zakonov, upravlyayushchikh suzhdeniyami, estestvenno sostavlyayemymi nami snachala o postupkakh prochikh lyudey, a zatem i o svoikh sobstvennykh [The Theory of Moral Senses, or The Experience of Studying the Laws that Manage Judgments, We naturally compose first of all about the actions of other people, and then about our own]: URL: http://gallery.economicus.ru/cgi-bin/frame_rightn. pl?type=school&links=./in/smith/works/smith_w2_1_1_1.txt&img=works_ small.gif&name=classic&list_file= (accessed 03.09.2018) (in Russian).

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CHAPTER 17

DIALECTICS OF EQUALITY AND JUSTICE IN THE ECONOMIC THEORY OF KARL MARX Saida T. Makhamatova Financial University under the Government of the Russian Federation, Moscow, Russia Tair M. Makhamatov Financial University under the Government of the Russian Federation, Moscow, Russia Timour T. Makhamatov Financial University under the Government of the Russian Federation, Moscow, Russia

MODERN DISCOURSE ON EQUALITY AND JUSTICE It is possible to objectively evaluate the contribution of Karl Marx to the study of the most important categories of the philosophy of democracy of

Marx and Modernity, pages 215–224 Copyright © 2019 by Information Age Publishing All rights of reproduction in any form reserved.

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equality and justice based on the analysis of contemporary discourse on these categories. The philosophical discourse around the two most important dialectically contradictory values ​​of democracy, which are equality and justice, has been going on since Plato and Aristotle and continues today. [Aristotle 1984: vol.4. pp. 571–575; Rawls 1999; Sandel 2009; Bolz 2009; Shapiro 2012 et al.]. As the well-known German sociologist Karl Manheim noted, democracy as a “structural, sociological phenomenon” is carried out in the political sphere and in the cultural social process and “proceeds from the idea of​​ equality of all people and rejects any vertical division of society into higher and lower. Belief in the fundamental equality of all people is the first fundamental principle of democracy” [Mannheim 2000: p. 171]. The well-known modern German scientist Norbert Bolz writes that “the extrapolation of legal equality to moral and social relations between people constitutes the spirit of democracy” (Bolts 2012: p. 48). At present, in some concepts of democracy, equality is understood as equality of opportunities provided by the social state, and in others, reduction of state intervention in the life of citizens and application of the principles of “free market” to an ever increasing number of aspects of public life. In the first point of view, all hope is placed on the “good and wise state,” on its social policy. This concept focuses primarily on the quantitative side of equality. Therefore, a problem arises here—how to make such a union of the state and civil society that would allow achieving maximum equality and justice while preserving individual freedom, individualism. The second view is held by neoconservatives and neoliberals. They oppose the first concept of equality to negative freedom, that is, freedom from the state, in which they see the absolute good, the source of the development of society and the only true way to solve all socio-economic problems. Here, the emphasis is on the qualitative side of equality, that is, on the natural uniqueness of individuals and the difference in their abilities, the possibility of unhindered development of the abilities of each without government intervention, but solely on the basis of the operation of the law of the market. The effect of the law of the market, as is known, means that physically, by their nature and starting position, unequal individuals are measured by the same measure, since they are only market participants. In practice, this means increased inequality and sociopolitical tensions, hardly mitigated by the social policy of the state and the activity of civil society. The well-known American political scientist R. Dahl notes that the market economy has a significant impact on democracy, on its ultimate condition: “Since market capitalism inevitably gives rise to inequality, it limits the democratic potential of polyarchic democracy to what leads to an uneven distribution of political resources” [Dal 2000: p. 169]. The same position is shared by C. Lindblom, who writes that “market systems create inequalities

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in income and wealth and, consequently, are an obstacle to democracy. The fact that communist and other non-market systems also create inequalities does not refute this conclusion” [Lindblom 2010 : p. 262]. The dialectic of equality and justice is more specifically revealed by N.Bolts. “The sad irony of world history is,” he writes, “that the ideal of equality perpetuates the hate generated by the reality of inequality” [ibid, p. 10]. Therefore, according to the author, “egalitarianism is nothing more than a guide to unhappiness” [Bolts 2012: p. 23], because “it is impossible to change “unjust advantages,” i.e., people’s ability and talent from nature, without threatening the freedom of society. Based on the fact that all people are different, the material inequality of their life situation comes from their observance of the principle of equality”[ibid, p. 49]. From the dialectic of equality and inequality revealed by N.Bolts, it follows that the scientific understanding of justice does not coincide with its widespread concept as a system of redistribution, an increasing expansion of social assistance to the state, which contributes, according to the author, to the development of dependency. Real justice is the legal basis for social distinction and social growth. “Material inequality is unfair only when it is the result of a conscious distribution. From which it follows that it is not the accidents of the market, but the policy of redistribution that causes injustice”[Bolts 2012: p. 49]. This position of Bolts reveals the incompleteness of Rowls’s concept of equality and justice, who believed that justice begins with ensuring equality through fair distribution, freedom of speech, conscience, religious teaching and the provision of equal starting opportunities [Rowls 1999: p. 74, 101– 103, 507–511; Sandel 2013: p. 168–196] and reveals the incompleteness. In their understanding of equality and justice, J.Rowls, especially N.Bolts are very close to the concepts of the neoliberals as F.Hayek, M.Friedman, R.Nozick and others, who defended the idea that any attempt of the state to achieve greater economic equality, for example, through progressive taxation, the law on minimum wages, social assistance to the poor will be violent and destroy the consolidated society [Friedman 1962: pp. 111–188; Hayek 1960; Nozick 1974: pp. 149–171]. According to Y. Shapiro, the factors of equality and justice are determined by the attitude of non-domination, which is “essentially the main political value.” “From the point of view of justice,” he writes, “egalitarianism is desirable only when it serves the goal of non-domination” [Shapiro 2012: p. 6;]. He agrees with D. Keane’s position that nothing in justice implies an egalitarian presumption [Kane 1996: p. 403–405]. J. Shapiro believes that the most correct way to justice is the democratization of human relations. Although Colin Crouch believes that egalitarianism and the state of democracy do not have a direct connection and the first cannot prevent “the onset of post-democracy” [Crouch 2010: p. 27].

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As can be seen from the review of the works of prominent representatives of modern European political philosophy, the problems of equality and justice are considered at the level of political and civil relations. Political and economic factors remain outside the scope of these authors. HEGEL’S DIALECTIC OF EQUALITY The dialectical concept of the equality of K. Marx and its connection with the concept of justice follows from the Hegelian understanding of equality. According to Hegel, abstract equality, as universal formal equality, contains a certain limitation of personality, it allows and, to some extent, creates and enshrines real inequality in the law. Such equality, taken in its one-sidedness, according to Hegel, is “an escape from all content as a restriction.” The philosopher called this equality negative, negative, or rational freedom. The “self-awareness of this negative freedom” arises from the destruction of all difference, separation, and objective certainty of both institutions and individuals. Only a person on the basis of rational, one-sided thinking can “inform himself of universality, that is, extinguish every peculiarity, every certainty.” The construction of the abstract (social) side of equality in a metaphysical separation from its concrete-qualitative state to the rank of the sole and highest manifests itself “in active fanaticism in the field of both political and religious life. This includes, for example, the period of terror in the days of the French Revolution, when all distinction between talent and authority had to be destroyed. “ Fanaticism strives for the abstract, for the sameness, and “if there are differences anywhere, he considers it opposed to his uncertainty and eliminates them,” because they are opposed to the “abstract self-awareness of equality” [Hegel 1990: p. 70–72]. Criticizing the rational concept of equality, Hegel at the same time believed that this one-sidedness always contains an essential definition, therefore it should not be rejected. However, for the development of any social organism it is necessary that each of its members can realize their creative abilities and abilities. The truth of Hegel’s thought is confirmed by modern research. “When an organization suppresses a person,” writes R. Waterman, an American expert on the social psychology of organizations and management, “she threatens her ability to change. When an organization stimulates self-expression of a person, it is difficult for it not to be updated. Individuals are the only source of renewal in the company “[Waterman 1988: p. sixteen]. Each person will be fully equal to another person only when she can show her difference from the other. According to the famous Soviet anthropologist Y.Y. Roginsky collectivity is born from the uniqueness of individuals, which is “the most indisputable condition for equality. Great

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and small talents can be equal only if they are incomparable; they are equal to the fact that each of them cannot be replaced” [Roginsky 1977: p. 253]. THE CONCEPT OF KARL MARX ON EQUALITY AND JUSTICE The advantage of K. Marx’s approach over modern studies of the dialectics of equality and justice is manifested in the fact that he, continuing the Hegelian dialectic of equality, on a materialistic basis reveals the economic basis and shows their mutual contradictory connection. The modern principle of equality as a formal equality of citizens before the law was formed as an objectively necessary prerequisite for the formation of the capitalist mode of production, i.e., establishing the rule of the law of value. According to Karl Marx, with the victory of the capitalist mode of production, all forms of social relations of social groups inevitably obey the law of value and are ultimately determined by it. In this context, equality is primarily a manifestation and the result of the establishment of the dominance of the relations of commodity production, the domination of exchange value. It is determined by the universal and necessary identity of abstract labor in capitalist production and the personal legal independence of man in society. Marx wrote that “above all, the indifferent simplicity of labor is the equality of the work of various individuals, the mutual relation of their works to each other as equals, namely due to the factual reduction of all works to homogeneous labor” [Marx 1958: t.13; p. 18]. Consequently, social equality is a form of expression primarily of an economic relationship—an equivalent exchange between the owners of capital themselves, as well as between them and hired workers. In the product market, a worker as the owner of a specific product—labor—sells it to the buyer-owner of capital at market value. Here an equal exchange is realized between them, based on equality of exchange values. In this process, the labor owner receives the “exact equivalent, since the price he received allows him to remain the owner of the same exchange value that he had before. The amount of materialized labor that was contained in his life activity was paid for by the capital “[Marx 1968: vol.46, p. 1, p. 278]. Such objectively necessary equality of exchange values in ​​ the labor market is also the basis of equality between entrepreneurs in the acquisition of labor. Equality in the sphere of commodity-money relations (in the sphere of market production relations) is a form of human relations in which the equivalent exchange of activities or the results of their activities takes place. According to Karl Marx, the social relation of individuals “as subjects of exchange is an equality relation”; in this respect, the objects of exchange

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“must be categorically equal and are taken as equal” [Marx 1968: vol.46, p. 1, p. 187, 188] and above all equal in value. But equality, exercised and manifested in relation to exchange, is only abstract, quantitatively measured, equality. It is the economic basis of the essence of the equality of people primarily as citizens or members of a particular social organization, community, and allows you to abstract from the natural, class, national, religious and other differences. Due to the domination of the law of value, it appears more transparently that every person is an abstract unit of the social organism and in this is the social essence of the individual and his objective dependence on society. Here the principle of “indispensable people does not exist” objectively and with necessity, which is, however much we like, the objectively necessary basis for preserving and enhancing the integrity of the social organism. So, in a market society, abstract equality, due to the law of value and as an adequate form of manifestation of the social essence of an individual, becomes the basis for establishing a single criterion for all members of society or a social group, which means the equation of people, different in their qualities, abilities, health, etc. . For some, this criterion creates enough scope for the realization of their abilities, while for others it is a limitation of development opportunities. However, as K. Marx shows, exchange as an economic relation in which abstract equality manifests itself and is realized is also possible because there are different use values and a difference in needs. In the process of exchange, exchange value is an expression of the universal identity of abstract labor, its substantiality with this mode of production and in society as a whole. However, here the use value, its inevitability and necessity as a manifestation of concrete labor and the dialectical negation of abstract labor, is a reflection of the diversity, non-identity of people, the need to develop the qualitative certainty of a person. K. Marx wrote that only the difference in the needs of exchanging subjects and the “dissimilarity of the production they carry out give rise to exchange and to their social equating to each other in exchange; this natural distinction is therefore a prerequisite of their social equality in the act of exchange, and, in general, is a prerequisite of the relationship in which they enter as producing individuals. Considered by this natural distinction, individual A is the owner of some use value for B, and B is the owner of some use value for A. On this side, the natural difference puts them mutually again in relation to equality. But as a result, they are not indifferent to each other, but complement each other, need each other, so that individual B, being objectified in the product, represents the need for individual A, and vice versa; so that they are to each other not only in terms of equality, but also in public terms “[Marx 1968: vol. 46, p. 1, p. 189] This statement by Karl Marx shows that here through

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the difference of use values, therefore through concrete labor the natural distinction of the individual is realized. Thus, equality as a social relation has as its prerequisite the distinction of individuals, that is, concrete equality, the specific labor of which is a socioeconomic manifestation. It, concrete equality, forms the objective basis of the principle “every person is irreplaceable.” Just as use-value gets its economic realization and development on the basis of value and through value, so concrete equality is realized on the basis of abstract equality and within the framework determined by it. Consequently, equality as a social relation is realized as a dialectical unity of abstract equality, expressing the social essence of an individual, his belonging to a certain integral social organism, and concrete equality, encompassing an individual, natural feature, uniqueness and in this context the indispensability of each person. “The principle of the inherent equality of all people,” writes K. Manheim, “does not in itself imply a mechanical equalization, as hurried critics of democracy are recklessly inclined to consider. The point is not that all people are equal in their qualities, merits and talents, he continues, but the fact that they all embody the same ontological principle of humanity. The democratic principle does not deny that in fair competition, some individuals will stand out and excel others; it only requires that the competition is fair, i.e., so that one would not be given a higher initial status than hereditary privileges “[Manheim 2000: p. 171]. Revealing the dual nature of labor, K. Marx showed that equality as a social relation is a dialectical unity of abstract and concrete equality, determined by the substantial contradiction of abstract and concrete labor. “In the exchange based on exchange values,” he wrote, “freedom and equality are not only respected, but exchange of exchange values ​​represents a productive, real basis of all equality and all freedom” [Marx 1968: vol.46, p. 1, 191]. The development of the law of value determines the nature of equality, its manifestation in the content of legal equality has become the basic law of social organization and began to determine the essence of justice in modern society. In the “Critique of the Gotha Program,” K. Marx noted that modern justice based on the principle “for each according to labor and for capital” is the only justice “on the basis of the modern method of production” [Marx 1979: vol. 3, p. 12] Under socialism, the principle “from each according to ability and to each according to work,” that is, such justice, which does not deny natural and social inequality, should function. Full justice is possible, according to Karl Marx, only under communism, when high labor productivity allows will realize l principle “from each according to ability and to each according to need.” Therefore, we can agree with N. Boltz’s successful

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statement that “justice acts as a self-justifying ideal, which rhetorically separated itself from tradition and experience” [Bolts 2014: p. 117]. CONCLUSIONS In studying the problems of equality and justice, it is wrong to bypass the contribution of K. Marx to the development of these most important principles of modern democracy. An analysis of contemporary discourse and Karl Marx’s understanding of the dialectical nature of equality and its contradictory connection with justice demonstrates their complementarity. Marx only reveals the conditionality of equality and justice with the basic law of the capitalist mode of production—the law of value. Even under socialism, the principle of distribution according to work should prevail, which creates inequality [Eagleton 2013: p. 142]. According to Marxism, justice is payment according to work, an objective assessment of each member of society in terms of the quantity and quality of his real contribution. Modern researchers, whose positions were analyzed in the first section, complement and concretize the position of Karl Marx. Based on the philosophy of equality of K. Marx and representatives of modern philosophy of politics, the following conclusion can be drawn. Abstract equality is the basis of the principle “No one is irreplaceable,” concrete equality, expressing the individual uniqueness of people, is the basis of the principle “Everyone is irreplaceable.” The dialectic of equality inevitably and objectively creates and reproduces inequality, which in the eyes of ordinary people looks like injustice. Of course, if it is not connected with the violation of the principle of distribution according to work, according to merit, what N.Bolts, J.Shapiro, D.Keen and other modern authors write about. In democratic societies the consequences, objective, but undesirable for civilized and democratic societies, of the modern principle of distribution depending on work can be mitigated by the active intervention of civil society institutions, the principle of tolerance, the charity of wealthy citizens and the steps towards the ideal of justice. REFERENCES Aristotle. Politika [ Politics ] // Works: In 4 tons. M., “Thought,” 1984. Vol. 4. (in Russian). Bolz, N. (2014). Razmyshleniya o neravenstve. Anti-Russo [Reflections on inequality. Anti-Russo] / trans. from German; Nat researches University “Higher School of EK-ki.”–M .: PH Higher School ek-ki. / Bolz, Norbert (2009). Diskurs uber

Dialectics of Equality and Justice in the Economic Theory of Karl Marx     223 die Ungleichheit. Ein Anti-Rousseau.–By Wilhelm Fink Verlag, Padeborn / Germany. (in Russian). Crouch, K. (2010). Postdemokratiya [Postdemocracy] / trans.–M .: PH State House un-that–Higher school ek-ki. / Colin Crouch (2003) / Post-Democracy.–Laterza & Figli, Roma-Bari. (in Russian). Dahl, R. (2000). O demokratii [About democracy]. / trans. from English–M., 2000 (in Russian). Eagleton, T. (2013). Pochemu Marks byl prav [Why Marx was right ]. / Per. from English–M .: Career Press. (in Russian). Friedman, M. (1962). Capitalism and Freedom. Chicago: University of Chicago Press. Habermas, Y. (2003) Postnatsional’naya konstellyatsiya i budushcheye demokratii. [Postnational constellation and the future of democracy] // Logos. 2003. No. 4–5 (39). (in Russian). Hayek, F. A. (1960). The Constitution of Liberty. Chicago: University of Chicago Press. Hegel. (1990). Filosofiya prava [ Philosophy of law]. M., 1990. (in Russian). Kane, J. (1996). Does not Presume Equality // Political Theory. 1996. Vol.24. Number 3. P.375–393. Keen, J. (2001) Demok]ratiya i grazhdanskoye obshchestvo [Democracy and Civil Society ] M.. (in Russian). Lindblom, Ch. (2010). Rynochnaya sistema. CHto eto takoye, kak ona rabotayet i chto s ney delat’ [Market system. What it is, how it works and what to do with it] English– M .: PH State. Univ—Higher School of Economics. (in Russian). Manheim, K. (2000) Esse o sotsiologii kul’tury [Essay on the sociology of culture] // Favorites: Sociology of culture. M.—SPb., 2000. (in Russian). Marx, K. (1958). K Kritike politicheskoy ekonomii. [Towards a Critique of Political Economy] // Marx K., Engels F. essay 2 ed.–T. 1–50 M .: PH political literature, 1955–1974 / T. 13. (in Russian). Marx, K. (1968) Ekonomicheskiye rukopisi 1857–59 godov (Pervonachal’nyy variant «Kapitala»). [Economic Manuscripts of 1857–59 (Initial version of “Capital”)]. Part One // Marx K., Engels F. essay 2 ed. M .: PH political literature, 1955–1974. / T.46, part 1. (in Russian). Marx, K. (1969) Ekonomicheskiye rukopisi 1857–59 godov (Pervonachal’nyy variant «Kapitala»). [Economic Manuscripts of 1857–59 (Initial version of “Capital”)]. Part One // Marx K., Engels F. essay 2 ed.–T. 1–50 M .: PH political literature, 1955–1974 / T.46, part 2. (in Russian). Marx, K. (1979). Zamechaniya k programme Germanskoy rabochey partii [Comments on the program of the German Workers’ Party ] // Marx K., Engels F. Sel. works: In 3 t. M .: Politizdat, 1979. T. Z. (in Russian). Nozick, R. (1974) Anarchy, State, and Utopia– New York, NY: Basic Books. Rawls, J. (1999). Theory of Justice. 2nd ed. Cambridge, MA: Harvard University Press. Roginsky, Y. Y. (1977) Problemy antropogeneza [Problems of anthropogenesis]. M., 1977. (in Russian).

224    S. T. MAKHAMATOVA, T. M. MAKHAMATOV, & T. T. MAKHAMATOV Sandel, M. (2013). Spravedlivost’. Kak postupat’ pravil’no? [Justice. How to do the right thing? ] / Per.s English–M .: Mann, Ivanov and Ferber. / Sandel M. (2009). Justice. What’s The Right Thing To Do? –Farrar, Straus and Giroux. (in Russian). Shapiro, I. (2012). On Non-Dominatin // University of Toronto Law Journal, No. 62. P.293–336 Waterman, R. (1988) Faktor obnovleniya [Factor renewal ]. M., 1988. (in Russian).

CHAPTER 18

ACTUALITY OF KARL MARX’S SOCIAL CONFLICT 150 Years Later Marina A. Allenykh Financial University under the Government of Russian Federation, Moscow, Russia Svetlana A. Varvus Financial University under the Government of Russian Federation, Moscow, Russia Maria G. Novichenkova Financial University under the Government of Russian Federation, Moscow, Russia

The problem of conflict1 has been in the field of view of economists since the 18th century and nowadays it is reduced to the problem of subordination and domination. Its solution is possible only with the intervention of the state. The object of our study is the approach of Karl Marx and his followers to the theory of conflict on the example of modern Russian society, Marx and Modernity, pages 225–238 Copyright © 2019 by Information Age Publishing All rights of reproduction in any form reserved.

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since the conflict is reproduced from one social structure of society to another. All over the world, due to the problems of global economic development, recurring crises, the theory of the socio-economic development of Karl Marx again becomes relevant. Our country was not exception, because the basis of intractable and poorly managed conflicts are differences of value order. These conflicts affect the economic, social and political structure of society and are antagonistic in nature. The purpose of the research is to analyze the economic consequences of the collapse of the social system within the framework of the economy of modern Russia, which resulted in real and potential conflicts. Since the transition to market relations, changes in the political, economic and social foundations of society fundamentally restructured Russian society, the negative consequences of such a restructuring were expressed in the deterioration of the social situation of quite significant groups of the population and the growth of inequality. In these conditions, there is an increase in conflicts that do not stimulate the development of dialogue, but, on the contrary, increase social tension and lead to an increase in protest activity. Marx assumed that there was a conflict in society because of the division of people into classes: the bourgeoisie and the proletariat. There is hostility between them, because the bourgeoisie constantly exploits the class of hired workers. These conflicts lead to revolution and are an integral part in the development of society. Marx and his followers focused on the social consequences of inequality in income distribution. They share two types of relationships established in the process of forming and distributing incomes: natural-material, characterizing the attitude of people to things; socio-economic, characterizing the relationship between people about things. For the formation of income is characterized by a natural, physiological attitude of a person to things, but flowing in a certain social form. The starting point for Marx is production. It is the basis for the formation of income, serving as the main determining point in relation to consumption. “Production creates consumption . . . 1) producing material for it, 2) determining the way of consumption, 3) arousing in the consumer the need, the subject of which is the product created by him.” At the same time, using incomes, the consumer stimulates a constant repetition of the production process, since the use of manufactured products instead of consumed creates the possibility and necessity of their continuous production. Moreover, consumption not only stimulates the repetition of production, but also serves as an impetus for expansion and improvement, prompting production to the emergence of new industries; new products and services. Therefore, the income makes the relationship of production and consumption. They are aimed at ensuring the livelihoods of people, since people are the main economic result of consumption. From a social point of

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view, income expresses the relationship between people about the use of goods for the purpose of reproducing labor power—a personal factor of production. In this case, Marx proceeds from the fact that the cost of labor has marketable coverage, i.e., all the needs of the worker and his family are met on the market through the purchase of goods for wages. Moreover, all needs that are met at a socially normal level for the wages received from the sale of their labor power are due to the needs of capitalist production. No savings remaining from wages are assumed, since, according to Marx’s plan, the worker’s means are barely enough to reproduce his labor power. Thus, the basis of the workers’ incomes is an objective value—the cost of labor of a certain historical period of capitalism. Considering the role of incomes and their differentiation in economic development, Marx drew attention to the solvency of the population. Pointing to this point, he wrote that demand is valid only if he has at his disposal the means of exchange. Solvent demand is thus closely related to income and money circulation. For example, one of the main factors that influenced the decline in the solvency of the population of the Russian Federation over the past three years was the decrease in real disposable money incomes of Russians [Novichenkova, 138] (Figure 18.1).

Figure 18.1  Real disposable cash income in the Russian Federation. Source: Federal State Statistics Service.

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In addition, being a form of expression of needs, demand is social in nature and is conditioned, according to Marx, “. . .  mainly by the attitude of different classes to each other and their relative economic situation.” Demand acts not just as a need placed on the market, but also as a need limited by a monetary equivalent. Therefore, effective demand enters a certain contradiction with the needs, which are expressed in the fact that each individual can satisfy his needs only to the extent that his solvency allows him to do so. This contradiction has social conditionality: its character is determined by the prevailing property relations. Since the market economy did not create economic equality sufficient for democracy, in the course of history all democratic regimes considered it necessary to “intervene” in the affairs of the market, implementing many programs designed to stop the growth of inequality. DEVELOPMENT OF SOCIAL CONFLICT IN MODERN REALITIES Modern society does not seek equality in income distribution. Equality corresponds neither to human nature, nor to the nature and system of economic motivation. Although Karl Marx put forward the proposition that a higher level of motivation is provided or can be achieved through an equalizing reward system—“from each according to his ability, to each—according to his needs,” but history has shown the inconsistency of this thesis. Throughout the twentieth century, this problem was widely discussed in the writings of many economists, especially during the period of competition between the socialist and capitalist systems. Economists in the Soviet Union in their works have repeatedly said that the conflict between labor and capital no longer exists. And the threat of the socialist revolution in other countries had an impact on the market economy, on the interaction of labor and capital. But the end of the twentieth century was marked by the destruction of the socialist system and a return to a market economy in almost all countries of the world. Throughout the twentieth century, this problem was widely discussed in the works of many economists, especially during the competition between the socialist and capitalist systems. Economists in the Soviet Union in their works have repeatedly said that the conflict between labor and capital no longer exists. And the threat of the socialist revolution in other countries had an impact on the market economy, on the interaction of labor and capital. But the end of the twentieth century was marked by the destruction of the socialist system and a return to a market economy in almost all countries of the world. One of the main reasons for the aforementioned destruction was the scientific and technological progress and the active development of new

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technologies that require changes in social relations. Today, the growing inequality in incomes of the population, the migration processes are becoming glaring, and is perceived as a threat to the development of developed countries. However, developing (peripheral) countries are rebelling against a similar development scenario: income inequality among various classes is steadily reproduced from generation to generation, and is now becoming more and more threatening. At this time, issues of equity in society are becoming more relevant. For example, J.K. Galbraith in his work “Fair Society. The humanistic view” (Galbraith, 1996) spoke about the obviousness of the goals and objectives of a just society -” to ensure the efficient production of goods and the provision of services, as well as to dispose of the proceeds from the sale in accordance with socially acceptable and economically viable criteria “[Galbraith, 226] In contrast to the capitalist economy, which K. Marx referred to in his works, J. K. Galbraith notes that the modern market economy no longer consists only of “great entrepreneurs who owned and operated capital at the same time” [Galbraith, 228], and includes “a huge and often inert army of corporate officials, and along with it—a mass of shareholders who have a financial interest in the activities of companies, but are unable to influence decision-making” [ Galbraith, 228]. However, modern society is faced with the following problem: how to develop a strategy for the distribution of income. It is undeniable that a modern market economy distributes wealth and income in a highly uneven manner, which not only causes negative social consequences, but also interferes with its own normal functioning. The world market economy in the late twentieth and early twenty-first centuries was influenced by various factors (such as globalization, changes in qualification requirements due to technical progress, the weakening of labor market institutions, and the growing pressure from financial markets to distribute profits from large corporations in favor of investors), which had an impact on the distribution of income. But for the majority of households, wages remain the main source of livelihoods. It is therefore not surprising that the long-term trend of deepening wage inequality is reflected in the growing disparity between households in terms of aggregate income (which includes not only wages, but all other sources of income). In the modern world, wages mean not only money, without it there can be no justice and human dignity. In contrast to K. Marx’s views, as the ILO indefatigably emphasized, “labor is not a commodity” and, consequently, its price cannot be determined solely by the ratio of supply and demand [ILO, 1944 and 2014a]. As Picketti noted, “the system of prices knows neither limits nor morality” [Picketti, p. 6]. One of the guarantees of a fair attitude towards an employee and respect for his human dignity is the minimum wage. The measures to regulate

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wages, working time and other working conditions on this basis can greatly stimulate social dialogue and collective bargaining, thereby ensuring an equitable spread of the fruits of progress at all [ILO]. Equity means equal pay for work of equal value and the elimination of discrimination in wages, both between men and women, and other categories of the population. Inequality in pay for the last decades has increased in many countries of the world. Although, to some extent, this inequality reflects individual and production differences between workers, the excessive deepening of inequality increasingly makes us afraid of its negative social and economic consequences. By the beginning of 2018, in most countries, remuneration of labor increases gradually, sharply increasing in the latter 10%, and especially in 1% of the highest-paid workers. In Europe, 10% of these workers account for an average of 25.5% of the total wage fund in a given country, which is almost the same as the share of 50% of the least paid workers (29.1%). Although the data are not strictly comparable, in some developing countries the share of the highest paid workers is even higher—35% in Brazil, 42.7% in India and 49.2% in South Africa. In India and South Africa, 50% of the least paid workers are, respectively, only 17.1% and 11.9% of the total wage fund. At the beginning of the XXI century, there was a trend of inequality in wages within enterprises, in Europe they accounted for almost half of the total inequality. As noted in the International Labor Organization’s study, if we compare the wages of individual workers with the average wage at the enterprise where they work, it will be found that the majority of employees (approximately 80%) receive less than this average wage. Excessive pay for certain workers in some enterprises leads to the formation of a “pyramid” of extremely unevenly distributed pay, which emphasizes the scale and extent of wage inequality not only between enterprises, but also within them. The excessively high inequality contributes to a slowdown in economic growth and destroys social cohesion [Ostry, Bergand Tsangarides, 2014; d’Hombres, Weberand Report “Wages in the world in 2016–2017.” Elia, 2012]. For example, in the USA, according to the Federal Reserve in 1989, 1% of the richest population owned 40% of GDP, and 20% of the poorest population accounted for 5.7% of GDP. At the beginning of 2018, these figures were 43.6% and 5.0% respectively. US GDP was 5 trillion. 657.7 billion dollars, and by early 2018–19 trillion. 362.1 billion dollars. These figures show a significant stratification in American society. According to J.K. Galbraith, the growth of the middle class in the modern economy plays a dominant role and provides protection and cover for the wealthy strata of society, the tax breaks introduced in the interests of the middle class are extended to some very rich people. According to Lester Thurow in “The Future of Capitalism. How Today’s Economic Shape Tomorrow’s World.” [Thurow], the middle class will live

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in a world where inequality is growing and the majority of the real wage falls, it does not have inherited fortunes, the government refuses from the policy of ensuring economic stability, and corporations treat them as “mercenaries,” who put less and less additional benefits guaranteeing well-being. The degree of development of modern society, as well as its well-being includes not only incomes, but also opportunities for the population to receive education, health services and other social benefits. To assess the degree of development of society, the world practice uses the index of human development. It shows the main characteristics of the human potential of the population of the studied country, which includes measuring the living standards of the population, literacy, education, life expectancy and other characteristics. Since 1990, there has been progress in this index, except for countries that have been affected by conflicts, epidemics and crises. As for Russia, the size of the index for a quarter of a century has undergone large fluctuations, since there was a transition from one economic system to another (Figure 18.2). Comparison of the values of the real disposable money income index and the human development index allows us to conclude that the measured characteristics of human potential affect the well-being of the population, including the level of household income. But, nevertheless, it is wages that remain the main source of income that has a significant effect on the change in household income. According to the International Labor Organization in developed countries, real wages over the past 10 years grew at a faster pace in South Korea (12%), followed by Australia (10%), Canada (9%), Germany (7%), France (6 %) and the United States (5%). At the same time, in Japan, Italy and the UK there is a decrease in real wages (by 2%, 6% and 7%, respectively). Thus, in recent years, there has been a significant differentiation among European

Figure 18.2  Growth of Human Development Index (Russian Federation).

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countries in the dynamics of real wages—for example, between France and Germany, on the one hand, and Italy and the United Kingdom, on the other. Due to differences between countries regarding the collection and measurement of data, the average wage statistics cannot be considered strictly comparable. However, if we convert the average wage in all these countries into US dollars at purchasing power parity (PPP), we will get a simple average equal to about $ 3,100 at PPP per month. If we carry out the same transformations with the average wage in developing countries—not forgetting that the average wage is not strictly comparable—then we get a simple average equal to about $ 1,300 in PPP per month, which is less than half the average value obtained for developed countries. This inequality is shown in Figure 18.3. For the economy, low growth rates of GNI per capita mean a decrease in household consumption incentives and, as a result, a reduction in aggregate demand. Quantitative assessment of differentiation’s process of population incomes is associated with the study of the structure of income, since it is the factor model of income generation that serves as the basis for economic differentiation. The structure of monetary incomes of the population in Russia over the years has undergone significant changes, as can be judged from the data of Figure 18.4. [Varvus, 215] Evaluating this diagram, we can say that the structure of money incomes of the population in Russia remained unchanged at first glance. The share of wages, which performs the reproductive function, in 2014 is 65.8% of all monetary incomes of the population. If to compare with the crisis in 2008,

Figure 18.3  Gross national income, 2017.

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Figure 18.4  Income structure of Russian population, %.

its value was 68.4%. Another type—business income fell to 8.4% in 2014 from 10.2% in 2012. Property income showed a similar trend: declined from 6.2% in 2008 to 5.8% in 2014. But social benefits in 2014 compared with 2008 increased by 4.8% and amounted to 18%. However, compared with the pre-crisis year of 2013, it decreased from 18.6% to 18.0% in 2014. At the beginning of 2018, the share of wages was 65.1%, income from business activities—7.6% of money income population [9]. Considering the wages shares in Russia’s GDP, we can say that it has risen from 40% in 2000 to 52.6% in 2014 (Figure 18.5). At the beginning of 2018, the share of wages in GDP is 50.3% [9]. Nevertheless, it lags far behind European countries more than twice. Important indicator of differentiation of incomes is the ratio of minimum wage to the cost of living (Figure 18.6) [10]. In recent years, in order to protect low-paid workers and inequality in wages in many countries have introduced or strengthened the mechanism for setting minimum wages. As follows from recent studies, an adequate minimum wage can lead to income growth of low-paid workers—mostly women—without significant negative effects on employment. The minimum wage in Russia is below the cost of living.2 During the crisis in 2008 the ratio amounted to about 50%, but by the beginning of 2015 amounted to 68.9%. Nevertheless, the minimum wage does not reach the cost of living, ensuring the physical existence of the individual. Thus, the crisis moved to the “social stage”: the unemployment rate in the country in 2015 was 15.7% of the economically active population, the share

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Figure 18.5  Dynamics of change of wages in GDP, economic growth.

Figure 18.6  The relationship between the subsistence minimum and minimum wage in Russia, 2000–2017.

of the population living below the poverty line rocketed to 11.2% in 2014, the ratio of funds in 2014 was 16 times, and the Gini coefficient—0.416. At the beginning of 2018, the ratio of minimum wage to the subsistence minimum is 78% [Varvus, 215]. The division of society into rich and poor can be traced in the dynamics decile or stock ratio. So, the stock coefficient (reveals the correlation between the incomes of 10% most and 10% least well-off population) in

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Figure 18.7  Ratio of funds in Russia in times.

the period from 2008 to 2010 soared to 16.6. However, in 2014 decreased slightly and amounted to 16. In fact, the value of the stock ratio is several times higher (see Figure 18.7) [12]. Therefore, the actual level of income differentiation exceeds the optimal level twice. In general, at the beginning of 2018, the process of differentiation of income remains unchanged and amounts to 16 times. Traditionally, the assessment of the level of income differentiation of the population is carried out using indicators based on comparison of the share of the incomes (expenses) of the various percentile groups of the population. These include the stock ratio, and Lorenz curve (Figure 18.8), and Gini index. Consider the level of differentiation of incomes in Russia and its dynamics, using data on changes in the distribution of the entire amount of income between quintile (20%) populations [13]. Data of the figure depicts that in Russia since 1992 inequality is increasing in income differentiation of the population. Vividly the trend demonstrated concentration of funds from the richest 20% group. For 2014 the share of income of the fifth richest 20% group of the population of Russia compared to 1998 declined slightly, remaining at the level of 2008. A striking feature of the crisis of 1998 was the purchase of food for the future (cereals, pasta, flour, canned meat), and in 2014—purchase of foreign currency, real estate, travel. So, purchase of currency by citizens through credit institutions in 2008 amounted to RUB 2004,1 million, excepted that in 2009—a drop to 1561,1 million. For 2014 is typical the converse situation: the purchase was 2780,6 million RUB, more 2013 on 906 million rubles

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Figure 18.8  Lorenz curve in Russia.

[14]. Changes in the relative position of the “intermediate” groups are less noticeable. 47.5% is the share of the three middle quintile groups in 2008– 2014 in the total income of the population. However, after the financial crisis in 2008 the tendency to “wash out” medium-sized groups was revealed again.3 At the beginning of 2018, the income distribution of the population among the 5 groups remains at the level of the previous year. Based on Lorentz curves it is feasible to define the Gini index, which characterizes the level of income concentration (Figure 18.9).

Figure 18.9  The Gini index in Russia, 1997–2017.

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The growth of the Gini index in Russia in the early 2000s demonstrates the increased concentration of incomes. Though now it remains stable at 42%. This is due to the fact that the Russian government does not pay attention to increasing income inequality and poverty in Russia, still living up to inertia (on the development model). Although an optimum level of income of the countries of the European Union inequality is in the range from 20% to 35% [15]. Economists adhere to the optimal level of income inequality within 7–9 times to the ratio of funds [16]. Consequently, the attempts were made to illustrate, that there was a suboptimal level of income inequality in Russia, using data from the Federal State Statistics Service over the period 18 years (2000–2018). CONCLUSION Based on the foregoing, the issue of conflict becomes more relevant. It is seen that after 150 years the problem of Marx’s conflict theory has not disappeared, but has acquired qualitatively new features in accordance with the development of economy. Globalization has increased disparities in income inequality at the international level and the antagonism between wage workers and capitalists has not disappeared in developed countries. There is a “washout” of the human reproductive process. Due to the fact that Russia has transitioned from a socialist system to market economy, there was a complete breakdown of the foundations and the new market system revealed a growing differentiation of incomes. The middle class was washed out and, also, the access to quality medical care and education plummeted. The share of Russians with incomes below the subsistence minimum income surges. And the concentration of funds from the richest 20% group only intensifies social tension and conflict. External shocks caused by slumping oil revenues and economic sanctions have exacerbated a structural crisis in the Russian economy. NOTES 1. The conflict was first considered in the work of Adam Smith “Study on the nature and causes of the wealth of nations.” The division of society into classes and economic rivalry lies at the heart of the conflict and is the driving force behind the development of society. 2. The valuation of the consumer basket and also obligatory payments and fees. In developed countries shows “a decent standard” of living of the concerned country.

238    M. A. ALLENYKH, S. A. VARVUS, and M. G. NOVICHENKOVA 3. As a rule, in developed economies the middle groups form the basis of the “middle class.”

REFERENCES 1. Allenykh M.A. Perspektivy razvitiya ekonomiki znaniy v Rossii [Prospects for the development of the knowledge economy in Russia].Actual Questions of Economic Sciences. 2009. No.8-1. pp. 24–28. (in Russian) 2. Allenykh M.A., Dairabaeva L. Autsorsing kak sposob snizheniya izderzhek firmy [Outsourcing as a way to reduce the firm’s costs]. Finance, Money, Investment. 2006. No.4. pp. 26–29. (in Russian) 3. Galbraith J.K. The Good Society.The Humane Agenda. Boston–N.Y., 1996 4. Novichenkova M.G. Prichiny rossiyskogo krizisa otrasli passazhirskikh aviaperevozok [Reasons of Russian Airline Industry Crisis.]. Hronoeconomics. 2018. No. 2 (10). pp. 136–140. (in Russian) 5. Neravenstvo, ekonomicheskiy rost i demografiya: neissledovannyye vzaimosvyazi [Inequality, economic growth and demography: unexplored relationships]. Shevyakov A.Yu., Kiruta A.Ya. Establishment of the Russian Acad. Science Institute of Socio-Economical Problem of Population, Russian Academy of Sciences.–: M-Studio, 2009. p. 192 6. Thurow Lester The Future of Capitalism. How Today’s Economic Shape Tomorrow’s World. L. Nicholas Brealey Publishing, 1996 7. Varvus S.A. Dokhody naseleniya v usloviyakh razvitiya tsifrovoy ekonomiki [Incomes of the population in the conditions of development of digital economy]. Druker’s messenger. 2018. No.1(21). pp. 213–220. (in Russian) 8. Varvus S.A. Poverty has a “new face.” Global Economy In The XXI Century: Dialectics Of Confrontation And Solidarity// London, 2018. P. 9. www.ilo.org 10. www.hdr.undp.org 11. www.global-finances.ru 12. Compiled by the authors on the basis of data http://www.gks.ru/wps/wcm/ connect/rosstat_main/rosstat/ru/statistics/population/level/# 13. Compiled by the authors on the basis of data http://www.gks.ru/free_doc/ new_site/vvp/vvp-god/tab34.htm 14. Compiled by the authors on the basis of data http://www.gks.ru/wps/wcm/ connect/rosstat_main/rosstat/ru/statistics/population/level/# 15. Compiled by the authors on the basis of data http://www.gks.ru/wps/wcm/ connect/rosstat_main/rosstat/ru/statistics/population/level/# 16. Compiled by the authors on the basis of data http://www.gks.ru/wps/wcm/ connect/rosstat_main/rosstat/ru/statistics/population/level/# 17. Compiled by the author on the basis of data http://www.gks.ru/wps/wcm/ connect/rosstat_main/rosstat/ru/statistics/population/poverty/#

CHAPTER 19

THE ERA OF CHANCE— A NEW STAGE OF ALIENATION Aza D. Ioseliani Financial University under the Government of the Russian Federation, Moscow Nelli V. Tskhadadze Financial University under the Government of the Russian Federation, Moscow

SOCIAL AND PHILOSOPHICAL UNDERSTANDING OF THE GLOBALIZATION PROCESS The profound changes, taking place in the modern world community, appear due to various reasons of the political, economic, social and spiritual nature. The rapid pace of development of information society, affecting the processes of globalization should be mentioned among the determinants. It leads to a change in the process of the acquisition of personal identity. First of all, it is connected with information of great significance for a

Marx and Modernity, pages 239–248 Copyright © 2019 by Information Age Publishing All rights of reproduction in any form reserved.

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person, which is becoming increasingly individualized, personalized, and also reflecting the characteristics of the personal perception of the world. While addressing main problems of modern global society, we should note the problem of intrusion of technology into interpersonal relations creates qualitatively new forms of social communication and affects deep spiritual, psychological, personal, ethical, political, economic, scientific and other spheres of human existence. Up to the middle of the 20th century, the period of development of technology philosophy reflected the era of mass production and consumption. The problem of alienation began to generate interest again after the boom in the 1960s and a surge of attention in the 1990s. Since the 1960s anxiety appeared instead of optimism regarding the scientific and technological revolution in connection with the alienation of technology, with the “extrusion” of a person as a subject, creator and consumer of culture from the technologized social reality. Individualized production and consumption is typical of the post-industrial society. Globalization is a multifaceted phenomenon that influences the life of every person through the education system, art, culture, information system, science, social and economic development, environmental problems, technical and technological processes, as well as directly the lifestyle of people and moral atmosphere of the society. If we consider the constructive and destructive components of globalization, then, unfortunately, the latter prevail. In modern conditions, globalization contributes more to the development of negative trends in the world than to positive and progressive changes. On the one hand, globalization contributes to the spread of human progress and universal human values. For instance, there are such positive trends as the dissemination of ideas and principles of democracy, humanism, freedom, individual rights, protection of children’s rights, equality of women and men, a departure from the trend of exploitation of man by man, familiarizing of broad masses with culture and art. It is also obvious that, without globalization, the fruits of civilization such as mobile communications, computerization, the Internet, modern household appliances, automobiles, etc., would not be widely available for most countries of the world today. On the other hand, globalization gives an unstable position to a person in the world; such trends as an alienation of the system of spiritual values and human connections, the development of various human vices, degradation and social apathy occur. The impoverishment of spiritual being emerges in a context of the gigantic growth in the volume of information. It indicates the presence of contradictions, which the previous historic periods have never faced.

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NEGATIVE TRENDS IN THE DEVELOPMENT OF TECHNOLOGICAL CIVILIZATION, SPIRITUAL AND ETHICAL PROBLEMS OF MAN The main problem in the social development of society and an individual in the modern era is that the Internet has no definite value orientation. Therefore, it is difficult to determine how much useful, positive and practically necessary information prevails over destabilizing, negative and demotivating one. The danger is that a person can become a passive consumer of poor-quality and destructive information without proper upbringing of spiritual, moral and ethical standards. Moreover, the vast majority of people do not have a proper level of critical thinking. Indeed, a person in cyberspace is forced to encounter information that has no cultural, spiritual and practical value along with information useful for social and cultural development, as well as for scientific activities, moreover, he is faced with the dominance of pornographic information, the demonstration of scenes of violence and cruelty. Wasting his time and sometimes money on useless and destructive informational sites, an Internet user thereby passively maintains ratings of these resources. Another problem, pushing a person towards alienation, is the problem of self-identification, since a person cannot associate or identify himself with any particular culture. It happens as a result of the cultural forms’ mixing and unsystematic information on the Internet. Previously, a person was more clearly aware of his development path, his goals and ideals. In agrarian and industrial eras the identity of the person was determined by his position in society, the cultural and social environment, and the religious faith of his family. Also, the person could identify himself with different goals and ideals. But this process was rather individual. The ongoing global changes in the society in the information age lead to the identity crisis. In modern conditions, the person is disintegrated, he has no life plans and an identity crisis emerges. As a result, apathy, depression, cruelty, aggression, various forms of complexes and addictions and even mental disorders appear. The solution of the problem might be in the integrated development of the whole personality based on the integration of such components of the spiritual development of the personality and its identity as social, religious, cultural, technology-related and psychological components. [Ioseliani, 2018; 161–169] All of them are the determinants of the formation of the spiritual world of an individual, and perhaps elements of a person’s withdrawal from the state of alienation. We believe that the most effective determinants and regulators of human development are such spiritual and

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moral imperatives as social, moral and ethical, environmental ones, as well as the imperative of responsibility. The relevance of the study is determined by the tendencies of increasing negative consequences of alienation, such as deviant behavior, deterioration of social health, political apathy and loss of confidence in public institutions, the impossibility of realizing one’s own creative potential. [Smolev, 2016; 9] Society is characterized by high rates of technology development at the present stage of its development. However, technological development leads to the separation of individuals, that is alienation. The breakthrough of the technogenic nature that we are witnessing today, undoubtedly, leads to changes in all spheres of human existence—in economic, social, spiritual terms, as well as in mentality. Personality and its needs, habitual ethical and aesthetic attitudes and the pyramid of values are changing. It creates premises for the next round of human alienation. The negative consequences of alienation are deviant behaviour, deterioration of social health, political apathy and loss of confidence in various public institutions [Smoleva, 2016; 10]. THE PROBLEM OF ALIENATION IN MARXISM, CLASSICAL GERMAN PHILOSOPHY AND EXISTENTIALISM: HISTORICAL INSIGHT The problem of alienation has a number of conceptual solutions (in Marxism, existentialism, dialectical theology, postmodernism). Alienation occurs in several systems: in the “man—the results of activity” system (Marxism, classical German philosophy, the theory of social contract); in the system of relations between people and between people and public institutions (existentialism), as a result, according to the psychological concept, the “personality-I-image” and “personality-other personalities” connections are broken [Shetulova, 2016]. Ways of overcoming alienation depend on the standpoint, from which various philosophical, sociological and psychological theories study it. It is possible to cope with alienation by changing the situation and the society, for example, by revolutionary social transformations (Marxism), creating a democratic system, overcoming social inequalities (social contract theory) or using a person’s rebellion against total alienation (A. Camus, Marcuse), or by activating the spiritual life of a person (N.A. Berdyaev, E. Fromm). A special role in overcoming alienation is played by the development of subjectivity, which occurs in the process of cognition (Hegel, I. Kant) and in all other activities (V.A. Petrovsky, S.L. Rubinstein).

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In the framework of existentialism, E. Fromm used the concept of “alienation” as such a state in which a person loses contact with the inner world [Fromm, 2016]. Alienation reveals oneself in the loss of a sense of self-worth. “Alienation, as we find it in modern society, is almost total; it pervades the relationship of man to his work, to the things he consumes, to the state, to his fellow man, and to himself” [Fromm, 2006]. Alienation affects all aspects of human life: the need for connections with his family, other people, the need for self-identity and creativity. According to E.Fromm, a person tries to overcome the contradiction between security and freedom by “escaping from freedom,” a person has a desire to have his own controlled small world: “. . . I am what I have and what I consume”[Fromm, 2016; 56]. Therefore, human activity is aimed at solving the problem of choosing a strategy. In Marx’ concept of “alienation,” people become “strangers” for each other, they are replaced by machines in production, in other words, people become in demand not for society, but only for production. They are turned off from the spiritual and social life[Rodin, 2017]. Workers had a feeling of alienation, expressed in the gradual loss of personality and the transformation into an appendage of a workplace. Within Marxists’ framework, alienation represents an objective process that plays an important role in social reality. Humanism, that is, the value-axiological aspect, is vividly expressed in Marxism. From the point of view of dialectics, the influence of alienation on creativity is both negative and positive, and this influence should be considered separately in each specific case. The consumer attitude of a person to the world promotes only personal well-being and leads to the dehumanization of the individual; as a result, a person is indifferent to other people and sometimes even indifferent to himself. His life activities are directed only at satisfying his needs, without regard to universal values. A person loses an emotional connection with the world and with other people. CAUSES OF ALIENATION IN THE TECHNOGENIC WORLD AND WAYS OF ITS OVERCOMING The modern technological order is characterized by a special digital culture, which is a product of the computer revolution and global informatization of the end of the 20th century [Deniskov, 2017]. There is an imposition of the system of values of the consumer society, typical of Western culture through the Internet [Valitov, 2016; 62].

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Today, in the era of postmodernism, the mass distribution of social networks is a particular threat. On the one hand, social networks allow people to find each other and communicate at a distance. On the other hand, many personal factors are not involved in such communication and, therefore, it alienates people. Many do not see the point in a personal meeting, when, formally, this is precisely what can be said by means of virtual communication. Such a trend is alarming: people lose interest in each other and in live communication. Despite the fact that there are obvious tendencies towards universal alienation through human technicalization, however, spiritual values are able to withstand the pressure of technicalization. Spirituality is an activity of consciousness. Spirituality is aimed at finding the meaning of life, to determine the criteria of good and evil in people’s behaviour. Spirituality allows an individual to control his behaviour, to act meaningfully and achieve moral goals. For the country’s prosperity, it is necessary that spirituality should be the meaning of life for most people, and reforms must be consonant with the interests of people, taking into account the peculiarities of the national character. Morality, art, religion, ecology, philosophy and sense of justice appear as the powerful potential of spiritual culture which is necessary for mental, physical and mental health. Thus, the subject of V. Frankl’s study was a number of semantic configurations of philosophy, considered by him as the concepts of “God” and “faith.” In addition to the principle of historicism, he also used the approaches and methods of philosophical and anthropological research. The merit of V. Frankl is not only that he identified the problems of the existential vacuum, but he also revealed positive ways to overcome it [Verba, 2016]. According to S.L. Frank, a person is not capable of knowing himself without believing in God as a transcendence beyond his limits, with a constant appeal to Him. According to Frank, concepts of “personality,” “God,” “culture,” “humanity” represent a single whole, which is revealed only in the internal interaction with each other. The separation of one of the parts entails “alienation,” provoking the weakening of spiritual forces to confront the growing evil in the modern world [Frank 1992]. Thus, the essence of religion is the relationship between man and the sacred, the Divine, and can be defined as the methodology of restoring communication with God [Arinin, 2013]. We take the view of V.A. Saprykin, who believes that at the present stage, the phenomenon of alienation encompasses a complete alienation from labour and its results, from property, from power, alienation from morality and culture. The social system of values is deteriorating: traditional spiritual values are replaced by surrogate ones, which are imposed by mass culture.

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Labour has lost its meaning of the basic value of society. Dehumanization of the individual occurs in the post-Soviet society [Saprykin, 2005; 57–58]. The problem of alienation cannot be solved without an integrated approach. If psychology is looking for answers to the questions of determining the essence of the social subject, as well as the process of alienation at the level of the individual, then sociology addresses the following problems: how alienation is manifested at the social level and what is its cause. Alienation is multidimensional and manifests itself in various forms. The phenomenon of alienation is characterized by various degrees of alienation, which should be considered in their interrelations and investigated in a comprehensive manner, that is, as a whole. It should also be noted that, at present, an epoch, which is related to production based on the capabilities of NBIC-technologies, is forming, that is, the hypothetical core of the sixth technological order, which is based on combining Nano, Bio, Information and Cognitive technologies. They inspire certain optimism, because they can overcome the alienation of man, technology and nature, at a new, higher level—in the form of the molecular production [Vnuskikh, Skomorokhov, 2016]. The reason for the emergence of alienation, for instance, for existentialists is the conflict of intuitive and rational knowledge. For existentialists, the overcoming of alienation is achieved through love, freedom, creativity, religion, that is, all things that allow a person to gain meaningfulness of his existence [Berdyaev, 1994]. This is an individual existential task for each person. Therefore, there is not any stage of social development that guarantees complete liberation from the alienating nature of human activity. The feeling of instability and the destruction of the usual way of life, associated primarily with stress and psychological pressure, provoke the onset of breaks and crises in society, leading to alienation. The traditional development paradigm, where rivalry and personal gain are priorities, is one of the main reasons of this crisis. In this paradigm, firstly, the technogenic principles are superimposed on the ethnic and national ones; secondly, it is important that the cultural conditions of the society, as well as the geoeconomic and political space, undergo transformations, which are a kind of reaction to the emerging challenges, threats and ruptures, including alienation. The main social gaps caused by the globalization of the economy and the culture of modern society are the following: 1. The gap between man and technology, generating new human needs. Moreover, the level of satisfaction of needs is reducing. Paradoxically, the needs become one of the main factors of human alienation. The clear example is the case when a Chinese student

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2.

3.

4.

5.

sold his kidney in order to buy a new iPhone. Social networks and the virtual world replace the need for real communication. In practice, we are witnessing a growing alienation between people in the real world, which is now being replaced by social networks. The gap between institutions and values. Institutions change too fast and do not take into account changes in value criteria. Newly created institutions are forced to push out the old ones and embrace those social segments that do not need these institutions, and do not even imply any institutional regulation (for example, the sphere of religious freedom and the sphere of family relationships). The gap between technology and institutions. The increased ability of modern technologies to market diffusion does not allow to control their turnover through the existing legal and market mechanisms effectively. On the contrary, there is a tendency to the development of non-market and extra-legal forms of control with the help of special means, as well as the trend of toughening the punishments of millions of people, whose behaviour does not go beyond the usual consumer and market forms. Therefore, the highest percentage of prisoners is in the U.S., which is one of the most technologically advanced countries in the world. The gap between real information (structure of the world) and interpretation (subjective picture of the world). The structure of the world is not so much connected with values as with technologies and resources. As for the picture of the world, then for a subject it is a reflection of the values of this subject. The behaviour, which is based on the picture of the world, alienates man from the changes taking place around him. Thus, there is a significant gap between the structure and the picture of the world. This gap can be bridged through the mutual adaptation of the picture and the structure of the world. The gap between human freedom and regulation. In the case when a person’s inner potential of his individual freedom is less than the strength of the regulatory institutions that put pressure on him, then, probably, it leads to a person’s degradation, reduction of his abilities and simplification of needs. Socialization is the answer to it.

The above-mentioned gaps are inevitable, as they are the result of multidirectional and various-speed changes. Gaps mean the growth of alienation, the expansion of the zone of chaos and uncertainty. It is reflected in the efficiency of resource use and the level of realization of values. Currently, technological development is a factor of human alienation and institutions are repressive. Values does not contribute to socialization, since they have lost the property of universality.

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The role of socialization grows in the face of increasing attempts to reformat values. Declared universal human values were not able to eliminate the restrictions on inhuman directions of technological progress, the strategy of changing values is becoming relevant on the agenda. An alternative to traditional values is the lifting of restrictions on the choice of a person and on the unimpeded construction of his values by him. The new structure of civilization implies that there is no place for traditional values, although, at the same time, tolerance for any ideology and views is declared. However, we emphasize that social values are given a fundamental role in the development of the society. REFERENCES 1. Arinin E. I. «Religiya» kak slovo i kontsept v istorii kul’tury // Svecha: Religiya, i religioznost’ v regional’nom i global’nom izmerenii [“Religion” as a word and a concept in the history of culture // Svecha: Religion, and religiosity in the regional and global dimension]. Vladimir, 2013. Vol. 23.–P. 18–57. (in Russian) 2. Berdyaev, N. A. Filosofiya svobodnogo dukha. [The philosophy of the free spirit].–Moscow: Republic, 1994.–480 p. (in Russian) 3. Valitov, I. O. Vliyaniye ekologii na demograficheskiy rost narodonaseleniya: (sotsiokul’turnyy aspekt) // Vestnik Bashkirskogo universiteta. [The impact of ecology on demographic growth of the population: (sociocultural aspect) // Vestnik of the Bashkir University]. Vol. 21—2016.—No.2.—P. 526–532. (in Russian) 4. Verba, Y. V. Smyslovyye konfiguratsii filosofii Viktora Frankla. // Psikhologiya i Psikhotekhnika [Semantic configuration of the philosophy of Victor Frankl. // Psychology and Psychotechnics].–2016.–No. 9.–P. 773–779. (in Russian) 5. Vnutskikh, A. Y., & Skomorokhov, M. V. Konvergentsiya tekhnologiy i sintez issledovatel’skikh programm gumanitaristiki [Technology Convergence and Synthesis of Humanitarian Research Programs]–Perm, 2016.- 139 p. (in Russian) 6. Deniskov, A. V. Filosofskiye predposylki proyektirovaniya vzaimodeystviy v tekhnogennom mire: tsivilizatsionnyy podkhod v rabotakh A.V. Soldatova // Nauchno-tekhnicheskiye vedomosti SPbGPU. Gumanitarnyye i obshchestvennyye nauki. [Philosophical premises for designing interactions in the technogenic world: civilizational approach in the works of A.V. Soldatov // Scientific and technical statements of the SPbU. Humanities and social sciences].–2017.–Vol. 8, No. 2.–P. 61–67. (in Russian) 7. Ioseliani, A. D. Antropologiya tekhnogennogo mira [Anthropology of the technogenic world]–Perm, 2018. –260 p. (in Russian) 8. Rodin, E. O. Riski v tekhnologicheski sverkh razvitom obshchestve. [Risks in a technologically advanced society].–Saratov, 2017.–268 p. (in Russian) 9. Saprykin, V. A. Marksizm, sotsial’nyy progress i budushcheye tsivilizatsii // Marksizm i sovremennost’. [Marxism, social progress and the future of civilization // Marxism and modernity].–2005.–No. 1–2.–pp. 53–62. (in Russian)

248    A. D. IOSELIANI and N. V. TSKHADADZE 10. Smoleva, E. O. Sotsial’noye otchuzhdeniye: analiz teoreticheskikh podkhodov // Voprosy territorial’nogo razvitiya. [Social alienation: analysis of theoretical approaches // Issues of territorial development].–Vologda, 2016.–No. 4. -P. 3–14. (in Russian) 11. Frank, S. L. Dukhovnyye osnovy obshchestva. [Spiritual foundations of society]– Moscow: Republic, 1992.–511 p. (in Russian) 12. Fromm, E. Zdorovoye obshchestvo. [The Sane Society].–Moscow: AST, Khranitel, 2006. 448 p. (in Russian) 13. Fromm, E. Imet’ ili byt’? [To Have or to Be?]–Moscow: AST, 2016.–320 p. (in Russian) 14. Shetulova, E. D. Metodologicheskiye aspekty issledovaniya otchuzhdeniya v kontekste sovremennosti [Methodological aspects of the study of alienation in the context of modernity]–Nizhny Novgorod, 2016.–305 p. (in Russian)

CHAPTER 20

KARL MARX AND THE POLITICAL ECONOMY OF POWER Vyacheslav V. Dementyev Financial University under the Government of the Russian Federation, Moscow

KARL MARX AND THE PROBLEM OF POWER In recent years, several fundamental works have appeared in the economic literature, including those by representatives of the neo-classical and neoinstitutional directions, in which the distribution of power (and violence) is considered as the main factor determining the dynamics and sustainability of economic growth [Acemoglu, Robinson, 2012; North, Wallis, Weingast, 2009]. This raises the need for a problem of power rethinking and the Marxist concept of economic power redefining, as well as its role and importance in the economic analysis. The peculiarity of the situation around the problem of power is that the dominant orthodox theory ignored it for a long time. Economic power was associated primarily with the Marxist legacy in political economy. This gave

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to A. Papandreou, an opportunity to note that the “Marxist connotation” of this problem was one of the reasons for neglecting the issue of power in neoclassical economic theory [Papandreou, 1994, p. 216]. Classical political economy (A. Smith and D. Ricardo) does not address the problem of power in economic life (except for the power of the State). Explaining the lack of economic power issues in the works of classics of political economy, It is generally accepted that for the first time in political economy, power as a characteristic of capitalist economic relations appears in the works of Karl Marx. “In the middle of the last century,” writes J.K. Galbraith, “he brought the subject of power into economic discussion with a vehemence which the world has not yet quite ceased to find alarming. The notion of a system of competitive and hence passive business firms he dismissed as an exercise in vulgar apologetics. Production is dominated by those who control and supply capital [Galbraith, 1969, p. 59]. In the works of Karl Marx, there is no special analysis of power as a category of economic theory; at the same time, power relationship, domination and exploitation are essential characteristics of capitalist production relations. Marx was the first to connect the concepts of power and property, and to show that property is a kind of power [Marx, 1955 a, c. 297]. In Marx’s eyes universal power of wealth serves as a general characteristic of capitalism. According to him, “the power exercised by an individual over the activities of others or over social wealth is inherent to him as to an owner of exchange values, money. This individual holds his public power, as well as the connection with society, in his pocket “ [Marks, 1968 , p .100 ]. Capital as an economic relationship in its understanding is, above all, the relationship of power (domination and coercion). “Capital,” he writes, “is a commanding authority over labor and its products. The capitalist has this power not because of his personal or human properties, but only as the owner of capital. His strength is a purchasing power of his capital, which nothing can resist [Marx, 1974, c. 59]. According to K. Marx, the exercise of power over the process of production is the prerogative of capital owners. In this sense, he indicates that economists call capital “power over the labor of others” [Marx, 1955 a, p. 297]. The economic power of capital over labor results in the power of the entire capitalist class over the working class. “A worker, as soon as he wants, leaves the capitalist to which he has been hired, and the capitalist, when he pleases, dismisses the worker, as soon as he ceases to bring him benefit or does not bring him the benefit he expected. . But the worker, for whom the sale of labor is the only source of income, cannot leave the entire class of buyers, i.e., capitalist class, without condemning himself to starvation. He belongs not to an individual capitalist, but to the capitalist class as a whole;

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and his job is to find a master, i.e., to find a buyer among the capitalist class” [K. Marx, 1979, p. 157]. Thus, the nature of power in relations between people is the most important characteristic of capitalism, its specific feature distinguishing this type of production relations from economic systems organized on personal dependence, which is based on violence. The problem of power in economic analysis. In its most general form, power represents a certain aspect in relations between people, which consists in the ability of one person or a whole group to impose their goals on others. Power is a phenomenon of the economic life of society, of everyday economic existence, the presence of which is not a subject to doubt. Relations between economic agents, as well as any social relations, include power component. It can be the power of an owner, the power of management, the power of trade unions, power of market, the power of the state, the power of money, etc. According to A. Toffler, ““power is an inescapable part of the very process of production—and this is true for all economic systems, capitalist, socialist, or whatever” [Toffler, 2001, p. 53]. The influence of power on economic behavior of people, its content and results, is another indisputable fact of economic reality. Describing the importance of power in society, B. Russell noted that power is a fundamental concept in social sciences in the same sense in which energy is a fundamental concept in physics [Russell, 2000, p. 9]. The attitude to this issue in economic theory was ambivalent. At one extreme there are economists who include power in the subject of economic analysis and consider it as a factor having a significant impact on the economic life of society . K. Rothschild characterizes these economists as “power-minded economists and schools» [Rothschild, 1971, p. 15]. This category include representatives of the Marxist school, traditional institutionalists, theory of economic order, social and institutional theory (French school). F.Perroux considers power as the fundamental principle of the economic activity. “Economic life,” F.Perroux wrote, “is something different from a network of exchange. It is rather a network of forces. The economy is guided not only by the search for gain, but also by the search for power” [Perroux, 1971, p. 56]. The central economic problem for institutionalists is the organisation and control of the economy, which is the formation of its power structure. “All institutionalists,” W.Samuels writes, “comprehend the economy as the system of power” [Samuels, 1991, p. 11]. Power relations in the economic system have traditionally been the subject of research in the political economy. R.Holton writes, “what is common to all shades of the political economy is that economic issues are always to be understood within the context of power relations, whether these are exercised through

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economic or politic mechanisms” [Holton, 1992, p. 142]. H.Albert considers the issue of power “as the dominant question of economics as a social science” [Albert, 1971, p. 28]. At the other extreme there are economic concepts that deny the importance of the concept of “power” for economic analysis. Neoclassical school in economic analysis ( mainstream economic ), as well as a number of other trends in economic thought (for example, the Austrian school), have a negative attitude towards the inclusion of the issue of power (with the exception of monopoly power) in the subject of economic analysis. Neoclassical economic theory does not at all consider power as a general characteristic of the economic system, and, accordingly, the concept of economic power is as well not formulated. Power (coercion) is an “alien factor for production,” whose action is caused by external forces, or to be a deviation from the normal (natural) state of the economic system. “Power has been a taboo word in mainstream economics,” A. Papandreou rightly assumes [Papandreou, 1994, p. 216]. “The meaning and significance of power in economic analysis,” D. Young writes, “have seldom been a subject which engaged the efforts of mainstream neoclassical theorists. This is not to say that the term ‘power’ is never used or that it does not play a significant role in certain models. But, it tends to be used in a very specific and narrow way and its alternative meanings and wider significance are seldom acknowledged” [Young, 1995, p. 85]. “In orthodox neoclassical economics the standard presumption is that there is no exercise of power if both parties voluntary enter a transaction,” Bardham writes” [Bardham, 1991, p. 266]. Both Bowles and Gintis believe that liberal tradition in political philosophy and economic theory implies the idea of the fact that un ideal liberal capitalist society, the State is the only agent able to impose sanctions and, therefore, is the only source of power. In accordance with this point of view, there is no power in a competitive economy, although, of course, economic power can be used through public policy, influence, lobbying, etc. The notion of “purchasing power” in neoclassical theory is not power in our everyday understanding. At the same time, as the authors rightly point out, power is clearly present in the economy–in the hands of the bankers who distribute loans, or the capitalist employer who directs the activities of the workers. Describing such a situation as the gap between elementary observation and liberal economic theory, they note that the origins of this “gap” lie in the features of the prevailing general equilibrium theory associated with neoclassical tradition, and especially with L. Walras [Bowles, Gintis, 1988, p. 301]. General behavioral preconditions of neoclassical theory form a methodological obstacle to the inclusion of the problem of power in the subject of economic analysis. General economic equilibrium in Walras model implies

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the existence of equality between economic agents and, consequently, the lack of social restrictions on free choice and voluntariness in transactions between them. There are no social barriers to free exchange in the form of coercion in this model. All transactions are free and voluntary. This “default” condition is assumed to be a “natural state” of economic life of society. Consequently each agent, abandoning the current or most preferred transaction in favor of another better alternative, loses nothing. In this situation, there are no agents capable of sanctioning another agent. For example, if the labor market is perfect, then the firm’s manager cannot use the threat of dismissal to control the behavior of a hired worker, since the dismissed worker can find equivalent employment anywhere. Since every economic agent can refuse any exchange without costs, there should be no power in the equilibrium state of the competitive economy. Therefore, questions of power distribution and the presence of coercion in exchange relations do not arise: no one is a subject to any form of coercion or any type of restriction. The moment of inequality and coercion in exchange is considered as a deviation from the normal state caused by forces external to economic life. In the absence of external interference in economic life, the phenomenon of power (including monopoly market power) has a transitory nature, the importance of which can be neglected. Another precondition of this model is that the terms of the exchange can be fixed in contracts that can be implemented without costs for the parties to the exchange. Thereby, the use of power by some economic agents to force others to fulfill the contracts they signed is eliminated. In the Walras model, the nature of the distribution of power does not have an allocative and distributive effect in competitive equilibrium, and, consequently, the phenomenon of power is of no interest to economic theory. P. Samuelson expressed the essence of the matter more briefly: in the model of perfect competition . . . it does not matter who hires whom; so, it can be assumed that the worker hires “capital» [Cited from: Bowles, Gintis, 1994, p. 301]. Neoclassical economists undoubtedly recognize the presence of power structures in an imperfect market, where prices are controlled by monopolies or by the government, but at the same time they regard the market theory of imperfect competition just as supportive to the perfect market and neglect the non-market power structures that inevitably surround all market systems. According to F. Perroux, force and coercion were always included in the number of elements alien to economic science, in the number of factors of a “non-economic” nature, thanks to which the economist considered himself liberated from many efforts and forgave himself serious gaps in knowledge in this sphere [Bocage, 1985, p. 346]. Moreover. The literature repeatedly draws attention to the feature that the disregard of the problem of power in economic life has not only

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theoretical, rooted in the methodological foundations of neoclassical economic theory, but also certain ideological reasons. The liberal doctrine has become a means of ideological substantiation and cunning justification of the unlimited economic power at the disposal of certain individuals (B. Seligman In this regard, W. Eucken expressed the following: “We, economists, should raise the curtain with which ideologies reflecting the interests of various groups cover the concentration of economic power and struggle for economic power” [W. Eucken, 1996, p. 251]. THE POLITICAL ECONOMY OF POWER AND ITS SIGNIFICANCE The economic world of neoclassical theory as a world without power and coercion is nothing more than an utopia. The real economic world is a world of unequal (asymmetric) relations, a world of relations between agents who occupying unequal positions in exchange and having unequal opportunities to subordinate (coerce) each other. Equality in economic life, as well as an absence of power, is a theoretical abstraction and exists in real economic life, rather as an exception than as a rule. Economic system is dominated by relations including power and coercion of one another. In this sense, it is not the absence of power but its presence in relations between economic agents that can be considered as a “natural state” of the economic organization of society. Thus, economic system (or the system of economic relations) acts as a system of power (or a system of power relations par excellence). Power exists not only “outside,” “together” or “above” economic relations (state power), power is also an element, side, aspect, attribute of economic interactions: relations of exchange, hiring, organization and production management; distribution relationships also include power component. A. Toffler notes that “the ‘power relations’ than to the ‘money relations’ according to Marks” [Toffler, 2001, p. 55]. From F. Perroux’s point of view, economic reality is a network, a multitude of explicit or hidden power relations, a network of interactions between unequal forces, i.e., dominant and dominated (subordinate) partners. He opposes models of the economy of equals to the theory of economic struggle or the economic power of unequal economic agents [Bocage, 1985, p .30]. Economic system can not be understood without explanation of who, over whom, to what extent and for what purposes exercises power. The problem of power remains marginalized. Almost any author writing on the problems of power in economy considers it his duty to emphasize the lack of knowledge in this field. Power, writes the K . Rothschild , should have become a recurring theme in the economic science of both

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theoretical and applied nature. However, if we examine the main course of economic theory over the past hundred years, we find that it is characterized by a strange lack of consideration of power. The facts that people will use power to change the market mechanism; that unequal power can have a big impact on the market performance; that people seek power as much as economic wealth–are neglected [Rothschild, 1971, p . 7]. The contradiction between the unsatisfactory reflection of the problem of power in orthodox economic theory, on the one hand, and the obvious value of the power factor in economic life, on the other, raises the question of creating a theory of economic power (political economy of power) or, more generally, economic theory based on power (“ power–based economic theory “). At the same time, it is reasonable to agree with V. Eucken that there is no principal incompatibility between economic theory and the phenomenon of economic power [Eucken, 1996, p. 251]. “If the economic theory is correctly developed,” he writes, “it is not only compatible with the economic power display, but also it is necessary . . . to cognize the phenomenon of the economic power” [Eucken, 1996, p. 252]. The study of the problems of power implies the rejection of neoclassical assumptions for the basic model of choice of economic agents and the inclusion of factors of inequality, strength and, further, limited voluntariness of exchange into the behavioral model. In this regard, D. Bocage, a researcher of creativity of F. Perroux states that the ability of conventional economic theory to describe and explain accurately inequalities and manifestations of power is highly questionable. “It is therefore desirable to develop a new economic theory that would enable the analyst to investigate systematically the problem of power in economics” [Bocage, 1985, p. 3]. To explain power, it is not enough to understand the theory of voluntary exchange: we must also understand the logic of force [Olson, 2000, p. 2–3]. Answering to objections related to the inclusion of the problems of power into economic theory, Y. Takata emphasizes: “Many researchers, recognizing the functioning of such elements of power within the economy, believe that they should not be included in economic theory for they are non-economic in nature, and should be considered as something qualitatively different from economy. However, until now the economy did not need such concepts as utility, technology, population. Neither production nor economic development can be analyzed without taking into account the concept of technology. However, these factors are inherently non-economic. They just need to be included in economic analysis as a starting point for explaining how economic factors are determined. Utility is not considered something economic, but we need pre-economic concepts as determinants explaining how economic phenomena are determined. Power has a similar position in economic theory [Morishima, p. 117].

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Stressing the importance of the problem of power for economic analysis, M. Morishima suggests distinguishing “economics in the narrow sense, or pure economics,” “economic theory,” while “economics” must be used to refer to broad economics, or the second approximation of economics, which incorporates the influence of power [Morishima, 1998, p. X]. Takata distinguishes and opposes utility economy and power economy [34, p .82–86]. He believes that, compared with mainstream utility–based theory, power-based economic theory, is “the second (better) approximation” to reality, since the world is inhabited by active human beings, not by “the machines that calculate utility. At the same time, he did not try to replace marginal utility theory with power theory, but rather to connect them. Takata recognizes the correctness utility-based economic theory but considers it insufficient to understand economic life. In his opinion, if the action of power is not included in economic theory, then the most important economic phenomena cannot be explained [Takata, 1995, p. 88]. Moreover, in his opinion, a power based economic theory has the advantages of comparability with other social sciences at a fundamental level. CONCLUSIONS The heuristic value of the political economy of power stems from the fact that real economic world is a world of unequal relations par excellence. In economic life, there are no mechanisms that would contribute to the establishment of equality between economic agents and the elimination of power between them. Therefore, it is inequality that can be considered as the “natural state” of economic life. We can agree with F. Perroux that economic reality is a network, a lot of explicit or hidden power relations, a network of interactions between unequal forces, i.e., dominant and dominated by (subordinate) partners [Bocage, 1985 , p . 30]. Equality is an ideal mental structure. Moreover, this is a structure, which has a limited sphere of implementation. For, if the mechanisms ensuring the effect of the tendency to implement this structure in economic life are absent, the latter, being transferred into the sphere of economic policy, becomes a utopia. Thus, the economy should be regarded as a system of power, which is characterized by a certain distribution, hierarchy and power struggle, [1] as well as by a certain balance of power. Analysis of the phenomenon of economic power should contribute to finding an answer to the question–what is the socially necessary order of power: who, over whom, to what extent, by what means and for what purposes power should be exercised in the economic life of society. At the same time, the answer to the question, given the “interdisciplinary” nature of the phenomenon of power, can be found, in our opinion,

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only on the paths of political economy of power, through joining forces of economists, sociologists and legal specialists. Not accidentally K. Rothschild chose B. Russell’s statement as an epigraph to the book “Power in Economics”: “Economics as a separate science is unrealistic, and misleading if taken as a guide in practice. It is one element—a very important element, it is true—in a wider study, the science of power” [Russell, 2000, p. 92]. REFERENCES Acemoglu D.; Robinson J. (2012) Why Nations Fail: The Origins of Power, Prosperity and Poverty. New York, NY: Crown Business. Albert H. (1971) The Neglect of Sociology in Economic Science // Power in Economics. Ed. By K.Rothschild.—Harmondworth: Penguin books. (1971) Bardhan P. (1991) On the Concept of Power in Economics // Economics and Politics. Vol.3. November. Pp. 265–277 Bocage D. (1985). General Economic Theory of Fracois Perroux. Lahman: University Press of America. Bowles S., Gintis H. (1994) Power in Economic Theory // The Elgar Companion to Radical Political Economy. Ed. By P.Arestis and M.Sawyer.–Aldershot: Edward Elgar. Pp. 300–305 Bowles S., Gintis H. (1988). Contested Exchange: Political Economy and Modern Economic Theory // American Economic Review. 78/2 Pp. 145–50 Companion to Contemporary Economic Thought. (1991) Ed. By D. Greenaway, M. Bleaney, I. Stewart. London and New York, NY: Routledge. Dugger W. M. (1992). Underground Economic. A Decade of Institutionalist Dissent.–Armonk, New York, NY: M.E. Sharpe Inc. Economy as a System of Power (1988). Ed. By Marc R. Tool and Warren J. Samuels. New Brunswick (U.S.A.) and Oxford (U.K.): Transaction Publisher. Eucken W. (1996) Osnovy nazionalnoy ekonomii [Die Grundlagen der Nationalökonomie]. M., Econom. (in Russian). Eucken W. (1995) Osnovnye prinzipy economicheskoy politiki [Grundsätze der Wirtschaftspolitik]. M., Progress. (in Russian). Galbraith, J. K. (2007) New industrial society. Princeton University Press. Holton R. (1992) Economy and Society. London: Routledge. Marx K. (1955) Moraliziruyushchaya kritika i kritiziruyushchaya moral [Moralizing criticism and critical morality] // Marx K., Engels F. Collection. 2 Ed. Vol. 4, M., Politizdat, p. 291–321. (in Russian). Marx K. (1955b) Nemezkaya ideologiya [The German ideology]//Marx K., Engels F. Collection. 2-Ed. Vol. 3, M., Politizdat, p. 7–544. (in Russian). Marx K. Kapital. (1960) Kritika politicheskoy ekonomii [Capital. A Critique of Political Economy] Vol. 1. The process of production of capital//Marx K., Engels F. Collection. 2 Ed. Vol. 23, M., Politizdat. (in Russian). Marx K. (1968) Ekonomicheskie rukonisi 1857–1859 g. [Economic manuscripts of 1857–1859 years]//Marks K. Engels F. Collection. 2 Ed. Vol. 46, M., Politizdat. (in Russian).

258    V. V. DEMENTYEV Marx K. (1974) Ekonomichesko-filosofskie rukonisis 1844 goda [Economic and Philosophic Manuscripts of 1844] //Marks K. Engels F. Collection. 2 Ed. Vol. 42, M., Politizdat, p. 41–174. (in Russian). Marx K. (1979) Naemnyy trud I kapital [Wage Labor and Capital] // Marx K. and Engels F. Selected Works in Three Volumes. Vol. 1, M., Politizdat, 1979. p. 144–180. (in Russian). Morishima M. (Ed.) (1998) Power or Pure Economics? Joseph A. Schumpeter and Yasuma Takata. Ed. By. London: Macmillan Distribution Ltd. Olson V. (2000)) Power and Prosperity: outgrowing communism and capitalist dictatorships. New York, NY: Basic books. Papandreou A. (1994) Externality and Institutions. Oxford: Claredon Press. Perroux F. (1971) The Domination Effect and Modern Economic Theory//Power in Economics // Ed. by K.W.Rothschild. Harmondworth: Penguin books. Pp. 56–73. Power in Economics (1991). Ed. by K.W. Rothschild. Harmondworth: Penguin books. Rothschild K. (1971) Introduction // Power in Economics. Ed. by K.W.Rothschild. Harmondworth: Penguin. Pp. 7–17. Russell B. (2000) Power. London and New York, NY: Routledge. Schutz E. (2001) Markets and Power: The 21st Century Command Economy. Armonk, New York London, England: Sharpe Takata Y. (1995) Power Theory of Economics.–New York, NY: St. Martins Press. Toffler A. (2001) Metamorfozy vlasti. Znanie, boganstvo I sila na poroge XXI veka [Powershift: Knowledge, Wealth and Violence at the Edge of the 21st Century]. M., OOO “Izdatelstvo ACT.” (in Russian). The Politics and Economics of Power. (1999). Ed. By S.Bowles, M. Fransini, U. Pagano. London and New York, NY: Routledge. Young D. (1995). The Meaning and Role of Power in Economic Theories // On Economic Institutions: Theory and Applications. Ed. By J. Groenegen, C. Pitelis, and S.-E. Sjostrand. Aldershot: Edward Elgar.—pp. 85–99.

CHAPTER 21

GLOBAL GOVERNANCE Nature and Ostensibility M. A. Pivovarova Financial University under the Government of the Russian Federation, Moscow T. A. Yerofeyeva Financial University under the Government of the Russian Federation, Moscow

CONTRADICTIONS OF GLOBAL GOVERNANCE The global financial crisis exposed the internal contradictions of global governance. Information and communication technologies and globalization processes have led to the complication of the world economic system. The level of its integrity has increased. The interaction of economic entities operating in the global space has become closer, deeper and more multifaceted. Their interdependence has increased [Derviş; Lagarde]. Under these conditions, the responsibility of all participants in global governance is increasing.

Marx and Modernity, pages 259–268 Copyright © 2019 by Information Age Publishing All rights of reproduction in any form reserved.

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Global governance can be viewed as multilateral cooperation to achieve the overall goals of sustainable development. J.M. Boton, K.I. Bradford (Jr.), G. James, and other researchers believe that global governance consists of guiding collective efforts to solve complex global problems of alleviating poverty, protecting from diseases, terrorism, and environmental destruction [Boughton, Bradford; James]. After the global financial crisis, despite the efforts of international organizations to expand and coordinate multilateral cooperation, the world witnesses an imbalance in the system of global governance. The inclination of countries that have previously promoted multilateral cooperation to pursue national policies to the detriment of other economic entities has increased. IMF Managing Director C. Lagarde underlines that uncoordinated actions of the international community heighten global risks and destroy the existing system [Lagarde]. Many researchers are concerned that the United States, which has played a key role in creating global rules for multilateral cooperation, is pursuing a “arm-twisting” policy. D. Trump said that membership in the WTO imposes unprofitable trade deals on the country. The US president is threatening that the country will withdraw from the WTO. The introduction of economic sanctions against China, Russia and other countries are laying the foundation of trade wars [Stiglitz]. In the fall of 2017, United States announced that it would withdraw from the United Nations Educational, Scientific and Cultural Organization (UNESCO). Back in 2011, the United States, Canada, Israel and a number of other countries suspended the payment of membership fees to UNESCO. Industrialized countries practice a double standards policy for less developed countries. The presumption of innocence for the accused, against whom there is no sufficient evidence, is guaranteed for citizens of their country, but not guaranteed for citizens of other countries. In modern conditions, the combination of mutually beneficial relations with robberies and wars, mutual support with mutual destruction has become typical. Such actions lead to the fact that the essence of global governance, as a form of multilateral joint cooperation in the common interest, is distorted. It creates the appearance of joint regulation of global risks that are systemic and multi-sectoral. However, in reality, there are poorly coordinated actions of numerous highly specialized institutions operating in particular sectors, such as finance, energy, health care, tourism, etc. These problem points, in our opinion, require appropriate attention devoted to them. It is necessary to find out the reasons for the formation of an illusory view of global governance. When studying such objects, with the external form distorting (hiding) the essential interrelations and interdependencies, it is advisable to use Karl Marx’s dialectical method.

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PECULIARITIES OF THE DIALECTICAL METHOD OF K. MARX K. Marx’s dialectical method allows to see the underlying, hidden or distorted connections and relationships. In order to show the complexity, multidimensionality and interdependence of all components of economic reality, K. Marx introduced the concept of “converted forms” (verwandelte form). The logic of Capital can be defined as a gradual ascent from the most abstract converted forms to more particular and specific ones. At present, researchers rarely pay attention to Marx’s analysis of “converted forms.” The Soviet philosopher M.K. Mamardashvili believed that the problem of converted forms was characteristic of all the humanities. This is a tool for analyzing ontological reality. It can be used in the study of special forms of human consciousness—mythologies, ideologies, various trends in art, literature, music, painting, the Jung concept of “archetypes,” etc. [Mamardashvili]. Some provisions on the analysis of K. Marx’s converted forms can be found in the works of D.I. Rosenberg, M. Blaug [Rosenberg; Blaug]. In the 1960s–1970s, the analytical tools of converted forms were widely used by Soviet political economists in the study of economic methods [Cherkovets; Langstein]. Currently, this analytical tool is used in the study of the contradictions of socio-economic systems [Buzgalin; Oleinik; Rushanic]. Similar analytical tools are used to study distorting effects and stimulus in markets with asymmetric information and in individual sectors of the economy (mining, energy, insurance) [Yilma, van Kempen, de Hoop; Gill; Hojman]. The authors of the UNCTAD report on trade and development write about false assumptions and misconceptions in the world trade sphere. Objective and subjective factors make it difficult to consider the internal connection between various specific economic forms. The development of productive forces and production relations, as well as real processes (social, political, etc.) contribute to the distortion of essential relations. Explicit or implicit disregard concerning the interrelation of economic and non-economic aspects is one of the reasons for the emergence of complex concrete forms that hide (change) the essence of a phenomenon. The peculiarities of person’s way of thinking and perception limit the idea of a particular process as a developing and changing object. There are contradictions of the whole and the part. On the one hand, the whole is always greater than the sum of its parts. The whole is known only through the analysis of individual parts and their interrelations. On the other hand, the parts are the product of the disintegration of the whole. They can be studied only on the basis of knowledge of the whole [Philosophical Encyclopedia;474]. Therefore, the converted form, as a more specific one,

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creates an illusory idea of a particular phenomenon. Illusion dissipates as a result of a critical analysis of its causes. The analysis of the converted forms makes it possible to reveal the internal connection between various production relations, to find their internal unity behind the external isolation. In Chapter 17, Volume I of Capital, Marx analyzes the objective and subjective factors that influence the process of converting the value and price of labor into wages [Marx 1973]. Based on a study of the organic composition of capital, as well as intra-industry and inter-industry competition, K. Marx uncovered the stages of turning profit into average profit and value of goods into production prices. Production relations cease to be random. Thus, the study of interest, entrepreneurial profits and land rent as converted forms allowed Karl Marx to identify the sources of their origin—capital-property, capital-function and the application of capital to the land [Marx 1970]. In every converted form there is an element of fetishization of the relations of production. When analyzing converted forms, forms of fetishization of production relations are gradually clarified and disclosed—commodity fetishism, monetary, distributive, redistributive, etc. The Volume III of Capital considers how the process of modifying essential relations leads to the appearance of false social value. With special combinations of supply and demand, the extreme conditions of production become the regulator of the market price. In the case of insufficient supply, the worst conditions act as a regulator, and in the case of an excess amount—the best conditions [Marx 1970;203]. False social value is explored in Chapter 39 of Volume III of Capital, which is called “First Form of Differential Rent (Differential Rent I).” However, it would be wrong to associate a false social value only with the differential rent. Such a specific form may arise under exceptional conditions in any sphere of social production. The study of converted forms ends with an analysis of incomes and their sources. In these relations, commodity fetishism manifests itself in all of its diversity. In our opinion, the analytical tools of the transformed forms allow to disclose the diverse factors that distort the essence of global governance—objective and subjective, economic and non-economic, internal and external. GLOBAL GOVERNANCE AS A MULTI-LEVEL SOCIAL CONTRACTING SYSTEM Factors That Distort the Essence of Global Governance In recent years, the scientific concept in which management is viewed as a system of social contracts has gained wide popularity. Social contracts

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can be vertical or horizontal, formal or informal, bilateral or multilateral, long-term or short-term. Theoretically, global governance can be represented as a multilevel system of social contracts [Bussolo, Dávalos, Peragine, Sundaram]. This system is not based on legal legitimacy, but on political, psychological, ethical, confessional and ideological [Global Governance;18–19]. It cannot be strictly institutionalized. Therefore, there is a distortion of the essence of global governance as a system of social contracts. The distortion of the essence of global governance is due to the lack of a single institutional subject of management. Global governance is represented by heterogeneous economic actors—governmental and non-governmental, international and supranational. Each of them protects (fairly effectively) their own interests. Performs certain functions. But not all economic subjects can be qualified as representing the interests of the entire world community [Boughton, Bradford;12]. Not all economic entities have the same level of trust. D. Lipton stresses that at present there is a decrease in the level of trust in the most important institutions—national and international, as well as in partners in international trade and investment [Lipton]. There is no single understanding of global governance and its goals. As a result, the global system of social contracts is fragmented and imbalanced. This makes it difficult to make decisions on the complex problems of sustainable development. The contradiction between the integrity of the world economy and the narrowly specialized institutions of global governance manifests itself, on the one hand, as a relationship of cooperation, mutual assistance and friendship, and on the other—as a relationship of rivalry, dictate and hostility. Another factor distorting the essence of global governance is the complex hierarchical structure of the system of social contracts. Theoretically, it can be assumed that under the conditions of uneven socio-economic development and a high level of differentiation of individual countries, the most developed one, which will serve as a regulatory center, will stand out among all economic entities. The world center is trying to mitigate structural inequality, guided by the goal of stabilizing the entire economic zone. All other economic entities recognize the status of the world center, expecting a gain from such a hierarchy. The process of forming a global system of social contracts and its hierarchical ordering has been going on since the beginning of the 20th century. After the end of the First World War, an international intergovernmental organization, the League of Nations, was established to develop cooperation among nations and guarantee their peace and security. In 1946, it ceased to exist due to the establishment of the UN.

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At the end of the Second World War, under the prevailing influence of the United States, multilateral international organizations were created that became the basis of the global system of social contracts—the UN (with the Security Council and numerous specialized agencies), the IMF, the World Bank, GATT. The new system of multilateral cooperation contributed to social progress, raising the standard of living of the population of individual countries, production growth and economic growth in general. Global governance has intrinsic contradictions between the general and the particular, the global and the local. The resolution of these contradictions was seen through the formation of a system of horizontal social contracts. However, a system of conditionally vertical social contracts with elements of governance-submission type relations was essentially formed. The external environment objectively exceeded the level of development of many countries affected during the Second World War. Therefore, countries were forced to recognize the leadership of several more developed countries. As a result, a group of countries that were at the top of the world hierarchy practically did not cede its control powers for more than 60 years [Boughton, Bradford; 11]. Fetishism of Global Interests Fetishism of global interests appeared under the influence of objective and subjective factors. It is based on the absolutization of the hypothesis about the reducibility of national interests to global ones. This also contributed to the reduction of the role and functions of nation states in the regulation of socio-economic processes of individual countries. The dominance of global interests over national ones led to the fact that national authorities began to manage processes that went beyond national borders [Goldin, Kutarna]. The formed world center began to identify itself not as a part of the whole world, but as a whole itself. The whole, as a rule, is perceived through local interpretations and representations. Therefore, the economic subject is inclined to expand its “national niche” to a planetary scale and project its own local views to the whole world. The whole is replaced by a separate part. The world center consciously or unconsciously imposes its values, methods, approaches to all other subjects. All events and phenomena have been evaluated through the prism of their own experience and on the basis of their own selfish interests. Representatives of a small group of countries make decisions about which goals, whose welfare or rights are most important. The fact that the imposed values contradict the traditional foundations, religious traditions, and customs of individual countries and regions is ignored. Decisions that are optimal for the center and are taken on behalf

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of the entire global whole are not always optimal for individual economic subjects. The question of adjusting the actions of the world center depending on the intentions of other subjects is not considered. In order to coerce economic actors to the behavior and actions that are necessary in the opinion of the world center, there is an explicit or implicit pressure on weaker market counterparts. There are frequent cases of price dictatorship. A credit strike tactic is applied. The practice of applying sanctions measures is expanding so that a country refuses to pursue a sovereign foreign policy and strategy of socio-economic development. There is a bias in the selection of facts and the development of conflict resolution procedures. In disputes, the parties appeal to the authority of the leader as the guarantor of the protection and assertion of “their own truth.” Draft agreements that would allow private corporations of individual countries to cancel (or not implement) government decisions or the laws of other countries, are being elaborated. And today military-political tools are used as a basis for establishing and expanding economic relations. The fetishism of global interest has led to the unstable nature of the system of conditionally vertical social contracts with elements of governancesubmission relations. The intensification of interactions of economic entities operating in the global space, as well as the expansion of their number increased the degree of uncertainty in the behavior of individual subjects. Paradoxically, but it is the United States and the United Kingdom, that were the main architects of the established system of global governance, today are taking steps to loosen it [James]. An extremely wide palette of interests, goals and aspirations of economic entities led to the localization of connections. Economic subjects limit the range of their relations in several directions or reduce the number of subjects of communication. Localization process intensified after the global financial crisis. Localization of international interaction has its limitations. In the local structure, all other economic entities are perceived as “external” or “alien.” This leads to group individualism. Obligations in relation to members of the local community are more significant than obligations in relation to the world community as a whole. There is also the problem of the effectiveness of cooperation between global and local institutions. It is difficult for local structures to counter secondary effects and feedback mechanisms when decisions made by one country (or group of countries) affect other countries [Lagarde]. So, the current model of global governance is a transformed form of a multi-level system of social contracts. This more complex, concrete form distorts the essential relationships. Therefore, the formation of a new model of global governance is currently one of the most important and complex tasks that the world community faces [Goldin, Kutarna; James; Lagarde].

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CONCLUSION The analytical tools of the converted forms allows not only to reveal the distortions of the essence of global governance, but also to outline the contours of the new model. The constant clash of global trends and national interests is unlikely to lead to the formation of a single regulatory body on a global scale. It can be assumed that global governance will be represented by a heterarchy of social contracts. Its main function will be to find a balance between national and international interests. Equal relations and multilateral cooperation will be based on mutual concessions and the rejection by economic actors of their greatest personal gain. The institution, which will be preferred by all economic actors, will appear when the world leader makes predetermined advances of a financial and organizational nature in the interests of the entire world community [Kozlowski; 235–236]. The formation of a new global governance model is a long process of transformation of the existing system. A focused selection of forms of interconnections is required, allowing economic actors to adapt to the changing conditions of the external and internal environment. The institutional sustainability of the social contract heterarchy depends on the widest possible involvement of all stakeholders, the regular consultation of the participants, the orientation towards compromise, the voluntary agreement and the binding nature of their execution. This will be facilitated by a flexible policy of all economic entities (governmental and nongovernmental, international and supranational), based on trust, competence of decision-makers, their responsibility, transparency of information, reporting and control by the global community. The new model of global governance will require the transformation of formal and informal relations of economic actors. The system of informal relationships will characterize the level of coherence and organization of the world community. The readiness of economic entities to coordinate and harmonize their interests will be linked to moral obligations that have an ethical, ideological, religious, and partially legal basis. REFERENCES Blaug, M. EHkonomicheskaya mysl’ v retrospektive [Economic Thought in Retrospect]. Moscow: «Delo Ltd», 1994, 720 p. (in Russian). Boughton, J. M., & Bradford, C.I., Jr. (2007) Global Governance: New Players, New Rules. Finance & Development 44 (December):10–14 Bussolo, M., Dávalos, M. E., Peragine, V., & Sundaram, R. (2018). Europe and Central Asia Studies. Washington, DC: World Bank, 250 pp

Global Governance    267 Buzgalin, A. V. Pozdnij kapitalizm i ego predely: dialektika proizvoditel’nyh sil i proizvodstvennyh otnoshenij (k 200-letiyu so dnya rozhdeniya Karla Marksa) [Late Capitalism and Its Limits: the Dialectic of Productive Forces and Production Relations (to the 200th Anniversary of the Birth of Karl Marx)]. Questions of Political Economy, 2018, no. 2, pp. 10–38 (in Russian). Cherkovets, V. N. Planomernost’ socialisticheskogo proizvodstva [Plannedness of Socialist Production]. Moscow, Economy, 1965, 212 p. (in Russian). Derviş, K. (2012) World Economy: Convergence, Interdependence, and Divergence. Finance & Development 49 (September):10–14 Global’noe upravlenie: vozmozhnosti i riski / Otv. red. V.G. Baranovskij, N.I. Ivanova [Global Governance: Opportunities and Risks. Ed. by VG Baranovskij, NI Ivanova]. Moscow, IMEMO RAN, 2015, 315 p. (in Russian). Gill, G. S. (1976) Perverse Economic Incentives and Energy Conservation. Energy 1(4):445–450. Goldin, I., & Kutarna, C. (2017) Risk and Complexity. Finance & Development 54 (September):46–49 Hojman, D. E. (1982) Chilean Mining–Perverse Supply Response to Profit Rate Incentives. Resources Policy 8: 75–77 James, H. (2017) Bretton Woods to Brexit. Finance & Development 54 (September): 4–9 Kozlowski, P. Principy ehticheskoj ehkonomii [Principles of Ethical Economy]. St. Petersburg, School of Economics, 1999, 334 p. (in Russian). Lagarde, C. (2012) Straight Talk: Fragmentation Risks. Finance & Development 49 (September):26–27 Langshtejn, M. S. Irracional’nye i prevrashchennye formy ehkonomicheskih otnoshenij [Irrational and Transformed Forms of Economic Relations]. Economics, 1969, no. 1, pp. 16–22 (in Russian). Lipton, D. (2018) Trust and the Future of Multilateralism. URL: https://blogs. imf.org/2018/05/10/ trust-and-the-future-of-multilateralism/ (accessed: 5.09.2018) Mamardashvili, M. K. Kak ya ponimayu filosofiyu [My Understanding of the Philosophy]. Moscow, Progress, Culture, 1992, 414 p. (in Russian). Marx, K. Kapital. Kritika politicheskoj ehkonomii. T. I, Kn. I. Process proizvodstva kapitala. Predisl. F. EHngel’sa; Per. I.I. Skvorcova-Stepanova [Capital. To the Critique of Political Economy. T. I, vol. I. The process of capital production. Preface F Engels; transl. II Skvortsov-Stepanov]. Moscow, Politizdat, 1973, 907 p. (in Russian). Marx, K. Kapital. Kritika politicheskoj ehkonomii. T. III, Kn. III. Process kapitalisticheskogo proizvodstva, vzyatyj v celom. Ch. I–II. Pod red. F. EHngel’sa [Capital. To the Critique of Political Economy. T. III, vol. III. The Process of Capitalist Production, Taken as a Whole. Part I–II. Ed. by F Engels]. Moscow, Politizdat, 1970, 1084 p. (in Russian). Olejnik, A. Nauka prevrashchennyh form [Science of Converted forms]. Economic Issues, 2003, no. 6, pp. 111–118 (in Russian). Filosofskaya EHnciklopediya. V 5-h t. T. 5 / Pod red. F. V. Konstantinova [Philosophical Encyclopedia. In 5 volumes. Vol. 5. Ed. by FV Konstantinov]. Moscow, Soviet Encyclopedia, 1970, 740 p. (in Russian).

268    M. A. PIVOVAROVA and T. A. YEROFEYEVA Rozenberg, D. I. Kommentarii k «Kapitalu» K. Marksa [Comments to the Capital by K. Marx]. Moscow, Economy, 1983, 720 p. (in Russian). Rushanik, B. A. CHerez prevrashchennye formy—k politicheskoj ehkonomii socializma [Through the converted forms—to the political economy of socialism]. Economic Sciences, 2012, no. 2 (87), pp. 46–50 (in Russian). Stiglitz, J. (2018) Trump and Globalization. Journal of Policy Modeling 40: 515–52 UNCTAD. (2018) Trade and Development Report. Power, Platforms and The Free Trade Delusion. N.-Y., Geneva, 162 pp Yilma, Z., van Kempen, L., & de Hoop, T. (201) A Perverse ‘Net’ Effect? Health Insurance and Ex-ante Moral Hazard in Ghana. Social Science & Medicine 75 (1):138–147

CHAPTER 22

DYNAMIC PROCESSES, ENTROPY, AND INFORMATION IN NATURAL AND SOCIAL SYSTEMS N. V. Katargin Financial University under the Government of Russian Federation, Moscow

Karl Marx and Friedrich Engels revolutionized science, combining the laws of nature and society, creating dialectical and historical materialism, based on them political economy, allowing to analyze socio-economic processes and manage them. What is the principles of the theory of Marx and Engels? “Marxism understands the laws of science,—all the same whether we are talking about the laws of natural science or laws of political economy—as the reflection of objective processes taking place independently of the will of the people”[1], i.e., there are objective laws of nature, and society as part of nature. Understanding the laws of nature, we can understand the laws of society. What is the essence of historical materialism? People interact with each other to increase productivity: it is more profitable to get together

Marx and Modernity, pages 269–277 Copyright © 2019 by Information Age Publishing All rights of reproduction in any form reserved.

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and kill a mammoth than to catch mice alone. “Productivity is ultimately the main thing that determines the victory of the new social system” (V. I. Lenin). A system (a tribe, a State) is constructed from people as elements. A system has the property of emergence, i.e., it can do what a separate element or subsystem cannot do. The system has its own laws that differ from the laws of interaction of individual elements, i.e., there is a qualitative leap. The unity of the laws of living and inanimate matter was used by V. I. Vernadsky, who showed the role of living matter, including people, in geological processes[2]. L. N. Gumilev used V. I. Vernadsky’s views for the analysis of historical processes, showed their dependence on natural factors. Unfortunately, in the USSR Marxism was extremely dogmatized, ceased to develop, and its teaching, political studies and the subject of “Scientific communism” caused rejection. As a result, there was an erosion of ideology, and in 1991 the USSR disappeared from the world map. The losses from this disaster surpassed the losses from the Great Patriotic War: the decline of the population, the destruction of the economy, education, science and culture. A new stage in the search for unified system regularities began in the 1970s with the works of I. Prigozhin[3] and G. Haken[4]. In the United States, in Santa Fe, near the nuclear center of Los Alamos, created an Institute that studies complex systems and processes: earthquakes, forest fires, locust invasions, wars, revolutions, the ruin of banks. In Russia, this direction was developed by S. P. Kurdyumov, G. G. Malinetsky, S. P. Kapitsa[5, 6], it is supported by S. Y. Glazyev. Unfortunately, the Russian leadership does not listen to them, but uses primitive models such as “inflation targeting” and “money supply sterilization” to bleed the Russian economy and transfer money, resources and brains abroad. Works on mathematical modeling of complex systems led to a revolution in science, in its scale and importance of the results far superior to the quantum revolution in the physics of the twentieth century. This revolution is associated with the use of social and economic methods and approaches developed by mathematicians and theoretical physicists, which allows us to move from relatively simple mathematical models of economic processes to more complex, allowing us to understand, for example, the behavior of such systems in crisis situations. In principle, this is comparable to what was done by Marx and Engels—the search for common laws for various processes, from physical to economic and social. In this paper, the author tries to link socio-economic problems with mathematical models, allowing a new look at these problems.

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INVESTIGATION OF NATURAL AND SOCIAL SYSTEMS IN MULTIDIMENSIONAL PHASE SPACE Modelling of social and economic objects may be research as moving of points (ends of vectors) in multidimensional space on the path which can be smooth and predicted, and can sharply change in a short time (bifurcation, catastrophic crash). Estimation of “power” and stability of social structure (state, enterprise, militaries and their components) possible by using of the big set of indicators (coordinates of the end of a vector) in information-and-geometrical phase space or to curtail its to four variables: • physical substancies (m), including masses (or amounts) of people, animals, plants, foodstuff, masses of products of work (machineries, buildings) and masses of energy and ore resources; • volume of the information which have been saved up in the system (I ): scientific knowledge, social order (political culture, ideology), formation, level of technologies (especially arms). Possible to consider religion, traditions, culture as ideology components. • expenses on speed of manufacture and moving of a physical substacies (dm/dt), and for the speed and adequacy of the information processing (dI/dt). We use two approaches to understanding the nature and role of information: 1) Technical approach based on the change in entropy (entropy—a measure of the ordering of the system, based on the probabilities of detecting of elements of the system in possible states; in complete chaos, the maximum, in full order is zero). 2) Cost of creating and processing of information (science, education, design, culture) and the cost of information products. All specified indicators are expedient for estimating in unified units: money. Thus, the monetary unit is a unit of measure in multidimensional space with axes of coordinates m, I, dm/dt, dI/dt (Figure 22.1). I dI/dt

2

3 m

dm/dt

1

Figure 22.1  Multidimensional space with axes of coordinates m, I, dm/dt, dI/dt.

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The world financial and economic system is a multicomponent system with nonlinear connections in multidimensional space. In such systems, the forecast horizon is limited, dynamic chaos and energy-saturated (rich) structures (financial groups, oligarchs, criminal, terrorist and armed organizations) may occur unexpectedly; even in the simplest system of this type, its only variable x(t) can make periodic oscillations for a very long time, and then go to infinity[7]; small impacts at critical points can lead to bifurcations, i.e., sharp changes: revolutions, defaults, etc. Analysis of one of the nonlinear dynamics equations—Ginzburg-Landau—predicts the appearance of giant amplitudes (hard turbulence)[8]. In the fusion reactor it is heterogeneity in the plasma, in a social environment—the emergence of vast riches under non-equilibrium diffusion of money in an inhomogeneous medium with non-linear relationships of the elements. “Power” of a system can be estimated under the formula similar to the formula of Kobb-Douglas Y = m α1 I α2 (dm/dt) α3 (dI/dt) α4 where α1, α2, α3, α4 characterize the importance of factors (elasticities) and if their sum is equal to 1 then Y also has dimension of money. If dm/dt = 0 or dI/dt = 0, i.e., the enterprise makes nothing and isn’t improve, it costs nothing or will soon depreciate. Such approach allows more visually, in the compressed kind, to represent the information on social structures and, accordingly, quickly to make adequate decisions. For example, defeat of the USSR in cold war and its disappearing can be interpreted as follows: the aspiration of the Communist Party to supervise all information space in the state (manufacture and consumption planning, ideology, art, science) has led to small speed of information streams and bad decisions, that is there was a failure in the block (space) dI/dt, then to the structure infringement dm/dt (manufacture, distribution) and ideology disintegration. The state has collapsed, despite high m, I, and dm/dt. Post-industrial society is characterized by the fact that 80% of employers do not produce material values with their own hands, but create and process information, and the phase volume I, dI/dt can be estimated at 80%. Accordingly, the economy, the struggle between States, as well as crime are moving from the material sphere to the information space. It is believed that the lower category States trade in raw materials and metals (Zone 1 in Figure 22.1; they will always be poor because of the small phase volume), higher-develop knowledge-intensive industry (Zone 2), and the countries of the highest category (more precisely—their elite) create symbols, images and financial and economic models that affect other peoples and allow them to plunder with impunity (Zone 3). An example of such a symbol is

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the US dollar, which maintains its stability and attractiveness, despite the huge US debt: $21 trillion, growing by a trillion a year. This is not possible in a classical equilibrium economy. In the US, the Santa Fe Institute studies the behavior of various nonequilibrium systems. ENTROPY, INFORMATION AND VALUE OF NATURAL AND SOCIAL OBJECTS The amount of information contained in the system can be estimated through entropy, reflecting the degree of chaos of the system. As an example, consider a set of coins. At full order entropy is zero (coins lie with obverses up), at full chaos—maximum (coins are mixed). Information in both cases is zero. If the coins are spread out in Morse code and form a meaningful text, the system is contains an information, the probability of detecting a coin in the state of an eagle is not 1 and not ½, and its entropy lies between zero and maximum. The system is semi-chaotic. In accordance with the Second Law of thermodynamics, the entropy of a closed system can only increase, but in nature and society there are objects with a high energy content and/or high order: tornadoes, typhoons, lightning, gold nuggets, living organisms and biocenoses, mankind and his products, including information. Biosphere systems are stable if they strive for maximum biomass[2] and information saturation (species diversity)[9], neglect of this principle leads to instability of artificial cultivated plants and landscapes with monocultures. The lifeless desert is also stable. Socio-economic objects should be considered as self-organizing multicomponent systems with decreasing entropy, i.e., seeking to reduce internal chaos by increasing the entropy of the environment, for example, fuel combustion (open dissipative systems)[10]. Views about multidimensional information space, connected with structures in observable space, correlated with traditional views about supernatural powers and their role in a universe. Let’s try to formulate definitions of God, Devil, soul: God is a set of the information (data and algorithms, software), stored in natural objects and promoting arising of objects with the high maintenance of energy and information. Devil is a set of the information (data and algorithms, software) stored in natural objects and promoting destruction of objects with the high maintenance of energy and information To avoid a discussion with clerics, instead of notions of God and of the Devil I suggest to introduce the concepts of G-object, G-process, D-object, D-process. Let’s define processes promoting occurrence and existence of

274    N. V. KATARGIN Lifeless Chaos

M G

4

Live Ent = max I = 0

1

G M ∆I = –∆S

2

I = max

3

G M ∆I = ∆S

Order

Ent = 0 I = 1bit

Figure 22.2  A parity of entropy and information in lifeless, biological and social systems. Arrows show the directions of G-process and arising of M.

objects with the high maintenance of energy and the information as Gprocesses, and D-processes, if on the contrary. Let’s define all software stored in natural objects as G-object if it supports G-processes in biosphere both social sphere, and D-object, if on the contrary. Figure 22.2 illustrates a parity of entropy and information in lifeless, biological and social systems, and its evaluation in money (M). In the right part of the drawing the parity of entropy and information in biological and social systems is shown: Zone 1: the entropy is maximum at the absolute chaos, the information equals to zero. An example: the broken and run up army. An estimation of the value of such system by society is zero or negative. The social importance (power, utility) Y may be estimated in money (M). In a Zone 1 a decrease of entropy corresponds the increase of the information and a system cost. The direction of G-process and increase in cost of system is from top to down, the D-process direction is from below upwards. Zone 2 corresponds an information maximum in the system, but entropy is not equals to zero, means, there is no a total order, there is a partial chaos, that is a freedom in choosing. The Zone 2 corresponds to wild ecosystems which aspire to the maximum biomass and a variety. In social systems Zone 2 corresponds a free market and dynamic efficiency realized by free entrepreneurs ordered by laws and morality. They aspire to growth of things and the information (including the 9th symphony of Beethoven, Bill Gates Microsoft, etc.) through human entrepreneurial creativity within the limits of public and resource restrictions; also they disappear as businessmen if operate by another way. The mentality of live beings for billions years was generated so that to feel pleasure and happiness at aspiration to a Zone 2 that stimulates instinctive maintenance of dynamic efficiency, that

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is continuous search and creation of new material and information values, or G-process. Zone 3: At the total order entropy equals zero, the information is thus equals 1 bits, that is almost a zero. An example: army and prison which operate only for supply of their own order; they demand resources, but create nothing. In a Zone 3 decrease of entropy there corresponds the decrease of the information both the system cost. According to the Second Law of Thermodynamics, for maintenance of decrease of entropy, expenses of energy and/or other resources from environment are required, that it is unprofitable doubly. The Zone 3 in biosphere is a zone of agricultural monocultures which can’t exist independently. The Zone 3 in social life is a zone of monopolies, collusions, bureaucracy, corruption, interventionism and a Soviet socialism. In micro-economics the Zone 3 corresponds a hierarchical control systems. That is recognized as unprofitable. A direction of G-process and increase in cost of system is from below upwards, a D-process direction from top to down. Zone 4: the lifeless objects in which any information is absent, but it is possible to use concept of entropy. Objects with low entropy and the high free energy, arising due to dissipation of huge amounts of Solar or Earth energy, provide people with energy resources (a wind, falling water, fire wood, coal, oil, gas) and separated substances: fresh water, ores, gold. The social importance of these objects estimated in money grows in process of entropy decrease. G-processes are directed from top to down, D-processes are directed from below upwards. Cost of especially pure rare metals with zero entropy is especially great, and they are standards of cost of as lifeless as life objects, including the substantiated and information products of people’s work. THE EMERGENCE AND ROLE OF SEVERE TURBULENCE IN THE SOCIAL ENVIRONMENT Growth of Y in animals and plants is limited by the resources available to them in the struggle for survival (dm/dt). The amount of resources is usually limited and determines the biological productivity of the territory. The accumulation and transmission of information to the offspring is mainly at the genetic level, and the rate of dI/dt is low. People differ from animals in that they can extract and use different types of non-living and biological resources, that is, to increase their available quantity, as well as to create new material and information values. Cooperation also plays a significant role: material values and information coming to the subject of economic activity initiate the production of new material and information values on

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the basis of available tools and knowledge. A person, receiving material and information resources, increases their cost and transfers products to others. So, production increases exponentially, similar to explosion or combustion. The explosion and burning begin at one point, due to the destruction of the resource, energy is released, which initiates the release of energy at neighboring points, and the avalanche process continues as long as there are resources. In this case, structures with a high energy content (giant amplitudes in the Ginzburg-Landau model) can be formed inside the explosion, which significantly affect the course of the process and its predictability. In socio-economic systems, thanks to the interaction of people, structures with a high content of monetary and information resources are formed: governments, police, banks, monopolies, criminal communities that affect economic activity. At the same time, there is a risk of slipping into Zone 3, so economic policy should be aimed at identifying and eliminating artificial obstacles to free trade and the business process. PRACTICAL CONCLUSION Let’s try to apply these views to the object called Russia. Russia is a system consisting of many subsystems: people, natural resources, technology, information. The system should ensure their interaction in order to maximize the volume of material and information objects, the speed of their change, and on this basis—survival (homeostasis). Subsystems can develop by taking resources from other subsystems (oil, gas, forest, fish from nature), and this is justified if the value of the system Y as a whole increases. Subsystems and elements that only consume resources are like cancer and kill the system. If subsystems are working together, there is a synergistic effect, and the potential of the system increases: the Soviet Union during and after the war, Japan and South Korea in the 1950s. If the subsystems are divided, their capacities are added together. If subsystems are at war, the potential of the system is equal to the potential difference of subsystems[10]. Now Russia is between disunity and enmity. The crisis situation in Russia is due to the lack of clearly defined goals and the concept of development of the country and the people, as well as generalized indicators to model the socio-economic and environmental situation. Ideological symbols that allow to control the mass consciousness have not been formed. Old ideologies-Christianity, communism–are ineffective in the new Russian conditions. It is possible and expedient to develop a fundamentally new national ideology based on the consideration of biological and social systems, including the State, in a single geometric and information space. This approach allows us to formulate the idea of the State as a unified social,

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economic, environmental and information space, to develop on this basis the concept of sustainable development of Russia and create a set of scientifically based slogans and symbols to ensure the structural and ideological stability of the State. REFERENCES 1. Ekonomicheskie problemi socializma v SSSR [Economic problems of socialism in the USSR]. Moscow, Glavizdat, 1953, p. 11 (in Russian). 2. Vernadsky V. I. Khimicheskaya struktura biosferi Zemli i eyo okruzheniya [Chemical structure of the Earth’s biosphere and its environment]. Moscow, Nauka (Science), 1987, 450 p. (in Russian). 3. Nikolis G., Prigozhin I. Samoorganizatsiya v neravnovesnih sistemah [Self-organization in nonequilibrium systems]. Moscow, Mir, 1979, 512p. (in Russian). 4. Haken G. Sinergetika [Synergetics]. Moscow, Mir, 1980, 370 p. (in Russian). 5. Kapitsa S. P., Kurdyumov S. P., Malinetsky G. G. Sinergetika i prognozi budushevo [Synergetics and forecasts of the future]. Moscow, 2003, 320 p. (in Russian). 6. Sinergetika. Budushee mira i Possii [Synergetics. The future of the world and Russia]. Editor G. G. Malinetskii. Moscow, Publishing house LKI, 2008, (in Russian). 7. Katargin N.V. Kolebatelnie processi v ekonomicheskih sistemah [Oscillatory processes in economic systems]. Khronoekonomika No. 1(1), 2016, p. 17–21 (in Russian). 8. Upravlenie riskom: Risk. Ustoichivoe razvitie. Sinergetika [Risk management: Risk. Sustainable development. Synergetics]. Editor I. M. Makarov. Moscow, Nauka (Science), 2000, p. 178–200 (in Russian). 9. Levich A. P. Ekstremalnii prinsip v teorii sistem i vidovaya struktura soobshestv [Extreme principle in the theory of systems and species community structure]. In the “Problems of ecological monitoring and ecosystem modeling,” vol. 1, pp. 164 –183. Leningrad, Gidrometeoizdat, 1978 (in Russian). 10. Prangishvili I. V. Entropiya i drugie sistemnie zakonomernosti [Entropy and other system regularities]. Moscow, Nauka (Science), 2003, p. 160 (in Russian). 11. J. Huerta de Soto. Sotsialno-ekonomicheskaya teoriya dinamicheskoi effektivnosti [Socio-economic theory of dynamic efficiency]. Moscow, Socium, 2011, (in Russian).

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CHAPTER 23

SPATIAL ECONOMICS, GEOPOLITICS AND MARXISM Svetlana L. Sazanova Financial University under the Government of the Russian Federation, State University of Management, Moscow Fanis F. Sharipov State University of Management, Moscow Maria A. Dyakonova State University of Management, Moscow

Spatial economics is a relatively young, but dynamically developing field of modern economics, the interest to which is constantly growing. Foreign and domestic scientists made a huge contribution to the development of spatial economics: F. Braudel, F. Peru, J. Budville, T. Hegerstrand, U. Izard, P. Krugman, P. Minakir, A. Demyanenko, G. Kleiner, A. Granberg and others. (Sharipov). In the process of formation and development of spatial economics, the essence of the subject of its research evolved. A. Granberg believes that “its subject is not only regions and regional systems, but also all spatial forms of Marx and Modernity, pages 279–287 Copyright © 2019 by Information Age Publishing All rights of reproduction in any form reserved.

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farming and settlement, including many spatial networks” (Granberg). P. Minakir and A. Demyanenko are of the opinion that “it is an integral part of the systematic spatial analysis oriented towards, firstly, the study, the measurement and the maximization of economic systemic effects in space, and, secondly, the achievement of general social balance” (Minakir ). The central category of spatial economics is the category of “economic space,” though, the opinions of the researchers in the perceiving of its content do not coincide, and they are quite close in the terms of meaning. F. Perru believes that the economic space is a force field, which is formed by means of the enterprises and firms interaction (Perruox). P. Krugman defines it as “the abstract economic landscape of the resources dynamic distribution depending on the situation and their location” (Krugman, p. 413). P. Minakir and A. Demyanenko prove that economic space is a multitude of economic agents distributed within a certain geographical space, interacting with each other in accordance with economic institutions united within this geographical space (Minakir). O. Biyakov believes that economic space is a “system of relations between the subjects that implement private economic processes and the entity that implements the cumulative economic process by forming the expected results of their activities (Biyakov). Thus, the problems of spatial economics affect the interaction of economic entities in the territorial, social, institutional and cultural aspects that requires the clarification of the spatial economics subject and the category of “economic space” with the aim of updating and totally disclosing their content. PROBLEM DEFINITION, RESEARCH METHODOLOGY The study of the economic thought history shows that the forerunners of spatial economics can be considered the researchers of the XVIII–XX centuries, including A. Smith, D. Ricardo, K. Marx, N. Danilevsky, the representatives of the German Economics School, the representatives of the scientific geopolitics school. In modern economics the relation between spatial economics and economic theory is revealed, where the theories of international trade are correlated with them (Astapenko), and it is also proved that the regional economics is a part of the spatial economics. However, in our opinion, the correlation of spatial economics, geopolitics and Marxism is not studied enough both on the methodological and theoretical levels, not allowing to reveal the heuristic potential of spatial economics to the full extent. The scientific problem of the chapter is to study the relation of the methodology and the theory of geopolitical concepts and Marxist political economy with

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the spatial economics theory that will help to reveal its heuristic potential and the ways of further development. The research methodology includes general scientific methods, such as the method of scientific abstraction, comparative analysis, historical and logical methods, methods of historical and economic research, as well as the method of rational reconstruction of science. THE INFLUENCE OF GEOPOLITICS METHODOLOGY AND THEORY ON THE FORMATION AND DEVELOPMENT OF SPATIAL ECONOMICS Geopolitics is the science of the political interests’ implementation of the country geographically and it was formed in the 19th century in the researches of German, Russian and French scientists. The founder of geopolitics as an independent science is F. von Ratzel. On the one hand, politics is an activity aimed at getting the power over the people in the particular society; on the other hand, politics is a means of implementing an idea, besides, politics is a component of economic and legal relations. The content of the policy is determined by the goals and objectives. The goals themselves are mostly determined by the ambitions of the person/the group of people who are aspiring to power or in power at the moment. The means of achieving political goals is an ideology that can be directed both to the population of one’s own country and addressed to the population of other countries. In the latter case, the ideology is a means of achieving geopolitical goals. Ideology, in turn, is a reflection of the geopolitics theoretical basis that can be based on different methodological approaches: civilizational, military-strategic, and geographical. The founder of the civilization approach is the famous Russian researcher N. Ya. Danilevsky, who founded the existence of special “cultural-historical types,” or civilizations that are the basis of states and nations that have fundamental differences. Danilevsky, singling out Russia and Europe as opposing civilizations, formulated the main goal of Russian geopolitics: to develop and strengthen the Slavic cultural and historical type. At the turn of the XIX–XX centuries and in the 20th century the ideas of K.N. Leontiev, P.N. Savitsky and L.N. Gumilev, as well as the German historian O. Spengler and the English one A. Toynbee, were developed in the researches of Russian scientists. The founder of the military-strategic approach is N. Machiavelli, whose ideas were developed by K. von Clausewitz, H. Moltke, A. Mahen, and also the Russian commander D. Milyutin. The main idea of this approach lies in the military-strategic advantages of one nation over another. The task of the politicians is to achieve advantages that allow controlling the territory of the

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enemy. If in the XV–XVII centuries it was important to have the domination on land, and in the XVIII–XIX centuries and in the beginning of the 20th century to have it on the sea, so with the development of space technology military strategic advantages are directly related to space dominance. The geographical approach has become the methodological basis for the concepts of geographical determinism; it lies in the idea of ​​the natural geographic environment influence on the development of peoples and countries. Such ideas were still expressed in ancient times, and in the period of the formation of science, French educators and the representatives of the German historical school, and Russian scientists S. Solovyov and L. Mechnikov began to develop this theory. The fundamental difference between geopolitics and political and economic geography is that geopolitics seeks to identify the patterns that allow the state to realize its interests in international politics, using the natural geographic (spatial) advantages of other states and its own. Nevertheless, despite the differences in the subject of the study, goals and objectives, political and economic geography and geopolitics are closely related. The main categories of geopolitics (balance of power, border, political space, interest and mechanism of state interests’ implementation, expansion) develop its central category—geostrategic, which actually controls space, and follows from the very subject of geopolitics. The research methods of this science, on the one hand, make it possible to achieve solutions to applied geopolitical problems, and on the other hand, theoretically to develop the main categories of geopolitics. The methods of geopolitics are borrowed from sociology, psychology, history, and political science. One of the main methods of geopolitics is the system method based on the structural-functional approach. The system method allows considering any sphere of public life as a complex organized system interacting with the world around through certain channels. In addition, geopolitics actively uses the activity method borrowed from psychology and sociology that allows studying the psychological characteristics of nations and social groups and modeling their interaction with other groups. Comparative and historical methods allow you to use the historical experience of other states. Institutional method allows studying the socio-economic institutions of society, their existence in time and space and their impact on the development of society as a whole. An analysis of geopolitical methodology shows that it developed not only under the influence of political, geographic, economic, and historical science, but also it influenced them. The central category of geopolitics is the control over space that directly links it to spatial economics. In the modern world, space is controlled more by economic and ideological methods, and not by physical control over the territory. The content of the categories “space” and “economic space” has changed, but the control over them, as

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before, has not lost its relevance. The control over the economic space in the modern global world is increasingly acquiring the features of control over the economic relations of economic entities, where a huge contribution to the study has been made by Marxist political economy. THE INFLUENCE OF MARXISM METHODOLOGY AND THEORY ON THE FORMATION AND DEVELOPMENT OF SPATIAL ECONOMICS Industrial revolution of the 19th century and the preceding Great geographical discoveries contributed to the formation of the economic space as a sphere of territorial realization of economic relations. Competition for raw material markets and sales, problems of energy supply of industry (Ryazanova p. 219), as well as a lack of financial resources, encouraged capitalists to increase the exploitation of workers by lengthening the working day, reducing wages through the use of female and child labor, etc. The working conditions of industrial workers were very hard, especially during periods of economic crises that occurred again from 1825 every 10–12 years. All this generated the discussions in economics about the effectiveness of a market economy and the prospects for its development. The most famous discussion on this issue is the “argument about the method” between G. Schmoller and K. Menger. The position of classical political economy and neoclassical economic theory consisted in recognition of the economic laws universality and the priority of the free market over all other ways of coordinating the actions of economic agents. The German History and Economics School insisted on the relativity of economic laws identified by opponents and the significant influence of geographic, historical, institutional and cultural factors on socio-economic systems. In fact, Marx synthesized these opposing points of view on the nature of the socio-economic systems development based on a fundamentally new methodology. The Marxist theory included the relations in the economic analysis that developed between people in the process of material production (production relations) in the socio-economic space, including a complex of economic, historical, geographical and social factors (Sazanova, p. 16). K. Marx approached closely to the modern understanding of economic space as the dichotomy of real (physical) and abstract (conceptual) spaces. For example, analyzing the historical process of the labor division, he notes that “the basis of any developed . . . labor division is the separation of a city from a village” (Marx, Vol. 1, p. 365). Certainly, we are talking about the division of space in a conceptual, not in a physical sense. Noting that “the actual movement of goods in space is reduced to the transportation of goods” (Marx, Vol.2, p. 171), and also

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emphasizing the role of the geographical factor in the development of world trade and capitalism in general, Marx proved that the formation of a united economic space was the driving force of capitalism, as “the constant equalization of constantly arising inequalities” (prices of production) “occurs the faster, firstly, the more mobile capital is, i.e., the easier it can be transferred from one sphere and from one place to another; secondly, the sooner the labor force can be transferred from one sphere to another, from one production center in this area to another one” (Marx, Vol. 3, pp. 214–215.). The special feature of Marxist political economy is the combination of historical and dialectical materialism methods that allowed studying economic problems in a broad historical context in interrelation with technical, institutional and social factors. Karl Marx considered the economic basis of society a “method of production,” including the productive forces (people with their skills) and social relations of production (relations regarding the creation, distribution and use of surplus value). According to Karl Marx, it is the method of production that “has the strongest influence on social institutions, social and religious consciousness . . . , determines the entire process of social, political and intellectual life” (Gurova, Sazanova, p. 32). Developing the theory of surplus value, the basic theory of his political economy system, Marx notified that “in the colonies, and especially in those where only products for trade were produced . . . where colonists . . . founded commercial enterprises, fertility had a crucial importance, at this location, and by this fertility, the location of the earth “(Marx, T1, p. 258). Marxist political economy became the methodological and theoretical basis of the theory for the distribution of productive forces, which was the basis for the rational distribution of production in socialist countries. K. Marx also paid a lot of attention to the role of social institutions in economic development, the complex of which he called the “superstructure” of the socio-economic system, that includes the institutions of state and law, cultural and religious institutions determining the forms of consciousness. The superstructure, in turn, depends on the “basis,” that is, the complex of historically established production relations that make up the economic structure of society. The basis and the superstructure develop in a dialectical relation with space (both in the physical and conceptual sense). Consequently, the productive forces of society and its economic potential are interconnected with the historically established institutional and cultural environment. Recognizing the importance of the space influence on the productive forces development, Marx made the concept of production methods, noting that “in general terms, Asian, antique, feudal and modern, bourgeois, production methods can be described as progressive eras of economic and social formation” (Marx, Engels, V.13, p. 7). The

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economic subject of each these production methods is the corresponding type of worker (Asian, antique, etc.), formed in correlation with the territorial, economic, cultural and institutional environment. In our opinion, the study of the institutional and cultural characteristics of economic spaces is of great importance for understanding the dynamics of their development. ECONOMIC SPACES: INSTITUTIONAL AND CULTURAL-HISTORICAL ASPECT The distinctive features of the capitalist economy are, first of all, the use of wage labor and machine production (from manufactory to factory) products. The presence of both features lets us conclude that capitalist relations developed equally in the economies of both Eastern and Western societies. In the East, in particular, in India, Russia and China, capitalist relations coexisted with the traditional way of life of the society as a whole. Economic interaction was built within the cooperative relations. The behavior of economic entities in the East was based (and this is considerably preserved today) on the principle of maximizing the total gain. In connection with these features, the development of capitalism proceeded at a slower pace. The emergence of capitalist relations in Western Europe was accompanied by revolutionary changes in the entire system of public relations. Due to the revolutions, the correlation of forces between social groups changed and, as a result, the legal infrastructure of society and the motivation of the behavior of economic entities changed. The above features contributed to the rapid development of capitalist relations. There is another reason for such significant differences in the pace of capitalism development in the East and the West, and it seems to us very important. We are talking about differences in the perception and application of knowledge. As P. Drucker rightly noted, “both in the West and in the East, knowledge has always been associated with the sphere of being, existence. And suddenly . . . knowledge [in the West] began to be considered as a sphere of action. It has become one of the types of resources, one of consumer services” (Druker, p. 70). In the East, knowledge was always a tool for a man to know the essence of the world around him and himself as a part of the universe. In the West, knowledge has become, first of all, a tool for transforming the world into an individual, as well as an instrument for self-realization of the individual in the process of establishing himself over the secrets of this world. The perception of knowledge as a commodity made it possible to create a legal framework in Western economies for transactions with knowledge products, and then for organizing the knowledge production process itself.

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Since the second half of the 20th century, knowledge has been used not only to organize and transform inanimate nature, but also to influence wildlife and man in order to realize the main goal of capitalist relations, namely, to profit. First, knowledge in the modern economy is a tool for organizing and transforming complex technical and information systems. Secondly, knowledge is a tool for organizing and transforming living systems and individual organisms at the material (biological) level. Thirdly, knowledge is used as a tool for influencing living intangible systems, namely social relations. The evolution in the use of knowledge in the West explains, firstly, the fact that non-economic and economic coercion to work is supplanted by non-economic information coercion. The economic and social behavior of a person in space is modeled with the help of targeted information flows. RESULTS The study of the relation of geopolitics, Marxism and spatial economics ideas, conducted in this chapter, made it possible to establish that the geopolitical idea of the role of space in the development of socio-economic systems influenced the formation and development of the subject and method of spatial economics. The geopolitical idea of control ​​ over space can and should play an important role in the development of spatial economics, since it can become the basis of the theory of space management not only in the territorial, but also in the socio-economic, institutional and technological context. A study of the Marxism development showed that K. Marx recognized the influence of the territory, its cultural, religious, institutional and other features on the development of productive forces and production relations, and therefore, the economic dynamics in general. He came closer compared with other researchers, to the understanding of the space not only in the territorial and economic, but also in the institutional, cultural dimension. The theory of productive forces and production relations, its historical and economic concept in combination with the dialectical method can become the basis for the study of space as a complex multi-level system of economic, institutional, social, cultural relations. Thus, the ideas of geopolitics, Marxism and institutionalism can become the basis of a new methodology and theory of spatial economics. REFERENCES 1. Krugman, R. (1994) Complex Landscapes of the American Economic Association. Papers and Proceeding. No. 84. P. 413.

Spatial Economics, Geopolitics and Marxism    287 2. Perroux F. (1950) Economic Space: Theory and Applications // Quarterly Journal of Economics. V. 64. 3. Astapenko M.S. Teorii i kontseptsii prostranstvennoy ekonomiki: sushchnostnyye aspekty i evolyutsiya podkhodov [Theories and Concepts of Spatial Economics: Essential Aspects and Evolution of Approaches]. The Eurasian Scientific Journal, 2018 No.1. URL: https://esj.today/PDF/50ECVN118.pdf (in Russian). 4. Biyakov O.A. Teoriya ekonomicheskogo prostranstva: metodologicheskiy i regional’nyy aspekty. [Theory of Economic Space: Methodological and Regional Aspects].– Tomsk: Publishing House Tomsk. University, 2004.–152 p. (in Russian). 5. Granberg A.G. Osnovy regional’noy ekonomiki. [Fundamentals of Regional Economics]. M.: SU HSE. 2003, 495 p. (in Russian). 6. Gurova I.P., Sazanova S.L. Istoriya ekonomicheskikh ucheniy [History of Economic Studies. Educational and practical manual]. Ulyanovsk: UlSU, 2001. 100 pp. P. 32. (in Russian). 7. Drucker P. Postkapitalisticheskoye obshchestvo. [Post-Capitalist Society], in book: New Post-Industrial Wave in the West. Anthology. / Ed. Inozemtsev V.L. Moscow: Academia Publisher, 1999, P. 70. (in Russian). 8. Marx K. Kapital. [Capital]. Vol. I. / K. Marx. M.: LLC Publishing House AST, 2001.–565 p. (in Russian). 9. Marx K. Kapital. [Capital]. Vol. II. / K. Marx. M.: Publisher: Eksmo.–1200 pp. (in Russian). 10. Marx K. Kapital. [Capital]. Vol. III. / K. Marx. M., 1975.–1084 p. (in Russian). 11. Marx K. K kritike politicheskoy ekonomii. Predisloviye. [A Contribution to the Critique of Political Economy, Preface]. In Marx and Engels Collected Works, 2nd edition. Vol. 13. Moscow: State Publishing House of Political Literature, 1959. 771 pp. P. 7. (in Russian). 12. Ocherki po prostranstvennoy ekonomike [Essays in Spatial Economics]. / P.A. Minakir, A.N. Demyanenko; managing editor V.M. Polterovich; Russian Academy of Sciences, Far East Department, Institute of Economic researches. Khabarovsk: Economic Research Institute FEB RAS, 2014. 272 p. (in Russian). 13. Ryazanova G.N. Integratsiya proizvodstva i potrebleniya al’ternativnoy energii dlya koordinatsii eye sprosa i predlozheniya [Integration of production and consumption of alternative energy for coordination the supply and the demand] / in the book: Managing the development of large-scale systems MLSD`2016. Ninth International Conference. General editorship: Vasiliev S.N., Zvirkun A.D. Vol. II. 2016.—Pp. 219–221. (in Russian). 14. Sazanova S.L. Sravnitel’nyy analiz metodologii traditsionnogo institutsionalizma i neoinstitutsionalizma [Comparative Analysis of Methodology of Traditional Institutionalism and Neo-institutionalism]: Ph.D. thesis in Economics: 08.00.01 / Sazanova S.L., St. Petersburg, 2002. 186 pp. P. 16. (in Russian). 15. Sharipov F.F. Evolyutsiya predstavleniy o prostranstvennoy organizatsii ekonomiki [Evolution of Ideas of Spatial Economic Organization]. University Bulletin (State University of Management), 2017, no10, pp. 80–81. (in Russian).

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CHAPTER 24

DIALECTICS OF KARL MARX AS A HIDDEN FORM OF ORGANICISM IN ECONOMICS Konstantin Lebedev Financial University under the Government of the Russian Federation, Moscow Yulia Budovich Financial University under the Government of the Russian Federation, Moscow Anna Lebedeva Financial University under the Government of the Russian Federation, Moscow

Organicism in Economics is the likening of economic objects to organisms. There is an open organicism that does not hide it. There is militant organicism, not limiting itself with boundaries of making analogies. By the way, both types are represented in the “organic school of sociology” of the 2nd half of the XIXth–the beginning of the 20th century. (H. Spencer,

Marx and Modernity, pages 289–298 Copyright © 2019 by Information Age Publishing All rights of reproduction in any form reserved.

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P. Lilienfeld, A. Schuffle, R. Worms, etc.). As the Russian philosopher S.L. Frank wrote (Frank, 1922), according to this doctrine, society is an organism, as it contains all or the main constitutive features of the organism. So societies are born, grow and die (decompose); societies multiply (the fact of colonies formation); societies have something like the Central nervous system in the face of authority or government whose impulses regulate their activities; societies feed in the face of economic activity; in society, there is a division of labor between the bodies, each of which performs its function (as we have seen, there is a regulatory body, the government that performs the function of the nervous system, the organs of nutrition—productive classes, further, there are organs that transmit food throughout the public body—trade and transport, the organs of selfdefense and attack—army, etc.). Often detailing of analogies by supporters of the organic theory goes even much further; indicate, for example Often detailing of analogies by supporters of the organic theory goes even much further, on the identity of the functions of Railways and blood vessels, or Telegraph wires and the nervous system, etc. [Frank; 41]. Obviously, there is a moderate organicism, consisting, for example, in the use of analogies with organisms as an additional approach in the study. But there is also a hidden organicism, hiding the use of organic analogies in the study or its scale. K. Marx’s dialectics is such an organicism, at least, which became so by the time the founder of the Austrian school of political economy K. Menger in his work (Menger, 1883) put forward theoretical arguments against organicism in socio-economic research. As K. Menger wrote, “firstly, only a certain part of social phenomena reveals an analogy with natural organisms (. . .) secondly, the analogy between social phenomena and natural organisms, even where, according to the above, it may be in question, it is not complete, embracing all sides of the substance of the known phenomena . . .” [Menger; 390]. In terms of the systems approach of L. Bertalanfi, which arose in the middle of the twentieth century, firstly, the properties of organisms can be likened to only part of the properties of socio-economic systems, and secondly, the manifestations of those in the first correspond only to part of their manifestations in the latter. Hence, organicism: 1) limits socio-economic research to the narrow scope of the properties of organisms, 2) is dangerous by incorrect conclusions regarding the relevant properties of socio-economic objects. Passionate about the fight against the organicism K. Menger makes, of course, too radical conclusions about the benefits of organic analogies in socio-economic research: (. . .) The transfer of the results of the study of physiology and anatomy by analogy to the political economy—such an absurdity that no researcher in the field of methodology would even give it a serious objection. / These false ways

Dialectics of Karl Marx as a Hidden Form of Organicism in Economics    291 of research are obviously the same as those of a physiologist or an anatomist who would like to transfer the laws and methods of national economic doctrine without any criticism to his science, i.e., to explain the functions of the human body with the dominant theories of national economic doctrine, for example bleeding—with one of the dominant theories of money circulation or commodity exchange, digestion—with one of the dominant theories of consumption of things, the nervous system—with the doctrine of Telegraph communication, the function of separate organs of the human body—with the function of different classes of people, etc. [Menger; 394–395]

Of course, one can find many examples of how analogies with organisms contributed to the development of socio-economic knowledge. It is generally recognized that significant results from their application were received physiocrats. Thus, applying to society such a property of organisms as organization (internal order, i.e., the interaction between the elements of the object by virtue of internal laws), they came to the conclusion that the economy operates by virtue of internal laws, and that external laws, or regulation by the state, is not necessary for it.1 But, unfortunately, there are numerous examples of the reverse. The saddest thing is that modern economic knowledge is mainly built on the organicism, and its negative impact on it is absolutely underestimated. We demonstrate the negative impact of the systems approach of L. Bertalanfi in part of the use of analogies with organisms, which is also a hidden organicism, as properties of organisms (integrity, openness, organization, progressive differentiation, homeostasis, etc.) in it are applied to the studied objects in the form of properties of the system and a number of “complex” systems (open, targeted, cybernetic, selfregulating, etc.), from the names of which their organic origin is unclear. The negative impact of the systems approach on economic knowledge can be judged by the generally accepted theory of management of the company from a typical management textbook, the foundations of which were created by applying to the enterprise of properties of organisms, which is clearly seen in the work (Johnson et al, 1962). So, the theory of control was formed by applying to the firm, mainly of such properties of organisms as “self-regulation on the basis of feedback” and “self-regulation on the principle of homeostasis.” Let us limit ourselves to the study of the influence on the theory of control of only the first of them. In the systems approach after it absorbed Cybernetics of N. Wiener this property of organisms is traditionally represented “by Wiener,” i.e., as the operation of the control unit of a room thermostatic heater (thermostat), for example, powered by a fuel tank. It reacts only to deviations in the temperature of the heated air from the norm and ensures its return to the norm, regulating the flow of fuel to the burner. Control at the company, corresponding to the work of the thermostat, is a control consisting in responding to negative deviations, control of the company’s processes,

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control by the management of only its managed objects, intermediate and final control, control exercised by the chiefs, control of the main activity, control of production processes, control of the characteristics of processed objects of labor, and only of their quality. It is this model of control (without characteristics derived from other properties of organisms) that underlies the generally accepted theory of control. The “system” control model does not represent the opposite (complementary) sides of control, also characteristic for socio-economic objects: control, consisting in responding to positive deviations, control of processes of environmental objects, control of the work of related departments of the company, current control, self-control, control of construction, reconstruction and repair, research and development work, control of management processes, including control of the control activity itself, control of the characteristics of employees, means and conditions of labour and quantitative characteristics of the processes of the environment of the company. And they reflect the best practices of modern corporate control. But since the basis of the generally accepted theory of control is its system model, these practices are only randomly reflected in it [Lebedev]. Dialectics is positioned as a set of “universal” laws. These are the three laws of dialectics proper (transition of quantitative changes into qualitative and Vice versa, unity and struggle of opposites and negation of the negation) and the laws of interaction of interrelated philosophical categories (essence and phenomenon, content and form, cause and effect, etc.). Their characteristics do not show their belonging to organisms, which allows us to interpret dialectics as a hidden organicism. The name “Universal” or “General” also hides it. But already attempts to ponder what is behind these words, reveal their belonging to the world of organisms. As the second founder of Marxism, as well as the popularizer and interpreter of Marx, including his method, wrote in “Anti-Düring” (1876–1878), “. . .  dialectics is considered as the science of the most General laws of any motion. This means that its laws must be valid both for the motion in nature and human history, and for the motion of thinking” [Engels; 291]. It is not difficult to understand that because of this commonality they are all inherent, in particular, to living nature, i.e., organisms. Hence, their application to socio-economic objects is the application of analogies to organisms. It is interesting that the very proof of the universality of the laws of dialectics at the same time looks like the transfer of the laws of organisms to the objects of another nature. So, in the above-mentioned work, Engels deduces the negation of the negation law from the case of the barley grain: (. . .) If (. . .) barley grain will find normal conditions, if it will fall on fertile ground, then, under the influence of heat and moisture, a kind of change will happen to it: it germinates; the grain as such ceases to exist, is subjected to

Dialectics of Karl Marx as a Hidden Form of Organicism in Economics    293 negation; in its place the plant grew out of the grain appears—the negation of the grain. What is the normal way of life of this plant? It grows, flowers, is fertilized and finally once again produces barley grains, and as soon as the latter mature, the stalk dies, is subjected in turn to the negation. As a result of this negation of the negation, we have here again the original barley grain, but not just one grain, but ten, twenty, thirty times more grains. [Engels; 106]

F. Engels then finds this law in the development of plastic ornamental plants and insects. And having already explained the essence and proved the existence of the law of negation of the negation on the example of the vegetable and animal kingdoms, he confirms its action in geology, mathematics, history and philosophy [Engels; 107–110]. K. Marx’s organicism consisted in application to economy and of properties of organisms, later generalized in the systems approach. For this reason, in the USSR K. Marx was even declared its founder, and one of the directions of the study of the systems approach was the search in the writings of K. Marx of places where he uses the properties of the system and “complex” systems, for example V.N. Sadovsky in (Sadovsky, 1974) showed K. Marx’s use of the property “integrity” under the same name [Sadovsky; 7]. It is no coincidence that dialectics in the USSR was declared the philosophical basis of a systems approach. How I.V. Blauberg and E.G., Yudin in (Blauberg, Yudin, 1973) wrote, “(. . .) the fundamental relationship between dialectics and system-structural methodology is quite clear: dialectics is the basis of this methodology, its philosophical basis (. . .).” [Blauberg, Yudin; 99]. K. Marx in his works preferred to avoid direct comparison of socio-economic objects with organisms, allowing it only in the most necessary cases. Obviously, it became a place in the “Preface to the first edition” in the 1st volume of “Capital” (1867): “. . . The present society is not a solid crystal, but an organism capable of transformations and is in a constant process of transformation” [Marx; XXXIV]. F. Engels was hiding the use of dialectics by K. Marx. He tried to deny receiving conclusions by K. Marx on its basis, first of all “revolutionary,” meaning that they were obtained by him on the basis of General scientific methods. So, in the “Anti-Düring,” F. Engels denies the use of negation of the negation law for the proof of the “natural” need to change the capitalist property by the public property by K. Marx in response to the corresponding criticism of E. Düring, who “clung to” what K. Marx said in the 1st volume of “Capital”: The capitalist mode of appropriation arising from the capitalist mode of production, and therefore capitalist private property, is the first negation of individual private property based on one’s own labour. But capitalist production, with the inevitability of the process of nature, generates self-negation. This is negation of the negation. It restores not the private property of the worker,

294    K. LEBEDEV, Y. BUDOVICH, and A. LEBEDEVA but individual property on the basis of the conquests of the capitalist era, i.e., on the basis of cooperation and common ownership of land and other means of production, which are produced by the labour itself. [Marx; 613]

In these words, as F. Engels writes, “(. . .) Marx summarizes the final results of the previous 50 pages of economic and historical research on the socalled initial accumulation of capital” [Engels; 104]. But F. Engels himself shows that really Marx by that law doesn’t summarize but proves it, because the process is not yet completed by “the expropriation of the expropriators»: “(. . .) Calling this process a negation of the negation, Marx did not even think to see in it this the proof of its historical necessity. On the contrary: after he has proved historically that this process is partly already done, partly still has to be done, only after that Marx characterizes it as a process that occurs under a certain dialectical law” [Engels; 105]. The fact that K. Marx does not “summarize” anything with the help of dialectics, but directly uses it to obtain predetermined conclusions is best evidenced by the well-known excerpt from the Preface in K. Marx’s work “To criticism of political economy” (1859): In the social production of their lives, people enter into certain, necessary, independent of their will relations–production relations that correspond to a certain stage of development of their material productive forces. The totality of these relations of production is the economic structure of society, the real basis on which the legal and political superstructure rises and which correspond to certain forms of social consciousness. The mode of production of material life determines the social, political and spiritual processes of life generally. Not the consciousness of men determines their being, but, on the contrary, their social being determines their consciousness. At a certain stage of its development, the material productive forces of society come into conflict with the existing production relations, or—which is only a legal expression of the latter—with the property relations within which they have developed so far. From forms of development of productive forces, these relations turn into their fetters. Then comes the era of social revolution. With a change in the economic basis, a revolution in the entire huge superstructure is more or less rapid. When considering such coups, it is always necessary to distinguish the material, with natural-scientific accuracy stated revolution in the economic conditions of production—from legal, political, religious, artistic or philosophical, in short—from the ideological forms in which people are aware of this conflict and fight for its resolution. [Marx, Engels-1; 6–7]

Above are the laws of economic and social development, created on the basis of the law of interaction of content and form: the content of the subject develops evolutionary and form—revolutionary; content determines the form, causing its change after it finally ceases to correspond to it; form has a reverse effect on the content, as much as possible contributing to

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its development after its change, and more and more complicating it at the time of its next change. In the 1st law content -productive forces, and form–production relations, and in the 2nd–the mode of production and superstructure, respectively. These laws were obtained by Karl Marx 8 years before the release of “Capital,” to which their conclusion on the basis of General scientific methods could be attributed. But also in “Capital” there is no justification of fast and necessary change in this case of capitalist production relations, first of all property relations, by socialist, through the proletarian revolution, received by means of General scientific methods. K. Marx may have wanted to deduce this through scientific deduction, but unfortunately, the main law of capitalism, obtained with its help—the universal law of capitalist accumulation, could only point to the deterioration of the working class. To obtain the above conclusion K. Marx used dialectics, in particular, the law of negation of the negation (see above). But, obviously, this law does not have the “revolutionary” form necessary for K. Marx, and therefore for appropriate purposes he uses other dialectical laws. This is the law of unity and struggle of opposites, which were the social nature of production and private property form of appropriation (“the main contradiction of capitalism”). As the authors of the Chapter “Method of political economy” of textbook (Kofman et al, 1932) wrote, Marx argues the need for the death of capitalism, considering the real process of its development, which reproduces the main contradiction between the social nature of production and capitalist appropriation in more and more expanding and deepening sizes . . . This is the path of the movement of capitalism, the path that inevitably leads to the aggravation of the class struggle and, in the end, to the victorious proletarian revolution, resolving the main contradiction of capitalism by the transition of all means of social production to the public property of all workers. [Kofman et al.; 648–649]

It is also the law of interaction of content and form, used by declaring the effects of capital accumulation, such as the concentration of an increasing part of production in large and largest enterprises and the development of social division of labor, strengthening the social nature of productive forces, requiring the same nature of production relations, including property relations. It is no accident that the justification for the revolutionary destruction of capitalist property by these two laws in the relevant Chapter of “Capital” is before its justification by the law of negation of the negation: Along with the constant decline in the number of capital magnates who usurp and monopolize all benefits (. . .), there is a growing mass of poverty, oppression, enslavement, degeneration and exploitation, but at the same time, the

296    K. LEBEDEV, Y. BUDOVICH, and A. LEBEDEVA indignation of the working class grows (. . .) The Monopoly of capital becomes the fetters of the mode of production that, together with it and thanks to it, has reached its peak. The centralization of the means of production and the socialization of labor reach a level at which they become incompatible with their capitalist shell. The latter tears. The knell of the capitalist private ownership sounds. The expropriators are expropriated. [Marx; 612–613]

In accordance with the said by K. Menger, as an analogy with organisms, the laws of dialectics do not cover all the laws peculiar to socio-economic objects, and characterize only a part of the interactions that are possible in them. In connection with the latter, the application of the laws of dialectics to socio-economic objects may lead to incorrect conclusions. Such was the conclusion about the quick and inevitable change of capitalist production relations by the socialist by means of the proletarian revolution. No world proletarian revolution, with which K. Marx and F. Engels scared the bourgeoisie in the “The Communist Manifesto” (1847) (“A spectre is haunting Europe—the spectre of communism”) [Marx, Engels–2; 23]) and in the 1st volume of “Capital” (1867) (“The knell of capitalist private property sounds”) [Marx; 613]) has not occurred. “Successful” October revolution of 1917 occurred in one country (Russia) and in the country of underdeveloped capitalism. The world revolutionary fire did not arise, despite the policy of export of the proletarian revolution pursued by the Soviet leadership since 1919, almost 20 years. The huge funds allocated for the fanning and support of revolutionary movements, which could be spent, for example, on the restoration of the destroyed national economy, were lost in vain. The budget of the Comintern created for these purposes in “heavy” 1922 was 2,5 million gold rubles, and in a month after its approval was increased to 3 150 600 rubles, the average number of its personnel was 300 thousand people, and almost all expenses on the maintenance of the Comintern were borne by the Soviet state [Questions of the USSR]. No world proletarian revolution took place after the Second world war, despite the fact that the USSR continued to significantly support the ProCommunist regimes and Communist and left parties with weapons and money. In the period 1981–1990, the CPSU provided financial assistance to 98 parties and movements in the world, including 23 European, 16 Asian, 27 African, Australian [Rosin; 312]. Thus, it turned out that the change of capitalist production relations by socialist in capitalist countries, despite the extremely social nature of their production, may be delayed indefinitely. But in the early 90-ies of the 20th century generally, it became clear that socialist relations of production can make the inverse transformation in the capitalist. This confirms what was said above about the applicability of dialectics in socio-economic research. The saddest thing is that the majority of Russian economists continue to consider dialectics an adequate method of economic research.

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NOTES 1. Outstanding historian of economic thought D.N. Rosenberg in lectures (Rosenberg, 1940) wrote the following about physiocrats: Society as a whole they considered like a human body. Here, perhaps, it was affected by the fact that the Creator of this school (Francois Quesnay (1694–1774). —K.L., Ju.B.) was a doctor himself and approached to the society as a doctor approaches to his patient. He said that society knows two states: a healthy state and a painful state. Healthy state . . . in which economic activity is not limited by anything and anyone, when production, circulation, distribution function quite normally . . . The economy of the era of the physiocrats and of the eve of the revolution, the physiocrats considered as a painful state. Hence a very important conclusion . . . : as in nature, they said, there are immanent laws, laws inherent in this nature there are immanent laws in society . . . This provision supported their position in favor of non-interference of the state power in economic life . . . There is no need to introduce any external laws, any external regulation. [Rosenberg; 77]

REFERENCES Blauberg, I. V., & Yudin, E. G. (1973). Formation and essence of systems approach. Science, Moscow, 271 pp Communist international. The third and final/Questions of the Soviet Union. Ussrvopros .ru, available at: http://ussrvopros.ru/politika-sssr/sovetskij-stroj/266-kommunisticheskij-internatsional-tretij-i-poslednij (accessed 12 July 2018) Engels, F. (1978). Anti-Dühring. A revolution in science, made by Mr. Eugene During. Politizdat, Moscow, 358 pp Frank, S. L. (1922). Essay on the methodology of social sciences. Coast, Moscow, 124 pp Johnson, R., Kast, F., & Rosenzweig, D. (1971). Systems and management. Soviet radio, Moscow, 648 pp Kofman, D. et al. (1932). Political economy. Issue II: the Textbook. Partizdat, Leningrad, 712 pp Lebedev, K. N. (2008). Systems approach and management methodology. Red star, Moscow, 840 pp Marx, K. (1929). Capital. Criticism of political economy. Volume one. Book one. The process of production of capital. State publishing house, Moscow-Leningrad, [XLVI] 621 pp Marx, K., & Engels, F. (1959). Compositions. Volume 13. Ed. 2. State publishing house of political literature, Moscow, 771 [XXVI] pp Marx K., & Engels, F. (1974). The Communist Manifesto. Politizdat, Moscow, 63 pp Menger, C. (2005). Selected works. Territory of the future, Moscow, 496 pp

298    K. LEBEDEV, Y. BUDOVICH, and A. LEBEDEVA Rosenberg, D. N. (1940). History of economic thought. Publication of the Military-political of order of Lenin Academy of the Worker-peasant Red army named after V.I. Lenin, Moscow, 303 pp Rosin, E. (1996). Lenin mythology of the state. Lawyer, Moscow, 320 pp Sadovsky, V. N. (1974). Bases of the General theory of systems. Logical and methodological analysis. Science, Moscow, 280 pp

CHAPTER 25

NEW FORMS OF RELATIONS ARISING IN THE CAPITAL FLOW Alexander Yermolenko Financial University under the Government of the Russian Federation, Krasnodar Olga Brizhak Kuban State Technological University, Krasnodar Olesia Digtiar Financial University under the Government of the Russian Federation, Moscow

HUMAN CAPITAL In the last decades of the twentieth century the concept of human capital with the onset of profound technological shifts has become a part of economic science. It is known that new categories rely on firm basis, created by the previous development of science, and are established in it only if there

Marx and Modernity, pages 299–317 Copyright © 2019 by Information Age Publishing All rights of reproduction in any form reserved.

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are necessary prerequisites. Such prerequisites are applied to the category of human capital: • the judgment that economic science studies only a part (sphere) of human activity space, in which not all personal potential is realized (Mill 1970); • a conceptual idea of the man essence as an ensemble of social relations (Marx, Engels 1959); • a disclosure of entrepreneurial activity as a creative process in which new capital combinations arise (Schumpeter 2003); • a knowledge-based economy formation forecast (Neysbit 2003), etc. The formation of a new category often occurs within the framework of its broad interpretation, which applies to human capital (Polishchuk 2005). Affirming in the field of scientific researches and attracting supporters, the new economic category sacrifices its qualitative certainty, creating clearly overstated expectations in theoretical and applied relations. Metaphorically speaking, something unusual is expected of it, and “manna from heaven” is promised to its supporters. The “Manna of Heaven” of human capital is an inflated income expectation from investing in people’s education [Schulz 1994]. Based on such expectations, the idea of human capital has become a popular component of business projects, political programs, the agenda of public discussions, etc. However, income expectations need to be supported by real investment results, otherwise categorical innovations associated with them lose their supporters quickly and move into a category of fail far-fetched innovations. Simply expanding the investment of public education does not lead to an increase in the productivity of the social economy and the emergence of a multitude of high income holders; the immersion in the research process often gives rise to “martyrs of science” than billionaires. The expanding interpretation of the human capital category and associated overstated income expectations from investing in people’s education have led to a crisis situation in a public evaluation of this category, similar to the crisis in the economy development, accompanied by a contraction of demand, the “washing away” of surplus products, services and works, getting rid of inefficient technologies and workers, closing down projects that have been failed. The crisis situation in the social assessment of the scientific category is resolved by compressing the “demand” for its discussion, correcting scientific approaches, getting rid of hasty conclusions and failed recommendations. A correct transformation of the initial interpretation of the human capital category will make it possible to determine its true place in the developing system of knowledge about economic life, to reveal its functional

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capabilities in economic research, to get rid of exaggerated expectations associated with its practical use. Otherwise, the expectations of the “manna of heaven” are quickly replaced by a nihilistic negation of a new categorical form. After the global recession of 2008–2009, the flow of publications devoted to the development of the human capital problem has sharply decreased in the scientific literature, which indicates a decrease in public attention and an exhaustion of credit trust in its capabilities. Let us define the main tasks of the transformation of human capital category’s initial interpretation: • to view this category in terms of the capital theory, which will save it from illusory ideas and inflated expectations of market participants; • to focus attention on the fact that we are dealing with one of the forms of capital, bringing to the fore the study of the interaction of human capital with financial, organizational, institutional and other capitals; • to recognize that the capitalization of some abilities that make up the personality reduces them to the factor of value creation and extracting income attributable to human capital; • to assert the specific transformation of the functional content and the structure of the personality in the process of capitalizing part of the abilities: all those excessive in relation to the task of value creation are withdrawn beyond the limits of personality development and are not provided from the fund of vital means; human capital retains, consolidates and reproduces only the creative abilities, which are required in the process of value creation; • to carry out the research of the human capital flow on the platform of the universal formula of capital, which delineates the generic basis of this category. What are the differences between human capital and other types of capital existing on the platform of the universal formula of capital? They are conditioned by the capitalization of the subjective potential that a living person has. If the owner of the money-capital acquires the factors of production necessary to him (the means of production and labor), then the sole agent of the value creation process is himself, as a functioning capitalist. Another situation arises in the case of participation in the process of the value creation of a subject that has human capital and is capable of generating ideas for the productive capital combinations formation. This circumstance allows us to reveal the key characteristics of human capital:

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• the capitalization of a person’s potential occurs without alienating him from the carrier subject and turning into an object factor of production. Human capital participates in the process of value creation, without separating from its owner and being under its control. This creates new forms of relations that go beyond the relations of purchase and sale and productive employment of labor, in which its seller is reduced to the applied factor of production; • human capital is given in a subjective form, since it is able to generate and practically realize new ideas for the formation of effective capital combinations, to transform the organizational mechanisms and institutions necessary for such combinations. Accordingly, that strength of personality that is alienated from it and embodied in the resources, factors and results of value creation is related to other objective varieties of capital. If “inspiration is not sold” in the case of human capital, so in all other cases “the manuscript may be sold”; • human capital is aimed at constructive transformation, creativity, creation and development of the public economy, has practically unlimited possibilities of updating various conditions, resources and factors of economic life; • from the perspective of the production factors theory, human capital is a highly developed form of personal factor. Human capital is compared with another form of personal factor of production—labor. Offering to acquire some of its personal potential, involving in the labor force, the seller is required to comply with a number of conditions: • to form within the personality a certain set of knowledge, abilities and skills that are in demand in the market; • have personal freedom to dispose of the personal potential independently; • do not have means for regular provision of needs of the material lives. The labor force is realized in the process of labor, ensuring the material needs of people’s lives. In accordance, there is economic utilization of the human person possibilities in this form. But this is only one side of the matter. Based on the principles of dialectics, the labor force, as a form of manifestation of the personal potential, must be associated with a certain pair of category in relation to it. Denote it as the free power of the human personality. In the conditions of society is divided into opposing social groups, the free force as a form of organization of the personal potential resists the labor force and exists due to its use as a factor in the production of other people’s wealth.

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The confrontation between the working and free forces of the individual is determined by the alienation of labor, which brings some people to the embodiment of a functioning labor force, while others turns them into monopoly administrators of space and resources for the development of the free individual power. In the process of capital formation, a wage worker is only formally represented as a person which means something in himself, in addition to his work (Marx, 1959, p. 242). A human being can be really represented as a person, if he manages his activity himself, that is realizes himself in independent one, controls his metabolism with nature, is free in public life and acts without external compulsion (Marx, Engels 1959, p. 91). As free power resists to labor power and exists due to the results of its productive use, it is defective. The evolution of personified forms of labor, among which the most interesting is the figure of the machine manufacturer, which contains some prerequisites for human capital is explored in the “Capital” by K. Marx. Since the machine manufacturer creates a basis for large-scale industry, it needs the appropriate competencies, and its workforce develops adequately with the progress of technology, as it assumes the nature of its activities. The machine manufacturer obeys the labor change law, which means the transition to an intensive type of labor force development, i.e., its regular renewal, qualitative transformation on an expanding personal basis (Marx, Engels, 1959, p. 499). This means that the workforce of the machine manufacturer, gradually absorbs new personal potential resources, functionally complicated and overcomes its boundaries. The question of the new personal potential resources involved in their composition is quite natural. Obviously, before enriching the workforce of the machine manufacturer, such personal potential resources must be formed as a part of the free power of the individual. It is impossible to include all the opportunities in the labor force that previously did not exist in the structure of the individual. In this respect, the intensification of the labor development of the machinery manufacturer means the resolution of the contradiction between the two forms of the manifestation of human being’s possibilities. The enrichment of the labor force through the resources of the individual free power means the synthesis of opposites. The resistance between the two forms of the possibilities of the human personality manifestation is removed in order to appear again at a new, higher level of interaction of opposites, where the institutional ordering and consolidation of socially necessary norms of working hours regulation, standards of environmental protection and reproduction of health potential, standards of educational processes take place (Marx, Engels 1959]. For a century and a half, since the character of the machine manufacturer has been studied a

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lot of derivatives of subjective forms of relations arose in the development process, in the course of which, the conditions and specific prerequisites for the emergence of human capital were prepared on the basis of the interaction of free force and the individual’s workforce. Suppose, that in the course of intensive development of the interaction of the workforce and the individual free power, a certain threshold of the measure passes, after which the former subject of labor acquires a qualitatively new opportunity to enter into partnership relations with the entities that own the functioning capital. The offer to buy workforce and to include it in the process of creation value is replaced in case of such a transition of the measure threshold by the proposal to develop and implement an effective capital combination. Before the owners of the functioning capital is an entirely different entity, ready to provide them with unique creative opportunities, the use of which will ensure breakthrough results in creation value. Changes in economic relations, which entails this transition of the measure threshold are estimated as following: • firstly, the owner of unique creative opportunities comes to replace the owner of the workforce; • secondly, the sales transaction of workforce gives way to a partnership agreement between the owners of capital share; • thirdly, the partners of the partnership agreement are aimed at the formation of an effective capital combination and the extraction of income (Marx, Engels 1959). There are some conditions for the transition from the owner of the labor force to the owner of human capital: • from the standpoint of the individual—the formation of a complex unique creative abilities in the structure of his personality capable of generating breakthrough business ideas on the basis of which effective capital combinations can arise. • from the position of society—the social fact recognition of the measure threshold transition from labor to human capital, as well as the approval of the relevant institutional status that gives the right to partnership with other subjects of the world of capital. As it is known, institutional changes require much more time and efforts than changes in technology. In particular, in the context of human capital, such transformations involve a set of measures to protect the quality of life, protect intellectual property, supporting the creative development of the individual and social programs for creative education implementation (Sapir 2001).

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As soon as the above conditions are ensured, a totally new subject of economic life appears—the owner of human capital, which required for its formation and social approval a very complicated historical process of transforming the personal factor of capitalist production. In this case, applicants for the status of owners of human capital have to invest their individual workforce into the development of unique set of creative abilities, and also, in part, into the institutional changes ensuring public readiness to recognize the appearance of a factor that it had not previously had in the economic system—human capital. The guiding principle here is: the later institutional changes come, the costlier they are (Arrighi 2006). Human capital is a multifaceted phenomenon corresponding to the diversity of spheres and processes of modern social and economic life, which causes the formulation of the scientific task of its forms systematization. Using the demarcation criterion of functional orientation, the following forms of human capital are presented: • intellectual capital—a functional form based on a set of outstanding intellectual abilities considering the formulation and solution of complex theoretical and applied problems aimed at profound rethinking and radical transformation of various processes of economic life (technological, organizational, etc.); • aesthetic capital (the capital of artists)—a functional form, based on a complex of outstanding aesthetic abilities, oriented towards the artistic transformation of the world; • the capital of physical strength—a functional form, based on a complex of extraordinary physical capabilities of the human body, the realization of which leads to updating records in sports competitions, overcoming previous ideas about the limits of the human body in various fields of activity. What are the positions of human capital in the Russian economy? Obviously, where the state dominates, human capital is under pressure. At the same time, a powerful state with huge resources is able to make a significant contribution to the human capital formation of modern Russia, initiating the implementation of relevant national projects, carrying out technological, structural, organizational and institutional reforms for which the capital is required. Fundamentally important is the representation of human capital in the Russian economy, as it characterizes the opportunities for participation in modern transformations, an adequate response to the challenges facing the country. At the same time, such representativeness provides for the needs of structural shifts, the creation of new economic growth zones, so

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important for Russia, which strategic orientation has caused moving to the periphery of world economic development. FICTITIOUS CAPITAL One of the characteristics of fictitious capital was given by K. Marx—it is spoken about frankly fraudulent way of fabricating capital by imitating the purchase of goods. Having created the illusion of buying, the fraudster writes out the bill, takes it into account and withdraws money, disappearing with it before the true picture of the transaction would have been revealed (Marx, Engels 1959, p. 1, p. 450–451). In this characteristic, one of the aspects of fictitious capital is prominently expressed: illusiveness, artificiality, reality distortion for fraudulent purposes. However, it is not necessary to be limited to this aspect of fictitious capital, since it has been a very multifaceted phenomenon. Bill was a starting point of the fictitious capital formation—the result of the reflection in the security of a real existing obligation that has been formed during the transaction, when one of the participants credited another, that was fixed in a bill whose value was determined by the representation of a certain amount of money. However, the bill has become fictitious capital only when it was involved in the market circulation with the aim of extracting income (Galbraith 1976). Using the principle of reflection, the modern economy puts in correspondence to real capital a lot of its reflected forms represented by different securities. These forms are circulating in the financial market according to their own laws and seem completely independent of real capital, objectively represented by operating means of production, working people, created products, etc. At the same time, the securities market valuation is rapidly declining almost to zero after market participants are faced with the inability to fulfill the obligations reflected in these securities. This circumstance makes it possible to form the simplest idea of fictitious capital as a reflected form of economic relations possessing the value of the real capital object imputed to it, which it represents. Let us formulate a hypothesis, analysis of which can further develop the concept of fictitious capital. Assume that the financial market addresses a combination of elements of fictitious capital, representing some imputed value to them. Suppose that a lot of participants in this market, operating with these elements of fictitious capital, stop to find enough money to continue their operations. The volume of operations decreases, the contraction of the market occurs that took place for example in the context of the global recession of 2008–2009, when mortgage securities issued by the two largest US corporations did not find enough money from participants in

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the financial market. The public evaluation of fictitious capital elements is reduced and adjusted in accordance with market realities. Two main branches of fictitious capital are pointed out. The first of them is the debt branch, which is represented by securities of the loan capital value hiding behind them (money borrowed at interest). Taking into account the numerous facts of the crisis situations formation involving debt securities (for example, the crisis of public borrowing in the EU in 2011–2013), it is worth mentioned that the debt capital branch has a significant potential for the “bubbles” formation in the financial market. The second branch of fictitious capital—the titular one—is represented by securities issued for the formation, institutional and property relations development and is associated with the organizational form of the jointstock company. At the same time, the capital of the joint-stock company (corporation) is split, presented as a unity of opposites—fictitious capital and real capital. If this division is considered from the standpoint of dialectical logic, then fictitious capital, as the title of joint-stock property embodied in securities, and the actual capital, objectively represented by the operating means of production and the workforce of the joint-stock company, are not divided in time and space, but are parties of an objective contradiction Brizhak 2017). As the contradiction between real capital and fictitious capital in jointstock companies is developed, profound transformations of subjective forms of relations take place there: • on the place of a functioning capitalist figure comes a qualitatively new figure of a corporate manager who manages the real capital of the joint-stock company; • the former individual owners of capital become owners of fictitious capital shares (blocks of shares) of the joint-stock company, that is, they are alienated from the movement of real capital and embody the title of capital ownership (Marx, Engels 1959, p. 1, p. 479–480). The core of the economy, making a decisive contribution to the GDP of the world leaders by the large share capital was formed at the end of the twentieth century. The dominant positions of this capital, in many ways, were provided by its emission mechanism, which provides an opportunity to attract various sources of investment in the development of joint-stock enterprises. Unlike small and medium-sized businesses, which are limited by using their own funds and attracting credit from banks, large share capital, using its own fictitious capital generation capabilities, gets access to any free cash, including household funds, individual entrepreneurs, public organizations, etc. So the generation of fictitious capital allows large

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corporations to manage their investment process and regulate the financial market (Glazyev 2015, Kachalov P.M 2015). If the aggregate fictitious capital of the national economy began to cost less, this does not mean that elements of real capital have become worse, need urgent renewal or poorly managed, since the movement of fictitious and real capital occurs according to various laws. This fact is reflected in the opposition of the fundamental and technical approaches to the analysis of capital. At the same time, the decline in the market valuation of fictitious capital means that the economy has faced a deficit of investment due to a depreciation, a large-scale sale of national securities and outflows to where there is an increase in the market valuation of fictitious capital. In many cases, the decline in the market valuation of fictitious capital leads to the readjustment of the financial market, clearing it of the “bubbles” artificially created by market players and concealing the separation of the movement of fictitious capital from the movement of real capital, that is, the unrealizable income expectations of securities buyers. Analyzing the movement of fictitious capital on the financial market, it is necessary to take into account the phenomenon of artificial demand for elements of this capital, that arises with the active participation of two factors: the perception of events and the potential buyers of fictitious capital thinking—players in the financial market; the activities of professional manipulators with the consciousness of these players. Thanks to these factors, fictitious capital is included in the game on the market. Accordingly, participation in such a game involves the selection of certain forms of players’ behavior, the implementation of which leads to opposite results: some players guess the dominant trends in the fictitious capital’s movement, which allows them to extract income; other players start from inaccurate estimates and assumptions and lose their invested funds. If in the analysis of the players’ behavior of financial market ignore the fact that the fictitious capital circulating on the market is a representative of the real capital, the idea that the entire process of fictitious capital movement turns into a financial game for winning when acquiring securities, that is, participating in a kind of casino. And this is not only an illusory idea, because in the participants’ activity of the financial market a certain functional reduction is realized in practice if they forget the derivative nature of fictitious capital in relation to the real capital of the economy, in other words, if the charts, models and figures of technical analysis reflecting the movement of a fictitious capital, obscure the results of fundamental analysis, reflecting changes in the state of real capital. At the micro level, the contradiction between fictitious and real capital is resolved through the synthesis of opposites, which is really ensured during the extraction, distribution and use of the profits of fictitious capital issuer

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and the owner of the real capital—the joint-stock company as a system subject of economic relations. On the one hand, the part’s distribution of the profit in the form of dividends takes place, that ensures the owners’ interests of shareholdings (shares of fictitious capital), on the other hand, retained profits are directed to the needs of the real capital development, that ensures the corporation interests, as a system subject with this capital as a whole. In the next cycle of reproduction technological changes, the increasing of competencies and the improvement of organizational mechanisms conditioned by the development of real capital, ensure the joint-stock company profit’s increment and the corresponding correction of the market valuation of fictitious capital. At the macro level, the contradiction between fictitious and virtual capital is represented differently—as a contradiction between the real and financial sectors of the economy. The global recession of 2008–2009 and a new stage in the development of competition between national economies embodied in the policy of “new protectionism” marked the aggravation of this contradiction, that was reflected in the separation of the financial sector development from the real sector, the destabilization of the investment process, the participants imbalance interests in the global economy. Qualitatively new elements of fictitious capital generated in the process of technological shifts—cryptocurrencies, the possibilities of which have not been practically investigated are contributed to the aggravation of this contradiction (Krugman 2017). The contradiction between fictitious and virtual capitals is spontaneously resolved by painful compression of markets, that is, a rigid restoration of the correspondence between the movement of these capitals. In the case of national and global regulators ensure an effective policy of balanced development, this contradiction is resolved in a softer form. This circumstance causes the macro- and mega-regulation of the economy functions alignment development of the economic system to the aggravation conditions of the contradiction between the financial and real sectors during the global recession of 2008–2009 and a new round of spatial competition development. Fictitious capital finds special forms of its embodiment and development in economies based on the relation of power-property to which the Russian economy belongs (Nureev, 2014). This relationship means a fusion, a sufficiently stable combination of two qualitatively different ways of ordering economic relations: imperious, for which powerful administrative vertical of power and government is in demand; property, for which an extensive system of mechanisms for protecting property and regulations for property relations and forms of contracts are needed.

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The subject core of the economy system based on the relation of powerproperty is considered to be a special figure of the ruler exercising full control over the process of social and economic life. Analysis of the Asian mode production concept created by K. Marx, allows to find an answer to the question of how such a figure appears and what functions it implements in the economy system based on the relation of power-property: • the ruler’s property, who embodies the unity of the people’ property interests forming the social community is the function of his power within the framework of this community; • this functional dependence gives the ruler the opportunity to have not only property, natural resources, but also the personal potential of individual participants in a subordinate community at his disposal; • within the framework of the Asian mode production the power implementation determines all property relations and ensures the authoritative control over a bundle of functions and property rights. Personalizing the relationship of power and property, the ruler implements complete control over the production, distribution, exchange and aggregate consumption of the material goods reproduced by the community of subordinate people, which enables him to appropriate the special form of the surplus-rent-tax by which the following opposites are connected: • on the one hand, the ruler seizes a rent corresponding to his position as the “supreme owner” of the resources used in the production process of the people’s community in his favor; • on the other hand, the tax nature of this form is due to the need for material support by the ruler some groups of joint needs, which presuppose the special funds creation (coffers, the general budget, etc.). It seems reasonable to conclude that the basis of the power-property relationship is a characteristic of the entire Russian history, including a present stage of development, when this relation is included in the process of large-scale transformations, modifies substantially but continues to function (Glazyev 2015, Nureev 2014). Fictitious capital transformations analyze of the domestic economy taking into account the impact of the power-ownership relationship is of great interest in this context. Carrying out such analysis, the attention will be concentrated on one of the most important aspects of fictitious capital formation in the system of economics—a public appraisal of the real capital in the estimation of fictitious capital, which is transformed in the financial market into specific characteristics of fictitious capital: stock exchange quotation; income expectations; technical analysis products; forecast scenarios, etc. (Stiglitz 2003).

New Forms of Relations Arising in the Capital Flow     311

Taking into account this circumstance and the fact that the real capital is the result of the power-property relationship influence, so as the specific results of the fictitious capital formation in the domestic economy are distinguished. • the display of real capital in fictitious capital in the form of a certain “sign of power” over the movement of all forms of capital value in the financial market, which provides the holders of this “power sign” with the necessary revenue stream and the latent anonymous control over existing property complexes; • a special type of fictitious capital formation—the capital of power status which is the result of the status capitalization (institutionalized) decision-making capabilities that are broadcast in the management system and provide pre-calculated effects. This kind of fictitious capital corresponds to the central figure of the economy system, based on the relation of power-property—to the figure of the “ruler.” The size of the status decisions capitalization is determined both by the cost effects caused by such decisions and specifically by the informational effects that arise in the public consciousness that focuses the researchers’ attention on a new phenomenon reading of the “naked king,” that is, on the distorted capital status assessments power formation through “fake” fictitious information; • capital formation of bureaucracy status, which is the capitalization result of officials’ institutionalized opportunities, complementing the central figure of the economy system, based on the relation of power-property formation. This kind of fictitious capital is derived from the capital of the power status, its existence is due to the need of ensuring the central figure by a bureaucratic apparatus, as well as the need to redistribute (transpose) social responsibility obligations (Ermolenko 2017). NEW FORMS OF RELATIONSHIPS INCORPORATION ARISING IN CAPITAL FLOWS INTO THE ECONOMY The interweaving of many transformation processes in modern economics actualizes a problem that was originally identified in the process studying phenomenon of conformism—the problem of new relation forms incorporation in a complex system that has its own core and periphery, institutions, organizational mechanisms and resource base (Fromm 1990).

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It is necessary to distinguish between two fundamentally different types of embedding new forms of relations arising in the movement of capital into the system: • stationary forms incorporation in the well-established system of relations, which offers them strengthened norms, ways of organizing relationships, typical statuses and behaviors, which remains to be adopted and converted according to them the private parameters of the new relations forms of. Obviously, this type of embedding into the system implies well-tested mechanisms basis and does not pose extraordinary tasks to the forms included in the system; • the dynamic integration of these forms into the system of relations, which is in a state of transformation, is faced with diversified qualitative changes caused by the influence of various factors transforming it, which can not affect the new forms of relations entering the system. When dynamically embedding the tasks of mutual adaptation and achieving a balanced interaction are becoming much more complicated, since the new forms must organically enter the process of change, transform their own characteristics with respect to them and acquire mechanisms of interaction with the changing system. Obviously, in the process of dynamic embedding a new form is expected to have significant changes (Khanin 2015). Stationary incorporation is not typical for the modern Russian economy, as far as over the past three decades its subjects and forms of relations have existed under the conditions of practically non-stop transformations of the relationship system (the “era of change”). This circumstance means that the dynamic incorporation into the changing conditions of the national economy development occurs throughout the entire life cycle of the participants in the economic system. It is legitimate to conclude that such a prolonged dynamic incorporation into a changing, virtually unsteady system of relationships causes an increase in the costs of this process that is in many respects explains the external investors’ cautious attitude, as well as the own capital substantial size of outflow from the system of the Russian economy. The dominance of large corporations at the present stage of the economic system development brings to the fore the tasks of studying some complex systems incorporation into other complex systems related to a higher level of development including: • the corporate takeover processes researching tasks during which holding structures arise (Foster 1987); • the tasks of researching corporate integration processes (mergers of corporations), which are characterized by focusing on synergistic ef-

New Forms of Relations Arising in the Capital Flow     313

fects, expressed in the growth of competitiveness potential, creation of mechanisms for protecting corporate interests, entering into large-scale development projects, etc ; • the research objectives of the integration processes of spatial economies (regional economic systems), in which spatial synergetic effects come to the fore, as well as the formation and functioning costs of meta-regional economic entities; • the research tasks of global interaction between national economies in which the strategic integration effects, various models justification of national economic policy, etc., take priority. Considered the above provisions, the initial idea of new forms of relations incorporation in the economic system developing becomes more complex and modified. It is already about a complex interaction process and mutual transformation of the relation forms arisen in the process of capital movement and the economic system developing that takes these forms. The simplest way of incorporation is when a single and simple in level of its organization ratio enters a developing economic system, acts as a starting point of a very interesting process, the study of which leads the researcher to conclude that it is necessary to create a special scientific theory of conformity (Hayek 2012). Some explanations and a number of fundamental concepts of this theory are presented. First of all, a moving procedural view of new relation forms incorporation into in economic system development is singled out, the development of which leads to the dynamic concept formation “conformity” reflecting the conditions, factors and parameters of these forms of the incorporation process in the system (Hoffman 1999). This view is accompanied by a fixed, static idea of new relation forms incorporation in the economic system developing, the working-out of which leads to the resulting concept formation of “conformism” and the concept institutional nature of the “conformity,” which is a behavior characteristic (institution) of the incorporation process subject. Assuming that the embedded form of relations and its economy system are included in the growing transformation process, in which there is no place for inertial interaction, new interaction mechanisms and ways to streamline the results of change are to be searched for, which is typical for a modern economy, so a deeper understanding of the embedding process content arises.(Kaplan 2001, Leibenstein 1976). First of all, in the process of embedding the host system of the economy solves the task of mastering the creative potential that the relationship form has in this system. The simple absorption of the incoming form is fraught with the loss of indicated potential for the host economy, which is in demand for its further transformation and development (Mises 1966). Hence,

314    A. YERMOLENKO, O. BRIZHAK, and O. DIGTIAR

there is the requirement to the conformity process, consisting in ensuring the subjective nature of the parties to the interaction process, which means consideration and coordination of interests, the creative capabilities integrating of the embedded entities into the total creative potential of the receiving system. Given this requirement, it is useful to consider the incoming form of relations, no matter how simple and insignificant it may seem to the economic system, as a poly-aspectual and many-sided subject structure that has its own functions and a fairly complex organization. A powerful holding operating in many countries of the world will benefit from a careful and detailed analysis of the subjective potential of a small innovative organization embedded in its system (Roubini 2015). Further, as the host system of the economy is a complexly organized, integrated subject, the inclusion of the creative potential of the new relationship embedding form in it in the conditions of imposing and interlacing of many conversion processes may result in the generation of positive or negative effects of the aggregate potential integrated subject development, including the emergence or disappearance of some possibilities, the destabilization of a given potential (Sartre 1960). The profound qualitative differences between the receiving system and the embeddable form of relations can cause their mutual exclusion from each other and the failure of the conformity process. Analyzed process, by its nature, is designed to ensure productive and stable systemic links between the receiving system and the embedded form of relations, to align their interests and to ensure the development needs of the emerging organic integrity. Since every embedded subject enters this process, having its own ideas about the opportunities it has and their prospects in the host system development, the question of a public assessment of such opportunities arises. In modern economy such an assessment is provided by the market, the mechanisms of which provide for weighing and measuring the possibilities that are offered to the host system by the forms of relations that are embedded in it. Markets are noted to play a decisive role in the opposite process, which can be described as deconstruction, giving a public assessment and contributing to the inclusion in the market subjects exchange potential, emerging from economic systems for various reasons, from the composition of economic systems that fall into a crisis situation disintegration. It is known that in the conditions of a deep and protracted crisis large economic systems go to isolate a number of their «problem» components, making them independent economic entities and disclaiming responsibility for their further fate (Weber 1978). It is necessary to clearly distinguish the concepts of conformity and adaptation. Adaptation means the usual object or subject adaptation to the

New Forms of Relations Arising in the Capital Flow     315

requirements of the environment in which it falls. In this case there is a onesided change in relation to conditions that remain unchanged. Conforming means a two-way change process that is occurred during embedding when both an embedded object and its receiving system are converted. So, it is spoken about a dialectic process in which contradictions of embedding are arisen and resolved, which do not occur in the case of adaptation. The most difficult case of conformation is the case of embedding one complex system into another, more complex and highly developed system involved in the process of dynamic and deep transformations. (Ermolenko, Brizhak 2017). In this case, the concept of adaptation does not work. CONCLUSION New forms of relations, emerging in the movement of capital at the present stage of development are controversial. On the one hand, they have tremendous potential for transforming the economic system, on the other hand, they bring qualitatively new risks and threats to it. At the same time, human capital, fictitious capital, new forms relationship incorporation that have arisen in the movement of capital are integral components of the movement process from the industrial economic system to the new knowledge economy. Exploring them, it is necessary to take into account the specific characteristics of modern development: the reversal of the global integration process and the intensification of spatial competition, the emergence of new world leaders and the relocation of previously successful national economies to the deep periphery of world development. ACKNOWLEDGMENTS The study was carried out with the financial support of the Russian Foundation for Basic Research, project No. 17-02-000384 REFERENCES Alpidovsaya, M. L., Gryaznova, A. G., & Sokolov, D. P. Regress Economy vs Progress Economy: “Alternatives of Senses” // The Impact of Information on Modern Humans / Advances in Intelligent Systems and Computing, Volume 622/ Editor Elena G. Popkova.–Switzerland: Springer International Publishing AG, part of Springer Nature 2018.–p. 638–646. Arrigi, J. (2006). Dolgij dvadcatyj vek: Den’gi, vlast’ i istoki nashego vremeni [The Long Twentieth Century: Money, Power, and the Sources of Our Time]. M.: Territory of the Future Publishing House, 472 p. (in Russian).

316    A. YERMOLENKO, O. BRIZHAK, and O. DIGTIAR Brizhak, O. V. (2017). Korporativnyj kapital: transformatsionnyj kontekst (istoriko-teoreticheskie refleksii [Corporate capital: a transformational context (historical and theoretical reflections)]. Philosophy of Economics, No 6 (114), p. 53–69 (in Russian). Brizhak, O. V. (2018). Metodologicheskiye i teoreticheskiye aspekty konformirovaniya korpora-tivnogo kapitala v usloviyakh sovremennykh preobrazovaniy: monografiya [Methodological and theoretical aspects of the conformation of corporate capital in the conditions of modern transformations: monograph].– Krasnodar: Publishing house: «KubGTU», 236 p. (in Russian). Ermolenko, A. A. (2017). Ponyatie antisistemy v issledovanii rezul’tatov sotsial’no-ehkonomicheskikh preobrazovanij [The concept of anti-system in the study of the results of socio-economic transformations]. Proceedings of South-West State University, No. 4 (73). T.21, pp. 118–128 (in Russian). Ermolenko, A. A., & Brizhak, O. V. (2017). Kontsept konformizma: novye vozmozhnosti v issledovanii transformatsii ehkonomicheskikh otnoshenij [The concept of conformism: new opportunities in the study of the transformation of economic relations]. TERRA ECONOMICUS, No. 3, p. 92–105 (in Russian).Galbraith, J. K. (1976). Ekonomicheskaya teoriya i tseli obshhestva [Economic theory and the goals of society]. Moscow: Progress, 408 p. (in Russian). Foster, J. (1987). Evolutionary Macroeconomics, London, 244 p. Fromm, E. (1990). Begstvo ot svobody [Escape from Freedom]. M.: Progress, 272 p. Glazyev, S. Yu. (2015). Formirovanie novoj institutsional’noj sistemy v usloviyakh smeny dominiruyushhikh tekhnologicheskikh ukladov [Formation of a new institutional system in the face of a change in the dominant technological order]. Scientific works of the Free Economic Society of Russia, No. 1. T. 190, p. 37–45 (in Russian). Hayek, F. (2012). Individualism and Economic Order, Ch.: The University of Chicago Press, 280 p. Hoffman, R., & McRobert, A. (1999). Corporate Collapse. An Early Warning System for Leaders, Investors and Suppliers. New York, NY: McGraw-Hill, p. 39–43. Kachalov, R. M. (2015). Otsenka perspektivnosti predlagaemykh modelej razvitiya ehkonomicheskoj sistemy [Prospects Evaluation of the proposed models in the economic system development]. Russia’s economic revival, No 4 (46), p. 69–71. Kaplan, R. S., & Norton, D. P. (2001). The Strategy Focused Organization: How Balanced Scorecard Companies Thrive. Harvard: Harvard Business School Press, p. 1–19. Khanin, G. I. (2015). Ekonomicheskij krizis 2010-h gg.: sotsial’no-politicheskie istoki i posledstviya [The economic crisis of the 2010s: socio-political origins and consequences]. TERRA ECONOMICUS, No. 2, pp. 87–98. Krugman, P. (2017). On Economic Arrogance. The New York Times, 20.02. Leibenstein, H. (1976). Beyond Economic Man: A New Foundation for Microeconomics, Cambridge: MA, Harvard University Press, 297 p. Marx, K., & Engels, F. (1959). Ekonomichesko-filosofskie rukopisi 1844 goda [Economic and Philosophical Manuscripts of 1844]. Soch. 2nd ed. V.42, 412 p. Marx, K., & Engels, F. (1959). Ekonomicheskie rukopisi 1857–1859 godov [Economic Manuscripts of 1857–1859]. Soch. 2nd ed. T.46, Part 1, 562 p. Marx, K., & Engels, F. (1959). Kapital. T.1 [Capital]. V. 1. Op. 2nd ed. T.23, 788 p.

New Forms of Relations Arising in the Capital Flow     317 Marx K., & Engels, F. (1959). Kapital. T.3 [Capital]. Vol. 3. Soch. 2nd ed. T.25, 638 p. Marx K., & Engels, F. (1959). Tezisy o Fejerbakhe [Theses on Feuerbach]. Soch. 2nd ed. V.3, 534 p. Mill, J. S. (1970). On the definition of political economy and on method of investigation proper to it. Collected works: 9 vol. Toronto: UPress, Vol. 4, 368 p. Mises, L. (1966). Human Action: a Treatise on Economics. Third revised edition, Chicago: Contemporary Books Inc., 256 p. Neisbit, J. (2003). Megatrendy [Megatrends]. M .: Ermak, 380 p. Nureev, R. M. (2014). Periferiya mirovogo khozyajstva [Periphery of the world economy]. TERRA ECONOMICUS, No. 1. T.12., p. 123–149. Polishchuk, E. A. (2005). Chelovecheskij kapital v ehkonomike sovremennoj Rossii: problemy formirovaniya i realizatsii [Human capital in the economy of modern Russia: problems of formation and implementation]. Izhevsk: IzhSTU, 168 p. Roubini, N. (2015). The unconventional truth. Project Syndicate, p. 8–14. Sapir, J. (2001). K ehkonomicheskoj teorii neodnorodnykh sistem: Opyt issledovaniya detsentralizovannoj ehkonomiki [To the economic theory of inhomogeneous systems: Experience in the study of decentralized economics]. M.: State University Higher School of Economics, 232 p. Sartre, J.-P. (1960). Critique de la Raison dialectique. Paris, 761 p. Schulz, T. (1994). Cennost’ detej [The Value of Children]. Thesis. No. 6. pp. 43–69. Schumpeter, J. (1995). Kapitalizm, Sotsializm i Demokratiya [Capitalism, Socialism and Democracy]. M.: Economy, 540 p. Stiglitz, J. (2003). Globalizatsiya: trevozhnye tendentsii [Globalization: disturbing trends]. M.: National Social Science Foundation, 304 p. Weber, M. (1978). Economy and Society: An Outline of Interpretive Sociology, vol. 1.–Berkely: University California Press, 1469 p.

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PART III FROM CRISIS TO THE ECONOMY OF THE FUTURE

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CHAPTER 26

HERITAGE OF KARL MARX AND “TURBULENCE” IN THE MODERN INTERNATIONAL TRADE Mayya V. Dubovik Plekhanov Russian University of Economics, Moscow, Russia Igor S. Gladkov Plekhanov Russian University of Economics, Moscow, Russia; Head of the Center for European Trade, Institute of Europe, Russian Academy of Sciences (IE RAS) Moscow, Russia

The period after the last global financial and economic crisis (2010–2018) turned out to be significant both for the entire world economy as a whole and for one of the most important spheres of interaction of its member countries—international trade in goods and services. After a brief stage of recovery of national economies affected by devastating shocks, accompanied by the expansion of the scale of international commodity exchange, the era of “turbulence” [Gladkov I. S, pp. 108–109] began. A rather noticeable manifestation of the difficulties in the development of the most advanced national economies of the modern world (which were Marx and Modernity, pages 321–330 Copyright © 2019 by Information Age Publishing All rights of reproduction in any form reserved.

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once characterized as “developed capitalist countries”) in this period became the turmoil in the sphere of international commodity trade, especially significant in 2015–2016. K. MARX CONSIDERED FOREIGN TRADE AS A NECESSARY, IN ESSENCE “Environment of existence” of capitalism itself, and this was most clearly manifested at the stage of functioning of a large-scale machine industry. As K. Marx rightly noted, “capitalist production does not exist at all without foreign trade” [K. Marx and F. Engels, essay., 2nd ed., Vol. 24., p. 534], since the global market is “the basis and the vital atmosphere of the capitalist mode of production “[K. Marx and F. Engels, essay., 2nd ed., vol. 25, part 1., P. 122]. To quantify the complexity of the export product mix, an economic complexity index (ECI) has been proposed, which allows identifying the structure of export industries and assessing its impact on a number of social indicators [Hausmann R., Hidalgo C. A., C. 534]. ECI allows you to build graphs in the product space, to assess the “remoteness” of a product from the center, and this means the degree of development and level of diversification of the economy [Hidalgo, C.A, Klinger, B., Barabasi, A.-L., & Hausmann, R ., 2007]. And further, it can be used to estimate the formation and distribution of income for different countries. The advantages of the economic complexity indicator (ECI) are based on the material obtained, the authors constructed an Atlas of economic complexity. The product space is represented by different colors, reflecting the diversity of products, markets, technologies, and industries. If the vertices of the graphs are painted in the same color, for example, black, then this indicates one-sided export, for example, its oil content. The same color can also serve as a signal to create an appropriate institutional environment conducive to the emergence and development of new industries, production networks, ensuring political stability and reducing dependence on commodity orientation [Hausmann, R., Hidalgo, C. A., at al, 2011]. The ECI meter takes into account, on the one hand, the number of exported products, and on the other, their complexity. ECI authors with grace prove that countries where the indicator is easily filled with information, have good macroeconomic indicators, are deeply integrated into global value chains, have innovative technologies, prospects for developing new related industries are more competitive [Cherednichenko L.G, Dubovik M.V, Ermolaev S.A, Seleznev A.Z, 2018] .. The proximity of the technologies used allows us to predict and discover new export opportunities.

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At the present stage of development of the world market, which was also anticipated in the works of Karl Marx, when in the sphere of world production the use of the latest technologies with the direct participation of artificial intelligence becomes the most significant and significant, we can note the leading role of the largest supranational corporations. Therefore, it is not by chance that a situation has arisen, as emphasized by K. Marx, when a class possessing the means of material production simultaneously controls the means of intellectual production. There is no particular objection to the fact that even in the 19th century K. Marx not only noted the main features and characteristics of the development of the capitalist mode of production, but also expressed the foresight of its inevitable “collapse” (failure). According to him, the market relations that existed then, in a certain perspective, will exhaust their potential and collapse (that is, capitalism will exhaust its development potential and collapse). The relevance of the ideas expressed by Karl Marx is currently increasing to such an extent that liberal and neoliberal postulates are forced into the past. Following them over the past decades has largely caused the emerging trends of “turbulence.” First, in the conditions of preservation of the bipolar world (center and periphery), factors that significantly weaken the economies of developing countries are of particular concern. This is due to the rising cost of borrowed funds, the weakening of national currencies against the dollar, the increase in the debt burden and the change in its structure. These and other internal factors are harbingers of a new financial crisis that will also adversely affect world trade. Secondly, trade wars, which begin with bilateral conflicts, but further consequences, apply to all. For the time being, they concern the commodity market, but further are followed by restriction on the services market, and this is due to the restriction of financial operations and the containment of the banking sector, as well as the restriction of technology transfer and information flows. Thirdly, the revolutionary changes in the market itself occurred with the introduction of digital technologies and the transition from traditional market platforms to platform trading principles. The platforms involve algorithmic search, implementation and monitoring of transactions based on the BIG DATA mining analysis. In addition to the products, social networks, online stores, and various services work with the help of platforms. An example of a full-fledged platform can serve as a secondary market for goods and services eBay, emerged in the 90s. Currently, popular car sharing services include Uber, Yandex.Taxi, Airbnb, etc. On the one hand, the consumer and the seller do not need to think about the order; an algorithm of actions was invented for them. However, on the other hand, the consumer and the

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seller are pushed towards a certain set of actions, thereby narrowing the circle of his alternatives. The platform or algorithmic principle of market organization is developing exponentially: in 2012, platforms accounted for less than 1.5% of all commercial turnover in the US in the consumer sector, now more than 15%, and by 2020, according to a conservative forecast, more than 30% will be accounted for. Fourth, thanks to the introduction of new digital technologies into production and global trade, developing countries are joining global production and trade chains. However, it is the involvement of developing countries in world trade, despite the high share of China’s world trade, is rather one-sided and almost stopped. The optimism that accompanied the inclusion of developing countries in global chains is constrained by the adverse effects on employment in these countries, where the share of value added is very low, and in order to improve it, skilled personnel and professional competencies are needed. Technology and robotization contribute to the reduction of routine work and, accordingly, jobs. According to the theory of comparative advantage, developing countries are substantially losing both in labor-intensive industrial activities and in revenues from foreign trade. Entering into global chains hinders the overcoming of technological backwardness and the use of the advantages of cheap labor [Rodrik D., 2018]. Fifth, if we compare modern technological and informational changes with the traditional industrial revolution, we can note the following significant differences for developing countries. The Industrial Revolution brought additional jobs of varying qualifications and helped reduce unemployment. The industry creates goods needed both from within the country and abroad, which contributed to the expansion of trade relations. Industrial innovations were easily transferred from developed to developing countries. Modern technologies have the opposite effect on the development of poor countries if they do not rely on the existing potential, but require additional investments. As a result, inequality between developed and developing countries is growing, income inequality within these countries, inequality of opportunities in access to the benefits and achievements of the global world [Dubovik M.V., 2016]. The most obvious confirmation of the above-mentioned foresight of K. Marx, which was based on a very serious analysis of capitalism, can be considered to be significant (possibly tectonic) changes taking place in the system of the world economy and international trade relations. It seems that the “avalanche effect” in the mountains should be taken into account, since even a loud sound can serve as an impetus to its formation. For the time being, it can be stated that price fluctuations on world markets that form a positive or negative conjuncture that may be inherent in market relations may well claim the role of such a “push.”

Heritage of Karl Marx and “Turbulence” in the Modern International Trade     325

Indeed, throughout 2013–2017 A significant factor complicating the situation in a number of commodity markets was (starting from the turn of 2012–2013) a rather noticeable decline in prices for many commodity groups. A significant deterioration in the current conjuncture at external sites predetermined (right up to the beginning of 2017) low rates of economic growth and a gradual, sometimes precipitous, reduction in the value of world trade. Quite predictably, this negative affected, first of all, the most developed economies, predetermining extremely low rates of economic growth in this zone of the world economy (2013–1.3%, 2014–2.1%, 2015– 2.3 %, 2016–1.7%) [World Economic Outlook (WEO), P. 240]. It is obvious that the leading regional integration association in the modern world, the European Union, is among the “most affected.” The EU at this stage showed a modest increase in gross domestic product production in the range of 0.3–2.4% per year, having only increased to 2.7% in 2017. But the forecast for the dynamics of the gross product for 2018–2019 is disappointing for the European Union—within 2.5–2.1% [World Economic Outlook (WEO), P. 240]. The reflection of the above trends was the failure in this segment of the dynamics of international trade, the value of which decreased in exports from $ 18.975 trillion in 2013 to $ 16.011 trillion in 2016 (that is, there was a very significant decrease in 15.6%; see table1). Nevertheless, thanks to the thoughtful use of available resources and a balanced foreign trade policy, the European Union as a whole managed to achieve fewer deprivations. The EU’s foreign trade at this time showed a more modest decline in its cost parameters (in particular, its exports, only by 12.3%). The rather flexible maneuvering in the framework of external challenges allowed the European Union not only not to lose its leading position in the global exchange of goods, but even to raise them somewhat. The result was an increase in the EU’s share in international trade at a cost of 32.2% to 33.4% in 2013–2016. But in 2017, there were relatively positive changes in the external environment, which led to the long-awaited increase in the value of global merchandise exports to $ 17.581 trillion (or 9.8%). The European Union has demonstrated similar growth parameters for its exports (up to $ 5.866 trillion, or almost by 9.64%). Thus, the positive dynamics in foreign markets allowed the integration block to actually consolidate the success of 2016, to ensure the maintenance of its share in international exports of goods at the level of 1/3 (see Table 26.1). At the same time, it is worth noting that at this stage the European Union actually controls only 1/3 of the international commodity exchange, but also that its indicator has shown steady growth since 2013 (!). The total cost parameters of the export of EU commodity products are still the largest in the modern world trade system.1

326    M. V. DUBOVIK and I. S. GLADKOV TABLE 26.1  Dynamics of the Foreign Trade Turnover of the European Union, 2013–2017a (billion US dollars,%) 2013

2014

2015

2016

2017

World GDP growth rate, %

3.5

3.6

3.5

3.2

3.8

EU, GDP growth rate, %

0.3

1.8

2.4

2.0

2.7

18,975.4

18,973.9

16,498.6

16,011.2

17,580.7

3.22

–0.01

–13.05

–2.95

9.80

6,103.9

6,137.0

5,370.5

5,350.4

5,866.0

Exports Worlds, exports total Rates of growth, % Including:   EU exports (world), total   rates of growth, %

5.26

0.54

–12.48

–0.37

9.64

  share in the world, %

32.17

32.34

32.55

33.42

33.37

3,714.0

3,811.1

3,341.2

3,376.8

3,694.0

60.85

62.10

62.21

63.11

62.97

2,389.9

2,325.9

2,029.3

1,973.6

2,172.0

39.15

37.90

37.79

36.89

37.03

18,956.2

18,965.2

16,631.8

16,164.5

17,835.7

2.58

0.05

–12.30

–2.81

10.34

5,933.9

6,022.4

5,213.5

5,222.4

5,763.6

Including:   export, within the EU (Intra-trade)   share in total EU exports, %   export, outside the EU (Extra-trade)   share in total EU exports, % Imports World, imports, total Rates of growth, % Including:   EU imports (world), total   rates of growth, %

3.35

1.49

–13.43

0.17

10.36

  share in the world,%

31.30

31.76

31.35

32.31

32.32

3,446.7

3,532.3

3,068.4

3,098.2

3,386.4

58.08

58.65

58.85

59.33

58.62

2,487.2

2,490.1

2,145.1

2,124.2

2,377.2

Including:   import within the EU (Intra-trade)   share in total EU imports, %   import, outside the EU (Extra-trade)

a

  share in total EU imports, %

41.92

41.35

41.15

40.67

41.25

Foreign trade balance

170.0

114.6

157.0

128.0

102.4

Compiled and calculated by: World Economic Outlook, April 2018.–Washington: IMF, 2018.–P. 240–241, 253–254; http://ec.europa.eu/eurostat/

Nevertheless, consideration of the dynamics and structure of the external trade relations of the European Union requires taking into account the traditional division of their aggregate parameters into two components. Correct analysis should bear in mind trade contacts between member countries within the block (the EU Intra-trade) and export-import relations with third countries (the EU Extra-trade). Calculations show that the ratio of

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exchange inside and outside the group is 6 to 4. That is, internal contacts between the member countries of the bloc prevail, which gives the EU significant advantages in implementing foreign trade policy in practice. The above approximate ratio of the two components of export-import relations of the European Union may demonstrate some changes, that is, there is alternately an increase/decrease in one of them. Indeed, a more detailed analysis requires taking into account the complex of external and internal conditions in which the foreign trade activity of the block is realized. Among the most important external factors are such as the situation on world markets, the application of sanctions measures, contradictions in the exchange of goods between leading exporters, etc. The following trend is clearly visible. With the formation of more favorable conditions in the external environment, the volume of trade with third countries demonstrates growth (and, correspondingly, the share), and if the situation outside the bloc develops negatively, trade contacts between the countries-members of this grouping increase. The calculated data in Table 26.1 clearly show such trends. Such a behavioral model of the European Union in the global commodity markets is defined by the authors as the “turtle effect” [Gladkov IS, 2017]. Based on the data in Table 26.1, it can be stated that in the period of growing uncertainty in international trade (2013–2016), an increase in the relative importance of intrablock connections was clearly seen, then with the appearance of hopes for normalization in the external environment, an increase in the share of contacts began to be observed in 2017 outside the block. Thus, in the period under consideration, this trend has clearly shown itself. It is worth considering that in the period under review, a band of various kinds of troubles continued until the failed stage of 2015–2016. This time was very clearly associated with the gradual (in fact, according to Karl Marx, steady) increase of uncertainty, unpredictability and risks not only in the economic evolution of individual countries and regions of the world economy, but also in world commodity trade. In the longer term, the following key civilizational risks that humanity will face in the next 20–25 years should be taken into account. The risk of turbulence excludes the prediction of the results of the application of new technologies in both developed and developing countries. The sustainability and inclusiveness of economies can smooth out this risk. The risk of “dominoes” is dangerous because, despite trade wars, protectionist and sanction measures, the economies of the global world were too interconnected with each other, so the problems of some necessarily respond to others. The risk of aggression means that technological know-how can equally be in the hands of an aggressive minority, which can cause irreparable damage

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to cities, countries and blocks of countries until they disappear. This trend is already manifesting itself in Syria. The situation on foreign markets was aggravated by the fact that the significant and relatively long-lasting deterioration in the conditions of many commodity markets since 2014 was added to the active use by the largest exporters (importers) in relation to undesirable partners of various kinds of sanctions measures. Initially, sanctions measures were turned against and to varying degrees affected the Russian Federation, the Republic of Belarus, and more recently, with the advent of the new US administration, they also touched upon traditional American counterparties in Europe (EU), North America (Canada) and Asia (China, partly Japan) [Gladkov I.S. 2017,2018,2016]. Among the restrictions imposed by the United States as one of the most obvious examples is their refusal to participate in the rather large Integration Project of the Trans-Pacific Partnership (TPP) created earlier under their auspices. According to expert estimates, such steps on the part of the United States can expect long-term efforts (in the course of a closed negotiation process) to formalize the so-called Transatlantic Trade and Investment Partnership (TTIP). It envisaged the conclusion of a free trade agreement between counterparties in North America and Europe (primarily with the EU bloc), despite the fact that the leaders of the European Commission and the United States until recently continue to make statements about the allegedly successful promotion of this project. However, in the leadership of France, everything that happens is characterized as “trade (customs) wars” between the Atlantic allies. Thus, instead of leveling off the situation in world markets at the present stage of the evolution of international commodity exchange, measures such as increasing duties on imported goods, which caused an adequate response among counterparties, are quite extensive and actively used. The currently widely used mutual restrictive measures are quite able to exert an extremely negative impact on the dynamics of international trade, which has only recently received certain opportunities for growth. Again, according to Karl Marx, limited prospects are revealed for the development of market relations on a global scale. Such offensive measures by the “decrepitant flagship” of the modern world economy (USA) in practice lead to various violations of the rules of international trade previously adopted by the World Trade Organization. All this in aggregate cannot but put obstacles in the way of further progressive development of the world economy and international exchange. At the same time, countries that have fallen into “networks” of sanctions measures, starting with the Russian Federation, Belarus, the People’s Republic of China and ending with the European Union, Japan, tend to respond adequately to negative trends taking place. Various protection

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programs against sanctions are being implemented, examples of which are the intensification of import substitution in Russia, its contacts with long-standing counterparties in Asia (China, India, etc.), and the European Union’s search for stable partners in the Asian region Japan, in July 2018). Thus, there is a trend towards the gradual movement of trade relations of large exporting countries from the Atlantic to the Asian direction, which increases the chances of East Asia to become the leading region of the modern world economy. NOTE 1. The second largest regional integration association, NAFTA (North American Free Trade Agreement; in the United States, Canada, Mexico), occupies a much more modest position in world trade. By 2018, its share accounted for only 13.5%, almost 2.5 times less than the corresponding figure of the European Union. At the same time, its share decreases for the second year in a row.

REFERENCES Cherednichenko L.G, Dubovik M.V., Ermolaev S A, Seleznev A.Z., Economic Complexity and Inclusive Growth in a Climate of Outside Sanctions// Espacios(ISSN07981015-Venezuela-Vol.38 (No.18), 2018. P.39–46. (in English) Dubovik M V Global’nye cepochki dobavlennoj stoimosti i global’nye cepochki neravenstva [Global value chains and global inequality chains]. Drukerovskij vestnik. 2016, No 5, pp. 4–11.(in Russian) Eurostat. http://ec.europa.eu/eurostat/(in English) Eurostat. The EU in the World. 2018 Edition. Luxembourg: Publications Office of the European Union, 2018. (in English) Gladkov, I. S. Mezhdunarodnaya torgovlya v 2017 godu: snova rost, no perspektivy ne obnadezhivayut [International trade in 2017: growth again, but the outlook is not encouraging]. Power . 2018. No 5. pp. 77–84. (in Russian) Gladkov, I. S. Vneshnyaya torgovlya Rossii v 2017 godu: razvorot na vzlet [Russian foreign trade in 2017: turn to take off].Power. 2018. No 3. pp. 38–46. (in Russian) Gladkov, I. S. Vneshnetorgovye svyazi Evropejskogo soyuza na sovremennom ehtape: «ehffekt cherepahi» [The European Union’s Foreign Trade Relationships at the Present Stage: The Turtle Effect].Power. 2017. No 10. pp. 105–111. (in Russian) Gladkov, I. S. Mezhdunarodnaya tovarnaya torgovlya: trendy i itogi 2016 [International commodity trading: trends and results of 2016 y.].Power. 2017. No 5. pp. 91– 97. (in Russian) Gladkov, I. S. Vneshnetorgovye svyazi Evropejskogo Soyuza i Rossii: aktual’nye trendy (itogi 2016 g., zaglyadyvaya v 2017 g.) [Foreign trade relations of the European Union and Russia: current trends (results of 2016, looking in 2017y.) ]. International Economics. 2017. No 4. pp. 59–74. (in Russian)

330    M. V. DUBOVIK and I. S. GLADKOV Gladkov, I. S. Vneshnyaya torgovlya RF v usloviyah nestabil’nosti vneshnej sredy: 2014– 2017 gody [Foreign trade of the Russian Federation in conditions of instability of the external environment: 2014–2017]. Fundamental and applied research: from theory to practice Proceedings of the II International Scientific and Practical Conference, dedicated to the Day of Russian Science. 2018. pp. 108–112. (in Russian) Hausmann, R., Hidalgo, C., Bustos, S., Coscia, M., Simoes, A., & Yildirim, M. A. (2011). The Atlas of Economic Complexity: Mapping Paths to Prosperity. Cambridge: Center for International Development, Harvard University, MIT.(in English) Hidalgo, C. A., Klinger, B., Barabási, A.-L., & Hausmann, R. (2007). The product space conditions the development of nations. Science, 317(5837), 482–487. http://doi.org/10.1126/science.1144581.(in English) Marks, K. i E.Hngel’s F., Soch., 2 izd., t. 24. (in Russian) Marks, K. i E.Hngel’s F., Soch., 2 izd., t. 25, ch. 1. (in Russian) Rodrik D. Will New Technologies Help or Harm Developing Countries? https://www. project-syndicate.org/commentary/new-technologies-developing-countries -by-dani-rodrik-2018-10?utm_source=Project+Syndicate+Newsletter&utm_ campaign=0a9392ddd0-sunday_newsletter_14_10_2018&utm_medium= email&utm_term=0_73bad5b7d8-0a9392ddd0-93806929 (in English) World Economic Outlook. (WEO). Seeking Sustainable Growth. Short-Term Recovery, Long-Term Challenges. October 2017.—Washington: IMF, 2017. (in English) World Economic Outlook. (WEO). Cyclical Upswing, Structural Change. April 2018.—Washington : IMF, 2018. (in English) World Trade Organization. World Trade Report 2017. Trade, Technology and Jobs.—Geneva, Switzerland: WTO, 2017. (in English) World Trade Organization. World Trade Statistical Review. 2018.—Geneva, Switzerland: WTO, 2018. (in English)

CHAPTER 27

THE REASONS OF INTERSECTORAL VALUE AND PRICE DISPROPORTIONS IN THE LIGHT OF MARXIST THEORY M. N. Besshaposhny Institute of Economics and Management of AIC RSAU-MTAA G. K. Dzhancharova Institute of Economics and Management of AIC RSAU-MTAA

Within one article or chapter, it is difficult to establish a historical parallel between scientific directions and schools in the context of scientific increment in all areas of economic science, that’s why we believe it is possible to consider the ratio analysis of the value ratio analyze in historical development and interpretation of Marxist theory value elements.

Marx and Modernity, pages 331–342 Copyright © 2019 by Information Age Publishing All rights of reproduction in any form reserved.

331

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Really, size of value constantly changes that as well Marx and even the most of his critics noted. Different matter that according to the opinion of Marx, changes of value size should have objective character and to act on behalf of society to the greater extent, than on behalf of the owners of means of production or rare resources. And here it is possible to conduct enough interesting parallels in history between Marx’s doctrine and the current state of value distribution attitudes in the agro-industrial economy sector RESEARCH MATERIALS AND METHODS The fair value distribution principle in given economy segment does not work in full that it is possible to establish at the analysis of ultimate and initial foodstuffs value and the other products of activity agro-industrial complex. The added value of the distribution sphere often exceeds an initial value in a few times, resulting in an essential shift in the profitability and economic efficiency. It would seem, in given opinion there is nothing unnatural, indeed and Marx admitted non-uniformity of value change proportions of ultimate goods and services and initial value of their production, however, this original non-uniformity of value change according to Marx, opponents, pokes often not as minus of given market segment, but as his important plus. With what it is impossible to dispute, so it that from the positions of the Marxism any goods are intended for exchange, the main question is proportionality and justice of such exchange. THE COMMODITY AS A VALUE CARRIER The commodity, as value carrier comprises abstract and particular labor. The given pair—value and consumer value—form determined contradictions in agriculture, it’s quite another matter their correlation can change enough substantially in productive and unproductive years, leading to big risks in the given economy segment. In our opinion, development of commodity production to full extent leads to the occurrence of social proportional value measure, however, we believe that social value in modern conditions of managing is enough unstable by definition, as practically it is impossible to say about stability in the conditions of the market. For example, in some states of the world low value of labour leads to the fact that for workers directly engaged in the production of goods and services low value of its own labour given relatively begins to seem fair. And here the question arises, can this given a relatively

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low value of labour, which is considered a fair one in workers’ eyes, be a competitive advantage for the whole sector of the economy? In the economists writing, studying the change of prices and values to the goods of an agrarian branch can be very frequently met postulate that the rise in the price of industrial goods goes of higher rates than the same process to agro-industrial complex. You are able to be not in agreement with the statement because since 2013 this dynamic began to change in the opposite direction due to objective reasons (poor years) and subjective reasons (imposing sanctions regarding the Russian Federation and the subsequent adoption of anti-sanctions). Let’s imagine the change in price indices graphically (Figure 27.1) Based on the data presented in Figure 27.1, it can be concluded that the Producer Price Index of agricultural products is growing at a higher rate than other indicators starting from 2013, which suggests that the sanctions policy of 2014 plays a role in this increase, but the upward trend started earlier. Note that in the border areas of our country increase the dynamics of indices is more proportionate, in connection with what comes to mind another statement by Marx. In our opinion, as Karl Marx once said, in the understanding and perception of value this structural discrepancy can be interesting only when considering commodity-money relations at the borders of states and economies. Marx reflected the actual practice of value formation and business

Figure 27.1  Changes in price indexes in the economy of the Russian Federation for the period of 2012–2017 (based on data from the Federal State Statistics Service)

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activity on the borders of residents, saying that these economic actors are much more inclined to maintain external relations and external exchange than internal, and much faster oriented to external changes. Modern Practice of Management in the Agro-Industrial Complex and Marxism In the modern practice of agro-industrial business management it is expressed approximately as well in border areas of our country, but, it is necessary to admit, as the mechanism of managing within border Russian Federation territories recently acquires the lines, only under economies boundaries it is necessary to understand federation subjects. We will note that workers are more susceptible to moving and application of their forces in actual practice in those subjects, where the best results are shown by the economy as a whole, instead of separate objects (of the enterprises and organizations). It is confirmed by data on migration of the population in rural areas, both permanent and seasonal one. Opponents of the value formation process explanation try to say that Marxism does not fully reveal the specific and deep motives of value formation in specific areas of production, but it should be remembered that K. Marx spoke quiet interesting about the question of determining the value of products, calling it a mystery. We agree with the classic’s statement, because if the process of the labor product value forming was not so secret, then the economic system would be absolutely predictable, which we do not notice a priori. The modern concept of economic development involves in the state substantial support for domestic production and domestic consumption. Various liberal approaches that were based on the vision of the market, as the sole regulator of supply and demand, give way on a scientific basis to mixed approaches to the development of market relations based not only on pure market aspects, but also on a broad application of the institutional vision of the market situation, in the strict sense, and market relations in general. Really, pure market approaches cannot explain what takes place today in a global economy, in particular, market attitudes do not assume wide application economic sanctions and restrictive measures, and they are present now with reference to our country that substantially influences the overall picture of the economy functioning. On the other hand, sanctions applied to our country, delivered us to the situation, when it is possible to consider in another way economical processes, in view of specific features of modern attitude to an economy. It should be noted that from the point of view of influence on people in a particular society, issues related to affordability and value of food come

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first because in any economic crises that are known for history there was no one where food problem would not go to the first place. Marx spoke in his writings about crises as an inherent process of economic development, rightly believing that one must not only be able to foresee them but also know the mechanism for the economy to exit from one crisis situation or another. It was expressed in different ways, but the essence was always the same, both during a crisis situation of the Great Depression in the United States, when citizens were actually working for food, and during the late period of socialism in our country in the 80s years of the 20th century, when everyone was busy standing in lines. It should be noted that any crisis, despite its origin and strength, manifests itself in citizens to a greater extent through the food component, therefore, it is so important to understand the specifics of value reflected in the agro-industrial sector, explained by Marxism at the initial stage rather narrowly, more fully, taking into account the modern specifics of economic relations in the field of agro-industrial complex. Nowadays, there are many explanations for such extended manifestations of the value formation specificity, but, in our opinion, none of them gives a complete answer to the question of the occurrence of crisis phenomena, both in the food segment of the economy, in particular, and in the entire economy as a whole. For example, the Keynesian approach sees the cause of such situations in an acute shortage of money, and the Marxist believes to look for an answer in considering the crisis of overproduction, however, today we understand that none of the points made can be the main reason. If we talk about the applied character of the problem of expressing the monetary value of private works and services, and their manifestations, according to Marx, then they are most noticeably manifested in the food segment; It is the acute shortage of food or its high value that leads to social unrest and protests, plunging the economy into an even greater decline. Obviously, even greater attention will be paid to the issues of providing food to the population of the country, especially at present time the agricultural sector is the obvious leader in increasing production volumes, which is reflected not only in the domestic market, but also leads to real food safety of the state, what has a great importance from the point of view not only of macroeconomics but also in gaining independence from the supply of food products from outside. It is a mistake to accept the value of exchange between branches only from the side of exchange value. K. Marx repeatedly pointed out this inaccuracy in the formation of value, saying that it is possible to clearly define the universality of modern labor in the system of value relations. Translated into a modern economic language, it turns out that the market cannot always determine the value in all sectors of the economy rationally. And the rationality

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of determining the value can be questioned when we analyze such industries which the security of the state or the population depends on. Specific Features of Value Formation in the AgroIndustrial Segment of the Economy It should be noted the agro-industrial sector of the economy is endowed with all these specificity features, which Marx stated, therefore we believe that the full issue of the specificity of determining the value in the Agrarian and Industrial complex has not been fully resolved so far and cannot be resolved, given only market factors. The agro-industrial complex in the vital activity of any state is of paramount importance, which implies not only economic roots, but also institutional ones, which, in our opinion, is even more interesting and multifaceted. Actually, how is it possible, in the modern life of society, to present agriculture as a production base for replenishing food stocks in the economy, or as a kind of conveyor for the reproduction of food necessary for the functioning of society. The agro-industrial sector is the living environment of people; it is the ways of rural society and the way to establish relationships. In the whole modern and early history of our state, it was the village that was the engine of change and the supplier of resources, and if in the conditions of collectivization, the equipment needed for industrialization was bought for products made in rural areas, and then the village supplied prospective personnel to the country’s economy. The agro-industrial sector cannot be fully compared with other sectors of the economy, in the plane of inter-sectoral exchange, since in its execution the production process looks somewhat different than in other industries and areas. According to prominent scientists’ opinions who are engaged in examining the specifics of agro-industrial production from the point of view of the institutional model of understanding the economy, the agro-industrial sector is so affected by non-economic a factor, that’s why it is a separate specific institution. Let us agree with this position because in the agro-industrial segment many seemingly economic aspects are exposed not to the market mechanism of influence and prediction, but to the institutional one. This specific deviation starts from the moment of determining the value of land, which, as we know, is not fully expressed in the key of the commodity perception of production, ending with the determination of the products value in the agro-industrial complex, as at the stage of purchasing

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it from producers, ending with specific pricing for the products of the agrifood sector for the final consumers. Based on this point, there is a situation that is expressed in planning and prediction the production of goods in this economic segment so there are no unexpected jumps in the market and manifestations of crises caused by them, weather crises of overproduction or consumption crises. In our opinion, the state policy in the sphere of the agrarian and industrial complex should be inclined to a wider and more comprehensive application of indirect methods, because direct methods of support in the current economic conditions are becoming obsolete. As can be seen from the data of Figure 27.2, goods with low value-added prevail in the agrarian export of Russia. This fact, in our opinion, is definitely a negative point in the activities of our entire economic system and particularly in the agricultural sector. Based on the modern vision of the economy, as a constantly-changing process for the production of material goods, all this causes a great wave of negative impacts on the production of goods and services in the field of agriculture and the value of resources for this economy’s segment. The scientific dispute of Marxism with the physiocrats about the agro-industrial specificity comes immediately to mind. Marx clearly pointed to the dual nature of the value formation, both in terms of money circulation and commodity, while the physiocrats recognized the only value in agriculture. It is now becoming obvious that, for all the importance and necessity of the agro-food sector, it is not a special scientific and practical sense to consider the value and its manifestations in this area, without taking into account the value system in other areas. An integrated approach by means of considering value as an economic category on the part of Marxism, through the

Figure 27.2  The share of agricultural products with low value added in the export of the Russian Federation in 2014–2017.

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mechanism of expressing the competitive component of value formation in the production by different economic entities is very similar to the existing practice of doing business in the agro-food sector. The formation of a different scale and specificity of value, as an economic category, indeed, strongly resembles a modern, real mechanism of the large agrarian holdings activity, both in the production of goods and in their subsequent sale. The result is a situation that Marx characterized as a market situation where the actual type of labor is not decisive and dominant in the value. Moreover, it is very important when production is not simple but expanded which does not allow intensifying economic indicators. The main role of labor as the economic factor of production in the economy, as Marxism clearly states, is to precisely give an impulse to the expanded reproduction of the entire economic system. According to Marx, the universal abstract definition of any value which interprets the expression of value through the value of factors of production must fully take into account the value of labor, capital, and land. This is a very good example when the interpretation of the expressing value approach fits very well into the value relationship in the agro-food segment of the economy. In the production of agricultural products from the standpoint of Marxism, it is possible to fully and widely determine the value of land as a factor of production, based on the specifics of production and economic relations. In general, Marx very often used examples from agrarian practice in his works, which seems to us not accidental. With the formation of the goods and services value in the field of agro-industrial production, the owner of land resources is particularly specific and differs from any industrial production by its multiplicity and a certain degree of fragmentation. If we take any agrarian enterprise, there is the problem of relations between tenants and owners of land plots lies outside the plane of value formation in this economy segment. For example, the value of using land plots is almost always not correlated with the real economic result but is determined by the real competition between tenants for the right to use the land. It should be noted that Marx, speaking of the product as an external object, way to meet the needs, put forward the idea that the latter has an expression of the needs of the stomach and the needs of fantasy. We dare to suppose that in the goods produced in the agro-industrial complex, as in no other way, the vision of this two-sidedness of the goods manifests itself, as an economic category. Moreover, we believe that the needs of the stomach, first and foremost, distinguish marketable products from the agro-food sector from all other mass of goods. In this specificity, we see not only the competitive advantages of food products but also a considerable reserve for increasing the

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profitability of this segment of the economy, since the specificity of food is that it will always be in demand because people without it cannot exist. Despite the fact that the ideas expressed by Marx to the formation and determination of the goods cost found a response throughout the world, now in our country do not fully work in the production of agricultural products, which is a significant disadvantage in determining the effectiveness of the modern agricultural segment and food market in our economy. Due to the fact that the food production sector is not only of scientific interest but also of practical one, market mechanisms for the formation of commodity prices for the producer and prices for the final consumer cannot be viewed from the point of view as the market mechanism, as the representative of classical and neoclassical scientific schools in full. The fact that in the modern world there are no states that would not interfere in the activities of this economy’s segment speaks in favor of the impossibility to consider pricing and value formation in this segment of the economy from a purely market position. For illustrative propose and convenience of reflection, let us present the correlation of Marx’s ideas on the formation and reflection of value as an economic category and the current state of production and reflecting the value of goods and services of the agro-food sector (Table 27.1). Speaking about agriculture, labor productivity is the greatest interest, as an indicator of its efficiency. In this context, labor productivity is calculated as the cost of agricultural products per person employed in agriculture (Figure 27.3). Actually, it is possible to talk about efficiency and in real terms of production, however, for economics, it’s most significant to express everything in monetary terms, however, it can be stated that since 1990 our country’s share in world grain production has decreased from 6.2% from world volume to 4.3% of world grain production in 2017.

Figure 27.3  The cost of agricultural products per person employed in the industry in 2017 (thousand US dollars)

340    M. N. BESSHAPOSHNY and G. K. DZHANCHAROVA TABLE 27.1  Transformation of Karl Marx’s Ideas and Their Embodiment in the Real Economic Practice of the Agro-Industrial Complex Subjects The statement and the scientific substantiation of the economic category by K. Marx

The current position of the process under consideration in the practice of business segments and the market

The usefulness of a thing expresses use value.

In the modern practice of production and exchange in agriculture, the usefulness of a product has not been combined with consumer value for a long time. An example would be the market of agricultural products, primarily the market of grain and sunflower

Within a market, exchange value is an expression of the use value of goods.

This principle does not work completely, as in the domestic practice of market relations, use value is not comparable with exchange value, as a result imbalances are observed in industry, which need to be addressed by the state.

Exchange values should replace each other. The exchange value must express the effective replacement of one product by another.

Exchange value, as the ability of a product to proportionally exchange for another one, remains, but these proportions are often subject to purely conjunctive influence from the market (lean years, export or import volumes, etc.), rather than the factors of real expression of exchange proportions based on the cost of goods and services.

Amounts of value change regardless of the interests of manufacturers and owners.

This postulate fully works in modern economic conditions, especially at the first level of production in the AIC. Indeed, the amount of value varies for all parties, regardless of interests, however, in some aspects, the cost of ownership for the means of production changes in monetary terms substantially, without changing physically. The most common variant of such a change is the cost of leasing agricultural land, which, without changing in physical volumes of production, can significantly change in value terms of the latter.

The monetary form hides the social expression of the objective mental commodity world forms

Let us allow ourselves to say that this expression totally works now, since the producers still treat their products of labor as goods. However, we note that political economy has not fully provided a clear answer. The question of physiocrats about the emergence of land rent from the land as such, and not from society, is still relevant.

The cost of a commodity depends on the amount of labor concentrated in it.

In the modern practice of management in agribusiness, this expression of economic interrelationships works in some cases and does not work in others. For example, in the production of commercial products in the AIC by large holding structures, a result is observed when less labor is concentrated in one unit of goods than in small-scale production. It, in turn, makes the products produced by larger forms cheaper for the consumer and, therefore, more affordable. However, the consumer himself, with the growth of income, relies on more environmentally friendly products of small production forms. In fact, as Marx believe, it can be concluded that when the cost is concentrated in the order exists now, but this expression of value is also subject to the effect of the incomes growth of the population consuming these products.

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The Impact of Changes in Labor Productivity on the Cost Over the past 60 years, agricultural production in the United States has increased by more than 2 times, provided that the area of agricultural land has decreased by 25% and the use of labor has decreased by 78%. These figures indicate that their labor productivity is growing at a fairly high rate, which is not surprising given the attention that the US government pays to its farmers and agricultural holdings. The modern system of implementing the state policy in the field of agriculture should be based on the following areas of influence. In terms of optimizing production and a positive impact on the agro-food sector of the economy, institutional support in the field of agriculture should have at least two directions—support for production and support for consumption. It should be recognized that in determining the causes of intersectoral cost and price imbalances in the light of the modern vision of Marxism, it is necessary to take into account the fact that the modern consumer approaches the definition of his preferences in the food market. Modern Russian consumers set completely different preferences for themselves than those studied by economics 5–10 years ago, and these preferences cannot but affect the market price of a product that correlates with the use value. According to surveys of respondents that we conducted in August 2018, consumer preferences regarding food choices, and this is the range of products that the AIC supplies looks like (Figure 27.4). It should be noted that the survey data presented above in a graphic form are based on the opinions of respondents in the city of Moscow, in the

Discounts and promotions 12%

Other 8% Cost 29%

Convenience of purchase 19% Quality of production 32%

Figure 27.4  What is the determine factor, in Your opinion, for the choice of food products under modern economic conditions. (%) (1200 respondents surveyed in 80 districts of Moscow out of 125).

342    M. N. BESSHAPOSHNY and G. K. DZHANCHAROVA

regions the picture of preferences may look different, but the general trend is outlined quite clearly. Consumers are increasingly paying attention to a whole range of factors for purchasing goods, so the complexity of the impacts issue on the agrofood markets, which we put forward in this chapter, provides an even wider field for using methods and techniques of influence, both on consumers of products and on specialized types and kinds of markets associated with certain sectors of the economy. CONCLUSION The Marxist theory of value fully explains this situation in the markets for agricultural products, which speaks about its importance exclusively for all sectors of the economy, including the agro-industrial sector. In this context, it is possible to predict changes in approaches to the definition of value as one of the sides of the commodity and use value, on the other hand as a pair forming the famous Marxist contradiction. In conclusion, it should be noted that the Marxist theory of value is largely reflected and confirmed in the modern practice of economic relations in the agro-industrial complex. In our opinion, evidence of the effectiveness and correctness of the application of the Marxist value theory in this economy segment will be later increasingly manifest itself clearly due to the ever-increasing processes of food production globalization, as well as the ever-increasing practice of lobbying the interests of the domestic producers of all countries of the world community, and more direct use of protection tools in this segment of economic relations. REFERENCES 1. K. Marx. Teorii pribavochnoy stoimosti. CH. III [Theory of added value. P. III.] / Marx K., Engels F. Essay. V. 26. P. III, 1964, p. 137 (in Russian). 2. Buzgalin A.V., Kolganov A.I. Predely kapitala: metodologiya i ontologiya. Reaktualizatsiya klassicheskoy filosofii i politicheskoy ekonomii [Limits of capital: methodology and ontology. Reactualization of classical philosophy and political economy] (selected texts).–M., Cultural Revolution, 2009. –p. 680 (in Russian). 3. Sorokin D.E. Politicheskaya ekonomiya ustoychivogo razvitiya [Political Economy of Sustainable Development] // News of the Ural State University of Economics. 2017. No.5 (73). p. 20−33 (in Russian). 4. Vserossiyskaya sel’skokhozyaystvennaya perepis’ 2016 goda [Russian Agricultural Census 2016] (http://www.gks.ru/) (in Russian).

CHAPTER 28

INDUSTRY 4.0— MACHINE PRODUCTION OF THE 21ST CENTURY Scientific and Theoretical Substantiation and Methodology of Study Alexander N. Alekseev Plekhanov Russian University of Economics Russia, Moscow Julia V. Ragulina All Russian Research Institute of Agricultural Economics, Moscow Aleksei V. Bogoviz All Russian Research Institute of Agricultural Economics, Moscow Svetlana V. Lobova Altai State University, Barnaul, Russia

Marx and Modernity, pages 343–350 Copyright © 2019 by Information Age Publishing All rights of reproduction in any form reserved.

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344    A. N. ALEKSEEV et al.

The industrial revolution, which swiped the world economy on the edge of the 18th and 19th centuries, made it possible to set up machine production—to replace manual labor with machine production. Subsequently, it turned out that this was the first industrial revolution, followed by two more in the 20th century. Each subsequent industrial revolution brought humanity closer to the practical realization of the concept of general welfare, providing for this new technical capabilities for ever increasing automation of machine production. In the 21st century, the fourth industrial revolution should take place, due to the transition to the industry 4.0. The foundation for the new industrial revolution was laid by the digital economy, which is already formed in OECD countries. The fourth industrial revolution is called upon to fully automate machine production, fundamentally eliminating a person from it. At the initial stage of the new industrial revolution, all labor production functions will be performed by machines, and intellectual (managerial and creative) functions will remain with the person during the period of launching and testing the first digital technologies of industry 4.0. Subsequently, at the final stage of the fourth industrial revolution, the most complex and most expected technology will be created—artificial intelligence (AI), the introduction of which will close the cycle of machine production, finally ousting man from it. The socio-economic implications of the transition to industry 4.0 are unpredictable. According to the learning of one of the greatest sociological scientists and economists who devoted most of their scientific work to studying the essence and consequences of machine production, Karl Marx, the non-optimal state regulation of the economy may be the cause of reduced social justice and increased imbalance in society during the development of machine production. This accentuate the relevance of the scientific and theoretical substantiation and development of the methodology for studying industry 4.0, which represents a machine production of the 21st century, from the not only economic but also social efficiency standpoint, as well as the development of recommendations for optimizing state regulation of the fourth industrial revolution, which is the purpose of this article. MATERIALS AND METHOD The theoretical basis of this study was the works of modern scientists on the definition of the essence and features of the fourth industrial revolution and the transition in industry 4.0. It’s include the works of Bogoviz (2019), Bogoviz et al. (2019), Diez-Olivan et al. (2019), Imran and Kantola (2019), Muñoz and Capón-García (2019), Popkova (2017), Popkova

Industry 4.0—Machine Production of the 21st Century     345 TABLE 28.1  The Value of the Digital Competitiveness Index and the Social Justice Index in the OECD Countries in 2018 Index of digital competitiveness, points 1–100 (x)

Social Justice Index, points 1–10 (y)

Australia

90.226

6.5

Canada

95.201

7.0

Denmark

96.764

7.7

France

80.753

6.4

Germany

85.405

6.7

Italy

64.958

5.5

Japan

82.170

5.9

Netherlands

93.886

7.1

Norway

95.724

7.9

Sweden

97.453

7.5

The UK

93.239

7.1

The USA

100.000

5.8

OECD countries

Source: compiled by the authors based on materials from OECD (2018), IMD (2018).

(2019), Popkova et al. (2019a), Popkova et al. (2019b), Sukhodolov et al. (2018), Verba et al. (2019). A review of the literature on the selected topic showed that in existing studies and publications the study of the social consequences of the transition to industry 4.0, which causes incompleteness and inaccuracy of its scientific and theoretical substantiation and methodology of study. To determine the social consequences of the industry 4.0 becoming established at the initial stage of the fourth industrial revolution, this study uses a regression analysis method that evaluates the impact of the degree of digitalization of the economy (the IMD digital competitiveness index) on social justice (the corresponding OECD index). As objects for the study by the criterion of availability of statistical data, we selected OECD countries. The study is conducted according to 2018 (Table 28.1). RESULTS We conducted a regression analysis of data from the table. It led us to the following results (Table 28.2). Based on the second data table we have compiled the following model of pairwise linear regression: y = 32.93 + 8.39x. According to this model, an increase in the value of the digital competitiveness index in OECD

346    A. N. ALEKSEEV et al. TABLE 28.2  Characteristics of the Regression Dependence of the Social Justice Index (y) on the Digital Competitiveness Index (x) in OECD Countries in 2018 Regression Statistics Multiple R

0.6495

R 2

0.4218

Normalized R 2

0.3640

Standard mistake

7.9032

Observations

12 Analysis of variance df

SS

MS

F

Value F

7.2956

0.0223

Regression

1

455.6923

455.6923

Rest

10

624.6113

62.4611

In total

11

1,080.3036

Coefficients

Standard mistake

t-statistics

P-value

Lower 95%

Top 95%

Y- intersection

32.9263

21.1236

1.5587

0.1501

–14.1401

79.9926

Social Justice Index, points 1–10

8.3929

3.1073

2.7010

0.0223

1.4694

15.3164

Source: calculated by the authors.

countries in 2018 by 1 point leads to an increase in social justice by 8.39 points. The coefficient of determination (R 2) is 0.4218, which indicates a moderate connection of these indicators—a change in the social justice index by 42.18% is due to a change in the digital competitiveness index. Since the significance of F doesn’t exceed 0.05 (0.02), the resulting equation of paired linear regression is statistically significant and valid at the significance level α = 0.05. We have developed a special methodology, which is based on the following evaluation formula for a comprehensive assessment of the effectiveness of industry 4.0 at the later stages of the fourth industry:

Эindex4.0(tn) = (ЭРtn–t0 * СЧtn/t0)/(СЗ∑tn-t0 * ССt0/tn) (28.1)

Эindex4.0(tn/t0)—it’s the efficiency of the transition to industry 4.0 in the tn period (current calendar year), reflecting the social and economic advantages of the fourth industrial revolution compared to the base time period (t0), measured in fractions of 1; ЭРtn-t0—it’s the increase in GDP in the period tn compared with the period t0, calculated as the difference in GDP at current (market) prices, measured in billions of dollars;

Industry 4.0—Machine Production of the 21st Century     347

СЧtn/t0—it’s a calculated coefficient reflecting the increase in the value of the happiness index in the period tn compared to the period t0, calculated as the an attitude of the value of this index in the period tn to its value in the period t0, measured in fractions from 1; СЗ∑tn-t0—it’s the cumulative investment in industry 4.0 for the entire period from 0 to (n–1), calculated as the sum of costs, measured in billions of dollars; ССt0/tn—it’s calculated coefficient reflecting the increase in the value of the social justice index in the period t0 compared to the period tn. It’s calculated as an attitude of the value of this index in the period t0 to its value in the period tn, measured in fractions from 1. For the testing the developed methodology, we decided to evaluate the efficiency of industry 4.0 in OECD countries in 2018 compared with the launch period of the fourth industrial revolution in these countries (2011). However, we found that in 2018 the level of GDP in all OECD countries was below the level of 2011. To avoid distortion of the results of the assessment, we appreciated GDP growth and total investments in 2018 compared to 2017. Baseline data are given in Table 28.3. TABLE 28.3  Baseline Data for Assessing the Performance of Industry 4.0 in OECD Countries in 2018 GDP at current (market) prices, billion dollars

Social Justice Index, points 1–10

R&D costs

Happiness index points 1–100

OECD countries

2017

2018

2011

2018

% GDP 2017

Australia

1,504.236

1,427.822

6.3

6.5

2.20

29.91

Canada

1,788.647

1,656.389

7.1

7.0

1.61

25.76

39.7

23.9

344.003

312.759

8.4

7.7

3.01

9.16

35.5

32.7

2,865.304

2,483.199

7.2

6.4

2.23

53.98

46.5

30.4

Denmark France

US$ billion 2017

2011

2018

36.6

21.2

Germany

3,761.142

3,512.565

6.9

6.7

2.88

98.59

47.2

29.8

Italy

2,278.376

1,838.470

5.9

5.5

1.33

24.04

44.0

28.1

Japan

6,157.460

4,951.928

5.7

5.9

3.28

158.79

47.5

28.3

Netherlands

894.576

783.799

7.5

7.1

2.01

15.33

50.6

35.3

Norway

498.157

405.053

8.1

7.9

1.93

7.56

40.4

36.8

Sweden

696.447

672.766

8.4

7.5

3.26

21.50

48.0

28.0

The UK

2,611.108

2,543.413

7.1

7.1

1.70

42.44

43.3

31.9

The USA

15,517.930

20,351.770

5.5

5.8

2.79

541.74

28.8

20.7

Source: compiled by the authors on the basis of OECD (2018), Statista (2018), World Bank (2018), New Economic Foundation (2018).

348    A. N. ALEKSEEV et al. TABLE 28.4  The Results of Evaluating the Effectiveness of Industry 4.0 in OECD Countries in 2018 OECD countries

ЭР2018–2017

Australia

68.10

Canada Denmark France

СЧ2018/2011

СЗ∑tn-t0

ССt0/tn

Эинд4.0(2018)

1.73

1.36

1.03

29.91

56.12

0.99

25.76

1.66

1.29

8.54

0.92

9.16

1.09

0.79

62.76

0.89

53.98

1.53

0.68

Germany

89.28

0.97

98.59

1.58

0.56

Italy

31.05

0.93

24.04

1.57

0.77

110.71

1.04

158.79

1.68

0.43

Japan Netherlands

21.11

0.95

15.33

1.43

0.91

Norway

13.09

0.98

7.56

1.10

1.54

Sweden

13.40

0.89

21.50

1.71

0.32

The UK

46.66

1.00

42.44

1.36

0.81

The USA

934.63

1.05

541.74

1.39

1.31

Source: calculated by the authors.

Our calculations based on Table 28.3 and the results of the evaluation are shown in Table 28.4. As can be seen from the fourth table, in most (8 out of 12) OECD countries, industry 4.0 shows a low efficiency in 2018 (Eind4.0 (2018) ≤ 1), and only in 4 OECD countries industry 4.0 shows a high efficiency in 2018 (Eind4.0 (2018) ≥ 1). For the scientific and theoretical substantiation of the results obtained, we have compiled a conceptual model of industry 4.0 as a machine production of the 21st century (Figure 28.1). As can be seen from Figure  28.1, in the presented conceptual model, industry 4.0 is a closed machine production, human participation in which is completely excluded. At the same time, a person acts only as a consumer or investor. The establishment and maintenance of a balance of interests of investors and consumers, since only in this case it is possible to ensure social justice and prevent the deepening of social disparities in income constitute the basis for the effectiveness of state control of machine production within the industry 4.0. To this end, it is recommended to provide access for mass stakeholders to investing in industry 4.0, the legal form of enterprises in which there should be open joint-stock companies. CONCLUSIONS Thus, the results of the study presented a scientific and theoretical rationale and methodology for studying industry 4.0 as a machine production

Industry 4.0—Machine Production of the 21st Century     349 Machine production of the 21st century in industry 4.0 6 income

Artificial Intelligence Internet of Things (IoT)

4 organization and management of the production Production unit

Virtual reality technology 2 modeling needs and the best way to meet them

3 conclusion of an agreement

Investor (person) balance

1 individual demand 5 delivery of the finished goods

Consumer (person)

Unmanned vehicle

Blockchain (Big Data)

Figure 28.1  The conceptual model of industry 4.0 as a machine production of the 21st century. Source: compiled by the authors.

of the 21st century. The developed conceptual model of industry 4.0 as machine production of the 21st century reflected the place and role of man in this process, and also outlined the prospects for its state regulation. A special technique has been developed, the approbation of which is successfully presented in the article for a comprehensive assessment of the effectiveness of industry 4.0. REFERENCES Bogoviz, A. V. (2019). Industry 4.0 as a new vector of growth and development of knowledge economy. Studies in Systems, Decision and Control, 169, 85–91. Bogoviz, A. V., Osipov, V. S., Chistyakova, M. K., & Borisov, M. Y. (2019). Comparative analysis of formation of industry 4.0 in developed and developing countries. Studies in Systems, Decision and Control, 169, 155–164. Diez-Olivan, A., Del Ser, J., Galar, D., & Sierra, B. (2019). Data fusion and machine learning for industrial prognosis: Trends and perspectives towards Industry 4.0. Information Fusion, 50, 92–111. IMD. (2018). The World Digital Competitiveness Ranking 2018 results. Retrieved from https://www.imd.org/wcc/world-competitiveness-center-rankings/world -digital-competitiveness-rankings-2018/ (data accessed: 3.11.2018). Imran, F., & Kantola, J. (2019). Review of industry 4.0 in the light of sociotechnical system theory and competence-based view: A future research agenda for the evolute approach. Advances in Intelligent Systems and Computing, 783, 118–128. International Monetary Fund. (2018). Report for Selected Countries and Subjects. Retrieved from https://www.imf.org

350    A. N. ALEKSEEV et al. Muñoz, E., & Capón-García, E. (2019). Intelligent mathematical modelling agent for supporting decision-making at industry 4.0. Advances in Intelligent Systems and Computing, 865, 152–162. New Economic Foundation. (2018). The Happy Planet Index. Retrieved from http:// www.happyplanetindex.org/ (data accessed: 3.11.2018). OECD. (2018). Social Justice Index. Retrieved from http://internationalcomparisons .org/social/social-justice.html Popkova, E. G. (2017). Economic and Legal Foundations of Modern Russian Society: A New Institutional Theory. Advances in Research on Russian Business and Management. Charlotte, NC: Information Age. Popkova, E. G. (2019). Preconditions of formation and development of industry 4.0 in the conditions of knowledge economy. Studies in Systems, Decision and Control, 169, 65–72. Popkova, E. G., Ragulina, Y. V., & Bogoviz, A. V. (2019a). Fundamental differences of transition to industry 4.0 from previous industrial revolutions. Studies in Systems, Decision and Control, 169, 21–29. Popkova, E. G., Ragulina, Y. V., & Bogoviz, A. V. (2019b). Industry 4.0: Industrial Revolution of the 21st Century. Studies in Systems, Decision and Control. Berlin, Germany: Springer. Statista (2018). Weighted Index of social justice in OECD countries in 2011. Retrieved from https://www.statista.com/statistics/271339/index-of-social-justice-in-oecd -countries Sukhodolov, A. P., Popkova, E. G., & Litvinova, T. N. (2018). Models of Modern Information Economy: Conceptual Contradictions and Practical Examples. Bingley, UK: Emerald Publishing Limited, pp. 1–38. Verba, N., Chao, K.-M., Lewandowski, J., (. . .), James, A., & Tian, F. (2019). Modeling industry 4.0 based fog computing environments for application analysis and deployment. Future Generation Computer Systems, 91, 48–60. World Bank. (2018). Research and development expenditure (% of GDP). Retrieved from https://data.worldbank.org/indicator/GB.XPD.RSDV.GD.ZS

CHAPTER 29

TO THE METHODOLOGY OF CONSUMER BEHAVIOR ANALYSIS The Relevance of the Marxian Interpretation of the Price Dinara Peskova Financial University under the Government of the Russian Federation, Moscow Galina Rossinskaya Bashkir State University, Ufa, Russia

Despite the existence of many modern alternative theories and concepts that explain the dynamics of variables, continuing disputes over the phenomena that determine the basic motivational factors of consumer behaviour in the market economy are increasingly making people address to the fundamental principles of political economy laid down by Karl Marx and his associates.

Marx and Modernity, pages 351–360 Copyright © 2019 by Information Age Publishing All rights of reproduction in any form reserved.

351

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According to K. Marx, as will be discussed in detail below, consumer behaviour is determined by the usefulness of the product, its cost and user value, mediated by public necessity. The relevance of fundamental provisions of Marx’ writings is confirmed by the correspondence of laws of the modern consumer market functioning to methodological principles of the product value formation and the emergence of demand for it. Marx rightly emphasizes existing contradictions of the consumer market, speaks of oversaturation and under-saturation of public demand for goods, which is especially important for the effective marketing policy formation and competent management of consumer behaviour. The interpretation of price as a basic category, accumulating the whole system of contradictions associated with the contradiction between the product and the market is particularly relevant. At the same time, the cost and the user value are expressed through price and, accordingly, it reflects the interests of producers and consumers. All these aspects rightfully return us to Marx’ writings and force us to perceive his heritage from the modern perspective. THE PRICE AND CONTRADICTIONS OF THE CONSUMER MARKET The price is a monetary expression of socially necessary labour costs which serves as the form of value. Reflecting the level of costs which are socially necessary, the price demonstrates at what labour costs the production of this product has public expediency. The contradiction of the product is crucial in understanding the contradiction of supply and demand. Let us consider how price reflects this point. At the same time, it seems methodologically important to resolve the following issue: where exactly the contradiction of the goods appears– in the deviation of prices from socially necessary labour costs under the influence of the user value or in the formation of the price basis? In other words, it is necessary to identify whether the contradiction of the product is only a price formation factor, or the scope of this factor extends to the process of socially necessary labor cost formation. Let us examine this process from the point of view of the presence (or absence) of the contradiction between the user value and the cost. Let us first determine whether there is a direct relationship between the user value and the cost, whether there is a positive correlation between them. There is a view in the economic literature that heterogeneous user values are comparable directly in their usefulness. The search for a universal unit of the social user value is connected with this provision. Opponents of this point of view state that such a search is wrongful: heterogeneous user values created by the different types of specific labour differ, first and

To the Methodology of Consumer Behavior Analysis    353

foremost, qualitatively, and goods can have a quantitative difference only as exchange values. In other words, goods that are quantitatively different as user values are commensurable only in value terms. Thus, the user value does not seem to be a factor directly involved in value formation. However, these categories are still connected. This connection is mediated by social need. How is this mediated interrelation implemented? Although the user value is not a substance of socially necessary labour costs, nevertheless, it occupies an important place in the formation of the latter, playing an essential role in determining the boundaries of socially necessary labour. In this sense, it can be declared that the user value participates in the process of socially necessary labour cost formation in a specific way. Let us notice that K. Marx emphasizes the role of needs in determining the value of socially necessary labour costs even in the first volume of Capital: “Lastly, suppose that every piece of linen in the market contains no more labour-time than is socially necessary. In spite of this, all these pieces taken as a whole, may have had superfluous labour-time spent upon them. If the market cannot stomach the whole quantity at the normal price of 2 shillings a yard, this proves that too great a portion of the total labour of the community has been expended in the form of weaving. The effect is the same as if each individual weaver had expended more labour-time upon his particular product than is socially necessary” [Marx K., Engels F. (1961), P.47]. Thus, Marx states that labour-time spent in excess of social need is wasted and does not form value in the first volume of Capital. Although, when giving the definition of socially necessary labour costs, K. Marx still abstracted from the public need, although it was “invisibly” present in this definition. Such a methodological approach was induced by the following fact: K. Marx proceeded from the supply-and-demand equilibrium to study the basis of exchange correlations. This equilibrium also means that social labour is distributed in proportion to public needs. Those moments that hinder theoretical analysis and prevent the clarification of value basis and its essence are discarded. In the case when the distribution of labour by industry is proportional to social needs, the amount of socially necessary labour costs is determined by the following equality: labour required by conditions of production is equal to the labour required by conditions of consumption. The factor of needs is introduced into the analysis of the category of socially necessary labour costs in the third volume of Capital. If more goods are produced than the society needs, then the labour spent on production of excessive quantities of goods will not receive public recognition: “. . . the whole product is therefore sold solely as if it had been produced in the necessary proportion” [ Marx K., Engels F. (1962) Part II. P. 186]. Considering the influence of the ratio of supply and demand to the market value, K. Marx declares that “when the quantity is insufficient, the

354    D. PESKOVA and G. ROSSINSKAYA

market cost is always regulated by goods produced under the worst conditions; when it is excessive, it is always regulated by the goods produced under the best conditions . . .“ in the third volume of the Capital [Marx K., Engels F. (1961) Part I. P.203]. Thus, in the process of research, while moving from a less specific level to a more specific one, i.e., including factors of glut and undersaturation of public demand for goods in the analysis, K. Marx shows that, in view of these factors, socially normal production conditions, quantitatively determining the social value, cease to coincide with the average ones. When public needs are not saturated, these conditions are shifted towards the worst ones; when public needs become oversaturated—towards the best ones. If there is an excess of produced goods compared to the public need, then, first of all, obviously, the society will recognize those goods which are produced with minimal costs, i.e., in relatively better conditions. Suppose that a given group of goods does not completely satisfy the public need, and then the socially normal production conditions shift towards enterprises operating in medium conditions, etc. After the complete satisfaction of public demand labour costs of some enterprises working in comparatively worse conditions, which products do not fall within the scope of social need, will appear not to be recognized by the society. If the public need defines the boundaries, within which time spent working is recognized as socially necessary, it is logical to assume that these boundaries may be wider than the actual labour costs. In the latter case, obviously, socially necessary labour costs will exceed social costs of production. In general terms, we can apparently say that the public need points to the group of enterprises producing a certain product that operates in socially normal conditions (taking the need into account). If the output is not enough, the company recognizes as necessary not only all actual costs, but also the costs of enterprises, which must be additionally involved in the production of this product for full coverage of public needs. Accordingly, socially normal reproduction conditions will shift towards these enterprises, and the number of socially necessary working time will increase by the amount of their costs. Thus, the role of the law of value is not limited to the narrow view of individual labour costs as socially necessary only in the scale of a particular production sphere. This narrow view appears on the scale of the economy as a whole, and the law of value regulates the proportion of the distribution of all cumulative labour in society between different production spheres in accordance with the need of society in products of different production spheres. The influence of the public need on the quantitative certainty of socially necessary labour costs, of course, does not mean that their amount is determined only by the need. The size of the latter only affects the identification of those socially normal conditions in which costs receive public

To the Methodology of Consumer Behavior Analysis    355

recognition. However, the definition of these socially normal conditions occurs with the active participation of social needs. Thus, socially necessary labour costs are quantitatively determined only when the social need is taken into account. In the case of shortage of the produced quantity of user values in comparison with “user value on a public scale,” i.e., with a social need, these consumer goods are estimated by society on a scale as if the right amount of them was produced. Accordingly, the socially necessary working time exceeds the actual working time. Produced consumer values are not realized by the actual costs of labour, but at a cost corresponding to “user value on a public scale.” This is the effect of the social need and, at the same time, of the user value on the quantity of value. The user value determines the boundaries of necessary costs of social labour for the production of particular products. THE DUALITY OF SOCIALLY NECESSARY LABOUR COSTS AND THE ROLE OF A CONSUMER It is necessary to refer to the duality of the process of creating socially necessary labour. This is also true in relation to other economic processes and market economy phenomena, what is determined by the dual nature of the labour itself which lies in the mutual participation of two sides in its formation: we mean producers of goods and consumers. The costs of living and materialized labour create individual labour costs, which determine, all other things being equal, the social value of goods. Buyers have, to a greater extent, additionally regulating functions. Their contribution is determined by their expectations and evaluation of produced goods, rather than by labour. The more they buy goods of better quality at the lowest prices, the more perfect the structure of the consumer market becomes. “At the same time, only when consumers fulfil this function, various individual prices of the same goods produced by different producers become their common price. Only under this condition, various individual values of the same goods produced at different enterprises are reduced to their social value, which determines the single price for these goods. This means that the process of shaping the social value of goods is impossible without the active implementation of the primary function of buyers” [Afanasiev, V. (2002) P. 110]. Thus, socially necessary labour costs reflect the contradiction between the user value (on a public scale) and the cost. The formation of socially necessary labour costs occurs when the boundaries of social needs affect specific types of user values. In this sense, it could be stated that socially

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necessary labour costs are not only reflective of the abstract labour underlying the product value, but also of the specific labour. This complex, dual nature of socially necessary labour costs is also manifested in the price that is based on them. The issue of socially necessary labour costs as a problem of including producers’ individual labour in public labour is obviously universal for any system of social production. The contradiction between specific and abstract labour develops into a contradiction between the local value of the product, which depends on the productivity of a particular labour at a given enterprise, and the social value determined by socially necessary abstract labour costs on the production of a certain product. This contradiction, being a powerful engine of the economy, in its development helps to reduce the costs of social labour and increase production efficiency. The process of reducing the specific (special) labour to the abstract (general) labour is expressed by the formation of socially necessary labour costs. The price, being a monetary expression of socially necessary labour costs, bears the stamp of the same contradictions, which contribute in their progress to the formation of socially necessary labour costs. Often, the accounting function of the price is treated as a reflection of the actually existing average level of costs, such as the recovery of these costs by the price and the provision of the necessary profit. However, in this case, the price does not reflect socially necessary costs and the contradictions that form them. The price, reflecting the economic efficiency of products in consumption, is close to socially necessary labour costs. Products, which appear as more effective in consumption, are also more in line with the public need, which is reflected in the price being built on the basis of socially necessary labour costs. Only when the effectiveness of products in consumption is taken into account, the reflection of economic interests in the price will be adequate to objectively conditioned subordination of these interests. THE ROLE OF PRICE AS A FACTOR OF CONSUMER BEHAVIOUR The effective demand serves as a monetary expression of the volume and the structure of needs. It has been shown above that only those costs that are socially necessary which are determined with the consideration of public needs. Consequently, while establishing the correspondence between supply and demand, prices do not undergo deviations from socially necessary labour costs and help to resolve contradictions between the user value and the cost, between the interests of the consumer and the producer. Price accumulates the whole system of contradictions connected with the contradiction of goods, being not only a passive reflection of the progress of this

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contradiction, but also acting as a dynamic lever of influence on the contradiction of goods towards its resolution. Prices are able to resolve the contradictions of goods in the case when they are the quintessence of socially necessary costs in terms of production and consumption. It is the price that drives the whole system of contradictions connected with contradictions of the market. As it was already mentioned, the balance of the market is predetermined primarily by the harmonization of economic interests. The cost and the consumer value are expressed precisely through the price and, accordingly, it reflects the interests of producers and consumers. In other words, price reflects the weighting of the importance of certain economic interests and their coordination. The producer is interested in reimbursement of all costs in the price and in making the profit necessary for reproduction. In turn, the consumer is interested in meeting his needs, i.e., in obtaining certain user values. Priority is provided to the interests of the producer or the consumer to the extent that the levels and ratios of price are dependent on purely cost factors or on the usefulness of products. Production and consumption are opposed to each other in the final analysis as supply and demand. The contradiction of goods and the contradiction between the producer and the consumer are specified in the sphere of circulation in the very supply-demand relation. Demand and supply do not just mirror the relationship between the consumer and the manufacturer in the sphere of circulation. Demand is a need, provided by means of circulation, but its content is not limited solely to it. The effective need depends on income and price. The category of supply, being a specification in the sphere of circulation of the production category, is also richer in content than the latter. These differences must be emphasized, since, from the point of view of resolving the contradiction between supply and demand (as contradictions between the producer and the consumer), the price requirements are not identical to the requirements for it in terms of resolving the contradiction between the buyer and the seller, between goods and money. To resolve the first contradiction of the two that constitute a contradiction between supply and demand, the price should reflect labour costs which are socially necessary to produce the goods of the range and quality that the consumer needs. When this condition is met, the price, at which not only production conditions are laid but also consumption ones (public demand), is built at the level of socially necessary labour costs. The user value (more precisely, its utility function) also affects the size of the demand for a certain product (the higher the utility, the less amount of goods one needs to be satisfied), and the degree of satisfaction of the demand (the higher the utility, the more satisfied the need is). Hence it is clear that the price, which is built taking into account the public utility of products, does

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not deviate from the socially necessary labour costs, but approaches them, since such products satisfy the public need better. In this context, the price stimulates the output of products which are necessary for the consumer, and, at the same time, it provides the reduction of costs for it to the level of socially necessary ones. As a result, there is a resolution of the contradiction between the producer and the consumer in price, because it correlates the economic interests of the first and the second. The price of the product corresponds to the ability of the latter to satisfy a certain need, and consequently, this price will satisfy the consumer. The producer of goods also realizes his economic interest (subject to the production of goods that the consumer needs in the appropriate range and quality). It should be noted that the resolution of the demand-supply contradiction, the interests of the buyer and the seller, is identical to resolving the contradiction between the producer and the consumer in the production sphere. When insufficient coordination of economic interests in production appears, the proposal in its structure does not correspond to public needs, which is manifested in reality as a mismatch of the supply structure to the demand structure. The administrative-command system does not provide a mechanism for linking the interests of the producer and the consumer in the production sphere, and, in many ways, it occurs because of the planned pricing system. The producer’s interest is on the side of cost, and in the absence of real market relations, when the coverage of costs depends on the state (and not on the consumer) and it guarantees the sale of products, the only thing the producer is interested in is the compensation of actual individual costs. A cost-intensive pricing system which is typical of the administrative-command economy underlies the deformation of the contradiction of interests, when the consumer’s interest is completely ignored. A kind of circular dependence is formed: prices, calculated at actual costs, serve as the initial basis for gross cost targets that deform the incentive system by targeting enterprises to the “gross output.” Stimulation of the “gross output,” in turn, makes enterprises ensure that actual costs are reflected in prices. As any “individualization” in the approach to enterprises, it kills them as commodity producers, blocking the process of objective reduction of individual costs to socially necessary ones in price. Let us consider now, how the seller-buyer relationship differs from the producer-consumer relationship. If the production is confronted by the needs in a pure form, real needs in the second case, then the supply-demand relation characterizing the first case is more complex. While considering manifestations of the supply-demand contradiction on the surface of economic reality, it was shown that such manifestations can be caused by the general imbalance in the natural and cost structure of the economy,

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by the separation of the natural forms from the cost ones, of the user value from the cost. The balancing of supply and demand with the help of price does not always mean that price approaches socially necessary labour costs. As it is noted in the literature, the supply-demand ratio depends, on the one hand, on the factors that change the real conditions of production and consumption (for example, measures to modernize production, changing real needs), and on the other hand, from other factors (for example, changes in monetary income of specific consumers). The first group of factors affects the cost, the second does not affect it. Therefore, under the influence of the first group of factors, price does not deviate from cost, since the cost itself is subject to quantitative changes.1 The amount of labour costs, that are socially necessary under the conditions of production, does not capture the relationship between the interests of producers and consumers. It reflects only the interests of producers of homogeneous products, i.e., this is an intra-industry characteristic of socially necessary labour costs. Only the price, reflecting socially necessary labour costs, is not only in terms of production conditions, but also in terms of consumption conditions, can capture the ratio of interests of the producer and the consumer. While changing its level depending on the degree to which the structure of social labour costs corresponds to the structure of social needs, the price is no longer an industry-wide, but a general economic measure of costs. So, from the position of linking different groups of economic interests, the price does not only serve to compensate the producer’s costs, but also stimulates the output of products of this range and quality that satisfy the end user in terms of meeting his needs. Suppose that a manufacturer produces a product that does not suit the consumer in terms of quality. Is this assessment of the consumer reflected in price? In other words, does the producer take into account the opinion of the consumer, does he take a decision to stop the production of goods because of the inconsistency of its parameters with the parameters of needs? Under the conditions of the command economy, the consumer is practically deprived of the opportunity to participate in the evaluation of product quality due to the monopoly of the producer, who pursues his economic interest regardless of the implementation of the interests of the end user. The information on the reaction of consumers, accumulated in trade in the form of information on excess stocks or deficits, is not timely captured by the price. There is no solution to the contradiction between the interests of the consumer and the producer. It receives negative forms of manifestation in the forms of total deficit, rush in demand, etc. In the economic conditions of modern Russia, the consumer does not yet fully acquire the features inherent in him under the conditions of a

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developed market economy, i.e., sovereignty. At the same time, another feature inherent in the consumer in the market conditions, i. e. freedom of consumer choice, is formed almost immediately after overcoming the total deficit. In these conditions, the market price contributes to resolving the contradiction of goods to the extent that it is truly market-oriented and established in the mode of free competition. To the extent that the market is monopolized (and it remains highly monopolized), the price still “works” only to the interests of the producer, and therefore, there is no full resolution of the contradiction of the product. ACKNOWLEDGMENTS The research was conducted under the financial support of the Russian Foundation of Basic Researches and the Republic of Bashkortostan (scientific project No. 17-12-02004 “Household economic behavior in terms of shadow economy: modern peculiarities and ways of increase of state regulation effectiveness on regional level” ) NOTE 1. See: Voeykov M. I. Contradictions between individual and socially necessary costs // Theoretical problems of planned pricing: Materials of the symposium on the problem of the definition of socially necessary labour costs. M., 1975. P. 74.

REFERENCES Afanasiev, V. (2002) Vklad avstriyskoy shkoly v razvitiye trudovoy teorii stoimosti [The contribution of the Austrian school to the development of the labour theory of value] // Issues of Economics. No. 2. P. 110. (in Russian).​ Marx, K., & Engels, F. (1961a). Polnoye sobraniye sochineniy. 2-e izdaniye [Complete works, 2nd edition]. Vol. 23. P. 47. (in Russian).​ Marx, K., & Engels, F. (1961b). Polnoye sobraniye sochineniy. 2-e izdaniye [Complete works, 2nd edition]. Vol. 25, p. I. P.203. (in Russian).​ Marx, K., & Engels, F. (1962). Polnoye sobraniye sochineniy. 2-e izdaniye [Complete works, 2nd edition]. Vol. 25, p. II. P. 186. (in Russian).​ Voeykov, M. I. (1975). Protivorechiya mezhdu individual’nymi i obshchestvenno neobkhodimymi zatratami [Contradictions between individual and socially necessary costs] // Theoretical problems of planned pricing: Materials of the symposium on the problem of the definition of socially necessary labour costs. M., P. 74. (in Russian).​

CHAPTER 30

A RESEARCH OF MACRO-INSTITUTIONAL FOUNDATIONS OF NEOGLOBAL INNOVATION GROWTH IN THE LIGHT OF THE KARL MARX’S THEORY OF THE CAPITALISM CRISIS Bahadyr J. Matrizaev Financial University under the Government of the Russian Federation, Moscow Olga S. Gaissina Financial University under the Government of the Russian Federation, Moscow Leyla Madat kyzy Allakhverdieva Moscow State University of Humanities and Economics

Marx and Modernity, pages 361–372 Copyright © 2019 by Information Age Publishing All rights of reproduction in any form reserved.

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The global financial and economic crisis of 2008 is known to have initiated a wide renaissance of the of Karl Marx’s theory of crises in the scientific community. According to the neoliberal economic model that was developed in the last decade, the evolution of the 2008 crisis is absolutely convergent to the theoretical and methodological views, put forward by Karl Marx in his fundamental works on economic cycles. Since the subject of this work is the study of the relationship between scientific and technological development and economic growth, we only address the conceptual aspects of the “Marxist concept” of economic cycles and innovations. In our view, considering the “Marxist concept” of economic cycles, we should concentrate on the fact that the assumption that nominal wages in the short term may be inversely proportional to the rate of profit is oversimplified. During economic recovery, the increase in nominal wages, caused by a decrease in unemployment, is conditional on an increase in nominal production costs. However, before making the conclusion that this trend causes a reduction in the specific profit, we have to take into account wage growth as a factor determining effective demand. If we follow the concept of Marx that the workers’ marginal propensity to consume is always equal to one, in this case, an increase in demand for consumer goods in the short run leads to an imminent price increase. Since in the short-term period the cost of wages represent variable production costs in the economy as a whole, it is likely that an increase in the average nominal wage would provoke a corresponding increase in prices and average costs, while the amount of profit per unit of output, as well as the value of real wages, remains unchanged. Similarly, a reduction in the amount of wages should not be reflected in an increase in the specific profit during economic downturn, provided that workers normally fully spend up their incomes. But of course, we understand that in reality the workers’ marginal propensity to consume, as a rule, is below one, while in the long-term period, the amount of wage costs represents only a fraction of total costs. This means that at some point the manufacturer can accordingly adjust production capacities; therefore a decrease in the amount of wages during a recession does not necessarily facilitate recovery of original profit level. The above example allows us to affirm, in particular, that in his fundamental work Das Capital 1 Karl Marx proposes the theory of the cyclical nature of economic development under capitalism, i.e., the phenomena he classified as “economic crises” primarily on the grounds that they involved manifestations of diverse attributes of the law of the tendency of the rate of profit to decline. We think that the so called capital-saving innovations are among such manifestations. To support this assertion, we refer to Volume III of Das Capital, where the author highlights the paramount role of “cheapening of the

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elements of the structure of constant capital” as one of the hypothetical “reasons opposing” the fall in the rate of profit. Further on, for demonstrative purposes, he dedicates two chapters to explaining the theoretical possibility of using some inventions to reduce manufacturing time and accordingly increasing profits by reducing the inventory of the goods needed to put out the determined volume of products. In our opinion, such “cheapening of the elements of the structure of constant capital”—that is rising of the value of tc—undoubtedly refers to innovations that release fixed capital. We also mean that all kinds of improvements in the quality of machines making it possible to expand the range of auxiliary tools, to reduce the necessary workspace or extend the life of equipment, fall into this category of innovations. In the same volume of Das Capital, Marx also addresses the innovations that save working capital by cutting down delivery costs and delivery period or by reducing fuel consumption through regenerating and reusing waste products. Here, the economic necessity of capital-saving innovations is not as important for Marx as analyzing them in the capacity of a product of the action of free market forces. Marx notes, that “capitalist production induces savings in the use of constant capital, which can ‘prevent a fall in the rate of profit.’”2 However, the “counteracting cause” is not at all a reduction in the value of “elements of constant capital”: it acts more as an element necessary to increase labor productivity in all sectors, especially in sector A—“production of means of production.” Further on, in the same Chapter 30,3 Marx claims that “. . . the ultimate cause of all actual crises always remains the poverty and limited consumption of the masses, which counteracts the tendency of capitalist production to develop the productive forces in such a way as if the limit of their development was only the absolute consuming power of society.” That is he definitely links the emergence of crises with a fall in the rate of return. In some places, Marx points out that the firms introducing new technologies—i.e., undergoing innovations—receive excessive profits until these innovations are not mastered by others. He notes that the capitalists are innovating “for the sake of self-preservation and under the fear of bankruptcy.” As we see, the fundamental idea, disclosed by Marx in Das Capital, and expressed in defining main regularities of the reproduction process in an economy with free competition, is that the main obstacle to sustainable economic growth and the achievement of macroeconomic equilibrium is the classical contradiction—“ growth in production, regardless of the availability of effective demand,” which, as a rule, is intrinsic to the antagonistic capitalist society. Nobel Prize Laureate V. Leontiev4 noted, that “opposing the arguments of Jean Baptiste Say about the equivalence of society’s gross product and incomes, Marx . . . created a fundamental scheme describing the relationship between the branches of production of means of production and consumer goods.” However, the essence of his scheme, in which

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the economy is divided into two main sectors, is not only to reflect the differences between simple and extended types of reproduction, but also in an attempt to finally reveal the ill-intentioned nature of the “basic contradiction of capitalism”—to produce for profit, not for consumption. According to Marx, this contradiction is mainly the basis of economic crises of capitalist society. The above clearly reveals the technocratic approach of Karl Marx to cyclical fluctuations in economic dynamics. In particular, he seeks the causes of changes in the economic life of society in the changes of the productive forces, which in turn he reduces to the means of production, and hence to machinery and technology. In general, Marx’s conception presents science as a relatively independent, specific, differentiated sphere of human labor, an institutional form of activity: “Any scientific work, any discovery, any invention is universal labor. It is partly realized through cooperation of contemporaries, partly through the use of the labor of predecessors. Addressing science as a sphere of labor, as a special branch or form of production in the spiritual sphere is a universally recognized merit of K. Marx. He was the first who transformed the ideas of mutual influence of science and society, of originating and development of science, of socio-historical “dimensions” of scientific knowledge and cognition into a valid philosophical and sociological concept of science. Marx predicted that science would turn into a direct productive force. Such foresight was based on theory—on his doctrine of science as a special field of production in the spiritual sphere in particular. He comprehensively studied science as a socio-historical phenomenon, developed theoretical and methodological principles, which could be used as the basis for building a systematic teaching about science, based on facts, experience and suggesting practical conclusions. A prominent American economist Robert Gordon5 asserts in his recent work that the economic leap of the last 250 years is a unique case in the history of mankind. The assertion testifies that Marx’s approach, based from the very beginning on a dialectical-materialistic understanding of the essence of science, has been confirmed 150 years later. Marx said: “Since human scientific activity is a socio-historical process, we understand that the basic forms of the existence of science, its relationship with other spheres of social reality, the mechanisms of action and interaction of subjects performing the research process and its results—all this falls into two spheres: supposedly socially neutral general knowledge (the object of epistemology, the logic of science) and socio-historical conditions (the object of social philosophy, the sociology of science).”6 It is not surprising that the crisis of the “dotcoms” of 2000–2001, which at first covered the sphere of information technologies and the associated “knowledge economy” and turned into a world economic crisis, initiated

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very intensive discussions about the prospects for the development of technological progress in the 21st century and its impact on economic development. As known, the authors have divided themselves into two scientific camps at this issue. Some argued that the concept of continuous acceleration of scientific and technological progress remained relevant and, accordingly, it was logical to expect the emergence of breakthrough basic technologies in the immediate future that would be able to give a new impetus to economic growth, to solve a complex of energy and ecological problems and sharply improve the level and quality of life of people on Earth.7 Others are skeptical about the possibilities of modern technological progress and believe that in the 1970s there was a transition from the revolutionary development of science and technology to the evolutionary one, and as a result, in the 21st century, at least in its first half, we should expect a gradual slowdown in the rate of technical progress.8 They note that in the last thirty years there have been no revolutionary achievements in most branches of science and technology, and the pace of improvement of technical parameters has slowed down. Returning to R. Gordon’s idea, we can note that further innovative development of the US economy is facing six barriers: the demographic factor associated with retirement process among the so-called “baby boomers” generation; growing inequality in incomes; reduction of the quality of education; deteriorating state of the environment and energy problems; simultaneous huge budget deficit of households and the state; expansion of outsourcing, forcing American workers to compete with cheap labor from the emerging economy countries. In the opinion of the authors of this article, all these problems are not insurmountable obstacles for revolutionary innovations. And inclusive economic growth as a tool for ensuring neo-global innovation growth—according to the authors—is one of the most adequate models of post-crisis sustainable growth (i.e., neo-global equilibrium growth), successfully built on innovative development. As we noted above, the disparity in post-crisis development has become one of the acute problems facing not only the countries of the group of fastgrowing markets, but also the OECD countries. Over the past two decades, disparities in the incomes of the population have risen to exceedingly high levels. According to OECD statistics, the gap between the richest 10% and the poorest 10% widened almost tenfold. Therefore, the segments of the population that are in an unfavorable economic situation, universally lag behind in accordance with any welfare criteria, and not only related to income. We are convinced that promoting inclusive economic growth—that is a neo-global innovative growth which is intended to create opportunities for all segments of the population and fairly distributes dividends from improving welfare in society—is a key macrosocial task in a post-industrial society.

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Meanwhile, both digitalization of the economy and digital innovations have an impact on inclusive growth, as they support welfare and upset the static nature of markets. In our case, the advantage of inclusive innovation is that being a recognized key factor in economic growth, they can also promote social integration. In particular, innovations related to information and communication technologies (ICT) can these days promote inclusive growth in several areas. Growth in the well-being of society is achieved by increasing the flow of more affordable products and services of higher quality. They also include products and services in the education and health sectors that are the most important sources of welfare. For example, public online courses provide an opportunity for everyone to study on the Internet, often for free and at any time. ICTs also have a fundamental impact on the economy, reforming not only key products, but also the functioning of markets—perhaps the demands for labor supply, changing the dynamics of competition and the ability of individuals to create value. More ambitious technological solutions, including, in particular, artificial intelligence and robotics, can further strengthen these changes. All the “digital innovations,” which are implemented as new products and business processes in IT industries and beyond and based on or embodied in large data, make it possible to obtain an extreme effect of economies of scale and network effects, which in turn, allow the innovator to occupy all market structures. As known, such concentrated markets are the source of innovative rent, which is subsequently redistributed among the owners, management and executors of these business models, thereby increasing the share of income of the higher income groups to which these categories of population usually belong. At the same time, we are witnessing narrowing of the overall regional gap in the innovation potential of OECD countries. However, these countries still have significant differences in their innovation potential and investments. Despite the growth in investments aimed at promoting the development of new technologies on the ground and the associated activities leading to innovation and productivity growth, the gap in labor productivity between the regions has been increasing over the past two decades. The intensity of the spatial concentration of innovative potential varies depending on the choice of particular indicator of innovation which is used and analyzed in the country in question. According to statistics, from 20% to 65% of the total volume of R & D falls on 20% of regions, depending on the country. Apart from that, these regions also have about 30% of employees with higher education and about half of patent applications. The regional concentration of innovation activity in the OECD countries for the period 2000–2017 has slightly decreased mainly due to the fact that the less efficient regions in these countries grow faster as a result of the “catch-up”

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growth model, but overall remain fairly stable. In general, the countries demonstrate different trends in the development of regional imbalances. In our opinion, these signs reflect the following macro-institutional trends in the current policy of new economic growth: • Traditional policy in the field of scientific and technological development can inadvertently favor the leading regions and encourage the already existing achievements. Such a policy should consider creating opportunities for the regions lagging behind. This could be done by clearly implementing alternative strategies aimed at promoting advanced practices in backward areas. • Countries are increasingly implementing an “inclusive innovation policy”—a specific set of innovative strategies aimed at enhancing the innovative potential and capabilities of individuals and social groups that have been adequately represented in innovation, research and entrepreneurship. Their goal is to ensure that all segments of society have the opportunity to successfully participate in and benefit from innovation activities (we will call it here “social inclusiveness”). • Innovative policies can play a decisive role in stimulating inclusive growth. Features of the country’s production system also play a key role in shaping inclusive growth. The distribution of the potential and opportunities for participation in innovation activities between firms / sectors (here we will call it “industrial inclusiveness”) and regions (“territorial inclusiveness”) may be the most important of these characteristics. The industrial and territorial aspects are also closely related to social inclusiveness. When innovation potential is not widely distributed over sectors and regions, the welfare of people working in less innovative sectors and / or living in less innovative regions is affected; they are disadvantaged in many aspects (for example, have low work qualification, low income), because they have less chances of participating in more innovative activities. Despite the differences in substantiating the implementation of an inclusive innovation policy, the main objective pursued in the discussions is to solve the problem of irrational use of resources in the economy caused by alienation. Correction of such misallocation is crucial for both economic growth and job creation. Inclusive innovation policy complements other strategies of promoting social inclusiveness, in particular educational policies aimed at ensuring equal access to high-quality education (from preschool to higher education) and facilitating an access to higher education for all social strata.

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Higher education can contribute to inclusive growth, and the trend of technology development can support the progress of higher education system and thereby promote inclusive growth through greater participation of people in education. There are several current technological trends that continue to create more opportunities for inclusive innovation in education. These are primarily information and communication technologies, capable of delivering content in constant quality to a mass audience and of servicing target groups with special needs. ICTs have a twofold impact. Firstly, these technologies can greatly contribute to expanding the provision of educational services and coverage of different sectors of society, offering more diverse and flexible programs and responding to the growing and diversified demand. For example, public online courses allow students to participate in training in any place and at any time, often free of charge and. Secondly, such technologies can have a significant impact on the quality of education, given that they are transforming the traditional learning process. As we noted earlier, inequality is one of the most pressing problems facing the global economy of the 21st century. The process of concentration of capital continues: in 2012 the richest 10% controlled half of the total wealth of the global economy, while the poorest 40% held only 3% of the total in 18 OECD countries. People in economically disadvantaged circumstances often lag behind in other aspects of welfare, specifically not related to income. They often have a lower level of education, health status, are more often unemployed or unhappy with their work. Some social groups constantly prevail at the bottom of the income distribution, which indicates a link between an unfavorable economic situation and certain aspects of social identity. Such a high level of inequality not only affects well-being of the most vulnerable segments of the population, but also undermines economic performance in general. Social groups in a more disadvantaged situation tend to have fewer resources to invest in skills and education; they have less opportunity to gain access to more productive and useful work. Consequently, human resources in the economy are not fully used, which negatively affects the productivity growth in the long term. Besides, the widening income gap adversely affects social cohesion and reduces credibility of institutions, which can contribute to social and political instability. Promoting inclusive growth—i.e., economic growth that creates opportunities for all segments of the population and equitably distributes dividends from improving welfare throughout society—is the key to solving the problem of the quality of economic growth in a post-industrial society. Despite the fact that innovation has long been recognized as a key factor in economic growth, it can also contribute to social integration. Throughout

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history, innovation has played a key role in raising living standards and improving overall well-being. CONCLUSION Today, governments and all interested organizations all over the world are looking for answers to a number of complex and increasingly non-standard issues: • Will the global economy fall into a long period of relatively low growth in the face of budgetary constraints, close to zero interest rates and unfavorable demographic trends in many countries? Will the macro institutional challenges and demographic problems determine the fate of the world economy in the foreseeable future? • Is it possible to satisfactorily eliminate the growing inequality within a country in the framework of the existing neoliberal international economic order? Can we say that modern capitalist economy is confronted with its inherent limitations in this respect—that it’s internal “income distribution system” is broken and probably cannot be restored? • As the technological divide accelerates during the Fourth Industrial Revolution, how can societies respond better to challenges that affect potential employment and other processes of public benefit distribution? Do extended transfer payments represent the only or primary solution to these problems, or it could be better to develop market mechanisms ensuring wider social participation in new forms of economic value creation? These questions require the world community to make more fundamental decisions about the depth of correction in the existing model of economic growth to counteract age-old stagnation and dispersion (chronic low growth and growing inequality). It is necessary to find structural alternatives to the temporary monetary and fiscal measures of recent years, to cut the Gordian knot of slow growth and deepening inequality, to break the current vicious cycle of stagnation and deploy a positive process, in which wider social integration and sustainable economic development reinforce each other. That is why, over the past few years, a consensus has emerged around the world regarding the need for a more inclusive model of growth and development, but this consensus is mostly focused. And in this sense, inclusive growth remains rather a broad field for research than a panacea for emerging challenges.

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The ultimate goal of the national economy is comprehensive and sustainable progress in the standard of living of the population, which includes income growth, as well as widening of economic opportunities, better security and quality of life. This is the basis on which society assesses the economic dimension of the country’s development. Many countries are currently experiencing difficulties in meeting the social expectations of the population. For example, the average annual income in advanced economies has declined by 2.4% over the past five years, while GDP growth per capita averaged less than 1%. Inclusive growth can be seen as a strategy designed to ensure more efficient transformation of high economic performance into the end result that society is striving for—that is, economic empowerment and broadbased prosperity. However, inclusive growth is something more. The history of economic development shows that there is a feedback loop between the lower and upper lines (growth and equity) in the national economy. This feedback loop can work in both positive and negative directions. The extent to which the loop can be beneficial is influenced by the diversity of structural and institutional aspects of economic policy, but this goes far beyond the scope of our research. In this study, the authors attempted to outline the main range of macro institutional factors that have a particular impact on the extent of social participation in the neo-Marxist model of productive society and the benefits of economic growth. The societies that have succeeded in creating a strong middle class and in reducing poverty and social marginalization tend to create effective economic institutions and incentives in many of these areas, and also, over time, implement sound macroeconomic policies and reforms aimed at increasing efficiency. NOTES 1. Marx, Carl, “Das Capital”, the four volume Russian edition, vol I, chapter 23, and vol III, chapter 30. 2. Marx, Carl, “Das Capital”, the four volume Russian edition, vol III, chapter 30 3. Marx, Carl, “Das Capital”, the four volume Russian edition, vol III, chapter 30 4. Leontiev, V., Selected Works, scientific edition, introductory article by Granberg A., Moscow, Economics, 2006—2007. 5. Gordon R.A. Economic Growth and Instability: The American record, 1974 6. Marx, Carl, “Das Capital”, the four volume Russian edition, vol III, chapter 30. 7. Yakovets, Y.V., “Globalniye economicheskiye transformatsii XXI veka”, Economics, 2011.

Macro-Institutional Foundations of Neo-Global Innovation Growth    371 8. Hirooka M. Innovation Dynamism and Economic Growth, A Nonlinear Perspective, Cheltenham, UK North-ampton, MA: Edward Elgar, 2006, 426.

REFERENCES 1. Abalkin, L.I. Vozvrashchenie v politichescuyu economiyu [A Return to the Political Economy], Eco— 2009, No.1, 142–152 pp. (in Russian) 2. Leontiev, V. Selected Works in three volumes, scientific edition, introductory article by Granberg, A., Moscow, Economics, 2006–2007. 3. Marx, Carl. Capital. K Kritike Politicheskoi Economii. Process proizvodstva kapitala [The Capital. On the criticism of political economy. The process of capital production], vol. I, book 1, Institute of Marxism-Leninism under the CPSU Central Committee, Moscow, Politizdat, 1988, 891 p. (in Russian) 4. Marx, Carl. Capital. K Kritike Politicheskoi Economii. Process obrascheniya kapitala [The Capital. On the criticism of political economy. The process of circulation of capital], vol. 2, book 2, Institute of Marxism-Leninism under the CPSU Central Committee, Moscow, Politizdat, 1984, 650 p. (in Russian) 5. Marx, Carl. Capital. K Kritike Politicheskoi Economii. Process kapitalisticheskogo proizvodstva, vziaty v tselom [The Capital. On the criticism of political economy. The process of capitalist production, taken as a whole)], vol. 3, book 3, part 1 and part 2, Institute of Marxism-Leninism under the CPSU Central Committee, Moscow, Politizdat, 1953, 932 p. (in Russian) 6. Capital. K Kritike Politicheskoi Economii. Process proizvodstva kapitala [The Capital. On the criticism of political economy. The process of capital production], vol. I, book 1, Institute of Marxism-Leninism under the CPSU Central Committee, Moscow, Politizdat, 1969, 907 p. (in Russian) 7. Marx, Carl. Capital. K Kritike Politicheskoi Economii. Process obrascheniya kapitala [The Capital. On the criticism of political economy. The process of circulation of capital], vol. 2, book 2, Institute of Marxism-Leninism under the CPSU Central Committee, Moscow, Politizdat, 1969, 648 p. (in Russian) 8. Marx, Carl. Capital. K Kritike Politicheskoi Economii. Process kapitalisticheskogo proizvodstva, vziaty v tselom [The Capital. On the criticism of political economy. The process of capitalist production, taken as a whole], vol. 3, book 3, part 1 and part 2, Institute of Marxism-Leninism under the CPSU Central Committee, Moscow, Politizdat, 1970, 1083 p. (in Russian) 9. Yakovets, Y. V. Globalniye economicheskiye transformatsii XXI veka [Global Economic Transformations of the XXI century], Economics, 2011. (in Russian) 10. Berg, A. G., & J. D. Ostry, “Inequality and Unsustainable Growth: Two Sides of the Same Coin?” Staff Discussion Note 11/08, IMF, 2011. Available at http:// www.imf.org/external/ pubs/ft/sdn/2011/sdn1108.pdf. 11. Bernasek, Anna, “Income Inequality, and Its Cost,” The New York Times, June 25, 2006. Available at http://www.nytimes. com/2006/06/25 /business/ yourmoney/25view.html. 12. Gordon R.A., “Economic Growth and Instability,” The American record, 1974

372    B. J. MATRIZAEV, O. S. GAISSINA, and L. M. ALLAKHVERDIEVA 13. Hirooka, M., “Innovation Dynamism and Economic Growth. A Nonlinear Perspective,” Cheltenham, UK, Northampton, MA: Edward Elgar, 2006, 426. 14. Krugman, P., “Four observations on Secular Stagnation,” In Secular Stagnation: Facts, Causes and Cures, edited by Coen Teulings and Richard Baldwin, Washington D.C., Centre for Economic Policy Research Press, 201. 15. Organization for Economic Co-operation and Development, “Focus on Inequality and Growth,” OECD, December 2014. Available at https://www .oecd.org/social/Focus-Inequalityand-Growth-2014.pdf.

CHAPTER 31

MARXISM AND THE STUDY OF EQUAL EXCHANGE IN THE CONTEXT OF THE MODERN WORLD CRISIS Sergey A. Tolkachev Financial University under the Government of the Russian Federation, Moscow Oleg O. Komolov Plekhanov Russian University of Economics, Moscow

EQUAL EXCHANGE The globalization crisis, which is suffered by the world economy, is theoretically the result of the extreme development of the classical paradigm of political economy, the slightly updated methodology of marginalism and positivism at the turn of the 19th and 20th centuries. The fundamental basis of the classical paradigm is the idea of an equal market exchange as a universal subject field of economic science. Thus, we propose to call this paradigm an equilibrium or equivalent, in contrast to the opposite

Marx and Modernity, pages 373–383 Copyright © 2019 by Information Age Publishing All rights of reproduction in any form reserved.

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non-equilibrium or competitive paradigm that has been developed in the works of mercantilists and attempted to develop by the German historical school, Keynes and some branches of Keynesian theory. At the same, time under the scientific paradigm in economic theory, we understand this interweaving of ideas about the subject and methodology of science, which, being based on a single socio-cultural and religious basis of researchers, allows us to develop an idea of the ​​ condition and directions of development of scientific knowledge. Thus, the paradigm includes the ideological platform of researchers, formed on the basis of social, philosophical and religious ideas prevailing in a given society. A. Smith founded such an understanding of market processes in both versions of the theory of value. In the “unfinished” labor theory of value, Smith suggested that labor costs are a natural measure of the exchange of products of two primitive tribes: the famous exchange ratio—2 deer for 1 beaver—was determined exclusively by the average labor costs of hunters. The equivalence of the exchange of products of labor guaranteed an equal compensation for the time spent in exchange for the missing object of desire of each tribe [1]. In the theory of income, Smith explained the formation of the value of a commodity in a “civilized” society based on compensating the natural norms of income for the factors of production—labor, land, and capital. The natural rates of income of factors of production are formed in turn in factor markets due to the balancing mechanism of supply and demand, also implying the laws of equal exchange. D. Ricardo fully accepted the fundamental principle of equivalence of exchange in an attempt to construct a 100 percent labor theory» of value, however, he reached only 93% known [2]. Karl Marx, armed with the methods of Hegelian dialectics, created an outwardly consistent 100 percent labor theory of value based on the principle of the exchange of equivalents. The category of socially necessary labor expenditures, which is fundamental for observing the equivalence principle of exchange, becomes possible through the introduction of the abstract labor postulate, which has no qualitative differences and is quantitatively comparable. Although Marx pointed out that, in practice, the exchange of equivalent values, be it ordinary goods or labor, is rather a kind of unconscious tendency to find its way through countless complicating factors. That is, the principle of equivalence is based on the same mythological basis as the famous principle of the “invisible hand” of the market. The notorious “marginalist revolution” did not in any way affect the fundamental principle of equivalence of exchange, but on the contrary, strengthened its scientific attractiveness, shifting the scope of analysis from the objectively visible production environment to the sphere of consumer benefits of utility of goods. The main scientific achievement of marginalism and neoclassicism—the theory of general economic equilibrium—states

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that in a perfectly organized market economy, the marginal benefits are equalized to the marginal costs in all markets. Thus, the idea of ​​equivalence extends not only to the “objective” sphere of production and costs, but also to the subjective sphere of human preferences. With regard to international economic relations, the paradigm of equal exchange offered a free trade doctrine based on theories of absolute and comparative advantage and promised prosperity to all countries embarking on this path. Since then, countless studies have shown that the gap in the standard of living of developed and developing countries is growing steadily, despite the liberal methods of foreign trade and capital flows. In Western socio-economic science there is a whole interdisciplinary direction of research of the causes of the chronic underdevelopment of developing countries and the causes of their poverty. The economic side of these studies is reflected in the courses of “Comparative Economics,” where a conceptual apparatus is used to explain the reasons for the backwardness, which is far from the content of microeconomic courses. MORAL ALTERNATIVE It is essential to take into account the socio-philosophical basis of the paradigm of equivalent exchange, which arose in the works of liberal economists of the 17th and 18th centuries. It proceeded from the ideas of the philosophers of the new time about the natural rights of man and the initial equality of all people. It makes no sense here to state the well-known points of the ideas of Locke and the French Enlightenment. It is much more important to point out that this “revolution in the minds” had a quite opportunistic and pragmatic goal—to ensure the transfer of political power from the old feudal hierarchical to the new bourgeois class. For this, it was necessary to create an ideological counterweight to the former system of power, where the ideas of the inequality of the exchange of material goods had a deep moral justification in the form of religious dogmas and institutions. Therefore, the economic theory of equal market exchange appeared (in Smith’s ideas) primarily as a full-fledged moral alternative to the old hierarchical system of the unequal exchange of material goods for spiritual ones. The key ontological idea of ​​the “invisible hand” of the market was developed by Smith not in “The Wealth of Nations,” but in “The Theory of Moral Sentiments” [3], i.e., It is in no way connected with the development of any “economic theory,” but entirely belongs to the field of moral philosophy. The Institute of the Church and the State have traditionally been regarded as a kind of intermediary in the exchange of the lower material goods produced by the peasantry and craftsmen for the highest spiritual (semantic) benefits that exist in the unattainable transcendental space and are transmitted down

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by these institutions. Within the framework of such a traditional system of values, the economy was viewed as an auxiliary field of activity, embodying both the consequences of punishment for the original sin of mankind, and a way of redemption of sins for communion with the highest spiritual goods. Therefore, the idea of equivalence ​​ itself did not make any sense in terms of directing and coordinating the goals of economic activity. The question of the commensurability of material and spiritual benefits seemed offensive to the traditional system of values. And the “institution” of buying the forgiveness of sins in the form of the sale of indulgences was rightly regarded as the fall of the Roman Catholic Church itself. The new “masters of life,” whose views were personified by A. Smith, were interested in desacralizing traditional power and its institutions and in explaining the mechanisms of their own social advancement by certain “natural” laws of human society, which are close to natural laws. Ideas of equal exchange emerged because of the need to replace the traditional sociocultural basis in which power, coercion, unequal exchange of material values ​​were compensated by moral and ethical norms that ensured the stability of society with new hypocritical libertarian ideas of freedom, equality and fraternity. The equivalence of exchange and the whole subsequent system of economic relations with the top in the general economic equilibrium theory of Walras-Pareto is based on a false sociocultural basis. Nowadays, the idea on the determining dependence of economic development not on economic mechanisms and institutions, but on sociocultural values ​​inseparable from the interests of national or social-group institutions, which is already universally recognized by all economic schools. Capitalism is not a non-spiritual non-national and non-confessional mechanism for the full satisfaction of material needs based on market freedoms. On the contrary, the sociocultural basis of society determines the specifics of market institutions and types of capitalism (Protestant, Catholic, Orthodox, Muslim, etc.). Within the framework of the sociocultural basis, moral and ethical standards are immeasurably higher than the exchange institutions that are many times derived from them. Therefore, the religious and ethical norms of many nations are not allowed to deceive compatriots in the market, but they completely allow for the purpose of ensuring the competitive survival of their ethnic group due to non-equivalent redistribution of wealth to deceive strangers. THE EMPIRICAL ASPECT OF THE THEORY OF UNEQUAL EXCHANGE The fundamental discrepancy between the classical theoretical propositions about the exchange of equivalent values and the everyday practice of

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capitalism that violates this law has always existed. Moreover, the unequal exchange in the form of a steady violation of the proportions between costs and their compensation in foreign trade transactions began to develop rapidly along with the capitalist mode of production. In the modern world we can identify four main elements underlying such relationships. The first is technological differences: high-value-added production facilities are located in the core countries, low-productivity ones are located on the periphery. The second is the price structure: prices for the products of the countries of the core grow faster than for the goods of the peripheral economies. The third is currency relations: the national currencies of the backward countries are artificially lowered by the authorities, which contributes to the flow of resources due to increased exports. And the fourth—financial flows: peripheral incomes are invested in the economies of developed countries. 1) The core of problem of unequal exchange lies a different level of technological development of the countries of the world. High-value-added industries are located in the core countries, low-productivity—in the periphery. This structure of the global industry creates global value chains, each of whose links receives a different compensation for its contribution to the creation of value. Thus, in the production of the iPhone smartphone by the American corporation Apple, sold in the US market for $ 500, China’s contribution to the assembly of the finished product is estimated at only 6.54 dollars. Another $ 162.87 comes from Europe, South Korea and Japan, supplying components in the PRC. The remaining $ 330.9 goes to the head of this chain—Apple, which owns the brand and develops software [4]. However, due to the current mechanisms of foreign trade statistics, the final product and the total value created is credited to China’s exports. This explains the country’s large surplus in trade in high-tech goods, which in 2016 amounted to $ 287 billion (together with Taiwan) [5]. For the US, the EU and Japan, importing finished goods from China, the trade balance of high-tech products was –61 billion dollars, –12 billion dollars, and –10 billion dollars, respectively. At the same time, in the trade balance with hightech services, where accounting problems appear to a lesser extent, the EU and the USA remain leading—$ 138 billion and $ 81 billion against China’s $ 20 billion in 2016 [6]. 2) The theoretical basis of such an instrument of unequal exchange as the price structure is the law on the transformation of labor values into the prices of production known from the third volume of “Capital” by Marx. Its essence lies in the fact that value (and, therefore, surplus value) is created by labor, and distributed according to the power of capital. Due to the current trend of equalizing the average rate of profit between sectors of the economy, part of the value created in labor-intensive industries is distributed in favor of capital-intensive industries. As a result, goods of industries

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with a high organic composition of capital are sold on the market at a price higher than the value, and those with a low—lower than the value. In general, in the modern economy there is a steady downward trend in the price of labor-intensive goods relative to capital-intensive ones. From 1985 to 2010 the proportion of prices between them fell from 1.15 to 0.97 [7]. Applying this model to the analysis of international economic relations, the Italian Marxist A. Emmanuel concluded that there existed stable asymmetrical relations between the core, where mainly capital-intensive branches of production and periphery, concentrated on labor-intensive industries. For an empirical assessment of this statement, we should refer to such an indicator as the terms of trade. It reflects the ratio of export price indices to import price indices and may indicate the benefits that a country gets from foreign trade operations. The index value above 100 means an increase in the welfare of the country, below 100—its reduction. The terms of trade in China, which recently has become the main global exporter of goods produced using cheap labor, fell from 120 in 1981 to 98 in 2016, reaching a minimum in 2011 (78). Together with the truly huge value of net exports, which over the same period of time increased from 4.7 to 255 billion dollars (maximum—357 billion dollars in 2015) [8], China is a typical donor of the world economy, and mostly of its main foreign trade partners—the USA and the EU. Countries such as Bangladesh, the Philippines, Mexico, Uganda, Sri Lanka, Kenya, Nicaragua, Myanmar, which are often considered as “heritors” of China’s role in the global economy [9], also show a negative trend in the index of trade in recent decades with the growing investment that foreign capital directs to the development of their labor-intensive industries. At the same time, the position of the countries of the core of world capitalism looks more favorable. For the Eurozone, the terms of trade index has consistently assumed a value of more than 100 over the past 20 years [10]. It is worth noting that for the United States, the index value dropped from 140 to 104 in the period from 1970 to 2017, while for the UK the long term remains below 100. However, for the core countries this situation does not create economic problems. The UK and the USA have a persistently negative trade balance, which is covered at the expense of large-scale attraction of foreign borrowings, which will be discussed below. At the same time, the opportunity to acquire cheap imported goods became one of the factors that contributed to the growth of the profit rate in the western world after the crisis of the 1970s [11]. By 2015, the import price index of constant capital goods was 92% of the 1967 figure [12], and import prices for the US economy from 1970 to 2017 grew 1.6 times slower than the rate of inflation [13]. 3) The impact on the rate of national currency is an important tool of economic policy of modern states. Currencies of export-oriented countries

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of the periphery and semi-periphery, as a rule, are undervalued to the currencies of the core countries of world capitalism. The periphery countries use this tool in the competitive struggle on the world market by reducing the dollar price of their goods and the subsequent profitable conversion of export earnings into national currencies. The core countries gain the advantage of cheap imports of goods and resources, which reduces their costs. (see Figure 31.1) According to statistics, the poorer and less developed a country is, the more strongly its currency rate deviates from the purchasing power parity with the dollar. It is important to take into account the fact that in this case we are talking not about the weakness of the national currencies of poor countries in comparison with the American dollar, but about their additional artificial reduction in price by the states in order to achieve the goals outlined above. 4) For countries that are net exporters and that accumulate foreign currency, there are prerequisites for the strengthening of the national currency. Since this thoroughly worsens the export conditions of such countries, making it less competitive, government regulators are forced to consciously resist these trends. The most common measure in these conditions is the withdrawal of the “extra” foreign exchange earnings from the economy. For example, Russia, whose annual net outflow of capital is dozens, and some years, and hundreds of billions of dollars, is one example of such countries. Capital outflows are carried out both through private channels with soft regulation of the monetary authorities and through public ones, when the

Figure 31.1  The relationship between the degree of deviation of national currencies from PPP to the U.S. dollar and the level of development of the economies of the world (2016). Source: compiled by the authors on the basis of data [14]

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Figure 31.2  The total balance of payments of the countries of the “core” and “periphery” of world capitalism, billion dollars. Source: compiled by the author on the basis of data [15]. Note: The division of countries into “core,” “periphery,” and “semi-periphery” is based on the methodology of I. Valleratin, described in [18]

government and the Central Bank create excess gold and forex reserves and keep the amount of public external debt low (See Figure 31.2). As we can see from the chart, the aggregate balance of payments of the core has been negative for many years. Being net capital importer, the core is able to compensate for the trade deficit by attracting external debts. And the capital borrowed by the core comes from the periphery, which acts as a net exporter of capital, the source of which is the currency earnings obtained as a result of the positive balance of trade with the core countries. Thus, the countries of the periphery, selling their goods and resources to the center for dollars, return part of the funds received back in the form of investments in their economies, in particular in securities. As a result of the prevailing un unequal exchange relations in the global economy, the problem of global inequality continues to worsen. Firstly, it puts the majority of the world’s population in a dependent, subordinate position, and, secondly, does not allow humanity to use efficiently the most valuable resource on the planet—human potential, creative, intellectual, creative abilities, hidden in these societies. CONCLUSIONS So, the paradigm of equivalent exchange as the basis of a market economy is fundamentally incompatible with the laws of capital accumulation and is refuted by the entire history of capitalism, built on the forced exploitation of zones of unequal exchange. Some authors even suggest that the practice of unequal exchange in foreign trade be regarded as a recipe for quitting a

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so-called “Malthusian trap,” an economic regime with zero or almost zero (less than 1%) production growth rate [16]. At the same time, it is possible to identify the Malthusian trap itself with a non-capitalist economy, which can develop at a low rate based on the principle of the exchange of equivalents, and the capitalist economy proper—with overcoming the trap and the dominance of unequal exchange. K. Marx in the first volume of “Capital,” down to the last seventh section dedicated to the process of capital accumulation, carefully protects this system of categories and laws of a market-capitalist society from the “unscientific” prerequisite of the possibility of exchanging nonequivalents in trade operations. In Chapter 4, in the section “Contradictions of the universal formula of capital,” he argues: “Although goods may be sold at prices deviating from their values, such a deviation is a violation of the laws of exchange. In its pure form, it is the exchange of equivalents and, therefore, can not be a means of increasing value “ [17]. And speaking only about the epoch of primary accumulation of capital, Marx not only admits, but also in every way “justifies” the practice of unequal exchange as a kind of prehistory of civilized capitalism, already established in the 19th century in Western Europe [17]. The forcible expropriation of values ​​and the enforcement of unequal exchange in this era were typical practices. However, Marx did not dare to introduce this practice into the theoretical basis of his doctrine, fearing reproaches for the unscientific and speculative nature of such constructions. But the past 150 years of the evolution of capitalism have confirmed that this social system cannot organically function on the principles of equivalence between the exchange of economic entities. Capital for its self-growth can not stop using the scope of ultra-high return on investment. In fact, the era of primary accumulation of capital has never ended on a global scale and continues to this day, as evidenced by the patterns of income redistribution in the foreign economic sphere analyzed above. Thus, it seems very relevant, first of all, for the creative development of the Marxist research program itself, to find ways of theoretical substantiation of the principle of the nonequivalence of exchange under capitalism. In the current period of the systemic crisis of the capitalist mixed model of the economy and the painful search for a new model of development, the introduction of this principle into a set of categories and laws is not just a theoretical challenge, but also an acute practical necessity. ACKNOWLEDGMENTS The chapter (the participation of Sergey A. Tolkachev) was made with the financial support of the Russian Foundation for Basic Research, project No. 18-010-00877 A “The Problems of The Configuration of The Global

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Economy of The XXI Century: The Idea of The Socio-Economic Progress and The Possible Interpretations.” REFERENCES 1. Smit, A. Issledovanie o prirode i prichinakh bogatstva narodov [A study on the nature and causes of the wealth of nations] // M.: EHksmo 2016, pod nauchnoj redaktsiej P.N. Klyukina. Glava 5, ss. 88–103. // M .: Eksmo 2016, edited by P.N. Klyukin. Chapter 5, pp. 88–103 (in Russian). 2. Stigler Dzhordzh Dzh. Rikardo i 93%-naya trudovaya teoriya tsennosti [Ricardo and 93% labor theory of value] // Vekhi ehkonomicheskoj mysli. Teoriya potrebitel’skogo povedeniya i sprosa. T.3. Pod red. V.M.Gal’perina.- SPb.: EHkonomicheskaya shkola. 1999 (in Russian). 3. Smit, A. Teoriya nravstvennykh chuvstv [Theory of moral senses ]- M.: Respublika, 1997.— 351 p (in Russian). 4. Gereffi G., Lee J., Why the World Suddenly Cares about Global Supply Chains // World economic forum URL: http://reports.weforum.org/ manufacturing-growth/why-the-world-suddenly-cares-about-global-supplychains/?doing_wp_cron=1538064769.7283089160919189453125#read (date of the application 30.09.2018) 5. IHS Global Insight, World Trade Service database (2017). Appendix Table 6-20. https://www.nsf.gov/statistics/2018/nsb20181/figures (date of the application 30.09.2018) 6. World Trade Organization, International trade and tariff data, https://www.wto .org/english/res_e/statis_e/statis_e.htm, (date of the application 30.09.2018) 7. Industrial Structure and Capital Flows—Scientific Figure on ResearchGate. Available from https://www.researchgate.net/The-relative-price-of-labor-intensive -to-capital-intensive-goods-over-time-Annually_fig1_228451025 p. 40 (date of the application 30.09.2018) 8. Net trade in goods and services (BoP, current US$) // World Bank URL: https:// data.worldbank.org/indicator/BN.GSR.GNFS.CD?locations=CN&view=chart (date of the application 30.09.2018) 9. The PC16 Fact Sheet // Stratfor, URL: https://worldview.stratfor.com/article/ pc16-fact-sheet (date of the application 30.09.2018) 10. Terms of trade // OECD, data URL: https://data.oecd.org/trade/terms-of -trade.htm (date of the application 30.09.2018) 11. Komolov, O. O. Norma pribyli v kontekste nestabil’nosti mirovoj ehkonomiki [Rate of profit in the context of instability of the world economy] // Vestnik Instituta ehkonomiki Rossijskoj akademii nauk nomer: 3 god: 2017 stranitsy: 35–52 p. 41 (in Russian). 12. Price index, Bureau of Economic Analysis, USA. bea.gov. (date of the application 30.09.2018) 13. Import Price Index (End Use): All commodities // FRED, https://fred.stlouisfed.org/series/IR (date of the application 30.09.2018) 14. PPP conversion factor, private consumption (LCU per international $), World Bank. Retrieved from https://data.worldbank.org/indicator/PA.NUS.PRVT

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.PP$; Official exchange rate (LCU per US$, period average), World Bank, URL: https://data.worldbank.org/indicator/PA.NUS.FCRF Current account balance (BoP, current US$) World Bank. Retrieved from https://data.worldbank.org/indicator/BN.CAB.XOKA.CD Worldbank (date of the application 30.09.2018) Balatskij, E. V., & Ekimova, N. A. Vneshnetorgovyj faktor v likvidatsii mal’tuzianskoj lovushki [Foreign trade factor in the elimination of the Malthusian trap ] / V sb.: EHkonomicheskaya teoriya i khozyajstvennaya praktika: global’nye vyzovy. Materialy mezhdunarodnoj konferentsii «EHvolyutsiya mezhdunarodnoj torgovoj sistemy: problemy i perspektivy—2016». SPb.: Sankt-Peterburgskij gosudarstvennyj universitet, 2016.—453 s. ss.165–172. (in Russian). Marx, K. Protivorechiya vseobshhej formuly [Contradictions of the universal formula] // Marxist Internet Archive. Retrieved from https://www.marxists .org/russkij/marx/1867/capital_vol1/16.htm (in Russian). (application date 30.09.2018) Vallerstajn, I. Analiz mirovykh sistem i situatsiya v sovremennom mire[Analysis of world systems and the situation in the modern world] / Per. s angl. P. M. Kudyukina pod obshhej red. B. YU. Kagarlitskogo. SPb.: Universitetskaya kniga, 2001, 416 p. p. 24 (in Russian). Dzhabborov, D. B. Reindustrializatsiya i ehkonomika, osnovannaya na znaniyakh: potentsial v reshenii problem obshhestvennogo razvitiya [Re-industrialization and an economy based on knowledge: potential in solving the problems of social development ]// EHkonomicheskoe vozrozhdenie Rossii, No.1, 2015, s 65–70, pp. 66 (in Russian).

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CHAPTER 32

CLASSICAL AND NEOCLASSICAL INTERPRETATION OF COST GROWTH AND MARKET PRICE ISSUES Rafkat Gaysin Russian State Agrarian University, Moscow

THE METHODOLOGY OF COST AND PRICE STUDIES Cost (value) issues studies are mainly based on the methodology of the Classical and Neoclassical theories. Through this article author attempts to analyze the issues growth of cost basically with the concepts of the synthesis of cost and value theories expounded in cooperation with prof. Svetlov N.M. (Gaysin R.S., Svetlov N.M., 2014). Such a methodology of research creates conditions for a complex analysis of cost dynamics both in the essential and functional aspects based on the complementarity of the Classical and Neoclassical cost (value) theories. This method becomes possible if we refer to K. Marx’s interpretation of the cost law, outlined in the third

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volume of «Capital» as a basis. The given understanding of cost and socially important amount of work time has an important meaning during the transfer of the analysis of the process of price creation from the microeconomic (sectoral) level to macroeconomic (inter-sectoral) level. On this level there is a requirement for another attitude to the studies of social necessary work time, needed for the production of goods and services. K. Marx analyses the cost forming issue exceptionally on this level, as it corresponds to a high-developed market conditions. The exchange of goods at market value, which isformed as the labor expended, is characteristic of a low level of development of market relations. At the industrial stage of the society development, in the conditions of a deepening social division of labor and the increase in the unevenness of the development of the basic branches of the economy, the role of exchange and distribution processes in the formation of the value of production increases, as the importance of distributing and redistributing the total working time increasingly under the influence of changing social needs changing their relationship with production opportunities. The mechanism of this expenses formation is represented unfold by the neoclassical a theory of the society`s production possibilities. The studies of market mechanisms provides the understanding of the process of commodity value forming as a social process, proceeding in the scale of the whole economy and the dependence of the value not only on the absolute amount of work expended, but also on how much it quantitatively and structurally corresponds to public needs and social opportunities of reproduction of the given goods. The cost of goods is determined not by the actual cost of labor for its production, but by the socially necessary costs that are chosen by the consumer, and consequently by society as a whole, through the market, which is consistent with the interpretation of the cost of the third volume of «Capital» by Marx. The neoclassical method essentially converges with the classical one if one accepts the proposition that the marginal utility, standing behind the price, is not a subjective but an objective utility. In fact, it is estimated by the individual, but his estimate depends on the quantity of the given product and other goods on the market and on the marginal costs of their production. That is, it is a question of utility (value), estimated from the point of view of society’s social needs and production capacities. GROWTH OF COST AND PRICES IN CONDITIONS OF INCREASING LABOR PRODUCTIVITY According to Marx’s interpretation of the law of value in the first volume of the Capital, the cost of the good, and, ultimately, the magnitude of its market price, is determined by the dynamics of labor productivity (Marx

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K., Capital, vol. 1 , Chapter 15). The rise in the productivity of social labor leads to a decrease in cost, prices, and vice versa. However, actual reality often refutes this claim. In some fairly long periods there is a picture when, with the increasing productivity of social labor in the industry, with the reduction of labor costs per unit of output, the value and prices increase. It seems to refute the concept of labor interpretation of the value and prices. This phenomenon is presented in the literature as the main “dead end” of the labor theory of value. However, it should be noted that this “dead end” can be overcome. But for this it is necessary to abandon the interpretation of value only on the first volume of “Capital,” from the consideration of the third volume of “Capital” only as an illustration of the already completed theory of value. In fact, in the third volume of Capital, Marx develops and deepens the theory of value. In the third volume of Capital is the most significant amendment to the pre-Marxist interpretations of cost: it is shown that the cost, as the price, expresses not absolute but relative values. Value expresses the corelation of social needs and social outlays of labor. This approach to the consideration of value was laid by Marx in the third volume of Capital, where he was given “a more developed expression of the law of value in general . . .  the necessary working time here acquires a different meaning” (Marx, K., The Capital, vol. 3, Part 2, page 692). In accordance with the new methodological approach to the formation of value and price, the socially necessary working time, socially necessary labor inputs (cost) developed by K. Marx in the third volume of «Capital», are dependent on: • First, from the labor potential of society, from the aggregate social labor time and productivity labor force, • Secondly, from the needs of society, their structure and proportionality of distribution for specific types of products. At the same time, the cost is determined not just by the influence of each of these factors, but by the ratio of these factors, the ratio of the production (labor) opportunities of society and social needs, the rate of their growth. Economic growth and deepening social division of labor lead to the increase in the volume and variety of needs and to a dynamic change in their structure. Public needs in a group of goods or a separate type of goods can grow faster than production (labor) opportunities. This leads to the increase of working time (labor) necessary for society to produce large groups of goods. The volume of produced goods will be less than the volume of social needs in them. The amount of actually spent labor for the production of goods will be less than socially necessary amount to meet the needs of labor costs. The amount of actually spent labor for the production

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of goods will be less than socially necessary amount to meet the needs of labor costs. The size of the cost (value) is determined not by actual, but by socially necessary labor costs. In this situation, the cost (value) of production can increase even with increasing productivity of actual labor costs. At the level of social production, the main thing in the content of socially necessary labor costs is that these not actual labor costs, but necessary for society. The social optimum of labor is formed at the level of society, and not individual production. In the essential and functional analysis of value and the process of its formation at the macroeconomic level, socially necessary working time is considered not in relation to a single commodity, but to a given group, this kind of product made for society in general. This means, firstly, that the average costs per unit of product under average production conditions are socially necessary costs only if the total quantity of this product corresponds to the needs of the society at the moment. Secondly, the socially necessary labor costs for a single product depend on the actual costs and the degree to which they correspond to the optimal for goods of all other types in a given market. A change in the society’s need for a given product or a change in the actual costs of it affects the amount of labor necessary for the society embodied in other goods. The value expresses the dynamic balance of social production and consumption, the needs and opportunities of society, the level (not the magnitude) of demand and the level of supply in the market. If the growth of social needs for this group of goods outstrips the growth of production opportunities, the totaltime of the labor of society necessary for the production of goods in the given sector increases, that is, the cost of goods increases. Value determines the boundary of socially necessary working time, embodied in this type of goods. It expresses that part of the entire social working time, which is allocated by society for the production of this type of commodity, in accordance with the fact that the necessary proportional amount of working time must be spent on all groups of goods. “If this division is proportional,” notes K. Marx in the third volume of Capital, “then the products of various groups are sold at their values . . . The law of value does not really manifest itself in relation to individual goods or objects, but each time with respect to of the entire aggregate of the products of the individual social spheres of production that have separated due to the division of labor “(K. Marx, Capital, vol. 3, part 2, p. 691). If this group of goods, for example, fabrics, is produced in a non-proportionally large amount, then society spent more of its total working time than necessary. In such a case, the whole product can be sold “only as if it were produced in the necessary proportion” (K. Marx, Capital, vol. 3, part 2, p. 692). The social work allocated for this type of commodity is distributed to the actual quantity produced, and the unit value of the goods sold will be lower than when producing a proportional quantity of the goods.

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Consequently, socially necessary working time is not just a socially averaged actual working time applied to the conditions of production. This is different from the actual costs, the necessary working time allocated by the company to produce a certain number of goods of this type based on available labor opportunities (resources) and public needs. “The social need . . . that’s what,” writes K. Marx in the third volume of Capital, “defines here the proportion of the entire social labor time that falls on various special spheres of production” (Marx, K., Capital, vol. 3 , Part 2, page 692). The social need determines the quantitative boundary of socially necessary working time. This boundary does not always coincide with the actual working time actually spent on the given group of goods (or for the given goods). Marx presented a similar dynamic of price and value in the third volume of Capital on the example of the production of agricultural products. The number of employees is reduced, the productivity of their work is growing, and therefore, based on the traditional interpretation of value, the value of agricultural products should decrease. But at the same time, non-agricultural population is growing, public needs for food are growing, and faster than production opportunities. As a result, the mass of labor necessary for society increases, and it grows faster than the actual labor expended, that is, the value and rent grow. The value of the agricultural product, Marx concludes, “depends on the mass and productivity of the non-agricultural population” (Marx K., The Capital, vol. 3, part 2, p. 692). But this phenomenon “does not represent a specific feature of agriculture and its products,” Marx further notes (Marx, K., “Capital, vol. 3, p. 2, p. 692). In the situation under consideration, the amount of social labor allocated for the production of a given product increases, since the demand for this product is rapidly growing. Consequently, its social value increases. This interpretation of the problem does not contradict, but complements and deepens the interpretation of the same problem by neoclassicists. In particular, neoclassicists solve the problem of a long rise in prices, relying on the law of increasing imputed costs, the law of decreasing profitability of factors. But the effect of these laws in conditions of growth in labor productivity is associated with an increase in the volume and variety of society’s needs, which causes an increase in the imputed costs for large groups of products, caused by the transition to new, innovative production. The law of decreasing profitability of factors on the example of agriculture is a direct concretization of the provision on the growth of the value of agricultural products. Market approaches to the theory of cost (value), developed in the neoclassical concept, are first encountered in D. Ricardo’s classic theory of ground rent. The theory of differential rent is built on marginal categories. Average costs on the worst lands, underlying the market value of the agricultural product, are identified with the marginal cost of production in the

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neoclassical theory. D. Ricardo explains the dynamics of land rent and the rise in prices in agriculture precisely through the growth of marginal costs, through the declining yield of factors of production in connection with the transition to the worst lands. K. Marx, developing the ideas of D. Ricardo, connects the movement of value—in particular, the value of the product of farming—with the needs of society. With the rapid growth in demand for agricultural products, which increases the productivity of labor, society estimates land work (as socially necessary) more highly, which causes an increase in the value of its products. This creates a surplus value in the products of agriculture. Thus, Marx comes to the idea of absolute ​​ ground rent. However, in the 20th century. the picture changes. Production capabilities (labor productivity) in agriculture of industrially developed countries are beginning to grow faster than the needs of society in the products of this industry. In this connection, there is a reverse trend: the value of agricultural products decreases, and the surplus of value in agricultural products decreases or even disappears-the source of absolute rent. The problem, known as the disparity of prices between industry and agriculture in the 20th century, in fact represents the balance of social needs in food and the capacity of society to meet them in industrialized countries. It is caused by the influence of the “green revolution,” which led to a sharp increase in labor productivity in agriculture. Proceeding from the foregoing, the concepts of the classical and neoclassical directions of economic science in understanding the mechanisms for the formation of social production costs can be considered with sufficient justification to be complementary. The interpretation of value as a relative equilibrium rather than absolute value significantly brings together the classics and neoclassicists. In this interpretation, the price organically takes the place of the basis of the market price. On the other hand, studies of neoclassicists represent a sufficiently developed mechanism for the formation of value and its relationship to price. Despite the fundamentally different approaches of classical and neoclassical schools to the definition of the value of goods, there are scientific elements that bring these schools closer together in the understanding of the “natural” (value) basis of price. In particular, A. Marshall’s theory represents a kind of “bridge” between two directions: the classical theory of labor value of D. Ricardo and the theory of marginal utility E. Bem-Bawerk. This “bridge” is Marshall’s grounded mechanism of interaction between supply and demand. Marshall argues that the market price is determined not only by the utility of the goods, but equally by the costs of production. At the same time, he refers to the importance of D. Ricardo’s theory for solving this question: “. . . The fundamentals of the theory left to us by Ricardo remain valid today . . . Ricardo knew what a significant role in the formation of value demand is, but . . . he considered his action less hidden,

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than the influence of production costs “(Marshall A., 1993, p. 202). A. Marshall has formed a concept that considers as a substantial basis for the value of goods utility, commensurate with the costs of production, which, in turn, are due to the scarcity (rarity) of resources. The commodity theory of value considers social labor as the content of social costs in the production of commodities and, correspondingly, the substance of commodity value, and the market economy—the expenditure of resource factors of productionlabor, capital, land (natural resources), and entrepreneurial activity. The initial basis for these concepts is one: the limited nature of the resource factors of production, which gives the costs of production to an economic character. But in one case it is assumed that society takes into account and reimburses in exchange, as a basis of value, the costs of natural, labor and capital resources, in another—that it reduces these costs exclusively to the expenditure of labor resources. Strict analysis shows that there is a level of abstraction on which this difference is not fundamental. One consequence of the theory of abstract balance systems is that the limited nature of any production resources, ultimately, can be reduced to the limited nature of a single resource (Gaysin RS, Svetlov NM, 2014). This fully applies to working time, whose special role in a number of economic benefits is beyond doubt: this is the only benefit that is indispensable for the implementation of any technological process and, therefore, to meet any need of society. In this aspect working time is not fundamentally replaceable: if you meet the specified set of requirements, you can talk about the release of some of its number due to the availability of another resource, but, unlike other resources, it cannot be completely replaced by other resources either in one production process. On the contrary, the limited nature and capital (means of production) of resources can be overcome to a certain extent if there are sufficient resources (in terms of quantity and quality) of working time. Consequently, labor resources can be recognized as the ultimate limiting of production in society. That is why the assertion of the classics that the ultimate measure of the wealth of society is labor is not lost its significance. CONCLUSION The classical theory of value and the neoclassical theory of value, as can be seen from the foregoing, are strictly derived from the same theoretical assumptions and mutually enrich each other. The in-depth understanding of price and value, achieved through such unity, makes it possible to treat value as an expression of the dynamic correlative balance between the needs and production capacities of society in relation to a given commodity, while the market price is viewed as an expression of the dynamic balance

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between demand and offer. On the market the movement of value reflects the change in the ratio between the levels of supply and demand, and the movement of prices is the change in the quantities of demand and supply. This distinction clarifies the relationship between price and value at both the essential and functional levels. Price is one of the elements of the essence of value itself. Since the formation of value occurs on the market in the process of making transactions, the concept of “value” is not without the concept of “price,” just as there is no concept of “value” without the concept of “exchange value.” Labor becomes a substation of value only on condition of its social realization (recognition, accounting, compensation by society) through the market mechanism of the price. On the other hand, price, that is, a certain quantitative expression of the equilibrium between supply and demand, receives not a conditional, accounting, but a real economic content only insofar as it corresponds to a real equilibrium between the needs and production capacities of society, that is, expresses a certain social value goods. Functionally, a change in value causes a price change directly. The reverse effect of changes in price can lead to a change in value only indirectly, through changing the needs of society (but not the magnitude of demand) or the economic opportunities of society (but not the magnitude of supply). Neoclassicists argue that the limited nature of natural resources (for example, land) in comparison with others raises the price of the corresponding product, as it increases its marginal utility. Marx explains that the high price is due to the high market value, because the limited resources force the society to allocate more socially necessary labor to this product. As a result, this utility is estimated by a higher labor equivalent. In both cases, there is an increased appreciation of the utility by the society due to the limited nature of its sources: in one case, the evaluation of immediate utility in monetary terms, in another—the evaluation of its production in labor equivalent. It is in this way that the paradox of growing value and market price is resolved with increasing labor productivity. The thesis that in equilibrium the marginal utility is equal to the marginal cost, from the point of view of the concept of value as a correlative equilibrium value balancing the social needs and production capacities of society, acquires a deeper meaning. Ultimate costs express, in the final analysis, not only the subjective usefulness of the benefits spent in the production process, but also the objective full resource intensity in the prevailing technological and social conditions of social production, which is quantitatively expressed in terms of the full costs of working time (as well as in full costs any other limited resource, and in the time of the functioning of the economy as a whole). Ultimately, the value, quantitatively defined as the corresponding amount of the expenditures of socially necessary labor time, is objective,

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given by society through production and the market by a measure of public utility, and the notion of marginal utility deepens the understanding of value as a public evaluation of a given utility from the point of view of the total social expenditure of labor. Cost is not actually invested labor in a given utility, but its evaluation from the point of view of social labor, an estimate in labor equivalent. The theory of abstract balance systems, in which the contradiction between the labor theory of value and the theory of factors of production is fundamentally resolved, makes it possible deductively to deduce a quantitative relationship between the total costs of working time and equilibrium prices from neoclassical assumptions, thereby confirming the objective causal the relationship between the cost in its understanding of the economists of the classical school and market prices (Gaysin R.S., Svetlov N.M., 2014). However, the research potential of the theory of balance systems is not exhausted by this. The Achilles heel of the mathematical form proposed by L. Valras for the analysis of competitive equilibrium, on the basis of which the mathematical apparatus of the neoclassical theory of value was subsequently developed, is an abstraction from the mutual influence of production on social needs and social needs on the possibilities of production. The form of the balance system overcomes this gap and allows us to show mathematically how the balance of the needs and production capacities of the society is achieved in the economy, why this balance is characterized by correlative rather than absolute values of ​​ value, formulating the conditions and limits of market self-regulation of the economy more accurately than is achieved in the framework of the neoclassical approach (Gaysin R.S., Svetlov N.M., 2014). REFERENCES 1. Gaysin, R. S., & Svetlov, N. M. (2014). Stoimost’ i tsennost’: puti sinteza klassicheskoy i neoklassicheskoy teoriy [Cost and value [proposed translation: cost and value]]: ways of synthesis of classical and neoclassical theories]. Philosophy of the economy, No. 5. P. 102–124 . (in Russian). 2. Marx, K. Kapital [Capital. T. 1] / Marx K., Engels F. Works. t.23. Second edition Moscow: Publishing house of political literature, 1955–1974. (in Russian). 3. Marx, K. Kapital [Capital. T. 3. part 1] / / Marx K., Engels F. Works. T. 25, part 2. The second edition. Moscow: Publishing house of political literature, 1955–1974. (in Russian). 4. Marshall, A. (1993). Printsipy ekonomicheskoy nauki [Principles of economic science]. T. 2. Moscow. (in Russian).

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CHAPTER 33

DIGITAL ECONOMY A Marxist View of the Present and Future Larisa A. Chaldaeva Financial University under the Government of Russia, Moscow

The issues of the possibilities of introducing and using the digital economy are present in economic literature and practice. In this respect, the urgency of this issue is progressing not only because of the need to improve the efficiency of industrial production, but also attention to the theoretical foundations laid down in the writings of Karl Marx, who turned 200 years old. Following the teachings of Karl Marx, we note that the driving force of social progress is the economy and the practical implementation of its orientation in social production. Attention to this concept is reflected in this fundamental works, including in the publication “Capital. Criticism of political economy.” The order of the Government of the Russian Federation of July 28, 2017 No.1632-r “On the approval of the program “Digital Economy of the Russian Federation” [1] defined the objectives and tasks for creating conditions

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for the development of the digital economy, which is the main factor in production, providing economic growth and national sovereignty countries. Digital economy in the modern sense is such a way of realizing the process of production and rendering of services, in which information exchange and implementation of managerial decisions and carried out using telecommunication and electronic computers equipped with special software and algorithmic support. To solve the set tasks it is possible on the basis of a three-level program that allows using digital technologies: 1. the formation of an environment that will create conditions for the development of the industrial-production complex, of real- production industries, and then the life activity of the state; 2. creation of platforms and technologies allowing to develop the competence of creative activity; 3. activation of the functioning of markets and industries. And then the question arises as to how to harmonize the levels of digital technology and what are the directions can be proposed: 1. Regulatory and legal direction, which involves –– creation of legal bases for formation of a single digital environment; –– formation of legal conditions for protecting the interests of consumers; –– standardization of the format of interaction of economic entities. 2. Infrastructural direction, which forms –– providing access to the communication network—the Internet (including broadband and 5G format) throughout the country; –– providing all kinds of economic activities with the possibility of wireless data transmission, necessary for the development of modern intellectual, logistics and transport communications; –– integration into the domestic digital platform for the collection, processing, storage and dissemination of data, remote sensing of the Earth, for the account of mineral deposits, as part of the Digital Earth project. 3. Information security, which is necessary for –– sustainable and safe operation of information systems and technologies; –– technological independence and security of operation of hardware and data processing infrastructure; –– compliance with the legal regime of machine-to-machine interaction for cyberphysical systems, machine and cognitive interfaces;

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–– forming a “trusted environment” that ensures collective information security of economic entities and management bodies. However, the implementation of these directions of economic development is accompanied by social responsibility, the manifestation of which is already becoming topical, as with the introduction of new technological processes and new ways of manufacturing products, with the appropriate organization, mechanization and automation of production, the main problem is the provision of sufficient employment a wide range of specialities and professions. Consequently, with the acceleration of the introduction of the achievements of the digital economy, there is a need to maintain social stability in society. As a result, the success of the implementation of the digital economy will be ensured by the appropriate regulatory and legal basis, the results of infrastructure support, information security and social protection of the population on the basis of innovative resources. The need to switch to the digital economy and, based on it, to the development of the modern economy is also due to the fact that, although there is an increase in macroeconomic indicators that occured in difficult conditions of increasing economic pressure from foreign countries, the inertia of industrial production, in development of skills, a weak relationship between science, education and business, the stratification of society. The digital economy can contribute to changing this situation, as a factor in the growth of labor productivity, and, accordingly, material interest. In the conditions of economic reorganization, the formation of the information society and the transition to the digital economy, such an economic category as labor employment, and, consequently, the corresponding remuneration become even more ugent. All this will have an impact on supply and demand in the labor market, acquiring a special character, both positive and negative. One on the hand, the digital economy will form the need for highly qualified specialists, and on the other hand, the replacement of hired workers by products of the digital economy contributes to the growth of social tension. The solution of this situation is possible only through the re-profiling of obsolete production facilities, changes in educational processes, design and transition to new educational areas, which undoubtedly will affect pay as an economic category. At the same time, the fundamental principles of the organization will undoubtedly remain, supporting the following functions, namely, reproductive , stimulating and distributive. An addition, wages are peculiar object of regulation, in particular from the state in the form of a system of social partnership, providing for the conclusion of collective contracts and agreements in accordance with labor legislation. At the same time, it should be noted that in the digital economy, the importance of labor cost accounting systems will also increase, contributing to

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the improvement of labor costs, the growth of the labor productivity, affecting the technical, technological, financial, economic and social function of the production process. The result of the work done in this direction is the conclusion that in those industries where the system of rationing has the character of special attention on the part of engineering and technical personnel and enterprise management bodies, there is a significant reduction in production costs, an increase in labor productivity, and, as a result, an increase in profit and competitiveness. Such results are achieved by the fact that raitioning is based both on the technical component of production, but also on factors such as ergonomics, physiology, hygiene and sanitation, psychology, sociology and skill level. And, nevertheless, technical changes in production, the use of digital technologies will have an impact not only on the organization of production, working conditions, renewal of the range and quality of products, but also on the process of rationing, but also on improving the structure of working time. Since in this case the time of preparatory-final operations and the main (technological) time, the time of performing auxiliary operations and servicing the workplace are taken into account. Also draws attention and auxiliary time, as an essential characteristic of time spent on labor operations, providing opportunities to achieve the main goal—the production of quality products. However, one should also take into account the fact that operations can be performed both by machine, and, by machine-manual, and by hand, and therefore, in the time limit for manufacturing the product, only a part of the auxiliary time that is not an overlapping machine time should be taken into account, otherwise it may distort the structure of the norms of time and lead to an overestimation of labor costs. Consequently, it is rational to organize the labor process and ensure the validity of labor standards only on the bases of scientific research and the digital economy, and the regulation of labor will continue to play an important role the organizing the production process in the digital economy. In conclusion, we note that the digital economy and digital technologies are surely penetrating into all sectors and spheres of activity, which will require the introduction of digital technologies based on the standardization of production operation, automation of production, ensuring the employment of the population, retraining and advanced training, the labor intensive program and introduction of digital technologies in the real sector of production. REFERENCES 1. Order of the Government of the Russian Federation of July 28, 2017 No.1632-r “On the approval of the program “Digital Economy of the Russian Federation”

Digital Economy    399 2. “On Strategic Planning in the Russian Federation” Federal Law No. 172-FZ of June 28, 2014 (as amended on July 3, 2016) 3. Presidential Decree No.203 of May 9,2017 “On the Strategy for the Development of the Information Society in the Russian Federation for 2017–2030” 4. Independent expert report “Modernization of the economy as the construction of a new state.” http://www.apn.ru/publications/article22100.htm 5. Chaldaeva, L. A. Riski tsifrovoy ekonomki: realii nastoyashchego i perspektivy budushchego [The risks of digital economy: the realities of the present and perspectives of the future]. Applied scientific research. Digest of articles. [email protected], [email protected]—M.: Publishing House «Victoria+», 2018, pp. 144–147 (in Russ.). 6. Chaldaeva, L. A. TSifrovaya ekonomika: vchera segodnya, zavtra [Rossiya: tendentsii i perspektivy razvitiya.]. Rossiyskaya akademiya nauk.—M.: Rossiyskiy ekonomicheskiy universitet im. G.V. Plekhanova, 2018, p.p. 438–440 (in Russian). 7. Chaldaeva, L. A. Sovremennyye tsifrovyye tekhnologii effektivnogo predprinimatel’stva: riski i posledstviya [Modern digital technologies of efficient entrepreneurship: risks and consequences]. Theory and practice of entrepreneurship development: modern concepts, digital technologies and effective system.–M.: Publishing and Trading Corporation “Dashkov and Co.,” 2018, pp. 394–398 (in Russian).

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CHAPTER 34

DIALECTICS OF THE FINANCIAL MARKET CATEGORY IN THE RUSSIAN ECONOMIC SCIENCE From the Marx Era to the Digital Economy Irina Guseva Financial University under the Government of the Russian Federation, Moscow Elena Kulikova Financial University under the Government of the Russian Federation, Moscow Boris Rubtsov Financial University under the Government of the Russian Federation, Moscow; Institute of International Economy and International Relations (IMEMO), Moscow

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KARL MARX ABOUT THE CAPITAL MARKET In a market economy there is a market of goods and services, a market of labor, and a capital market (or a financial one). This classification depends on different roles of one or another market in the process of reproduction. In analyzing the capital K. Marx distinguishes three forms: productive, commodity and monetary. The money applied to purchase the means of production and to hire labor force is not just money, but the capital in a monetary form. The operation of capital in a productive form sets a new value, including surplus one in the production process. A partial surplus value is paid as use-of-loan capital interest. The interest acts as a converted capital price. K. Marx also used the concept of a “fictitious capital” hereby he meant the capital represented by securities in contrast to the “real” one applied in the process of reproduction. In particular, in the third volume of “Capital” K. Marx writes about the government debt as a fictitious capital: “. . . whenever the capital the offspring (interest) hereof is considered to be government payments remains delusive, fictitious one . . .  This amount has never been designed to be spent or invested as a capital, and meanwhile to be applied only as a capital could turn it into selfpreserving value” (Marx K. Capital. Vol. 25, part 2, P.4). At the same time, K. Marx noted a positive role of fictitious capital circulation in the process of reproduction, since securities are liquid, and, in particular, during a crisis the capital quickly flows to more entrepreneurial capitalists. As for the fall of purely fictitious capital (government interest-bearing securities, equities, etc.) where it doesn’t lead to the bankruptcy of the government and joint-stock companies and doesn’t slow down the reproduction in general, undermining the credit of capitalists owning similar securities, it is only a transfer of wealth from one to another; it has a favorable effect on reproduction because those who purchase these stocks or securities at cheap prices are more entrepreneurial than former owners. (Marx K. . Vol. 26, Part 2, P.552)

K. Marx pointed out an importance of joint-stock ownership, since an establishment hereof caused “. . . a tremendous expansion of industrial scale and the emergence of enterprises that were impossible for individual capital” (Marx K. Capital. Vol.3, Part 2, P. 479). In the article “British trade and finance,” K. Marx writes about joint-stock companies as institutions “rapidly growing influence hereof on the national economy of countries may hardly be overestimated” and describes them as “a powerful lever in the development of productive forces” (Marx K. Vol. 12, PP. 588–589). Thus, in Marx’ opinion the capital market is represented by the market of loan capital and fictitious capital, i.e., a securities market.

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SOVIET ECONOMIC SCIENCE ABOUT A FINANCIAL MARKET In a socialist economy the financial market as an integral phenomenon hadn’t existed (although some elements hereof had existed), therefore it hadn’t been virtually studied in Soviet economics and the term “financial market” had been rarely used. So, “Economic Encyclopedia” (Economic Encyclopedia. Political Economy. vol. 3, 1979, P. 526) in the article on the market of loan capital considers the latter as an area of creation of supply and demand for loan capital consisting of short-term loan market and long-term loan one. A short-term loan market is a money market where commercial and treasury bills are bought and sold. It is a market of long-term (money) loan and a market of fictitious capital (the equities and bond market of private enterprises and the bond market of central and local government authorities). In the above approach, the market of fictitious capital is actually identified with one of the securities’ market segments, i.e., the market of issuegrade securities (if we use modern Russian legal terminology). Indeed, through the issue of such securities a capital flow takes place, but it is hardly right to classify the equities market as a long-term loan market from a methodological point of view. In addition to the loan capital market the encyclopedia contains the article “Foreign exchange market” considered as a “special area of economic relations under capitalism where transactions on purchase, sale, exchange of foreign currency and billing documents expressed in foreign currency (checks, bills of exchange, telegraph and postal money transfers, letters of credit) are made” (Economic Encyclopedia. Political Economy, vol. 1, 1972, P.223). In other encyclopedic edition of Soviet times loan market is divided into the capital market and bank acceptance market as well as Euromarket (international loan market with transactions made in eurocurrencies). The securities market is perceived as part of the loan market carrying out issue, purchase and sale of securities (Finance and Credit Dictionary. Vol.3 1988. P. 83). MODERN APPROACHES TO THE CONTENT OF THE “FINANCIAL MARKET” CATEGORY The transition of the Russian economy from a centrally-planned system to a market aroused attention to the financial market. In the 1990s a banking sector was established, in 1993 a formal market of government securities was launched, and since 1992 the currency has been traded at the Moscow

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Interbank Currency Exchange. In the process of privatization appear tens of thousands of joint stock companies. In the literature of the 90s the financial market is viewed as a whole complex of a money market and a capital one (Mirkin 1995, P.100). The money market is a market for debts up to 1 year, both in the form of credits and short-term securities. The capital market is a market of medium-term and long-term instruments: credits, bond issues, stocks. The securities market is classified from the standpoint of geography of capital flow into international, national, regional one (Mirkin., P. 109). At the turn of Millennium, the notion of “world financial market” is introduced into scientific discourse (Rubtsov, P.14). The development of Internet technologies has led to the full-time and instant crossing of national borders by capital. Thus, in the run-up to the crisis foreign capital flowed from the Russian government securities market through selling securities denominated in rubles and converting Russian rubles into US dollars (1998). The Russian securities market attempts to be integrated into the global financial space. First of all, it regards the establishment of infrastructure and formation of accounting for titles to securities. At the same time, approaches to the category of “financial market” are being transformed, and the best world experience, in particular, the approach of the European Union is taken as a basis. The EU principles and approaches were applied to establish the Eurasian Economic Union (Stock markets of the CIS countries, 2015. P.133). The financial market is actually identified with a financial area as a whole herefrom results the need to establish a uniform regulatory body for the entire market (mega-regulator). The central bank (the Bank of Russia) had become the mega-regulator in Russia. In the economic literature, the financial market became to be interpreted in two senses. In a qualified sense (restricted approach) the financial market is taken as a capital market. The broadside approach considers the financial market as a total of markets of financial assets, instruments, and services. In this paradigm the financial market consists of the banking services market, securities market, foreign exchange market, derivatives market, insurance market, and precious metals market (Stock markets of the CIS countries, 2015). A broadside approach to the “financial market” category reflects the objective processes in the world economy associated with the financialization of the economy. The inclusion of new segments in the financial market is also related to the formation hereof. The foreign exchange market as a holistic phenomenon was developed in the last third of the 20th century. Currency exchange had existed earlier, but had been carried out on the basis of the gold parity. The emergence of floating exchange rates required the formation of a market mechanism

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based on supply and demand. The significance and scale of the foreign exchange market had grown significantly. Since early ’70s of the 20th century the derivatives market has developed exponentially, turning into a global economic phenomenon. Derivatives had been used earlier (in Tulipmania times of Holland; since the 19th century at the US agricultural market). However, the increased importance of price risks and their new quality caused an objective demand and need for hedging. Volatility of energy markets became a factor of price risks in commodity markets, floating exchange rates increased currency risks, floating interest rates caused capital price volatility, and as a result, risks in the securities market increased. Riskiness of any economic activity became higher that entailed the appearance of complex, unconventional derivatives adapted to the needs of specific market participants. The insurance market is considered as a segment of the financial market as it provides a financial service. The range of insurable risks has been expanding, insurance products has become more complicated and has been combined with other financial instruments. For example, life investment insurance. Thus, the insurance market gets partially integrated into the capital market. Despite a tangible form of the precious metals, the market hereof has a dual nature. On the one hand, precious metals are the goods in the classical sense with their own use- and exchange-value consumed in industrial production. On the other hand, gold and silver are an embodied value. In the era of global instability of the monetary system due to the floating exchange rate regime, growth of speculative capital flows between countries, and debt of both many governments and private companies, interest in precious metals as a reserve value increases both on the part of central banks of countries and private investors. This situation affects the price of gold that rose from $250–400 per troy ounce in the 1990s to $1200–1300 in the current decade (and sometimes reached the point of $1900) (World Gold Council) TRANSFORMATION OF A FINANCIAL INTERMEDIARY INSTITUTION IN CONDITION OF THE DIGITAL ECONOMY The financial market as a capital market get developed at that historical period when commodity relations become universal and objects of trade (which are not commodity in fact) get a commodity form. The transformation of the medieval handicraft workshop into a large capitalist factory based on machine production is a result of an objective development of the productive forces. But that production requires huge initial costs that can’t be provided by individual capital not only due to amount, but also due to increased

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financial risks. Large-scale machine production objectively demands the formation of a capital market ensuring the centralization of individual capital and developing high financial flows from small financial sources. If we consider the financial market as a capital one, then tradable commodity won’t be money, but will be the capital in a monetary form, money as a self-increasing value. In the loan market a financial intermediary is a commercial bank that accumulates resources from deposits and issues commercial loans. Money as a commodity (a universal equivalent, a token of value) obtains a new usevalue herein, i.e., the ability to bring in surplus value, and it is this ability is the “utility” that the buyer of capital is ready to pay. The owner of the business where the surplus value is made shares with the owner of the capital. An averaging of the profit rates happens and the owner of capital receives interest as a converted value and price of capital. Since the source of the bank’s profit is a value generated in the production process, the bank is interested in the loan capital to be used for its intended purpose. Hence follow strict requirements to a loan debtor and control over the use of loan funds. As the banking business develops, the bank itself as a financial intermediary undergoes tremendous changes. Today it is a kind of banking supermarket that not only accepts deposits, grants credit and manages settlement accounts of customers, but also offers a wide range of other products and services to the market: issue and servive of bank cards, money transfers, private banking, on-line service, ATMs, formation of own securities portfolios, design of derivatives and structured products, operations at foreign exchange market, etc. Therefore, the riskiness of banking activities has increased significantly. The aim of the borrower to reduce the cost of raising capital by eliminating a financial intermediary (a commercial bank) and to address directly investors leads to the development of the securities market. The circulation of capital receives a new form hiding the essence of the phenomenon. It is given the appearance that securities are being sold, and bargain between the seller-issuer and the buyer-investor is about the price of the security. However, actually we see a purchase and sale of capital, which is mediated by a sale/purchase of a security. If money is a converted form, a token of value, then the securities are a converted form, a token of capital. That’s why K. Marx called capital represented by securities a fictitious one. In contrast with illiquid bank loans, securities are a liquid commodity (with own use-value and exchange-value) traded at a special market. The use-value of securities is that they present a title to income. So, a share is a title to income, a debt claim for future production, a certificate on revenue. Since this income is capitalized and thus it is determined the

Dialectics of the Financial Market Category in the Russian Economic Science    407 price of a share, it seems as if there is a second capital in the form of a share price. But it is purely fictitious. Indeed, there is only an industrial capital and the profit herefrom. However, this doesn’t prevent the fact that the fictitious “capital” is existed as an object of calculation and is referred to as “share capital.” Really, it is not the capital, but simply the price of income; the price which possibility is determined by that any money in a capitalist society produces income and therefore, on the contrary, any income is fruits of money. (Hilferding, P. 52)

The price of securities depends on many forces, including random ones, also rumors, price manipulation, and use of insider information. The price of capital raised under securities is converted into the price of income, the title hereto is given by them. It is quite obvious at the secondary market the volume hereof exceeds manifold the volume of the primary one. On the latter an offering price is settled by thorough expertise in terms of fundamental analysis and independent evaluation. In the secondary market, the price is formed on the current supply-and-demand balance, the current behavior not only in a particular market, but also in other ones under the influence of the international market behavior. The “price of income” in the form of the securities price had been withdrawn from its basis as a “capital price.” On the securities market, the main financial intermediary is an investment bank, a financial institution that provides all types of services on issue and circulation of securities. If a commercial bank is a financial intermediary of old type that is personally liable for fulfilling obligations to its creditors (depositors), then an investment bank is a financial intermediary of new type that is not personally liable for fulfilling obligations to creditors (investors). The main function of the investment bank is an arrangement of the issue and placement of an issuing client’s securities, and income is generated as an interest of funds raised for the issuing client. The investment bank is responsible for the compliance of the securities’ issue with the law and for disclosure of information by the issuing client, but the latter is responsible for the fulfillment of obligations. The economic interest of an investment bank is the placement of securities at the highest possible price (a commission fee depends on it). The investment bank acts as a creative financial engineer who is interested in introducing financial innovations. They make it possible to produce new financial items that are attractive to customers (both issuers and, in a broad sense, investors). An investment bank as an intermediary in the securities’ market undertakes increased risks. One of the reasons of devastating financial crisis in 2008 is the activities of investment banks as financial engineers designing and placing high-risk securities at the market.

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An investment bank in the capital market doesn’t displace a commercial bank, but fills a new niche, i.e., an intermediary at the market of financial instruments giving the title to income. Buyers and sellers of securities are ready to undertake increased risks in the pursuit of higher profits that are indirectly related to the production process where it’s generated. The securities market not only gives an opportunity to raise capital more cheaply, but also quickly and without significant transaction costs to transfer claims at the secondary market of securities. Thus, the capital market is supplemented with a secondary market that doesn’t give direct benefits to issuers, but makes their securities more attractive when placing by their liquidity. There is a trend in terms hereof “the money supply was no longer determined by the needs of commodity-money circulation, but by the opportunities of raising temporary money capital to ensure the process of accumulation and expansion of capital” (Buzgalin, 2016). FORCES AFFECTING A FINANCIAL MARKET The forces with the most substantial impact on changing an economic space and financial markets are as follows: Pushing the limits of capital caused by the credit system (Buzgalin, 2016). This is evidenced by an increasing scale of the financial market and growing influence of financial capital on the circulation of industrial one. Digital technologies change the structure of financial intermediation when capital raising as they allow counterparties to cooperate directly. An example may serve a new way to attract capital, i.e., crowdfunding. Turnover in this segment increased from $2.7 billion in 2012 to $34.4 billion in 2015 (https://www.statista.com/statistics/620952/total-crowdfunding-volume-worldwide/). However, if the first projects really had insignificant transaction costs, the development of crowdfunding inevitably results in an establishment of specialized digital business platforms that operate on the principle of profit maximization. In fact, this is a fundamentally different intermediary. Crowdfunding may be viewed as a new segment of the capital market where a direct investor interested in the implementation of a specific project co-finances it. The change in the nature of the product. Goods that are not destroyed in the course of consumption are being more in demand, moreover, their value may increase in consumption (cultural goods, intellectual products). A special place in the economy is currently held by simulacra goods that are attractive not by their actual quality, but an inherent significance (fashion, public opinion, etc.) (Baudrillard, 2013). Social labor and management. The high level of government ownership in the Russian economy and the “nature of the existing quasi-market

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structure blocking competitive relations in this area” (Kulikova, 2011) exhibits their inefficiency. This determines an economic tendency to get free of the direct impact of the regulator. Organizationally, what stands out is innovations such as holacracy (refusal of a strict corporate structure), participatory budgeting (partial distribution of the municipal budget by city residents who decide themselves on what and how to spend the money). Russia implements experimental similar projects in Cherepovets, Sosnovy Bor (the Leningrad Region). The impact of digital technologies on the economy that entails “a significant part of the economy to get beyond the direct control of the monetary regulator” (Buzgalin, 2016). The period of striking development of digital technologies experienced by humanity is featured by a speculative promotion, corporate foundation using the Internet. There are new tools and substitutes, in particular, cryptocurrency. A cryptocurrency is not a substitute of money as a recognized commodity-equivalent in a certain country, but a substitute of a financial asset issued by a private person. K. Marx’ classical approach to the analysis of a commodity as a unity of use- and exchange-value allows us to conclude that, on the one hand, the use-value of cryptocurrency and its utility to the buyer is an anonymous nature, and on the other hand, is an opportunity to get speculative income from resale. This pattern reminds of a financial pyramid. A person issuing a cryptocurrency attracts real money, but the method of using raised funds is hidden from the investor that poses high financial risks. On closer analysis, the issue of cryptocurrency is similar to the issue of corporate securities. The influence of digital technologies on the economy is a consequence of the objective global change of the world. All elements of the economic system are transformed, economic categories are filled with new content that makes necessary improvement of the definitions of “financial markets” category. * * * A century and a half ago K. Marx laid the foundations for the theory of the financial markets operation that had served as a basis for the development of the corresponding branch of learning in the USSR and in the countries of the “world socialist system” for many decades. The provisions that were true in the 19st century became a dogma that resulted in an isolation of Soviet economic science (to a great extent) from the world one. 1990s brought changes and Marx was forgotten. Meanwhile, many Marx’ conclusions as well as ones of any genius thinkert are still topical. It’s no coincidence that there was a growing interest in his creative legacy at late 2000s when the world economy dealt with a devastating crisis entitled in the literature as the Great Recession.

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REFERENCES 1. Marx, K. Kapital. T. 3. [Das Kapital] K. Marx i F. Engels. Soch., t.25, ch.2. Izdaniye vtoroye. M., Izda-tel’stvo politicheskoy literatury. M., 1962, p. 551. (in Russian). 2. Marx, K. Teorii pribavochnoy stoimosti [The Theories of Surlus Value]. K. Marx i F. Engels Soch. t. 26, ch.2, p. 552 (in Russian). 3. Marx, K. Britanskaya torgovlya i finansy [The British Trade and Finances] K. Marx i F. Engels. Soch., Soch. t. 12, pp. 588–589. (in Russian). 4. Bodriyyar, J. Simulyakry i simulyatsiya [Simulacrums and Simulation] /– perevod O.A. Pechenkina.—Tula, 2013.—240 p. (in Russian). 5. Buzgalin A. V. «Kapital»–XXI. Prolegomeny [The Capital—XXI. Prolegomenas] // Al’ternativy. 2016. No. 2(91), pp. 8–42 (in Russian). 6. Gil’ferding R. Finansovyy kapital [The Financial Capital]. M, 1959, 493 p. (in Russian). 7. Guseva, I. A. Finansovyye rynki i instituty [The Financial Markets and Institutions].—M. : Izda-tel’stvo YUrayt.—247 p . (in Russian). 8. Fondovyye rynki stran SNG: sostoyaniye i perspektivy integratsii [The Securities Markets in the CIS Countries: Present State and Prospects of Integration]/ I.A. Guseva, M.M. Kudinova, P.Y. Malyshev, B.B. Rubtsov, A.P. Chigrinskaya, E.I. Yuldasheva ; pod red. B.B. Rubtsova.—M. : Izdatel’stvo «Ru-Science», 2015, 192 p. (in Russian). 9. Kulikova E.I. O gosudarstvennom regulirovanii rossiyskogo rynka tsennykh bumag [On the State Regulation of the Russian Securities Market]// Finansy. 2011. No. 7. pp. 72–75 (in Russian). 10. Mirkin, Y. M. Tsennyye bumagi i fondovyy rynok [The Securities and Securities Market]. M., izda-tel’stvo «Perspektiva», 1995, 532 p. (in Russian). 11. Rubtsov, B. B. Mirovyye rynki tsennykh bumag [The World Securities Market]. M.: Ekzamen, 2002, 448 p. (in Russian). 12. Finansovo-kreditnyy slovar’ [Finance and Credit Dictionary]: V 3-kh t. T.3/Gl. red. N.V. Garetovskiy. M, «Finansy i statistika», 1988, 511 p. (in Russian). 13. Ekonomicheskaya entsiklopediya. Politicheskaya ekonomiya. V chetyrekh tomakh [Economic Encyclopaedia. The Political Economy]. Gl. red. A.M. Rumyantsev. M, «Sovetskaya entsiklopediya», t. 1. 1972, 560 p. (in Russian). 14. Ekonomicheskaya entsiklopediya. Politicheskaya ekonomiya [Economic Encyclopaedia. The Political Economy]. V chetyrekh tomakh. Gl. red. A.M. Rumyantsev. –M.: «Sovetskaya entsiklopediya», t. 3, 1979, 624 p. (in Russian). 15. World Gold Council https://www.gold.org/data/gold-price 16. https://www.statista.com/statistics/620952/total-crowdfunding-volume -worldwide/

CHAPTER 35

MARXISM AND DIGITAL MONEY AS A NEW REALITY OF SOCIAL AND ECONOMIC SYSTEM Marina Abramova Financial University under the Government of the Russian Federation, Moscow Svetlana Dubova Financial University under the Government of the Russian Federation, Moscow Svetlana Krivoruchko Financial University under the Government of the Russian Federation, Moscow

The emergence in the last decade of new financial products and processes, primarily based on distributed registry technology (blockchain), the rapid growth of the electronic money market, first of all, Bitcoin, the entry of

Marx and Modernity, pages 411–421 Copyright © 2019 by Information Age Publishing All rights of reproduction in any form reserved.

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companies that attract investment resources through the ICO mechanism, require their understanding as an economic phenomenon, dictate the need for legislative support for their regulation and implementation in economic life, its use by civil society. The emergence and rapid development of financial innovations breaks down barriers to entry into the financial services market and stimulates the emergence of new business models from existing financial market participants, and also leads to the appearance of new entrants in this market. In this regard, actual monitoring of the use of digital money with the study of models of their adaptation to Russian conditions is in demand, in order, on the one hand, not to destroy their distribution under the influence of strict regulation, gently integrate the most promising ones, taking into account the possible consequences for market participants, and on the other hand—to protect the financial market from threats that new financial technologies carry, taking into account their anonymity, the possibility of financing terrorism and obtaining illegal income, to avoid the appearance of bubbles on their basis, to protect the interests of financial services consumers. The emergence and development of digital money, an assessment of the prospects for their use should be considered from an economic and legal point of view. The “success” of using digital money in terms of economic benefits, the safety of users and investors is achieved only if the economic nature of the concept (category) does not contradict its legal status. THE MAIN PART Consideration of the economic nature of digital money is impossible without addressing the issue of the evolution of money and the debatable problems of determining its essence. In the daily practical use of money, we think little about theoretical, fundamental questions of money. Understanding money as a scientific category does not occur immediately, because externally it acts as a market phenomenon, as “an object of sensual contemplation, as opposed to its essential basis—noumenon (as an object of intellectual contemplation.” [National Philosophical Encyclopedia] It is achieved on the basis of the intellectual perception of money as an economic category, associated with the category of “money” in its highest degree of abstraction, i.e., when ignoring all the specific forms and types in which it (money) functions (i.e., in contrast to the perception of money as a phenomenon of the market). K. Marx brilliantly highlighted in “Capital”: money is “a social production relation, but in the form of a natural thing with certain properties” [Marx, 21]. The question of the nature of money is still a subject of debates in the economic research. But with all the variety of interpretations of money, in our

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opinion, the Marxist, reproduction approach to the emergence of money, the evolution of its forms and types, the revelation of its essence remains true. It is the reproduction approach that makes it possible to assert that the emergence of new forms and types of money, new tools with the help of which payments are made when transferring value from ​​ one person to another does not change the essence of money considered as noumenon. Nowadays, people talk and write a lot about digital money as a truly “new reality.” At the same time, there is a need for an ostensive definition of this “new reality,” i.e., explicit indication of the defined object or phenomenon. An attempt to define digital money ostensibly, in our opinion, is connected to defining the concept of money in terms of institutional theory. Institutions in this case are referred to as certain formal (enshrined in the norms of law) and informal (generally accepted) regulations or behavioral stereotypes containing information about collectively adopted rational decisions. Institutions that have the cognitive property, i.e., abilities to mentally perceive and process external information can be formed initially on an informal basis in the form of an agreement between people (and this is fair in relation to the emergence of digital money in the market), but later, if they acquire mass character and prove their rationality, they, as a rule, are fixed in a formalized form, acquiring the status of formal regulations and stereotypes of behavior [Abramova, 130–133]. Let us further highlight that the Austrian economic school laid the foundation of the institutional theory of money. Developing the ideas of the Austrian economic school, J.H. de Soto in his book “Money, Bank Credit, and Economic Cycles” writes that “money is a spontaneously emerging institution, . . . that arises in an evolutionary way” . . . [Soto, 561]. As a result of social development, through trial and error, it is those institutions that better fulfill their functions that begin to dominate. Institutions that ensure progressive social development are formed and developed as a result of a spontaneous evolution. Acknowledging that the construction of money as an institution is logically correct, it should be noted that the formation of both informal and formal money institutions is based on the development of economic relations. Money cannot appear as an informal institution (and it is appropriate to consider digital money in the indicated manner) without forming a certain level of economic relations. We believe that the emergence of digital money is conditioned by the process of technological development, which is a part of the overall economic development of the socio-economic system. With the beginning of the process of “digitalization,” we are witnessing the following stages in the formation of ideas about digital money, each of which is caused by changes in the institutional elements of the mechanism of their turnover, namely:

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1. The stage of emergence of digital money circulation systems—the appearance of network communities using cryptocurrency exchange on a digital technology platform. 2. The stage of awareness of the problems of digital money is characterized by the awareness of central banks of the “legislative” risks associated with the spread of digital technologies in the financial sector of the economy. 3. The stage of establishment of the normative framework of the operation of digital money—this is the stage that countries, which, including Russia, are mostly undergoing today. At the same time, it should be acknowledged that currently the lack of a unified interpretation, of a meaningful and possessing a legal basis content of the concepts of digital money in combination with its active use, hinders the development of adequate regulatory frameworks for its application in modern economy, which can provoke a number of macro- and micro level risks. In our opinion, these issues should also be regulated within the framework of what is known as the Digital Agenda of the Eurasian Economic Union.1 Questions about the relationship between concepts such as digital money and digital currencies, electronic and digital money also remain open. To begin with, it should be noted that the legal definition of the word “money” is not equivalent to the concept of “currency,” which is always formalized in law, is used most often in relation to the economic meaning of the concept “national currency” and is perceived as the legally considered monetary unit of a given state. Furthermore, the following question arises: is digital money the new technological feature of electronic money or an independent type of money? In this regard, it is possible to give an interpretation that can be found in the materials of the Central Bank of Russia (Figure 35.1). According to Figure 35.1, digital money is nowadays a subset of digital currencies that is reasonably well developed and is at the stage of development of the regulatory operation framework. In this sense, cryptocurrencies are different from electronic money, which offers a mechanism for transferring fiduciary money through digital technologies. In other words, they allow electronic transfer of money that has the status of a legal tender in any country or jurisdiction. In general practice, cryptocurrencies are not equal to fiat money (and to electronic money). The authors of the study believe that several approaches to the concept of electronic money can be used: 1. e-money in the narrow sense (classic electronic money). In the framework of the European Directive 2009/110/EC, it includes

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Figure 35.1  Digital currencies. Source: Overview on Cryptocurrencies, ICO (INITIAL COIN OFFERING) and Approaches to Their Regulation. December 2017 [Electronic resource]. Retrieved from http://www.cbr.ru/Content/Document/ File/36009/rev_ICO.pdf (Date of access 28.09.2018)

stored money in electronic form, including on magnetic carriers, presented in the form of requirements to the issuer of value in monetary terms, emitted upon receipt of funds for payment transactions and accepted by physical or legal persons other than the e-money issuer.2 In the framework of the Federal Law of Russia of June 27, 2011 “On the National Payment System,” it is money that was previously provided by one person (the person who gave the money) to another person who takes into account information about the amount of money provided without opening a bank account (a person under obligation), to fulfill the monetary obligations of the person who provided the funds, to third parties and in respect of which the person who provided the funds has the right to transfer orders exclusively using electronic means of payment. 2. electronic money in a broader sense (digital money). In this case, electronic currencies include virtual currencies, first of all, cryptocurrencies, the circulation of which executed exclusively in electronic form with extensive use of cryptographic technologies. 3. electronic money in a broad sense. In this scenario, electronic money includes all types of money, the turnover of which is happening through an electronic mechanism. In particular, electronic money in a broad sense, in addition to digital money, includes noncash money in bank accounts, the circulation of which is carried out in electronic form [Krivoruchko, 68].

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It should be outlined that the explanation of the emergence and interpretation of virtual currencies, including cryptocurrencies, does not allow them to be used in the practice of economic circulation without being included in the “legal field.” At the same time, the emergence of the blockchain, which marked the creation of a system of decentralised data exchange, the formation of a distributed and secure database, digital transformation, the concept of the digital economy, changing the organisation’s capabilities, removes numerous services from the existing state control (electronic money and payments through mobile operators prior to the adoption of 161-FZ in Russia and other countries, and this is happening today through network communities that use cryptocurrencies). Under these conditions, the scientific discussion and theoretical frameworks on the formation of the legal field for the functioning of digital money at the state level, as well as the creation of a system of their state regulation, are of particular relevance. The authors highlight that in the Monetary and Financial Statistics Manual (IMF, 2000), which at present regulates the procedure for monetary statistics on the types of financial assets included in the broad money supply, it also includes along with the main ones, financial assets produced by other sectors (except depository corporations), as well as electronic money issued by units that are not depository corporations.3 Nowadays, there is no single approach to determining the nature of digital money both in different jurisdictions and within the same jurisdiction, which is also reflected in the absence of “closed” definitions of virtual currency. The existing set of definitions, within the same jurisdiction, in relation to various types of legal relations arising in connection with the turnover of virtual currencies, allows to refer to the latter as “private money,” means of payment, financial asset,4 product, property, property law, etc. The notions and definitions of cryptocurrency can now be found mainly in documents of international and national institutions of the financial sector that are of an informational nature. The regulation of foreign countries proceeds from the technological neutrality of the object of regulation—instead of the term “cryptocurrency”—the broader concept of “virtual currency” is used. At the same time, financial institutions tend to exclude restrictive language in the definition of virtual currencies, referring to a set of distinctive features inherent in them. The analysis revealed the following features of a cryptocurrency and its turnover, which are essential for determining its status: transactions are irrevocable and are carried out P2P (“peer to peer”); transaction information is publicly available; the circulation of cryptocurrency is decentralized; the finite number of currency is known in advance, and the creation of each new block is accompanied by the solution of an increasingly complex mathematical problem, which artificially limits the growth rate of the currency

Marxism and Digital Money as a New Reality of Social and Economic System     417

supply; in relation to cryptocurrency, there is no problem of limiting liquidity even in case of the output of its entire quantity; since the currency unit is divisible into smaller parts; cryptocurrency is no obligation, it is not secured, and its value is based only on the expectations of market players (that is, as long as it acts as an informal institution of money); cryptocurrencies are used by an unlimited number of persons for making transactions on the purchase and sale of goods and services, payment for work, as well as for investment purposes. The analysis showed that cryptocurrency performs its means of payment function based on its following properties: high liquidity, allowing it to be used as a means of circulation, payment and accumulation, the ability to create and transfer using advanced register technology information blocks (blockchain), the possibility of its use by an unlimited number of individuals when carrying out transactions. A distinctive feature of the Bitcoin turnover system is the absence of a re-emission mechanism that would allow one or other Bitcoins to be withdrawn from circulation. In this regard, it is impossible to re-issue defective bitcoins (for example, bitcoins received by addresses which are no longer accessible) in this system. The list of cryptocurrencies is quite wide, and for the purposes of their legislative consolidation, the entire totality of cryptocurrencies should be classified. The cryptocurrency category should be attributed to: 1. Cryptocurrencies used as a means of payment, a means of exchange, a means of savings, which are also used as an investment tool. Bitcoin, Bitcoin-cash, Eteherium, Litecoin, Ripple, Dash and others fully meet these characteristics. 2. Cryptocurrencies—tokens obtained as a result of ICO and used as a means of payment, a means of exchange, a means of savings and an investment tool. Waves, IOT, STRAT and other meet the specifications. 3. Cryptocurrencies and tokens that are not yet used as a means of payment, a means of exchange, a means of savings, which are not used as an investment tool (TRUMP-COIN etc.). It should be noted that this classification allows to categorise cryptocurrencies according to the degree of liquidity. Cryptocurrencies included in the first group have high liquidity, liquidity of cryptocurrencies—tokens are somewhat lower, and the latter group’s liquidity is the least of all considered. At the same time, one of the problems in the regulation of cryptocurrency turnover is their ability to act simultaneously in different qualities. So, tokens can also be used as a means of payment, circulation and accumulation, but at the same time (if the corresponding technologies are provided

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by the creator of the software product—and the use of these tokens as a stock and (or) bond, bill of exchange, sales receipt (and other) has spread (for example, as a result of ICO). By large, this phenomenon of “conflict of legal regimes” is associated with the development of new technologies and the search for new forms of legal relations from the market side (in the absence of strict regulation by the state). As stated above, cryptocurrencies as an informal institution appear at a certain level of economic and technological relations and appear on their basis. Strictly speaking, the state, as an aggregate economic entity, business entities and the population must come to realize the need to use cryptocurrencies in their activities, to realize the prospects for their use. Only if all participants in economic activity are aware of the possible ways and forms of using cryptocurrencies in circulation, the institutionalisation of cryptocurrencies will coincide with the understanding of them as an informal institution, for which it will be necessary to consolidate them as a formal institution. Otherwise (for example, if the state refuses to recognize cryptocurrencies), the role of money as an information guide will be distorted, the behavior of business entities, the population, their motivation will objectively violate the established norms and written regulations, i.e., in case of obtaining certain “benefits” from the use of a cryptocurrency, economic actors will still strive to use it. A decision can only be made if all participants in the economic activity are aware of the possible ways and forms of using cryptocurrencies in circulation. Only in this case, the institutionalisation of cryptocurrencies will coincide with the understanding of them as an informal institution, for which it will be necessary to consolidate them as a formal institution. RESEARCH METHOD It would be relevant to make a decision on the formalization of cryptocurrency based on the SWOT analysis. SWOT-analysis of the advantages and risks of using cryptocurrency in the monetary sphere revealed the following advantages (strengths) of cryptocurrency, its creation and transfer technologies, and the possibilities of using it at the level of micro- and macroeconomic processes in the national economy: cryptocurrencies are used by an unlimited number of persons for making transactions; it is defined as a means of circulation applied in a similar way to a fiat currency in certain communities; the finite number of cryptocurrency units is known in advance, and the creation of each new block is accompanied by the solution of an increasingly complex mathematical problem, which artificially limits the growth rate of cryptocurrency supply; performs the function of a means

Marxism and Digital Money as a New Reality of Social and Economic System     419

of payment based on its high liquidity, allowing it to be used as a means of circulation, payment and accumulation; there is no problem of limiting liquidity even in case of the output of its entire quantity; since the currency unit is divisible into smaller parts; it is created and transmitted using advanced information block registry technology (blockchain); the decentralized cryptocurrency turnover mechanism is controlled by equal participants of the peer-to-peer network, hence the independence from risks (including credit and liquidity risks); transparency of the turnover mechanism, all elements of which are under the control of a large number of independent actors; uninterrupted operation of the turnover mechanism, due to the low probability of simultaneous failure of all subjects; the adaptability of the turnover mechanism to changes in the external environment, due to the independence of the subjects of the mechanism in terms of changing their behavior under the influence of external factors; independence of the issue from political preferences and economic views of the subjects of the system, which allows to consistently adhere to the economic model embodied in the release algorithm; transparency of information about transactions and their volumes; transactions are made by P2P (“peer to peer”) and are irrevocable [Krivoruchko, 153]. The disadvantages (weaknesses) of cryptocurrency, technologies of its creation and transfer include the following: it has the status of a legal tender practically in no jurisdiction; does not have a full set of fiat currency attributes; there is no obligation, it is not secured, its value is based only on the expectations of market players to convert into other currencies or to exchange directly for goods and services; there are risks of state-free capital outflows; personal data of the parties to the transaction can be hidden, which makes it possible to use it for criminal purposes; transactions are carried out P2P (“peer to peer”—from client to client), which limits their widespread distribution, since participants must be assured of the good faith of the parties. CONCLUSION The revealed advantages (strengths) made it possible to formulate a number of opportunities that the national economy will receive, subject to the legalization of cryptocurrencies. For the state, these opportunities are as follows: stimulating the development of national jurisdiction, innovative technologies associated with the development of the cryptocurrency market (in particular, the use of blockchain technology in various industries); new investment attraction tool; source of income to the national budget from business activities related to cryptocurrency turnover and trade; sales to enterprises involved in the mining of virtual currencies, state services in

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the field of electric power industry; means of creating new jobs; potential state leadership in the use of new technologies in the financial sphere. For the public and business, the use of cryptocurrency carries the following possibilities: source of income formation in connection with the use of cryptocurrency (currently a means of circulation, payment and accumulation, investment), mining, participation and raising capital through ICO, operations on the stock exchange; new format of transfer of funds, which allows, due to the absence of banks as intermediaries, to significantly reduce the amount of transaction fees and increase their speed; ability to make payments with a significantly greater degree of confidentiality, rather than using fiat currencies; an integration with smart contracts and other technologies on the blockchain platform, as well as with the technologies of the Internet of Things creates new opportunities for business and the consumption of goods and services; exchange of virtual currencies for the currency of foreign countries that is not available for purchase in the national jurisdiction or by means of virtual currency can be acquired at a more favorable rate; mining activities as a way of self-employment of citizens. In addition to new opportunities for business and the public, the use of cryptocurrency carries significant risks. For the state in the use of cryptocurrencies, the following threats appear: the use for the purposes of money laundering (legalization) of proceeds from crime; use in financing terrorism and other criminal activities; fraudulent transactions for tax evasion; uncontrolled withdrawal of capital from the country; reputational risks as a jurisdiction with conditions for the development of the “shadow” sector of the economy and (or) not ensuring the security of doing business; in case of unbalanced regulation (in the absence of regulation, in case of rigid regulation), the departure of a promising business to the “shadow” sector of the economy or to other jurisdictions. In terms of threats to business and the public, the following aspects are highlighted: as a subject of exchange, accounting operations, a means of creating capital or acquiring capital, and also as an object of investment activity, they are risky in nature because they are not backed by real assets and are volatile, which means they can lead to losses; the possibility of involvement in criminal schemes due to the low level of financial literacy; legislative insecurity in the absence of legislative regulation as an object of investment in most countries, as well as the uncertainty of use as a means of calculations. NOTES 1. Digital Agenda of the EEU. [Electronic resource]. Mode of access: http:// digital.eaeunion.org/extranet/ (Date of access 28.09.2018)

Marxism and Digital Money as a New Reality of Social and Economic System     421 2. Directive of 16.09.2009.2009/110/EC “On the taking up, pursuit and prudential supervision of the business of electronic money institutions amending Directives” Federal law of 27.06.2011 “On the National Payment System” [Electronic resource]. Retrieved from http://www.consultant.ru/document/ cons_doc_LAW_115625/ (Date of access 28.09.2018) 3. Handbook of Monetary and Financial Statistics (IMF, 2000). [Electronic resource]. Retrieved from http://www.imf.org/external/pubs/ft/mfs/manual/rus/mfsmr.pdf (Access Date 28.09.2018) 4. The draft law “On Digital Financial Assets” [Electronic resource]. Retrieved from http://www.cbr.ru/Content/Document/File/36003/cfa_project.pdf (Date of access 28.09.2018)

REFERENCES 1. Natsional’naya filosofskaya entsiklopediya. [National Philosophical Encyclopedia] [Electronic resource]. Mode of access: /http://terme.ru/termin/noumen.html (Date of access 28.09.2018) (in Russian). 2. Marx, K. Kapital. K kritike politicheskoy ekonomii [Capital. A Contribution to the Critique of Political Economy] / Marx K., Engels F. Sobr. cit. 2nd ed .-M .: 1972.–V.13—805 p. (in Russian). 3. Abramova, M. Denezhno-kreditnyye faktory ekonomicheskogo rosta: osobennosti Rossii. Stat’ya v sbornike: Global’naya ekonomika v XXI veke: dialektika konfrontatsii i soli-darnosti. Sbornik nauchnykh trudov [Monetary factors of economic growth: Russia’s characteristics. Article in the collection: The Global Economy in the XXI Century: the Dialectic of Confrontation and Solidarity. Collection of scientific papers] / Ed. Sorokina D.E., Alpidovskoy M.L.– Krasnodar, 2017 (in Russian). 4. De Soto, J. H. Den’gi, bankovskiy kredit i ekonomicheskiye tsikly. / KH.-U. de Soto. M.: Sotsium [Money, Bank Credit, and Economic Cycles.] / J.H. de Soto. M .: Socium, 2008. (in Russian). 5. Krivoruchko, S. V. Mekhanizm oborota elektronnykh deneg: teoriya i praktika: monografiya / S.V. Krivoruchko, V.A. Lopatin, M.A. Abramova, I.e., SHaker.— M.: Izdatel’stvo “Rusayns,” [The Mechanism of Electronic Money Circulation: Theory and Practice: A Monograph / S.V. Krivoruchko, V.A. Lopatin, M.A. Abramova, I.e., Shaker–M.: Rusayns Publishing House], 2015. (in Russian). 6. Krivoruchko, S. V. Kriptovalyuty i podkhody k ikh regulirovaniyu [Cryptocurrencies and approaches to their regulation]. Financial Journal, 2018, no. 5, pp. 153–162 (in Russian).

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CHAPTER 36

THE ROLE OF THE PRICE FACTOR IN ENSURING THE GLOBAL COMPETITIVENESS OF CHINESE INDUSTRIAL GOODS Aleksei V. Bogoviz Federal State Budgetary Scientific Institution Julia V. Ragulina Federal State Budgetary Scientific Institution Svetlana V. Lobova Altai State University, Barnaul, Russia Alexander N. Alekseev Plekhanov Russian University of Economics Russia, Moscow

Marx and Modernity, pages 423–430 Copyright © 2019 by Information Age Publishing All rights of reproduction in any form reserved.

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The last global financial and economic crisis contributed to the transformation of the scientific and economic paradigm of the late 20th and early 21st centuries. The concept of “perfect” capitalism that prevailed before the crisis and the model of a pure market economy turned out to be unstable and in need of revision, or at least serious revision and adjustment, taking into account social factors. In this regard, in recent years, a number of trends have been launched in the world economic system, indicating increased attention of the world community to the social component of economic growth and development—the adoption of global sustainable development goals, the growth of corporate social and environmental responsibility, etc. These trends emphasize the global need for the development of a social market economy and indicate the relevance of the development of scientific and methodological substantiation of the process of harmonization of capitalist and socialist concepts and adaptation of Marxism to the modern conditions of business. It is noteworthy that the Chinese economy, which is developing along the alternative (in relation to capitalism)—Marxist-socialist—business model, has shown increase resistance to the global crisis. Therefore, the Chinese experience of adapting the market economy model to the socialist concept deserves in-depth scientific study. Particular interest of the modern economics and practice is the problem of ensuring the global competitiveness of a social market economy. The working hypothesis of this study is that the global competitiveness of Chinese industrial goods is based on the price factor (low prices). The purpose of this study is determining the role of the price factor in ensuring the global competitiveness of Chinese industrial goods and to identify prospects for using China’s experience in ensuring the competitiveness of the social market economy in other modern countries. MATERIALS AND METHOD As a result of a review of existing scientific literature, we found that in recent years, scientists from different countries of the world was actively trying to adapt the teachings of Marx (Marxist political economy) to new socioeconomic realities and to develop the concept of a modern social market economy. They are described in the writings of researchers such as Bank (2017), Chabanet (2017), Felice and Krienke (2017), Gornostaeva et al. (2019), Popkova (2017), Popkova et al. (2019), Schlösser et al. (2017), Sukhodolov et al. (2018). The experience of modern China in building a social market economy and ensuring global competitiveness with international industrial specialization in the export of industrial goods has been extensively studied and

TheRoleofthePriceFactorinEnsuringtheGlobalCompetitivenessofChineseIndustrialGoods    425

described in the publications of experts such as Chen et al. (2018), Stavropoulos et al. (2018), Xie et al. (2018), Zhang (2014). At the same time, despite of the high degree of elaboration of the research problem, the factors and sources of competitive advantages of the economy of modern China have been studied fragmentarily and, in particular, the role of the price factor in ensuring the global competitiveness of Chinese industrial goods is unclear and needs further study. The foundation of the methodological apparatus of this studying is the method of regression-correlation analysis. Using this method, we estimate the impact of various factors of national business competitiveness allocated by the World Economic Forum on the volume of exports of manufactured goods according to the World Bank estimates. As data factors, we selected the following ones: • level of customer orientation and the ability to fulfill individual orders (6.15 Degree of customer orientation); • product quality (11.04 Nature of competitive advantage); • marketing activity of the business (11.08 Extent of marketing). We selected countries that are characterized by the largest volume of exports of goods in 2018 as the objects for the study, The baseline statistics for the subsequent analysis are given in Table 36.1. TABLE 36.1  Baseline Statistics

Country China

The volume of export, million dollars

6.15 Degree of customer orientation

11.04 Nature of competitive advantage

11.08 Extent of marketing

2,263,329.00

4.6

4.4

4.6

The USA

1,546,724.57

5.8

5.7

6.0

Germany

1,448,302.29

5.7

5.8

5.5

698,130.53

6.2

6.4

5.1

Japan Netherlands

651,999.92

5.7

6.0

5.6

The Republic of Korea

573,694.00

5.2

5.1

4.8

France

535,186.22

5.2

5.7

5.4

Italy

506,226.03

5.1

5.8

4.6

The UK

444,981.60

5.4

5.9

5.8

Belgium

429,528.09

5.6

5.9

5.5

Canada

420,860.77

5.5

4.1

5.0

Source: compiled by the authors on the basis of materials (World Economic Forum, World Bank).

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RESULTS Our regression analysis of the dependence of the volume of exports of industrial goods (y) on the identified factors (x) led to the following results (Table 36.2). The compiled multiple linear regression model is statistically insignificant, since the value of the multiple R is very small (0.36), the significance of F exceeds 0.05, and the p-values exceed 0.05. Consequently, the volume of exports of industrial goods is not explained by any of the factors considered—customer focus, product quality and marketing activity of the business. Therefore, there remains only one factor of competitiveness of goods that is recognized by modern economics, which was not taken into account in the analysis, since it is not taken into account by statistics of the International Economic Forum—price. This is an argument that the price factor plays a key role in ensuring the global competitiveness of Chinese industrial goods. As you know, these products are characterized by low price due to the available cheap labor and active state support of industrial production in the country. Based on the results of an in-depth qualitative analysis, we compiled the following model of the global competitiveness of Chinese industrial goods (Figure 36.1). Marketing Inductrial of modern China Holding R&D Cheap resources Cheap labor

Production branch of a foreign transnational corporation

Elite market segment

Production process debugging

Original products: • High quality • High price

Know how Trained frames

Ready marketing and innovations Cheap resources Lack of quality control Lack of warranty service (low service)

Global consumers

Mass market segment

Chinese analog of inductrial production Starting the production process “Scale effect”

Similar products: • Unpredictable quality • Low price

Figure 36.1  Model of the global competitiveness of Chinese industrial goods. Source: compiled by the authors.

–386396.79 –196684.96

11.04 Nature of competitive advantage

Source: calculated by the authors.

245576.16

2767487.00

6.15 Degree of customer orientation 564433.99

391582.27

685525.70

2937715.66

Standard mistake

Coefficients

3227202743488.58 3719192942450.84

Y- intersection

11.08 Extent of marketing

SS 491990198962.26

10

7

Rest

In total

3

df

11

678991.14

–0.24

0.13

0.36

Regression

Analysis of variance

Notices

Standard mistake

Normalized R 2

2

R 

Multiple R

Regression Statistics

MS

0.44

–0.50

–0.56

0.94

t-statistics

461028963355.51

163996732987.42

TABLE 36.2  The Results of Regression-Correlation Analysis

F

0.68

0.63

0.59

0.38

P-Value

0.36

–1089098.13

–1122629.91

–2007407.49

–4179106.70

Lower 95%

0.79

Value F

1580250.45

729259.98

1234613.90

9714080.69

Top 95%

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As can you see from Figure 36.1, in China today a specific industrial production scheme is being implemented, based on the possibilities of globalization and, in particular, on international economic cooperation. Thanks to cheap resources (raw materials, energy) and cheap labor, the Chinese economy attracts foreign industrial transnational corporations (TNCs) to locate production branches in China. The holding company conducts research and development and carries out marketing activities, announcing future innovations and stimulating global consumer demand for them. It establishes the production process in the Chinese branch. After that, the acquired know-how and trained personnel are transferred to the Chinese equivalent of industrial production being created. This allows you to quickly start the production process. Chinese manufacturers can achieve low prices for manufactured goods due to ready-made marketing and innovations, cheap resources, lack of quality control, and the lack of warranty service (low service). As a result, a foreign TNC offers global consumers original products characterized by guaranteed high quality and high prices, focusing on a small—elite—market segment with a small amount of effective demand. The Chinese industrial enterprise offers global consumers similar products, characterized by unpredictable quality, but guaranteed low price, focusing on the mass market segment with a large amount of effective demand. This allows you to take advantage of the “economies of scale” and maintain low prices, making innovative products available to mass global consumers. The model of global competitiveness of Chinese industrial goods is contrary to the existing norms of international law on intellectual property and accepted standards of business ethics in the global business environment. To implement this model, we need a stable position in the world political arena to defend national economic interests. This makes this model inaccessible to the other developing countries. CONCLUSIONS As a result of the study, the working hypothesis was confirmed and proved that the price advantage is the key to the competitiveness of Chinese industrial goods. However, the model of global competitiveness of industrial goods, implemented by modern China, can distort the market mechanism in the field of international industry. Instead of establishing their own production and implementation of a full-scale innovation process, Chinese analogue industrial enterprises use the achievements of foreign transnational corporations. Probably because of this, the level of customer focus, product quality and marketing activity of the business turned out to be statistically insignificant factors in the volume of exports of manufactured goods of the largest global exporters.

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Speaking as the largest player in the international industry market, modern China has great market power and can change the situation of this market in its own interests. This changes the conditions of global competition in the industry and reduces the efficiency of entrepreneurship in this area on a global scale. The experience of modern China in ensuring the global competitiveness of manufactured goods is unique and inimitable. It is based on great market power and on the novelty of the global competitiveness model. At present (2018), this model is known to transnational corporations, and they are creating mechanisms to protect their rights and interests in collaboration with international organizations. However, China’s experience may be useful as an example (rather than a template) demonstrating the need for business to show high flexibility and adaptability in developing countries seeking to enter global markets. In conclusion, it should be noted that the model of global competitiveness of Chinese industrial goods is contrary to the idea of ​​ensuring a high quality of life for the population, which is the basis of a social market economy. Workers in Chinese industrial enterprises are characterized by low incomes with high labor productivity requirements, and Chinese industrial products in most cases do not meet the needs of global consumers. In this regard, in conducting further research it is advisable to study the experience of other countries in ensuring global competitiveness in the interests of the scientific and methodological substantiation of the social market economy. REFERENCES Bank, D. (2017). The double-dependent market economy and corporate social responsibility in Hungary. Corvinus Journal of Sociology and Social Policy, 8(1), 25–47. Chabanet, D. (2017). The Social Economy Sector and the Welfare State in France: Toward a Takeover of the Market? Voluntas, 28(6), 2360–2382. Chen, X., He, J., & Chen, M.-H. (2018). What Drives Internet Industrial Competitiveness in China? The Evolvement of Cultivation Factors Index. Emerging Markets Finance and Trade, 54(8), 1873–1885. Felice, F., & Krienke, M. (2017). Understanding Social Market Economy, Francesco Forte and His Interpretation. International Advances in Economic Research, 23(1), 21–37. Gornostaeva, Z. V., Kushnareva, I. V., & Sverchkova, O. F. (2019). Taxation of labor in terms of building a social market economy. Studies in Systems, Decision and Control, 182, 75–82. Popkova, E. G. (2017). Economic and Legal Foundations of Modern Russian Society: A New Institutional Theory. Advances in Research on Russian Business

430    A. V. BOGOVIZ et al. and Management, Information Age Publishing, Charlotte (North Carolina), USA. Popkova, E. G., Ragulina, Y. V., & Bogoviz, A. V. (2019). Industry 4.0: Industrial Revolution of the 21st Century. Studies in Systems, Decision and Control, Springer, Berlin (Germany). Schlösser, H. J., Schuhen, M., & Schürkmann, S. (2017). The acceptance of the Social Market Economy in Germany. Citizenship, Social and Economics Education, 16(1), 3–18. Stavropoulos, S., Wall, R., & Xu, Y. (2018). Environmental regulations and industrial competitiveness: Evidence from China. Applied Economics, 50(12), 1378–1394. Sukhodolov, A. P. Popkova, E.G., & Litvinova, T. N. (2018). Models of Modern Information Economy: Conceptual Contradictions and Practical Examples, Bingley, UK: Emerald Publishing Limited, pp. 1–38. World Bank. (2018). Merchandise exports (current US$). Retrieved from https:// data.worldbank.org/indicator/TX.VAL.MRCH.CD.WT?view=chart (data accessed: 3.11.2018). World Economic Forum. (2018). The Global Competitiveness Report 2017–2018. Retrieved from http://www3.weforum.org/docs/GCR2017-2018/05FullReport/ TheGlobalCompetitivenessReport2017–2018.pdf (data accessed: 3.11.2018). Xie, J., Dai, H., Xie, Y., & Hong, L. (2018). Effect of carbon tax on the industrial competitiveness of Chongqing, China. Energy for Sustainable Development, 47, 114–123. Zhang, K. H. (2014). How does foreign direct investment affect industrial competitiveness? Evidence from China. China Economic Review, 30, 530–539.

CHAPTER 37

INNOVATIVE INTERPRETATION OF LABOR PRODUCTIVITY IN THE DIGITAL ECONOMY Svetlana V. Lobova Altai State University, Barnaul, Russia Alexander N. Alekseev Plekhanov Russian University of Economics Russia, Moscow Aleksei V. Bogoviz Federal State Budgetary Scientific Institution Julia V. Ragulina Federal State Budgetary Scientific Institution

The becoming of the digital economy in developed countries, including modern Russia, radically transformed production and distribution processes in modern socio-economic systems. The breakthrough digital technologies created and developed in the framework of the new technological order—industry 4.0—allow not only to achieve significant growth in production, but also to expand the boundaries of automation of production and distribution processes. Marx and Modernity, pages 431–438 Copyright © 2019 by Information Age Publishing All rights of reproduction in any form reserved.

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Examples of fully automated production processes have already existed, in which man’s role is limited technically to maintenance, as well as the possibilities of intellectual decision-making support, during using of which management functions are performed by a machine almost on a par with man. At the end of the fourth industrial revolution and as a result of the final transition to industry 4.0, full automation of production and distribution processes is expected and there is no need for human participation. Concerning to this, the traditional binding of labor productivity to a person as a subject of labor is unacceptable in the new economic conditions and needs to be revised. Labor productivity is an important economic category, which allows evaluating the efficiency of economic systems, and to compare them with each other. We conduct an in-depth analysis of economic growth through the prism of labor as the basic factor of production. The treatment of this category has undergone revision throughout all three previous industrial revolutions. Now it also needs to get a new scientific and methodological platform. The purpose of this work is to determine the innovative interpretation of labor productivity in a digital economy. MATERIALS AND METHOD As a result of a review the literature, we found that the accumulated scientific knowledge in the field of labor productivity is scattered and contradictory. At the micro level (in the economic practice of entrepreneurial structures), labor productivity is interpreted through the prism of various business processes and it follows the next types: • Labor productivity, measuring by volume of production; • Distributional labor productivity (with an emphasis on marketing), measuring by sales volume; • Productivity of innovative labor (related to R&D), measuring by the number of advanced production technologies, which are created and used and also the number of patents which are filed and registered; • Managerial labor productivity, as measuring by the efficiency and competitiveness of the entrepreneurial structure. For the subjects of each of the listed business processes, appropriate plans and criteria for evaluating labor productivity are established, who are determine the conditions for stimulating labor. Fundamental basics, methodological tools and practical examples of measuring productivity at the micro level are discussed in more detail in the works of such scientists like Dixon and Lim (2018), Khanna and Sharma (2018), Yang and Tsou (2018).

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At the same time, at the macro level (in the economic practice of national economies), a generalized interpretation of labor productivity is used. It’s evaluated by the unity of non-delimited business processes. Conceptual features and evaluation methods which are using to measure labor productivity at the macro level are described in the works of authors such like Brezis and Gilad Brand (2018), Kwan et al. (2018), Suzuki (2018). The most authoritative interpretation of labor productivity using in modern world practice is the scientific and methodological approach of the OECD, according to which labor productivity in the economy is determined by finding the ratio of GDP per capita to the number of work hours (OECD, 2018). That is, GDP is divided into population and work hours. The undoubted advantage of this methodology is the simplicity of calculations and the possibility of relying on official statistics. However, its serious disadvantage is a strong generalization of labor productivity data. Because of this, this technique can only be used for international comparisons of the level of labor productivity with no ability to analyze cause-effect relationships basing on the economies of individual countries. The revealed inconsistency and insufficient systematization of scientific and methodological approaches to the interpretation of the essence and measurement of labor productivity in the economy leads to the results of the assessment. It doesn’t allow to fully, accurately and reliably determining the dynamics of changes in labor productivity in the economy and the level of its productivity compared to economy in other countries. Because of this, the economic category of labor productivity can’t fully perform the function assigning to it to serve as an effective analytical tool. In order to solve this problem, we study the evolution of the interpretation of labor productivity in different types of socio-economic systems using the dialectic method, the method of systematization and classification. We also develop an innovative interpretation of labor productivity in the digital economy using a set of general scientific methods in the System approach, including the method of induction and deduction, analysis and synthesis, modeling and formalization. During conducting the study, we rely on the existing scientific and methodological support in the field of studying the digital economy, presented in the works of researchers such like Bogoviz (2019), Bogoviz et al. (2018), Bogoviz et al. (2019), Popkova (2017), Popkova (2019), Popkova et al. (2019a), Popkova et al. (2019b), Sukhodolov et al. (2018). RESULTS As a result of studying the features of the interpretation of labor productivity in the conditions of various types of socio-economic systems, we have revealed its evolution (Table 37.1).

Management

Source: compiled by the authors.

The essence of labor productivity

Productivity’s components

Man’s production per hour

production

performed by man

Innovations

Distribution

person (worker)

The subject of labor productivity participation using machines

Catalyst of changes in the interpretation of labor productivity

Production

The first industrial revolution

Specifications

Human’s functions

Industrial economy (18–19th centuries) The third industrial revolution

“Knowledge Economy” (late 20th century)

machine control

Isolated person’s per hour result

production/ distribution/ management/ innovations

Complex person’s result per hour

production/ distribution/ management + innovations

participation using machines

car assistance

man (worker, manager, innovator)

The second industrial revolution

Postindustrial economy (beginning of 20th century)

Type of socio-economic systems

TABLE 37.1  The Evolution of the Interpretation of Labor Productivity in Different Types of Socio-Economic Systems

System result per hour

production,distribu tion,management & innovations

machine control

absent

car, man

The fourth industrial revolution

Digital Economy (21st century)

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Innovative Interpretation of Labor Productivity in the Digital Economy    435

As can be seen from the first table, four industrial revolutions were catalysts for changing the interpretation of labor productivity in different types of socio-economic systems. In the industrial economy, the subject of labor productivity was a person as an employee performing production functions in an enterprise using machines with a minimum degree of automation of labor. All other functions such like distribution, innovation and management are fully performed by man (automation is not provided). The only component of labor productivity is production. The essence of labor productivity lies in the volume of person’s production per hour. In the post-industrial economy, the subject of labor productivity was a person as an employee, manager and innovator in delimiting business processes. The main production functions are already performed by machines, and man only helps them. Distribution, innovation and management functions are also carried out by man, but already with the help of machines. Labor productivity is evaluated in the context of its production, distribution, management and innovation component separately. The essence of labor productivity lies in the isolated result (within the framework of the corresponding function) of a person per hour. In an innovative economy (“knowledge economy”), the subject of labor productivity also was a person as an employee, manager, and innovator in delimiting business processes. All production functions are performed by machines under human control. Distribution, innovation and management functions are carried out by humans using machines. Labor productivity is assessed in the context of its production, distribution, management component separately, with the obligation of each employee to perform innovative functions. The essence of labor productivity lies in a complex person’s result (based on a given plan for the implementation of the main function and an additional–innovative) per hour. In a digital economy, the machine becomes the main subject of labor productivity, and the human becomes an additional subject. Production functions are fully automated, human participation in them is not provided. Distribution, innovation and management functions are also carried out by machines under human control. Labor productivity is estimated in the aggregate production, distribution, management and innovation component. The essence of labor productivity lies in the systemic result of the subject of labor (machine and man) per hour. Based on the foregoing, we propose an innovative interpretation of labor productivity in a digital economy as an attitude of labor productivity to the number of machine and human subjects managing it, by section of business processes per unit of time. That is, the binding to time is preserved, that the attachment to a person as a subject of labor has been removed. Because of the fact that in the digital economy the number of technical devices

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involved in business processes is extremely large, it is more preferable to evaluate not the subjects of labor itself, but the subjects of labor management—artificial intelligence systems and people controlling their work. Business processes are proposed to delimit as follows. Since the production is not carried out by itself, but with the purpose of product sales, the production and distribution processes must be considered together. As the main indicator using for international comparisons, the proposed performance of distribution processes is estimated by the ratio of the volume (in value terms) of sales in the economy to the number of artificial intelligence systems which are involved in managing production and distribution business processes (and additionally to the number of people). The proposed production process performance is estimated by the ratio of the volume (in terms of value) of output in the economy to the number of systems involved in managing production business processes as an additional indicator of interest for conducting in-depth national research in relation to production capacity and marketing efficiency, intelligence (and in addition to the number of people involved). Labor productivity in innovative business processes should be considered separately, because of the fact that they are often not related to production and distribution. They perform as independent (specific and priority) goods and services sold in the economy. The main indicator used for international comparisons in this case is the resulting productivity of innovation processes, measured by an attitude of the volume (in terms of value) of implemented advanced production technologies and innovation products in the economy to the number of artificial intelligence systems, which are involved in managing innovative business processes (in addition to the number of involving people). An intermediate productivity of innovation processes is proposed, measured by the ratio of the number of advanced production technologies created (or the number of advanced production technologies used or the number of patent applications filed or the number of patents registered or the number of innovations produced ion products—separately) in the economy to the number of artificial intelligence systems involved in the management of production business processes (and in addition to the number of people involved in this) as an additional indicator of interest for conducting in-depth national studies in relation to the level of innovation activity and innovation performance. CONCLUSIONS So, the results of the study have shown that every new industrial revolution increasingly automated business processes, displacing a person from

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them and pushing it into the background. In a digital economy, the machine becomes the main subject of labor, and man only controls over it. The proposed scientific and methodological recommendations for the interpretation and assessment of labor productivity in the digital economy are designed to ensure the most accurate and reliable estimated results in modern economic conditions. REFERENCES Bogoviz, A. V. (2019). Industry 4.0 as a new vector of growth and development of knowledge economy. Studies in Systems, Decision and Control, 169, 85–91. Bogoviz, A. V., Lobova, S. V., Alekseev, A. N., Koryagina, I. A., & Aleksashina, T. V. (2018). Digitization and internetization of the russian economy: Achievements and failures. Advances in Intelligent Systems and Computing, 622, 609–616. Bogoviz, A. V., Osipov, V. S., Chistyakova, M. K., & Borisov, M. Y. (2019). Comparative analysis of formation of industry 4.0 in developed and developing countries. Studies in Systems, Decision and Control, 169, 155–164. Brezis, E. S., & Gilad B. (2018). Productivity Gap between Sectors and Double Duality in Labor Markets. Open Economies Review, 29(4), 725–749. Dixon, R., & Lim, G. C. (2018). Labor’s share, the firm’s market power, and total factor productivity. Economic Inquiry, 56(4), 2058–2076. Khanna, R., & Sharma, C. (2018). Testing the effect of investments in IT and R&D on labour productivity: New method and evidence for Indian firms. Economics Letters, 173, 30–34. Kwan, F., Zhang, Y., & Zhuo, S. (2018). Labour reallocation, productivity growth and dualism: The case of China. International Review of Economics and Finance, 57, 198–210. OECD. (2018). GDP per hour worked. Retrieved from https://data.oecd.org/lprdty/ gdp-per-hour-worked.htm (data accessed: 4.11.2018). Popkova, E. G. (2017). Economic and Legal Foundations of Modern Russian Society: A New Institutional Theory. Advances in Research on Russian Business and Management, Information Age Publishing, Charlotte (North Carolina), USA. Popkova, E.G. (2019). Preconditions of formation and development of industry 4.0 in the conditions of knowledge economy. Studies in Systems, Decision and Control, 169, 65–72. Popkova, E. G., Ragulina, Y. V., & Bogoviz, A. V. (2019a). Fundamental differences of transition to industry 4.0 from previous industrial revolutions. Studies in Systems, Decision and Control, 169, 21–29. Popkova, E. G., Ragulina, Y. V., & Bogoviz, A. V. (2019b). Industry 4.0: Industrial Revolution of the 21st Century. Studies in Systems, Decision and Control, Springer, Berlin (Germany). Sukhodolov, A. P. Popkova, E.G., & Litvinova, T. N. (2018). Models of Modern Information Economy: Conceptual Contradictions and Practical Examples, Bingley, UK: Emerald Publishing Limited, pp. 1–38.

438    S. V. LOBOVA et al. Suzuki, T. (2018). Permanent productivity shocks, migration and the labour wedge: business cycles in South Africa. Macroeconomics and Finance in Emerging Market Economies, 11(3), 290–303. Yang, C.-H., & Tsou, M.-W. (2018). Labour Unions and Firm Productivity: Evidence from China. Manchester School, 86(6), 699–721.

CHAPTER 38

NEW LAWS OF PRODUCTIVITY GROWTH IN INDUSTRY 4.0 Julia V. Ragulina Federal State Budgetary Scientific Institution Svetlana V. Lobova Altai State University, Barnaul, Russia Alexander N. Alekseev Plekhanov Russian University of Economics Russia, Moscow Aleksei V. Bogoviz Federal State Budgetary Scientific Institution

Labor productivity is one of the most important indicator and management tools, which is available, demanded and actively used in modern economic systems at the micro and macro level. First, labor productivity determines the global competitiveness of the economic system. For a micro-level system, labor productivity is at the core of production capacity and provides (or eliminates) opportunities to take advantage of the “economies of scale,” to gain and retain price competitive advantages in the target industry market.

Marx and Modernity, pages 439–446 Copyright © 2019 by Information Age Publishing All rights of reproduction in any form reserved.

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For a macro-level system, labor productivity is the subject of international comparisons with other countries. Secondly, labor productivity determines the efficiency of the economic system. For a micro-level system, labor productivity determines the efficiency of using one of the key factors of production—labor. For a macro-level system, labor productivity sets the boundaries of economic growth, which is the main goal of the development of this system. The issues of increasing labor productivity in recent years have received increased attention in the context of the launch of the fourth industrial revolution, the emergence of the digital economy and the adoption of advanced developing countries (OECD) and the most intensively developing countries (BRICS) on the transition to industry 4.0. This is due to the expectations of expert-practical community with a relatively sharp jump in labor productivity in connection to the new wave of increasing the level of automation of business processes. In this regard, from the standpoint of fundamental economics, the problem of establishing cause-effect relationships of the transition to industry 4.0 and changes in labor productivity is analyze. Predictions about the possible magnitude of its growth and developing recommendations for managing the transition process to industry 4.0 in order to maximize productivity growth were made. The solution to this problem involves reliance on the laws of productivity growth. However, the traditional understanding of labor productivity as an added value creating by an employee per unit of time contradicts the basic idea of industry ​​ 4.0 as fully automated business processes, because of the fact that added value in this case is created by the cyber-physical system which replaces the employee. The working hypothesis of this study lays to the complication of the labor process and the change in its essential characteristics triggers new laws for the growth of labor productivity. The purpose of the study is to identify new laws of productivity growth in the industry 4.0. MATERIALS AND METHOD The law of productivity growth came out, which was formulated by K. Marx, is the growth in the cost-effectiveness of living labor and the reduction of production costs over time, that is, in the process of evolution of socioeconomic systems as a fundamental platform of this study. In the Marxist economic concept, the following factors act as the controlled factors of the growth of labor productivity: • The mechanism of the distribution of labor: due to the growth of employee specialization in a particular business process, the neces-

New Laws of Productivity Growth in Industry 4.0    441

sary competences develop (the “economies of scale” are achieved), which leads to an increase in labor productivity. In contrast, the frequent change of types of work reduces productivity because of the need to constantly adapt to work; • Scientific and technical progress: the introduction of newer (more advanced) technologies and equipment into production contributes to the growth of labor productivity. The law of growth of labor productivity, formulated by K. Marx, laid the scientific and theoretical basis for studying it and it was further developed in the works of modern economists, including Brezis and Gilad Brand (2018), Dixon and Lim (2018), Khanna and Sharma ( 2018), Kwan et al. (2018), Suzuki (2018), Yang and Tsou (2018). The essence and specificity of the organization of business processes in industry 4.0 is described in the works of experts such like Bogoviz (2019), Bogoviz et al. (2019), Diez-Olivan et al. (2019), Imran and Kantola (2019), Muñoz and Capón-García (2019), Popkova (2017), Popkova (2019), Popkova et al. (2019a), Popkova et al. (2019b), Sukhodolov et al. (2018), Verba et al. (2019) and lays in follows things: • Closed production cycle on the basis of full automation under the control of artificial intelligence (AI); • Technical and intellectual machine support for non-productive business processes, for example, using virtual and augmented reality technologies; • A new communication format that doesn’t require human representation on the part of the enterprise on the Internet of Things (IoT). Specific features indicate qualitative transformations of business processes in the conditions of industry 4.0 compared to the previous technological structure (industry 3.0, which is currently popular). However, the existing law of productivity growth, formulated for the first industrial revolution, takes into account only quantitative changes, because of which qualitative changes don’t receive a scientific explanation, and there is no methodical apparatus from measurement and forecasting. To fill the identified gap in the system of modern scientific and economic knowledge, this work is focused on defining new laws of productivity growth in industry 4.0, which will reflect not only quantitative changes (output growth), but also qualitative changes as scientific and technological progress and technological modernization of business processes. The study uses the evolutionary (historical) method, the method of analysis, synthesis, induction, deduction, modeling of socio-economic processes and systems, as well as the method of formalization.

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RESULTS We determined the corresponding characteristics of the growth of labor productivity as a result of studying the features of various technological structures (Table 38.1). As can be seen from Table 38.1, mechanized labor was used as a mode of production under the conditions of the first industry, established after the first industrial revolution (18–19 centuries). That is, the work was TABLE 38.1  Characteristics of Labor Productivity Growth in the Conditions of Various Technological Structures Characteristics of labor productivity growth

Technological structure Industry 1.0

Industry 2.0

Industry 3.0

Industry 4.0

Method of production

mechanized labor

conveyor production

work based on information technology

fully automated production in the framework of cyber-physical systems

Technical

modernization of technology and equipment —

Educational and Organizational

—

labor incentive

Sources

Managerial

Industrial

production growth

Results

Marketing

Innovational

—

development of human resource

Source: compiled by the authors.

development of artificial intelligence

production growth, improving product quality, availability of more complex products for production sales growth

—

integration of elements of cyber-physical systems

—

growth in individual sales, balancing supply and demand increase in the number of innovative technologies created and innovative products produced

increasing value of innovative products

New Laws of Productivity Growth in Industry 4.0    443

carried out by a person using mechanical devices that allow automating individual components of labor. During this period, Marx formulated the law of growth in labor productivity, according to which the modernization of technologies and equipment contributes to an increase in production and, respectively, an increase in sales. Innovative processes couldn’t be improved with the help of new technologies and equipment. Under the conditions of industry 2.0, which was formed following the results of the second industrial revolution (beginning of the 20th century), conveyor production became the production method. This made it possible to automate part of the production processes while maintaining significant human involvement (for example, for the final assembly of industrial products from the details produced by machines). During this period, the modernization of technologies and equipment still contributed to the growth of labor productivity, but an additional source of its growth appeared—labor stimulation. Properly selected and understandable incentives for employees contribute to an increase in production with the required quality of products. During this period, the modernization of technology and equipment allowed not only to increase production, but also to improve product quality and make more sophisticated production accessible thanks to greater precision of production equipment. Under the conditions of industry 3.0, created after the third industrial revolution (mid-late 20th century), human labor was the method of production based on information technology. Most of the production processes during this period have already been automated, but in non-production (marketing, innovation and management) the key role of business processes belongs to the person performing the basic labor functions with machine support. In addition to modernizing technology and equipment and stimulating labor, a new source of growth in labor productivity—human resource development is available within this technological order. The training of workers, the development of their creative abilities, team building and the creation of favorable conditions for the disclosure of the labor potential of workers also contributed to the growth of labor productivity. During this period, it became possible to technical support of the innovation process based on information and communication technologies. This made it possible to achieve a growth in the number of creating innovative technologies and producing the innovative products. Under the conditions of industry 4.0, which will be installed after the fourth industrial revolution in the 21st century, fully automated production will be organized within the framework of cyber-physical systems, which are a combination of physical objects and digital devices (human participation is not provided). Modernization of technology and equipment is still one of the sources of productivity growth. It is complemented by the

444    J. V. RAGULINA et al. Production Cyber-Physical System Training, development

Artificial Intelligence (AI)

Integration

Modernization

information sharing, management, software update

Subject of production 1

Subject of production n

Production growth, improved product quality, availability of more complex products for production

Growth in individual sales

Consumers

Internet of Things (IoT)

Growth in the number of created innovations

Growth value of product innovation

Approaching equilibrium supply and demand

Figure 38.1  The new laws of productivity growth in industry 4.0. Source: compiled by the authors.

integration of elements of cyber-physical systems and the development of artificial intelligence. The increase in labor productivity in production is manifested in the growth of production, improvement of product quality, availability of more complex products for production, in marketing—in the growth of individual sales, balancing demand and supply, in innovation—in the growth of value of innovative products for consumers. That is, not only quantitative, but also qualitative transformations are taking place that fall outside the framework of K. Marx’s Law. The new laws of productivity growth in industry 4.0 are illustrated in Figure 38.1. As can be seen from Figure 38.1, for different components of cyber-physical systems there are different ways of increasing labor productivity: for the managerial component (artificial intelligence)—training and development, for the communication component (Internet of things)—integration, for the production component (production objects representing production equipment, equipped with digital devices)—upgrade. It promotes to the integrated growth of labor productivity in the unity of the quantitative and qualitative components, which allows you to take advantage of business to its owners and consumers. CONCLUSIONS Thus, the working hypothesis was scientifically confirmed. The work showed that the complication of the labor process and the change in its essential

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characteristics in the context of industrial revolutions triggers new laws of productivity growth. Industry 4.0 assumes an innovative method of production based on cyber-physical systems. Therefore, labor productivity management is focused not on a person, but on the machines. The traditional source of productivity growth associated with the modernization of technology and equipment. In addition to this, qualitative changes are more pronounced with an increase in labor productivity. This allows us to formulate the new laws of productivity growth in industry 4.0: • Modernization of technologies and equipment contributes to the growth of production, improvement of product quality and allows you to start production of more complex products, but only if the integration of elements of cyber-physical systems will be improved; • The development of artificial intelligence leads to increase in the number of created innovations and an increase in the volume of production of innovative products, and also to increase in its value to consumers. The new laws formulated clarify and complement to the original law of productivity growth, formulated by K. Marx during the industry period 1.0. They reflect the conditions under which growth in labor productivity can be achieved and show that to achieve the greatest (synergistic) effect associating with balancing supply and demand, in industry 4.0. It is necessary to use all available sources of quantitative and qualitative growth in labor productivity. REFERENCES Bogoviz, A. V. (2019). Industry 4.0 as a new vector of growth and development of knowledge economy. Studies in Systems, Decision and Control, 169, 85–91. Bogoviz, A. V., Osipov, V. S., Chistyakova, M. K., & Borisov, M. Y. (2019). Comparative analysis of formation of industry 4.0 in developed and developing countries. Studies in Systems, Decision and Control, 169, 155–164. Brezis, E.S., Gilad Brand (2018). Productivity Gap between Sectors and Double Duality in Labor Markets. Open Economies Review, 29(4), 725–749. Diez-Olivan, A., Del Ser, J., Galar, D., & Sierra, B. (2019). Data fusion and machine learning for industrial prognosis: Trends and perspectives towards Industry 4.0. Information Fusion, 50, 92–111. Dixon, R., & Lim, G. C. (2018). Labor’s share, the firm’s market power, and total factor productivity. Economic Inquiry, 56(4), 2058–2076. Imran, F., & Kantola, J. (2019). Review of industry 4.0 in the light of sociotechnical system theory and competence-based view: A future research agenda for the evolute approach. Advances in Intelligent Systems and Computing, 783, 118–128.

446    J. V. RAGULINA et al. Khanna, R., & Sharma, C. (2018). Testing the effect of investments in IT and R&D on labour productivity: New method and evidence for Indian firms. Economics Letters, 173, 30–34. Kwan, F., Zhang, Y., & Zhuo, S. (2018). Labour reallocation, productivity growth and dualism: The case of China. International Review of Economics and Finance, 57, 198–210. Muñoz, E., & Capón-García, E. (2019). Intelligent mathematical modelling agent for supporting decision-making at industry 4.0. Advances in Intelligent Systems and Computing, 865, 152–162. Popkova, E. G. (2017). Economic and Legal Foundations of Modern Russian Society: A New Institutional Theory. Advances in Research on Russian Business and Management, Information Age Publishing, Charlotte (North Carolina), USA. Popkova, E. G. (2019). Preconditions of formation and development of industry 4.0 in the conditions of knowledge economy. Studies in Systems, Decision and Control, 169, 65–72. Popkova, E. G., Ragulina, Y. V., & Bogoviz, A. V. (2019a). Fundamental differences of transition to industry 4.0 from previous industrial revolutions. Studies in Systems, Decision and Control, 169, 21–29. Popkova, E. G., Ragulina, Y. V., & Bogoviz, A. V. (2019b). Industry 4.0: Industrial Revolution of the 21st Century. Studies in Systems, Decision and Control, Springer, Berlin (Germany). Sukhodolov, A. P., Popkova, E.G., & Litvinova, T. N. (2018). Models of Modern Information Economy: Conceptual Contradictions and Practical Examples, Bingley, UK: Emerald Publishing Limited, pp. 1–38. Suzuki, T. (2018). Permanent productivity shocks, migration and the labour wedge: business cycles in South Africa. Macroeconomics and Finance in Emerging Market Economies, 11(3), 290–303. Verba, N., Chao, K.-M., Lewandowski, J., (. . .), James, A., & Tian, F. (2019). Modeling industry 4.0 based fog computing environments for application analysis and deployment. Future Generation Computer Systems, 91, 48–60. Yang, C.-H., & Tsou, M.-W. (2018). Labour Unions and Firm Productivity: Evidence from China. Manchester School, 86(6), 699–721.

CHAPTER 39

DYNAMICS OF DURATION OF WORKING HOURS ACCORDING TO KARL MARX The Come True Forecast Elena Bekker Financial University under the Government of the Russian Federation, Moscow Olga Orusova Financial University under the Government of the Russian Federation, Moscow Maria Ekaterinovskaya Financial University under the Government of the Russian Federation, Moscow

Marx and Modernity, pages 447–457 Copyright © 2019 by Information Age Publishing All rights of reproduction in any form reserved.

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THE THEORY OF K. MARX ON THE REDUCTION OF WORKING HOURS As is known, labour a factor of production, is measured in working hours in most of the cases. Working hours is one of the most important elements of economic theory and practice. For the measurement of working hours, in labour law, units such as the working day (shift) and working week are most often used. A study of the dynamics of working hours was carried out, by Karl Marx in his famous work “Capital.” The future trend in economy, Marx highlighted would be the reduction of working hours, in the sectors of the productive sphere and as a result of technological progress, this would lead to absolute reduction of the workers employed. Marx wrote: “If the development of the productive forces reduced the absolute number of workers and it would enable the nation to achieve full production in a shorter time, it would cause a revolution, because the majority of the labour would be left out of work.” [1. V. 25. P. I, p. 289] Marx rightly considered the reduction in the absolute number of workers, as an expression of the development of the productive forces, as criterion towards increase the labour productivity [2, p. 28]. In the conditions of such an increase—with a fixed working hour by the worker, it is possible to provide for the social needs of the reduced labour. The fact that this approach is not accidental is confirmed by another, better known theoretical proposition put forward by Marx: “The country is richer, with the same quantity of products, with smaller productive population in relation to the unproductive. Indeed, the relatively small number of the productive population would be just another expression relatively high labour productivity.” [1. V. 26. P. I, p. 215] According to the developed capitalist countries experience there was decrease in number of workers with the increase in labour productivity, resulted in decrease in total time spent on production. However, the majority of the population had not out of work, and there had been no revolutions in those countries. So, the author of “Capital” operates with the dynamics of the total number of workers to quantify the cost of labour in social production and associates such dynamics with regular increase in labour productivity. It is, by concept of modern economics, macroeconomic approach to the analysis of the dynamics of working hours. There is a significant difference in the above provisions, in the first case, a reduction in the absolute number of workers has been stressed, while in the second, a relative reduction, in compare with unproductive population has been emphasized. The relative decrease in the number of workers is compatible with its absolute growth: it is enough that employment in the

Dynamics of Duration of Working Hours According to Karl Marx    449

non-production sphere, characterized as a “non-productive population,” grows faster. Consequently, Marx, in conditions when capitalist industrialization was accompanied by an increase in the number of workers, as evident as per the statistics used in Capital, thought about its absolute reduction. So, he anticipated the situation that was established in the economy of the developed capitalist countries, after a century. [2, P. 29]. In the analyzed situation, attention is drawn to idea of ”the ​​ ability of a nation to fulfill all its production in a shorter time.” Thus, we are talking about the absolute savings in labour, in material production due to an increase in social labour productivity. Reducing the number of employees is one of the forms of such savings, since the reduction of labour costs is also feasible in the form of reducing the working hours of employees. Obviously, in the forecast, the first form is taken as the only one: if the reduction in the working hours is presumed, there would be no such situation where the majority of the population would be without work. Marx had identified the grounds for labour release, in capitalist production with the dismissal of workers. He rightly noted: “The absolute interest of every capitalist is to squeeze a certain amount of labour from a smaller, not from a larger number of workers, even if, it is just as cheap or even cheaper. In the second case, the cost of constant capital increases in proportion to the quantity of labour produced, in the first case—much slower” [1. V. 23, p. 649]. Thus, when “a certain amount of labour” is reduced due to the use of new equipment, there should not be a decrease in working hours per employee while maintaining the same number of employees, but a decrease in employment. A similar situation prevailed in the nineteenth century. That’s why Marx links the universal law of capitalist accumulation with the formation of a “reserve army of labour,” as was formed at the expense of the laid-off workers. This basically happened with reduction of labour as the process of saving labour cost in production. So, as per Marx, it is possible to find the answer why the absolute reduction of number of workers does not mean that most of the labour force becomes unemployed. The fact is that the reduction of total working hours in production creates a basis for progress in the non-production sphere, which is important for development of society. As per Marx’s, “there would be individualities development and reduction of working hours may not be needed for the sake of surplus labour. In general reduction of labour to a minimum, facilitates artistic and scientific development of individual, with the time that become available and the means created for this purpose” [1. V. 46. P. II, p. 214]. Obviously for development of such abilities requires employment in education, healthcare, science, etc.

450    E. BEKKER, O. ORUSOVA, and M. EKATERINOVSKAYA

Activities in these areas, even having the form of employment, are not identical to labour in production of goods. It comprises of two things: one ensuring the development of people and the other is creating the material conditions for such development. In this transformative activity, a person is to reckon with the forces of nature and to an extent he is not free. Marx rightly noted: “The kingdom of freedom begins, in reality only when work, dictated by need and external expediency ceases. Therefore, by the nature of things, it lies on the other side of material production” [1. V. 25. P. II, p. 386–387]. That is why, from his point of view, it is so essential to release time from production for the development of workers. Marx, therefore, had accurately predicted a decrease in the number of people employed in the production sphere and on the other hand their increase in the sectors of the non-production sphere. If, the development of human abilities becomes a priority, then the prevalence of more activities in the non-production sphere over the total labour costs in production is natural. Such prevalence is manifested in the modern economy as the dominance of employment in the services sector. As historical experience has shown, the reduction of working hours and working hours worked out for a week, month, year, working life is not only compatible with the existence of capitalism, but also acts as a factor in its development. Much of what Marx attributed to the future society, has found its realization. This can be seen by considering the dynamics of working time in foreign countries and in Russia, in historical aspect. HISTORICAL ANALYSIS OF WORKING HOURS REDUCTION IN RUSSIA AND OTHER COUNTRIES Russia In Russia, working hours, until the end of the 19th century, were not limited legally and were 14–16 hours per day. In 1897, due to the labour bargaining for the first time the working day was limited by legislation to 11.5 hours (on Saturdays 10 hours), and for women and children—10 hours for six working days a week. After the October Revolution, working hours were determined by internal regulations of enterprises and not exceeded 8 hours per day and 48 hours per week. In the 1928–1933 transition to a 7-hour working day was carried out. Also, in the early 1930’s a five-day work cycle was introduced. In 1940, due to the outbreak of World War II and the tense international situation, a shift to an eight-hour working day, a seven-day working week was carried out [3]. At the end of the postwar reconstruction period, i.e., in 1956–1960 the working day in the USSR was reduced to 7 hours with a six-day working

Dynamics of Duration of Working Hours According to Karl Marx    451

week. Subsequently reduced to five-day workweek with two days off. The working hours were 42 hours per week. As economic and other necessary prerequisites were created, the transition to a shorter working week was carried out in the USSR. In 1977, the Constitution of the USSR, consolidated 41 hours of work per week. Further reduction of working hours was provided by the RSFSR Law of April 19, 1991, “On Increasing Social Guarantees for Workers.” In accordance with this law, the working time of employees cannot exceed 40 hours per week. This norm still applies to this day. A five-day workweek has been set for employees with two days off. A six-day week is established where, according to the nature of production and working conditions, the introduction of five working days a week is not practical, as, for example, in the enterprises of trade, communications, transport etc. At the same time, the working day cannot exceed 7 hours at a 40-hour weekly rate, 6 hours at a weekly rate of 36 hours, and 4 hours at a 24-hour weekly rate. Table 39.1 contains data on the change of working hours in Russia from 1890 to 2017. The International Labour Organization (ILO)1 recently proposed to reduce the working week to four days, i.e., up to 32 hours per week. The fourday working week, according to experts, will increase the number of jobs and reduce the burden on the environment. According to the results of research, a short week would have a beneficial effect on labour productivity. According to a study by Headhunter, in Russia only one in ten employers approve of “four days week,” and every fourth categorically opposes. Obviously, the material component of the work prevails over personal affairs and the value of free time. Although in the coming years the chances of moving to a four-day working week, in Russia, are less, in the long term, however, it does not seem to be impossible. FOREIGN PRACTICE The industrial revolution, which began in the second half of the 18th century, led to the fact that most of the people began to work all round the year. Work has ceased to depend on the seasonal factors. Artificial lighting facilitated long working hours. Entrepreneurs sought to recoup expensive equipment by increasing the working hours. In those years, the working day lasted from 12–16 hours with a 6–7 weekly working days [5]. Such a long working day was necessary, because the level of development of the productive forces was still very low. At the beginning of the 19th century, a typical working day in the United States was about 14 hours for industrial workers. President Vannes Buren special act limited it to 10 hours a day, on federal public works.

452    E. BEKKER, O. ORUSOVA, and M. EKATERINOVSKAYA TABLE 39.1  Duration of Working Time in Russia From 1890 to 2017 [4] Duration of working day in hours

working week in days

working week in hours

12.3

6

73.8

Year

Basis

1840

Duration of working time was established by agreement

1898

The Law “On the Duration and Distribution of Working Time in the Industrial units”

men–11.5; women–10

6

men–69; women–60

1917

Decree of the Council of People’s Commissars (here and after—CPC)

8

6

48

1927

Manifesto of the Central Executive Committee of the USSR

8

6

48

1929– 1933

Resolution of the Central Executive Committee and the CPC

7

6

42

1940

Decree of the Presidium of the Supreme Soviet of the USSR on the transition to the 8-hour working day

8

6

48

1956– 1960

Decree of the Presidium of the Supreme Soviet of the USSR “On ratification of the Conventions of the International Labour Organization No. 29 of June 28, 1930 concerning forced or compulsory labour and No. 47 of June 22, 1935 on reducing working time to 40 hours per week”

7

6

42

1967

Resolution of the Central Committee of the CPSU, the Council of Ministers of the USSR and the All-Union Central Council of Trade Unions “On the transfer of workers and employees of enterprises, institutions and organizations to a five-day working week with two days off”

8.4

5

42

1977

USSR Constitution

8.2

5

41

1991

Law “On the Enhancement of Social Guarantees for Workers”

8

5

40

2003

Labour Code of the Russian Federation

8

5

40

The reductions in working hours was one of the initial objectives of regulating employment and were first fixed by laws adopted in European countries, in the middle of the 19th century to reduce child labour time [6]. These were followed by laws that regulated the working time of adults, and these quickly spread throughout Europe, resulting in a ten-hour working day. These were relatively widespread, in the region, by the beginning of the First World War.

Dynamics of Duration of Working Hours According to Karl Marx    453

Although this development had been noted, first of all in Europe, nevertheless two non-European countries—New Zealand and the USA, were considered pioneering countries, those switched, at the beginning of the twentieth century to a 48-hour workweek. Shortly after the end of the war, these norms, of time had spread in most European countries and a number of Latin American countries, including Mexico and Uruguay [6]. Under the strong influence of trade unions, international working time standards (an eight-hour a day and a 48-hour a week) were included in the preamble to the ILO Constitution and the first Convention of 1919 on Working Time in Industry [7]. In 1930, international norms were extended to all, but the agricultural workers in the adopted Convention No. 30 on Working Time in Commerce of 1930. The importance of limiting the 48-hour workweek was it’s closeness to the first legal standard to the time line, beyond which regular work begins to cause harm to health, which is 50 hours as per medical literature [8]. Indeed, maintaining the health of workers had been a primary goal in the adoption of this standard since inception it remained an important rationale for policies, aimed at preserving working time within this standard. However, health and safety were not the sole purpose behind the 48-hour workweek. Other goals were reflected, for example, in the debates around the adoption of Convention No. 1, in which, although the health and safety of workers were meant, the dominant motive was to provide adequate non-working or leisure time for workers. However, the 48-hour norm of working hours was not the last one adopted at the national or international level. By the 1920s, in many industries in Europe and in the United States, a 40-hour workweek was used. During the Great Depression, the reduction in working hours occurred to create the potential for increasing the employment. In 1935, a new international document was adopted ILO Convention No. 47 “On reducing working hours to forty hours a week,” which became a priority document in almost all developed countries. The 40-hour work week was not considered solely as a way to stimulate employment, but it serves a solution to a wider range of tasks, including, the issue of maintaining a balance between work and personal life of individual. Gradually, it was such working time norm that became acceptable in many jurisdictions, and in the early 1960s, Recommendation No. 116 “On Reducing Working Time” was adopted [6]. Considering the evolution of the reduction of working time, it is important to note that the requirement to limit the duration of working time was not limited to labour legislation, it was also defined as the human right in the Constitution of various states.

454    E. BEKKER, O. ORUSOVA, and M. EKATERINOVSKAYA

After the Second World War, the Universal Declaration of Human Rights was adopted, which recognized the right to rest and leisure, which included “reasonable limitation of working hours,” as well as the International Covenant on Economic, Social and Cultural Rights, including standards of working time as an elements of the right to fair and favorable working conditions. Labour time restrictions were also included in later regional human rights documents: the European Social Charter (revised) of 3rd May 1996, the Charter of Fundamental Rights of the European Union and the Protocol of San Salvador [9,10]. In 1967, the ILO for the first time conducted a comparative analysis of national legislatively fixed working hours, which showed a clear trend towards a 40-hour work week. Only in 35 out of 93 countries participating in the study, 48 hours of workweek were legislatively enacted, in the rest, lower standards were applied. In Table 39.2 the differences in the legislative limits of working hours are shown in countries by region in 1967, 1984, 1995 and 2005. There are many economic and sociological studies proving that the reduction in working time is due to the intensification of labour, i.e., scientific organization and mechanization of production. The scientific organization of labour led to the standardization of production, the labour process was divided into standardized tasks, operations with the exact time of their implementation. The mechanization of production allowed firms to monitor and control productivity. Studies of the labour process have proved that labour productivity has been significantly reduced with the increase in working hours. Daily, weekly and annual periods of rest and recovery are necessary for workers to ensure high productivity. Labour productivity increases as a result of the use of new technologies, modern equipment, raising the professional level of workers, and at the same time there is a reduction in the duration of working time. The data of Table 39.3 confirm the tendency to decrease the working time and increase the free time [5, p. 140]. In general, the trend towards reducing working hours, which Karl Marx wrote about, is obvious in developed and some developing countries. It can be noted that a 40-hour work week is typical for a group of developed countries, in Latin America, however a 48-hour week is more common. In some Asian countries, for example, in India and Pakistan, there is no legislative restriction of working hours. In the report “Working time: the situation in the world,” 614 million people or 22% of the global workforce work 48 hours a week [12]. Attempts to reduce working hours in developing countries have not been successful. Overtime work is used, in these countries, to increase output in conditions of extensive economic growth and low labour productivity. Thus, there is a

Dynamics of Duration of Working Hours According to Karl Marx    455 TABLE 39.2  Dynamics of the Legislative Limits of Working Hours per Week in the Countries of the World Economy 1967–2005 (in hours) Country

1967

1984

1995

2005

The developed countries  Australia  Denmark

No legal time limits

40

  Great Britain  Canada

40

40

40

 France

35–39

35–39

35–39

40

40

40

  United States

40

40

40

 Belgium

40

40

35–39

40

40

40

41–46

48

41–46

  New Zealand

 Sweden  Switzerland

40

41–46

 Norway

40

 Austria  Japan  Germany

40 48

48

 Italy

40

48

Asia  India

No legal time limits

 Pakistan  Malaysia

There were no legal time limits

48

48

48

35–39 (office) 41–46 (industry and trade)

41–46

41–46

41–46

 China

48

48

40

40

 Philippines

48

48

48

48

 Thailand

48

48

48

48

41–46

41–46

41–46

41–46

 Singapore

Latin America  Uruguay  Venezuela  Argentina

48

48

41–46

41–46

48

41–46

 Mexico

48

48

  Bolivia

48

48

 Brazil  Chile

48

48

Source: compiled by the authors on the basis of ILO data.

456    E. BEKKER, O. ORUSOVA, and M. EKATERINOVSKAYA TABLE 39.3  The Dynamics of Working Time, Productivity and GDP per Capita in Industrialized Countries in the Period From 1870 to 1992 [11] Country

USA

Working hours

–46.3%

–46.9%

–36.3%

–47.6%

–50.0%

+1,287.6%

+1,734.7%

+4,352.2%

+2,127.9%

+918.0%

+918.6%

+998.3%

+2,632.0%

+967.11%

+918.0%

Productivity during working hours GDP per capita

Germany

Japan

France

United Kingdom

so-called “vicious cycle of poverty”: the wider the practice of overtime, the more workers are forced to work to maintain a low standard of living. The British New Economic Foundation report highlights the benefits of implementing a 21-hour week: reducing the overall unemployment rate, improving the environment, changing the consumer habits, increasing free time, time to spend with children and family, etc. [13]. According to sociological surveys, the less people work, the greater is their satisfaction with life. Thus, nowadays full-fledged personal development is impossible without a reduction in working hours. In conclusion, we note that the analyzed forecast by Marx of the absolute reduction in the number of workers and the ability of the nation to carry out its production in a shorter time deserves scientific recognition as brilliantly revealing the development prospects for the centuries ahead. This forecast was the result of a comprehensive deep study of the theory of capitalist production, and therefore it turned out to be exactly implemented right up to the present day and will continue for future centuries of market economy development. NOTE 1. The International Labour Organization (ILO) is a specialized UN agency dedicated to the regulation of labour relations. Established in 1919 on the basis of the Versailles Peace Treaty as a structural unit of the League of Nations. In 2017 the ILO includes 187 states.

REFERENCES 1. Marks, K., & Engel’s F. Sobr. soch. [Collected works], M., 1980. (in Russian). 2. Zolotov, A. V. Marks i Keyns o sokrashchenii rabochego vremeni: prognozy nesbyvshiyesya, no genial’nyye [ Marx and Keynes about working time reduction: forecasts which are unfulfilled, but ingenious ]// Vestnik Nizhegorodskogo

Dynamics of Duration of Working Hours According to Karl Marx    457 universiteta imeni N.I. Lobachevskogo. Seriya: Sotsial’nyye nauki. 2015, no. 4(40), pp. 27–35 (in Russian). 3. Istoriya izmeneniya rabochey nedeli v Rossii. Spravka. [The history of changes in the working week in Russia. Reference]. Retrieved from https://ria.ru/spravka/20110427/368728816.html (accessed: 18.09.2018) (in Russian). 4. Potudanskaya, V. F., & Batuyeva, A. V. Prodolzhitel’nost’ rabochego vremeni: otechestvennyy i zarubezhnyy opyt [Duration of working time: domestic and foreign experience]// Biznes. Obrazovaniye. Pravo. Vestnik Volgogradskogo instituta biznesa, 2016, May no. 2(35), p. 61. (in Russian). 5. Bylinskaya, A. A. Prodolzhitel’nost’ rabochego vremeni: dinamika i tendentsii. [Duration of working time: dynamics and trends]. Retrieved from e-library .ru/ 23431678.pdf (accessed: 18.09.2018) (in Russian). 6. International Labour Organization. (ILO). Sangheon Lee, Deirdre McCann and Jon C. Messenger. Working Time Around the World. Trends in working hours, laws and policies in a global comparative perspective. 2007. 7. Murray, J. 2001. Transnational Labour Regulation: The ILO and EC com-pared (The Hague, Kluwer Law International). 8. Spurgeon, A. 2003. Working Time: Its impact on safety and health (ILO and Korean Occupational Safety and Health Research Institute). 9. McCann, D. 2005. Working Time Laws: A global perspective (Geneva, ILO). 10. McCann, D. 2006. The role of work/family discourse in strengthening traditional working time laws: some lessons from the on-call work debate, in Murray, J. (ed.) Work. 11. Bosch, G., & Lehndorff, S. Working time reduction and employment: experience in Europe and economic policy recommendations / Cambridge Journal of Economics. 2001, no. 25, pp. 209–243. Retrieved from http://lmps.gofor.de/cambridge workingTimereduction.pdf (accessed: 18.09.2018). 12. Lee, S., McCann, D., & Messenger, J. C. Working Time Around the World: Trends in Working Hours, Laws and Policies in a Global Comparative Perspective. London and New York, NY: Routledge, 2007. Retrieved from http://www.ilo.org/public/ russian/region/eurpro/moscow/news/2007/070607_1.pdf (accessed: 18.09 .2018) 13. Coote A., Franklin, J., & Simms, A. Why a shorter working week can help us all to flourish in the 21st century, London: New Economic Foundation. Retrieved from http://neweconomics.org/publications/21-hours. (accessed: 18.09.2018).

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CHAPTER 40

PROJECTS OF “FUTURE” IN “CAPITAL” Dmitri P. Sokolov Financial University under the Government of the Russian Federation, Moscow Nizami S. Askerov Dagestan State University, Makhachkala, Russia Alla I. Varlamova Financial University under the Government of the Russian Federation, Moscow

For a long time, neoclassic mainstream of economics supported the idea of stability of a market economy and its inherent ability to solve the emerging disproportions and conflicts. A study of the market economy as a system of social and economic relations and its strategic perspectives was carried out in an effort to create a universal economic growth theory, which, according to the research of William Easterly [Easterly], was unsuccessful. The term “capitalism” became a heritage of rather philosophical and sociological

Marx and Modernity, pages 459–470 Copyright © 2019 by Information Age Publishing All rights of reproduction in any form reserved.

459

460    D. P. SOKOLOV, N. S. ASKEROV, and A. I. VARLAMOVA

areas of knowledge that emasculates its economic content as a certain method of production based on private property and generation of profit through constant deepening of the division of labor and the extension of selling market. System-based and dynamic components of the market economy research were developed by Adam Smith in “An Inquiry into the Nature and Causes of the Wealth of Nations” (first of all, in sections devoted to the division of labor), by the end of XX–XXI century. Although, it seems to be uncalled due to spirits of optimism at global financial markets, torrid growth of economies in South-Eastern Asia, and scientific-technological revolution in consumer-oriented microelectronics. The global economic crisis in 2008 had stamped out the illusory beliefs about the stability of the market economy. The subsequent long-term recession had resulted in actualization of futurological economic researches, in the methodology of which one of the eminent positions is occupied by the theoretical heritage of Karl Heinrich Marx. Practically, K.Marx wrote nothing about the future of the capitalist system, except for the general words regarding the inevitable growth of controversies between the community nature of labor and a private form of appropriation of its results, as well as inevitable transformation of the later into a community form. For citing purposes, the most known are final lines of Chapter XXIV of Capital (on transformation of the capitalistic private property into a community one . . . [Marx K. Capital; 741]). It is also worth mentioning the critic of the Gothic program, in which Marx rather gives more detailed definitions of the communistic mentality, based, nevertheless, more on negation of the conflicting elements of the capitalist system, rather than the definition of the communism as a system [Marx K., Engels F.; 19]. The method of Marx K., which is based on the principles of the Hegelian dialectic logic, presents itself as an efficient futurology instrument. Foreknowledge, both near and more distant, is based on understanding of the logic of historical development of major social and economic systems. It is a capitalistic society soaking up the entire world and becoming a planetary system, dynamics of which was described by K. Marx. Herewith, local attempts to exit such system serve neither a confirmation, nor a refutation of his postulates so far as the system evolves and extends. It appears to be a material error to apply the term “capitalism” to certain national economies or its groups, seeing them only at a macro level, being conscious of only higher order system components in them. Thus, the terms “American capitalism,” “Japanese capitalism,” and “Russian capitalism” focus us on regional and cultural features of manifestation of the effects of capitalistic laws, which are universal for the integral geo-economics system. Controversies inherent in such system may, in varying degree, manifest themselves in different national economies (first of all, by spreading over the hierarchical

Projects of “Future” in “Capital”    461

levels), but shall be studied synthetically, in the logic of historical development of the system as a whole. The backbone component of the capitalistic system is a capital, which is conceivable as social relations for self-expansion of value. According to Marx K., the content of capitalistic relations involves a connection of living labor and production means resulting in a greater value as compared to spent permanent and variable capital. Several properties of a system based on such principle originate from this basic definition. The need for constant expansion serves as the first feature. An increase in the profit mass with decreasing profit rate requires outgrowth of volumes and qualitative structure of both production, as well as relevant selling markets. Production here is limited to the resource base available for such system, whereas sales are limited to the effective demand as a distribution result of created added value. Second feature of the capitalism originates from commodity circulation formula “M–C–M.” The purpose of production process is not to satisfy the demand, but to generate profit, which makes its usability of the primary objective, rather than the ability to be a commodity. Unification of the first and second feature leads to commoditization as a process of involvement of more and more new spheres of human living in the commodity circulation. As early as at the production stage, the commodity reproduction gives a rise to the third feature of capitalism—alienation. Alienation of a worker from his labor results, from labor itself, and from a human being finally results in alienation himself from himself. A wage-worker, according to Marx K. in Economic and Philosophical Manuscripts of 1844, “by estranging of its own activity, assigns to other person the activity not typical for such person” [Marx K. Capital; 843]. The imperative consequence of estranged labor is the capitalistic private property. Continuous expansion of the capitalistic method of production occurs both regionally with involvement of new selling markets and sources of cheap resources in paracapitalistic periphery, as well as by deepening of the division of labor and an increase of its productivity. The commoditization serves as a component of such process ensuring the replacement of human activity earlier pursuing the cultural, moral, and ethical needs by capital purpose and logic. Labor force is transformed into a commodity. The educational process or healthcare actions take larger signs of commodity circulation. Friendship, family relations, and religious beliefs are subject to the commoditization. Just as the capitalistic method of production has, according to several researchers, a religious dimension (W. Benjamin, J. Derrida, Katasonov V.Yu., et al.), which enables it to subordinate the growing mass of relations of non-productive sphere in public life to its development purposes.

462    D. P. SOKOLOV, N. S. ASKEROV, and A. I. VARLAMOVA

The issues of the commoditization in terms of non-economic aspects of the public life are particularly relevant for the underdeveloped regions of Russia, especially for those where the institutions of the traditional society remain to the large extent. For example, in certain North Caucasian republics of Russia, blood-related ties, polyethnicity, polyjuridism, etc. are considered as such factors [N.S Askerov; 20–26]. The presence of these factors determines the high level of the shadow sector in the economy in the region, since non-economic traditional relations do not imply the commoditization (or monetization) of all sorts of social relations themselves. However, legal regulators require the regulation of traditional institutions on the basis of uniform rules for all regions. At the same time, the objective processes of the market laws penetration into the economic life of economic entities in these regions make the process of the commoditization irreversible. According to Berdyaev N.A. in 1930s, “Human being is wholly determined by an economy in capitalistic society, it relates to the past». For the last 80 years passed after this saying, the depth of conditionality upon the human life economy simply grows due to the intensified consumerism in the consumer-oriented sphere and economism in the production sphere. Due to the importance of such events and the ambiguity of the terms defining such events, let us consider it in more details. The consumerism will mean a growth of human dependence of surrounding things, a break of consumption process and an initial (not social, but functional) use value. The same capital accumulation logic, which requires producers to release more and more new commodity variations with decreasing useful lives, works for development of consumer society, drawing to them consumer attention by refined and more individualized marketing tricks. Recently, the economism in the production sphere is far from the economic determinism, which is also specific to Karl Marx, and expresses the prevalence of a figure, but not the economic law. In this context, “Figure” is a quantitative indicator serving as a benchmark of production activity. Thus, after the income, profit flows and cost savings, success of an enterprise, individual, and government are determined by quantitative indicators of the output units, number of written articles and conducted seminars, and GDP volume. The qualitative performance indicators of the economic subjects are of no concern to their regulators, and to a lesser extent are of concern to the performing parties. The quantitative element, which is closer by perception to monetary valuation, but at the same time is often limited to it in the mind, is separated from the performed process. Similarly, a monetary indicator is not always limited to the effectiveness assessment. This problem is of the most concern as regards to the state governance, education, healthcare, fundamental science, and culture. In the Russian Federation such problem is exacerbated by strengthened break between

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the controlling subject and the performed process: professional managers operate methods, which are universal (according to them) to equal extent for all spheres of production activity. Could this total economy conditionality be considered as a past heritage? It is possible only by an effort of will of future-oriented human conscience, but in fact, it is an objective trend of present days. However, one should limit the process of expansion of economy influence on human and society life from life cycle of the capitalistic method of production, for which it serves as a feature. Recently, the capitalistic system of management has undergone the crisis in its development, having reached the expansion margins. Territorial expansion of the capitalistic system had commenced as early as in the Age of Discovery, and at the beginning of the XXI century, i.e., five centuries later, had practically terminated. Merge of several capitalistic systems of compartmentation into a single one as a result of the I-II World Wars had resulted in a formation of the global capitalistic system. The last major territorial expansion of the capitalism was inclusion of the soviet economic zone, reallocation of resources and selling markets, which for a long time ensured normal system operation. Capitalism also reached the margins and technological expansion. Karl Marx formulated the economic law of the decreasing trend of profit rate, subject to which mass and relative share of the main capital is increased along with a progress of the production forces, leading to a decrease in added value and profit rate. Actual statistical confirmations of such law are enclosed in research papers of the Argentinean economist Esteban E. Maito, according to whom the profit rate in core capitalistic countries decreased from 44.6% during 1855–1859 to 12.6% during 2005–2009, where peripheral countries display the similar dynamics: 40.1% during 1955–1959 and a decrease up to 24.4% during 2005–2009. [Maito;164–166]. Considering the foregoing trends, the profit rate in the core countries will have reached the zero level in 2030, where in peripheral countries this indicator will have become zero by 2050. However, there are a number of important factors signifying acceleration of the trend. First of all, even now interest rates in developed countries are at near-zero level that does not promote intensification of investments in real sector since financial capital concentrates either on risk-free profit or on financial speculations or seeks similar investments at the markets of developing countries according to the analytics of Joseph Stiglitz [Stiglitz]. The second factor relates to the first one, but has more fundamental nature: the capitalistic system has been expanding not only in the territorial and technological contexts, but also in the time span, realizing the current demand out of profits of more and more distant time periods. Debt load of the subjects of economy has increased: in particular, by the end of 2017 volume of global debt (including both state, and corporate) comprised USD

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237 trillion, and global debt to GDP ratio comprised 297% [IIF], and it increased, as compared to 2016, 15 years ago, in 1993, where global debt to GDP ratio comprised 1 to 1 (USD 25.87 trillion against USD 25.76 trillion. [IIF; Economy Watch]. Generation of current income and positive economic growth rates would be achieved by further separation of the financial sector or the real economy and by an increase of the loan payout rates in the structure of future income of both the state and corporations, and house holding units. The policy of increased demand-site financing is merely an illusionary view of the market expansion. Certain positive expectations arise due to the development of new hightechnology markets linked by so-called NBIC-convergent technologies (NBIC—nano, bio, info, cogno technologies). It is assumed that such technologies, being in close relationship between them, may give a rise to new impulse of the global economic development and may stop the current “innovative interval». Expectations regarding an increase in profit rates due to the emergence of the new general-purpose technology were also specific for the preceding turns of technological development. In particular, similar expectations were related to computer scientific and technological revolution, however they were not realized in full—a jump in income was compensated by an increase in costs. At that, main mass of profits was related to expectations, but not to real industrial success—large-scale investments in production means (software, equipment, buildings and structures), being a result of a bubble at stock market and sharp growth in companies’ capitalization could not bring the expected output [Brenner; 488]. In so far as implementation of new technologies and emergence of product innovations may, in the first phase, reduce total income of reproduction cycle according to Hazin M.L., only innovations that result in its increase (both at a company level, and as a whole in economy) could be used in this system. Technologically and technically interrelated production conglomerate based on certain related widely used technologies forms the technological paradigm. NBIC-convergent technologies represent the basis for new VI technological paradigm, development process of which presupposes the replacement of a part of obsolete production chains by new ones—reallocation of both the division of labor, and selling markets. There is a contradiction: from the one side, the capitalist method of production has exploited its expansion options, whilst from the other side, a formation of new paradigm represents the objective process. Ways to settle the argument are as follows: first of all, expansion options of the system have not been fully exploited yet, and reserves could be used to get an impulse from development of new technologies, and secondly, possible solution would be the transformation of the capitalist method of production itself. Let us analyze the current geo-economic system transformation processes by these two directions.

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Nowadays, exhaustion of the territorial expansion within the scope of capitalist method of production leaves the space for optimization of the structure of existing system—keeping the profit margin at an acceptable level by re-allocation of cash flows inside the system. The most evident tendency in such domain is strengthening of inequality of inhabitants of the planet both in the inter-state aspect, and inside the national economies, both in terms of property and revenues, and in terms of the capital and its return rates. The best known contemporary researcher of inequality in the capitalist system is Thomas Piketty. He states that the particular return on equity in the market economy may in the long run exceed the earningsgrowth and production rates, which, in the context of reduction of the average return on equity, may result in a new cycle of strengthening of the global inequality in wealth and income [Piketty, 585]. According to The World Inequality Database, world inequality in wealth and income has grown since 1980, where the key trend is reduction of the middle class share. According to the analysts, one of the drivers of such process is reduction of the state-owned property due to privatization processes in post-Soviet environment, strengthening of market relations in China, as well as general reduction of the state-owned equity in developed and developing countries. When it comes to specific figures, during the period 1980–2016 growth of income in 1% of the highest income group comprised 27%, whereas 50% of the lowest income group accounted for 13% of growth due to the economic upswing in peripheral countries [The World Inequality Database]. Preserving the current state of the capitalist system and ensuring the minimum acceptable economic growth rates could be also achieved by structural reforms actively promoted by the International Monetary Fund. A set of such measures for developing markets is approximately identical: a reduction of the government involvement in the economy, an optimization of social programs, a high integration of economies in global added value chains, and market liberalization. Common activity directions for all countries are productivity enhancement (including greater efficiency of the labor markets) and re-allocation of production factors in favor of more profitable spheres [IIF Annual Report]. Analysis of IMF proposals for Russia indicates that the realization thereof promotes wider reproduction of inequality inside the country and higher peripheral dependence. Structural reforms form part of the system transformation: strengthening of local operation without any external sources means migration from the extensive development to the intensive development, oriented inwards. The method of production based on private ownership to production means is inevitably oriented outwards due to the need to ensure particular added value margin in the context of growing capital requirements to production. The intensive development of capitalist economy is possible only

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upon transformation of property system, with movement of other ownership form towards the system foundation. The question that has to be answered is what form such property system would take. Development of the capitalist system requires periphery with pre-capitalist paradigms. In the context of exhaustion of similar fields, logical option of system development is a formation of similar fields inside the system, archaization of public relations with preservation of the capital as a key public link of the system. From this perspective, the concept of system-wide cycles of capital accumulation proposed by the Italian economist Giovanni Arrighi, where the terminating American capital accumulation cycle is followed by the Asian cycle and where Arrighi proposes China as the central actor that is confirmed in his last publication “Adam Smith in Beijing: Lineages of the 21st Century” [Arrighi] is of interest. In recent times, the tendency towards regionalization is manifesting itself in break-up of the uniform geo-economic system into macro-regions that is also the objective reality of the global economy development primarily displayed in the US strategy of repatriation of production operations offset to South-Eastern Asia for minimization of expenses and in commercial wars with China. Realization of this tendency and break-up of the existing whole into the regional labor division systems leads to more intense competition between them, recreating to somewhat extent the situation of the early 20th century, when British, German, and Japanese systems reached the limits of their development with commencement of active globalization phase as formation of a uniform labor division system. In the new context of achievement of the capitalist accumulation margins, competitiveness of the regional reproduction system would depend on its capacity for intensive operation of the internal resources. And here, the key distinctive feature of the reproductive system of the People’s Republic of China defined by Karl Marx as an Asian ownership form [Marx Ch.3; 919] and further theoretically developed in the concept of the Asian method of production is brought to the forefront. Historically, the Asian method of production is disclosed in existence of two levels of property—collective (peasant-communal) and sovereign, to whom the surplus product created at the first level is re-allocated. Modern China, having formed the ideology and instrumentality under the USSR influence, finds in itself features of the historically created Asian method of production involving the government supremacy in property system over other subject groups (including private property). It is not about the formal judicial or quantitative superiority, but it is about the existence of two levels of production relationships, in which government plays the same decisive role as ultimate owners of big business in Western countries. Without getting into the detailed consideration of specific features of modern Chinese method of production, we would like to highlight three

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actual features of the Chinese state in production relations: strategizing (building up a long-term strategy and a system of its control over realization), information centralization (Big Data, formed for government, of which by biggest public corporations), and financial centralization. As a result, the Chinese social and economic system serves as a centralized labor division system producing practically full nomenclature of commodities, with population of 1.4 billion people (sufficient to ensure sovereignty of production and selling markets) managed by the administrative hierarchy and governmental control over two key resources of the XXI century—information and finances. Similar centralization at the governmental level in the context of reduction of the global profit margin is far more flexible and effective that functioning of classic capitalist economies. Financial centralization of China means that National Bank of China, as apart from the central banks of other countries (including Russia), is directly accountable to the state council of PRC, whereupon the leading commercial banks of China (occupying the leading positions both in terms of assets, and in terms of profitability—in 2017) form part of the state-owned property. At that, state-owned property in China (and in many Asian countries) is, in fact, property of the government as a “supreme ruler” pursuing strategic interests, as apart from America and Europe, where such state-owned property is ultimately focused on beneficial ownership of big capital owners. Information centralization of China involves implementation of already widely known Social Trust Credit Scoring (社会信用体系). There have also been initiated public discussions in other countries mainly around issues of social fairness, moral and ethical aspects, and criterial base of such system that slightly obscures its economic content. Social Trust Credit Scoring is, by definition, a system of automated adjustment of social reproduction—as well as production, distribution, exchange, and consumption. Its importance in the distribution relations as motivation-based relations in the reproduction process is of essence. The system involves not only population, but also organizations, effective performance criteria of which are prescribed clearly and in details [Kovachich]. In such a case, information flows cover practically all institutions, by which an individual and a firm had to interoperate during their social and production activities. In combination with influence of the central government, such mechanism of direct communication and feedback significantly enhances the strategizing effectiveness of Chinese social and economic development. Similar information systems have been evolving in many countries (primarily, in USA and Western Europe) in form of banking and marketing scoring from the companies’ side, as well as in form of national security from the government side. Herewith, information collection medium from the nation and subjects of economic activity is not only information about

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firms and state structures, payment systems, and video surveillance systems, as well as information about activity of subjects in the information environment (first of all, in social networks). Furthermore, subcutaneous chips with GPS have been recently developed, while chipping precedents in humans during the last two years have been more often, with USA and Sweden as examples. All of this allows creating the exhausting databases by people as consumers of commodities and services, as citizens of relevant states, and by companies, as subjects of judicial and financial relationships. An important distinctive feature in formation of social and commercial Big Data in USA and in the European countries is primacy of capitalist private property, where the described instrumentality mainly serves as means for reduction of risks and for keeping the decreasing profit margin at the level acceptable for big business. Capital interests in new conditions remain priority as regards to interests of the government and society. Public needs here are satisfied to the extent it is required to ensure reproduction process. Karl Marx wrote in his Economic and Philosophic Manuscripts of 1844: “Production is creating a man not only as a commodity, but also as a man-commodity, a man in the meaning of commodity, and it is creating a man, in this definition, as a spiritually and physically dehumanized creature” [Marx Ch.1; 849]. With development of information technologies, possibility of control over a person as a labor force and over a person as a consumer of produced commodities is getting close to absolute values. As NBIC-technologies have been evolving, coverage of information on physiological and social livelihood of humans, and quality of its processing would only grow, while purposes of use of the collected data would depend on economic interests of the owners of big information centers. In the context of profit motivation dominance, technological advancement would result in more estrangement of humans from society and from themselves. In this context, the impropriator is a constituted information environment, in which the performing actor is not an individual himself, but also his information image, including his past, present, and future determined by the information system itself. Criterion for determination of the individual’s position in such system is not his direct social interaction, but also the figure—calculated performance indicator. In the modern context of global leadership of the capital as subject of the social interaction, which is setting marginal criteria-based intervals, appears to be consisting of the capital owners and self-educating artificial intellect. Dialectic logic of Karl Marx points out to possibility of further development of production forces and relationships through the lens of leasing of private property. Marx defines communism as an authentic appropriation of humanity by a human and for a human [Marx Ch.1; 866], as “solution of historical mystery.” Based on analysis of key development trends of the capitalist system with approaching to margins of its extensive expansion, the

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development of production forces at a modern stage leads not to removal of human self-estrangement, but rather to its strengthening as continuation of the capital logic effect in the context of migration to the intensive method of production based on advanced information technologies. At the same time, technological development creates a possibility for future existence of society as a uniform non-alienated whole—both at the level of rural settlement, and at the level of global association. Although, this possibility remains only the possibility in the context of strengthening of human estrangement from himself to the information space, “figure” space, transformation of a human from the subject of production relationships into an object. The movement towards communism, according to Marx, is not a security of equal allocation of the public product, which was criticized by him in “Critique of the Gotha Programme.” The movement to the future is return of a human to himself not simply pre-defined by the logics lying behind the public formation layout—as besides the progress in the nature, there is also regress—not conditioned upon a human’s will and subjective society. ACKNOWLEDGMENTS The chapter was made with the financial support of the Russian Foundation for Basic Research, project No. 18-010-00877 A “The Problems of The Configuration of The Global Economy of The XXI Century: The Idea of The Socio-Economic Progress and The Possible Interpretations” REFERENCES Alpidovsaya M. L., Gryaznova A. G., & Sokolov D. P. Regress Economy vs Progress Economy: “Alternatives of Senses” // The Impact of Information on Modern Humans / Advances in Intelligent Systems and Computing, Volume 622/ Editor Elena G. Popkova.—Switzerland: Springer International Publishing AG, part of Springer Nature 2018.—pp. 638–646. Arrighi, G. Adam Smith in Beijing: Lineages of the 21st Century / Giovanni Arrighi; [translated from English by Menskaya T.B.] M.: Institute of Social Development, 2009. Askerov, N. S. The problems of interdisciplinary approach updating to the study of modernization processes in the Republic of Dagestan. Bulletin of Dagestan State University. 2017. No. 3. Berdyaev, N. A. The Origin of Russian Communism. Reprinted publication.YMCAPRESS, 1955—M.: Science, 1990 Brenner, R. The Economics of Global Turbulence: The Advanced Capitalist Economies from Long Boom to Long Downturn, 1945–2005 [text] / translated from

470    D. P. SOKOLOV, N. S. ASKEROV, and A. I. VARLAMOVA English by Guseva A., Haitkulova R.; under scientific editorship of Chubarov I.; Research and Development Institute “Higher School of Economy.”—M.: Publishing House of the Higher School of Economy, 2014. Easterly, W. (2001). The Elusive Quest for Growth: Economists’ Adventures and Misadventures in the Tropics. Massachusetts Institute of Technology Economy Watch: Economic Statistics and Indicators 1993. IIF. Retrieved from https://www.iif.com/ IIF Annual Report 2017. Retrieved from http://www.economywatch.com IIF Quarterly Global Debt Monitor. May 2017. Institute of International Finance. Retrieved from https://www.imf.org/external/pubs/ft/ar/2017/eng/pdfs/ AR17-RUS.pdf Kovachich, L. Big Brother 2.0. How China builds up its Digital Tyranny // Moscow Carnegie Center http://carnegie.ru/commentary/71546 Maito, E. El capitalismo y su tendencia al derrumbe. En Defensa del Marxismo. No 48. Pp. 125–172. Marx, K. Capital. A Critique of Political Economy. Ch.1—M. : Eksmo, 2011. Marx, K. Capital. A Critique of Political Economy. Ch.3—M. : Eksmo, 2011. Marx, K., & Engels. F. Writings, 2nd edition, Ch.19.—1961. Piketty, T. The Capital in XXI Century.—Moscow: Ad Marginem Press, 2015. Semenov, Yu.I. Philosophy of History (General Theory, Main Problems, Ideas and Concepts from the Antiquity Period to Present Times).—M.: “Sovremennye Tetradi.” 2003. Stiglitz, J., & Rashid, H. What’s Holding Back the World Economy?—Project Syndicate. https://www.project-syndicate.org/commentary/whats-holding-back-the -global-economy-by-joseph-e—stiglitz-and-hamid-rashid-2016-02?barrier =accesspaylog The World Inequality Database. World Inequality Report 2018.

PART IV THE SOCIO-ECONOMIC DEVELOPMENT AND MANAGEMENT OF MODERN ECONOMIC SYSTEMS

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CHAPTER 41

COMPARATIVE ANALYSIS OF ECONOMIC CONCEPTS IN KARL MARX’S “CAPITAL” AND THE MODERN THEORY OF INNOVATIVE ECONOMY Anzhelika P. Buevich Financial University under the Government of the Russian Federation, Moscow Olga V. Karamova Financial University under the Government of the Russian Federation, Moscow Evgeny V. Sumarokov Financial University under the Government of the Russian Federation, Moscow

Marx and Modernity, pages 473–482 Copyright © 2019 by Information Age Publishing All rights of reproduction in any form reserved.

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CREATION OF A DICHOTOMOUS SERIES IN THE CONTEXT OF THE SET OF ORDERED PAIRS Transformations in the modern world affect all areas of human community, including economic cognition. These changes are characterized, first of all, by such factors as: • Permanent systemic crisis. • Aggravation of economic activity risks. • Transformations of the main provisions of economic theory and practice, etc. In the modern system of scientific knowledge, a comparative analysis is interpreted as a comparative historical method (means) of studying various processes, including in economic theory and practice. Naturally, in the aggregate of sciences there are also directions that are adequate to this method, such as: comparative philosophy, comparative sociology, comparative theology, comparative pedagogy and, of course, comparative economics. It must be said that the integrative (general) conceptual foundations and methodological components of a comparative analysis have a genetic basis, which, of course, can be found in the conglomerate of philosophical comparative studies, which, as it evolved, at the end of the twentieth century, acquired the rank of a separate scientific direction in the field of modern philosophical discourse. Speaking about the principles of universalism and logocentrism in the framework of the pre-classical and, especially, classical philosophy and, of course, in the many types of sciences adequate to it, it is possible to conclude that the general and particular characteristics, specific explanations and the procedure itself of identifying the estimated parameters of phenomena of other scientific systems knowledge was carried out by comparing them with similar phenomena in the system of different sciences, on the temporal basis: Greek, Latin, Early and Late European, etc. These systems of science took the shape of “true,” in fact—“benchmark,” and the author of the article believes that an example of that is a Eurocentric linear and progressive model of social and natural evolution, which, in turn, made it possible to determine the value of different economic realities in the form of a comparison of different states of the components of scientific knowledge, namely: the level of the socio-economic state of different human communities at different times and at different stages of their development from the standpoint of comparing the level of “developed at the “high” level—developed at the “low” level,” “innovative–traditional,” “community development at the “high” level—community development at the “low” level, etc. The study of the comparative analysis of basic economic concepts, considered in this article, is conducted accordingly. The concepts represent

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different stages in the development of economics and practice in Marx’s times, as well as at the modern stage of economic development. Then, it is necessary to dwell on the characteristics of the considered method of analysis in the field of “non-classical” philosophy, where the method of comparative analysis is itself directly related to the desire to “correct” a one-sided approach to this method, in which the main vector courses were the following: • shifting from the use of a planar system in economic analysis; • identifying the value of the subject of economic activity in the gnostic process; • “folding” of the economic field of analogy and extrapolation in the context of the application of the logical principle of the unevenness of economic paradigms, etc. Based on the above, it is possible to conclude that the leading importance of creating economic models (schemes) for using comparative analysis became fully visible at the end of the last century. The basis of the theoretical postulates of such an approach is the process of formation of postmodern economic strategies and, especially, the technologies of practical application of theoretical economic knowledge that have foundations in the laws of decentralization and a certain heterogeneity, foreignness, and the presence of unequal elements in the aggregate components of economic knowledge. The summary of the experience of using comparative analysis in the process of studying the conceptual basis of any research allows to conclude that today’s modern economy requires the development and use of extremely accurate in a mathematical sense and, especially, objective methods of analysis, which, in turn, make it possible for the implementation of the process of strategic planning of economic entities’ activities in general. What is important for us is that the method of comparative analysis contains all the features of the universe, that is, the integrative set of objects, subjects and phenomena that are studied in a single system and, in fact, represent an objective reality in “time and space.” We will now consider the systematics basics of comparative analytical methodology when conducting research, namely: Basics of Systematics

—

Indicators of Systematics Elements

The scope of the study

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Using the method at the micro and macro level.

The nature of the subject of study.

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Levels of research (formalized and substantive).

The object of study (comparative standard)

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Research approaches (textual, functional, and axiological).

Characteristic features

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Comparison by parameters: epistolary, diagnostic, problematic.

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The number of top problems solved in the context of comparative analysis in economic theory and practice is quite large, and therefore we, constrained by the length of the article, will consider only a few of them: • making new quantitative indicators that characterize the evolutionary process of the economy systematic; • determination of the main principles and prognostics of their development in the modern economy; • identification and justification of the leading directions in the modern economy; • comparison and analysis of the positive and negative of different economic systems. In the article, the comparative theory method is implemented to analyze the basic conceptual bases that are used in the process of considering intellectual capital as the basis of the innovative economy of the future in the context of K. Marx’s Capital. This work of Karl Marx carries the original title of “Capital. Criticism of political economy” in Russian transcription and “Das Kapital. Kritik der politischen Ökonomie “in the original (German) version. This edition was published in the form of the publication of the first volume entitled “The Process of Capital Production” in 1867. It should be noted that this study, in fact, is a continuation of K. Marx’s scientific research in the framework of the analysis of the elements of political economy, that is, the study “A Contribution to the Critique of Political Economy,” published in 1859. In order to elaborate on the topic of the article, the author uses the method of developing and substantiating a dichotomous logical series, which, in turn, is a process of differentiating the definitions of the basic concepts of a topic in the context of the systematization of their components. In this article, they are presented as a combination of the following logical compositions, namely, “ordered pairs,” which in the theory of sets are represented by several options: • Option number 1—“empty (single-element)” set. • Option number 2—“non-empty (two-element)” set. namely: • The logical composition “1”—[“property”–“private property”]; • The logical composition “2”—[“capital”–“human capital”]; • The logical composition “3”—[“intellectual property”–“intellectual capital”].

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At the same time, on the top of this set is the innovative economy of the future, in the sphere of which the manifestation of the main characteristic features of these “ordered pairs” takes place. The innovative economy itself, that is, the knowledge economy or the intellectual economy, is a type of economic knowledge that is based on a rapidly expanding field of “innovation,” “technological positive transformation,” “high technology,” etc. At the same time, there is a “transfer of meaning” in the process of formation of profits from the industrial economy of capital to the formation of the intellect of personnel and the information sphere. THE AUTHOR’S INTEGRATION OF THE FUNDAMENTAL TENETS OF KARL MARX’S THEORY INTO MODERN ECONOMIC THEORIES Let us imagine these characteristics in accordance with this aggregate in the system of interaction of each of them both in K. Marx’s “Capital” and in modern economic theory and practice. The logical composition “1”—the first “ordered pair” is the interaction of such definitions as [“property”–“private property”]. Having compared the definition of the nature and content of these concepts, given in the “Capital” and in the modern system of scientific knowledge, it possible to establish the following correspondence: “Property,” according to Karl Marx’s definition, is related to the conditions of production as to their own, and is carried out only through the production itself. It is interpreted as an ordered set of elements that transform in the genesis of interaction between people in the process of production, distribution, exchange and consumption, which is nothing but the appropriation of the means of production and consumer goods not by those who create them, but by the owners of the means of production [10 ]. “Property” in the modern understanding of economic realities is manifested in the form of a changing system of social relations, containing in themselves a systematization in the process of appropriating things as components of the material wealth of society between different persons [1]. Comparing these definitions of concepts, we come to the conclusion that they, in their essence, structure and, of course, content, differ from each other only by the lexical notions of the same processes. Therefore, in modern practice of analyzing socio-economic concepts there is an opportunity, with an amendment to modern linguistics, to use the definition of the concept “property” given by Marx. So, the analysis of the first ordered couple provided grounds for concluding that both the founder of political economy and modern economics theorists express thoughts with multiple coincidences, which, of course, did

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not happen by accident, but represent, in the author’s opinion, an evolutionary dialectical development of K. Marx’s concepts. Considering the logical composition “2”—the second “ordered pair,” we analyze the essence and content of the link [“capital”–“human capital”], here it should be noted that, according to Karl Marx, “capital” appears only where the owner of the means of production and livelihood means finds a free worker in the market as a salesman of his labor power [4]. “Capital is not a thing, but a definite, social, belonging to a certain historical formation of society, a production relation that is represented as a thing and gives this thing a specific social character. Capital is not simply the sum of the material and produced means of production. Capital is represented by capitalized means of production, which by themselves are as much capital as gold or silver is money itself.” In the initial version of the text in German, it looks like this: “Das Kapital kündigt daher von vornherein eine Epoche des gesellschaftlichen Produktionsprozesses an. Das Kapital ist kein Ding, sondern ein bestimmtes, gesellschaftliches, einer bestimmten historischen Gesellschaftsformation angehöriges Produktionsverhältnis Das Kapital ist nicht die Summe der materiellen und produzierten Produktionsmittel. Das Kapital, das sind die Kapital verwandelten Produktionsmittel, sap so wenig Kapital sind, wie Gold oder Silber an sich Geld ist “[3]. In the modern interpretation, the “capital” concept represents “resources that can be used in the production of goods or in the provision of any services,” are in fact, one of the elements of the factorial aggregate: “capital,” “land,” “labor.” In the English language, we have the following version of the text, namely: “Capital in economics, a stock of resources that may be employed in the production of goods and services. In classical economics it is one of the three factors of production, the others being labour and land. “[2] Analysis of the definitions of this concepts’ pair shows that they, at most, form coinciding sets, differing only by lexical modern explanations and, naturally, can be used to simultaneously define the concept of “capital.” “Human capital,” in the interpretation of Karl Marx, is perceived as the fact that “. . . the saving of working time from the standpoint of the direct production process is considered as the production of fixed capital, and this capital determines the person himself.” [8] Today, the concept of “human capital” is interpreted, on the one hand, as “the present discounted value of the additional productivity of people with experience and qualifications exceeding the performance of unskilled labor,” and on the other, as “an assessment of the potential ability to generate income embodied in an individual.” Human capital itself consists of the abilities of the individual and his talents, and the received education and the acquired qualifications are necessarily taken into account [1]; [14].

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Comparative analysis of these concepts in various temporal planes shows that only at the present stage of human community development, the leading engine of progress comes to the leading position in the economic aspect of the social development process—human capital,- foreseen brilliantly by K. Marx, but not considered by him in detail because of the untimely vector of its significance at that time. The logical composition “3”—the third “ordered pair” of a comparative analysis of the basic concepts of the topic is a liaison of [“intellectual property”—“intellectual capital”]. “Intellectual property,” from the standpoint of Marx’s theory, was not directly considered in the middle of the 19th century. In his work, in the author’s opinion, only the initial approaches to the formation of this concept are presented, namely: “Excess of the product of labor over the costs of maintaining labor and education and the accumulation of this excess of public, industrial and reserve funds has always been and remains the basis of all public political and mental progress “[6]. K. Marx also concludes that “Labor is a game of physical and intellectual forces” [7]. Today we interpret this concept as “fixed by law a temporary exclusive right, as well as personal non-property rights of authors to the results of their intellectual activity” [5]; [15]. The analysis shows that this concept in a modern actual formulation has a more specific and definite meaning. “Intellectual capital” at the time of the release of the first volume of “Capital” by K. Marx, only outlined its future framework and prognosis of development, therefore, this definition may, with some tolerance, be attributed to his following statement that “intellectual capital” is “an indicator of the extent to which the conditions of the social process of life itself are subject to the control of the universal intellect and transformed in accordance with it; to what extent social productive forces are created not only in the form of knowledge, but also as direct organs of social practice, of the real life process “[11]. At this stage of development of modern scientific knowledge, “Intellectual capital” is understood as a set of “knowledge, skills and production experience of specific people and intangible assets consisting of patents, databases, software, trademarks, etc., which are productively used for profit maximization and other economic and technical results “[12]; [13]. According to the writings of Karl Marx, with some assumptions and “translation” into the language of modernity, it is possible to attribute to the interpretation of this concept his statement, which says that “capitalsaving innovations, in fact, are an unknown manifestation of complex technologies: labor-saving improvements are introduced as growing wages

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begin to reduce profits, while capital-saving innovations occur, as a rule, for technical reasons, but at a higher stage of capitalism.”[9] IMPLEMENTATION OF PROCEDURES FOR COMPARATIVE (COMPARATIVE) ANALYSIS OF BASIC CONCEPTS Conducting comparisons of definitions according to the logical composition “1,” that is, the first “ordered pair,” considering the concepts of “ownership” and “private property” both in the interpretation of the conceptual foundations of the economic theory of Karl Marx and in the understanding of modern economic theory, we are providing the following conclusions about the concept of “property,” which shows that this concept in the sense of its essence and content differs only at the level of vocabulary in the temporal context. Consequently, we can say that they are “equivalent,” with the exception of bringing translation of the vocabulary of the of K. Marx times to the modern lexical level. We can say that the following concept, such as “private property,” is not considered in its “pure” form in K.Marx’s own work, despite some of the foundations and elements of this concept used in the conceptual study itself. A comparative analysis of the content of the concept of “private property” in the scientific writings of K.Marx and modern economists determines their almost complete identity, taking into account the lexical phrases of the modern Russian language. Thus, the first “ordered pair” of the author’s logical series gives us grounds for considering it in modern language with some amendments to the lexical turns of a temporary nature, and in terms of content they almost coincide. Considering and comparing the definitions (essence, structure and content) of the logical composition “2”—the second “ordered pair,” we come to the conclusion that the concepts of “capital” both in the works of the founder of the political economy and in the studies of modern scientists and economics practitioners, are “coincident” aggregates, separated only in a time parameter. “Human capital” is considered in the works of Karl Marx somewhat simplistic, according to modern concepts, and therefore represents only the basis for its current use in the system of new socio-economic formations. The concept of “human capital” in the system of the world economic space is an integrative concept that represents many heterogeneous aspects, namely: the character, abilities and talent of an individual, as well as its educational and professional qualifications. It has a prognostic value as an engine of modern progress in all areas and spheres of vital activity of modern society. Next, discussing a comparative analysis of the elements of the content according to the logical composition “3,” that is, the third “ordered pair,”

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we consider the liaison between “intellectual property” and “intellectual capital.” “Intellectual property” in the works of Karl Marx in full has not yet had such decisive significance as at the present stage of development of our society. Comparing this concept in the definition, offered by Marx and modern economists, we conclude that these judgments, as a rule, do not coincide in their content due to the “gap” in time and space. The category “Intellectual capital” is a “non-coincident” set of definitions in the context of the above-mentioned reasons, therefore these concepts cannot have a mutually substitute role, but represent the landmark nature of their interrelationships, since in the works of Karl Marx only the basic position is given, and modern economics and practice uses this concept in much broader aspects. CONCLUSION To conclude, we can make the following main findings: • Analyzing the first couple of definitions from a logical series, we can note that the concept of “Ownership” and the concept of “Private Property,” both in the interpretation of K. Marx and in understanding of modern scientific knowledge, differ only in terms of lexical designation. Based on this, today they can be involved simultaneously. • Consideration of the second pair, expressed by a combination of such concepts as “Capital” and “Human capital,” provides grounds for suggesting that based on the results of a comparative analysis of these concepts in different social conditions of the mid-XIX—second decade of the XXI centuries, it is possible to conclude that only at the stage of the last time period of the development of the world community does “human capital” take the leading place in the economic plan of the evolution vector of socium, as a powerful amplifier of progress, already mentioned briefly in the works of Karl Marx. • Comparison of the main components of the third pair of the logical series provided an opportunity to determine that the understanding and use of components such as “Intellectual property” and “Intellectual capital” at the current stage of development of society and the economy is much deeper, more specific and more voluminous than before as they are both annotational and integrative elements of these concepts. • And the main idea is that all the concepts discussed above, which, in turn, constitute the concept of “intellectual capital,” conduct their activity in the context of a semantic cloud (sphere) that systematizes and differentiates all its constituent parts.

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REFERENCES 1. Black J. Èkonomika. Tolkovyj slovar' [Economics. Dictionaryc. / General Editorship: Doctor of Economics Osadchaya I.M. M .: INFRA-M, publishing house “Whole World,” 2000. (in Russian). 2. Britanskaâ ènciklopediâ. [British Encyclopedia]. (2018) https://www.britannica.com/topic/capital-economics (accessed: 15.09.2018). (in Russian) 3. Karl Marx. Capital [Capita]. 1867, Vol. 1. Ch.4 “The Transformation of Money Into Capital.” P. 183. (in Russian) 4. Karl Marx. Capital [Capita]. T.1. Ch.4 P. 181. (in Russian) 5. Kommentarij k Graždanskomu kodeksu Rossijskoj Federacii (postatejnyj). / È.  P. Gavrilov, O. A. Gorodov, S. P. Grišaev [i dr.]. [Commentary on the Civil Code of the Russian Federation (itemized). Part Four] / E. P. Gavrilov, O. A. Gorodov, S. P. Grishaev [and others].—M.: Prospectus, 2009. 800 p. (in Russian) 6. Marks K., Èngels F. Sočineniâ. [Marx K., Engels F. Collected Works]. V. 20, p. 199. (in Russian) 7. Marks K., Èngels F. Sočineniâ. [Marx K., Engels F. Collected Works]. V. 23, p. 188. (in Russian) 8. Marks K., Èngels F. Sočineniâ. [Marx K., Engels F. Collected Works]. V. 23, p. 234. (in Russian) 9. Marks K., Èngels F. Sočineniâ. [Marx K., Engels F. Collected Works]. V. 23. P. 293. (in Russian) 10. Marks K., Èngels F. Sočineniâ. [Marx K., Engels F. Collected Works]. V. 46. Part I. p. 482—483. (in Russian) 11. Marks K., Èngels F. Sočineniâ. [Marx K., Engels F. Collected Works]. V. 46. Part 2. P. 215. (in Russian) 12. Sergeev A. Intellektual'nyj kapital menedžmenta. Teoriâ I tendencii v Rossii. [Intellectual Capital Management. Theory and Trends in Russia]. Saarbrücken: LAP LAMBERT Academic Publishing GmbH & Co. KG, 2012. 316 p. (in Russian) 13. Tomas A. Stûart. Intellektual'nyj kapital. Novyj istočnik bogatstva organizaci [Stewart. Intellectual Capital: The New Wealth of Organizations]. M.: “Generation.” 2007. 368 p. (in Russian) 14. Èkonomičeskij slovar'. [Economic Dictionary]. 2010. http://www.klerk.ru/slovar/econ/. (in Russian) 15. WIPO Intellectual Property Handbook: Policy, Law and Use. WIPO publication; no. 489 (E). Geneva: World Intellectual Property Organization. 2004. 488 p. 16. Alpidovsaya, M. L., Gryaznova, A. G., & Sokolov, D. P. Regress Economy vs Progress Economy: “Alternatives of Senses” // The Impact of Information on Modern Humans / Advances in Intelligent Systems and Computing, Volume 622/ Editor Elena G. Popkova.—Switzerland: Springer International Publishing AG, part of Springer Nature 2018.—pp. 638–646.

CHAPTER 42

THEORETICAL UNDERSTANDING AND SUBSTANTIATION OF ORGANIZATIONAL AND ECONOMIC MECHANISM FOR MANAGING INNOVATION WITH A MARXISM POSITION Elena A. Pakhomova Dubna State University, Dubna, Russian Federation Olga V. Rozhkova Dubna State University, Dubna, Russian Federation

METHODOLOGICAL AND PRACTICAL VALUE OF THE THEORY OF MARXISM The purpose of most modern economic researches is to understand the changing economic reality and to answer the question, how to ensure the Marx and Modernity, pages 483–495 Copyright © 2019 by Information Age Publishing All rights of reproduction in any form reserved.

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efficiency and the sustainable development in societies that differ socially, politically and culturally. “But this knowledge will be revealed to scientists only if science can again switch to the study of the real man and the real economic system.”1 However, none of today dominant theories (monetarist, neoclassical, Keynesian, institutional and sociological, etc.) is able to cope with this scientific task, which encourages a researcher to turn his attention to the socio-philosophical and political economic thought of Karl Marx, who considers the capitalist system as a developing object characterized by the dominance of material production, alienated socio-economic relations and, as a consequence, cyclical crises [Marx, 1867]. As a direction of economic and theoretical knowledge, modern political economy departs from the primacy of production, including human needs in the sphere of its analysis. The widely spread in the world and in Russia, the so-called “Economics” (the term was introduced by a British scientist and economist, A. Marshall, and refers to the field of economic science, an economic theory, which studies the theoretical foundations of economic processes [Campbell, Stanley, 2009]) does not solve fundamental theoretical problems and builds a methodology in three main stages: the collection of facts and data, the nomination of the working hypothesis and the test of the hypothesis [Dzarasov, Men’shikov, Popov, 2004]. While the methodology of “Capital” implies a philosophical and historical view of the economy based on the dialectics of G. W. F. Hegel [Vazyulin, 2002]. This chapter is part of a series of works, united by the purpose of generalization and development of theoretical and methodological foundations of the formation of organizational and economic mechanism for managing innovation. In the context of this study, it should be noted that the fundamental science, namely political economy, which was the area of scientific interest of K. Marx, can have the most important methodological and practical significance for solving the designated applied problem, since it uses the following approaches: • subjective, that considers the economy through the interaction of independent entities that implement multiple interests emerging in the business environment; • reproductive, presented by the circuit “production”– “consumption”–“distribution”–“exchange” [Marx, 2013]; • institutional, focusing on the institutional environment and economic behavior of agents. Thus, it is important to assess the possibility of constructing the concept of such a mechanism based on these approaches and to identify the elements of the theory of Marxism that contribute to the possible projection

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of the conceptual model into reality. Through such a transparently organized and effectively functioning mechanism as a part of the relevant complexes of institutional units it is possible to systematically reform public administration [Burkov, Novikov, 1999] and to smooth the socio-economic contradictions studied by Marxism. In turn, to update the management system, it is necessary to determine a common approach to all participants, depending on the strategic priorities, on the combination of the leading actors, on the degree of implementation of key factors in the process of long-term macroeconomic modeling. APPROACH TO DEFINING DEVELOPMENT SCENARIOS Forecasting and qualitative description of several variants (scenarios) of the future state of the internal and external environment of the object under study on the basis of a certain combination of specified parameter values combines a set of approaches. K. Marx also identifies two trends, interrelated and united by the regulatory role of the state, which should lead to an increase in the dynamics of economic growth: the change in the meaning of the concept of “work,” ceasing to be a “great source of wealth,” and the strengthening of the role of science, which leads to the transformation of “general public knowledge . . . in direct productive force” and automation of production [Marx, Engels, 1839–1844]. Thus, according to K. Marx, the basis of the economy of the future are new technologies, rather than building the material base, which anticipates the assessment of the value of innovation in various theories of innovative development as a result of the implementation of a number of system-wide factors (the efficiency of state institutions, the degree of development of innovative sectors of the economy, the dynamics of labor productivity, the improvement of the quality of human capital, etc.), in general, determining the choice of a particular scenario: conservative, basic, innovative (Table 42.1). The definition of scenarios on the basis of subjective and institutional approaches is dictated by the need to abandon the generalized methods of extrapolation of averaged trends into the future and approximation of the elaboration and implementation of development strategies directly to economic agents at the micro level and their associations (meso level), ultimately contributing to the necessary macroeconomic structural shifts. INNOVATIVE ACTIVITY IN THE REGIONS OF RUSSIA The transition to a new production and technological structure, which was completed in the 2000s, due to the widespread use of information and

486    E. A. PAKHOMOVA and O. V. ROZHKOVA TABLE 42.1  The Brief Description of the Main Development Scenarios Conservative

Basic

Innovative

• “Manual” mode of economic governance; • Growth of macroeconomic imbalances and decline in profitability of the nonfinancial sector; • Reduction of investment; • Reliance on the old resource portfolio and traditional industries ‘ potential and transition to industry selfsufficiency; • Exacerbation of regional differences; • Increase in technological backwardness and retreating from leading international positions on a number of products; • Maintenance of low R&D and human capital development expenses; • Decrease in the share of qualified able-bodied population; • Fall of real income of the population and the threat of social instability.

• Resistance to fluctuations in the global economic environment; • Reduction of budget expenditures on social items; • Stabilization of investment flows; • Differentiated sectoral industrial policy with a focus on local technological competitiveness (MIC, nuclear and space industries, etc.); • Large-scale modernization of production and social spheres; • Technologies borrowing; • Weak development of civil sectors, as well as small and medium-sized businesses; • Increased exploitation of hired labour; • Optimization of the existing spatial structure; • Stimulation of internal intellectual potential; • Introduction of energysaving technologies; • Shortage of engineering and working specialties; • Low employment in knowledge-intensive industries.

• Effective implementation of natural resource potential; • Intensification of economic diversification and development of new activities and forms of employment; • Stimulation of domestic production; • Concentration of efforts on scientific and technological directions and formation of competitive scientific and technological base; • Production and export of goods with higher added value; • Territorial marketing and solution to the problems of one-industry towns; • Development of information and communication infrastructures and support to effective mechanisms of interacting and networking; • Renewal of the labor market due to the emergence of new competencies; • Increase in the quality of all types of capital; • Development of the consumer goods and services market.

communication technologies, created the ground for another cyclical crisis and escalation of socio-economic contradictions. In the aspect of national innovation management, it should be noted that at this stage the innovative activity of the regions is characterized by inefficient and heterogeneous—“focal”—structure and by low demand for innovation, and the development of the digital economy shows a level lower

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than in similar sectors of advanced countries. The introduction of innovations is influenced by a number of factors covering the characteristics of the regional innovation potential and the specifics of the subject [Pakhomov, Rozhkova, 2018; Pakhomov, Pakhomova, Rozhkova, 2017], which together form the so-called “favorable climate.” To understand the current institutional environment, we present brief conclusions of the study. Thus, the highest rates of innovative development are noted in the Central Federal District and the Volga Federal District, where the vast majority of organizations engaged in innovation sphere are concentrated and about 50% of all innovative products are produced. For some regions of the Northwestern Federal District and the Ural Federal District there is characterized by a high concentration of scientific and technical potential with a focus on military enterprises. Unconditional positive role is played by “the effect of metropolises” and by the surrounding areas. However, maintaining the level achieved by the subjects is not enough: the identified regions need supporting activities to increase productivity and to create new elements of innovation infrastructure, as well as to exchange best practices, including foreign ones. Many years of experience in the science cities functioning [Pakhomova, 2010] have affected the formation of the territorial research and innovation structure and the creation of local hot-spots, which to some extent explains the traditionally low level of innovative development in the Southern and North Caucasus Federal Districts and requires overcoming the existing backlog from the average Russian values. The intermediate position is occupied by promising regions that currently have all the necessary preconditions for accelerated innovative development, but are influenced by a number of constraints: the predominant position of a particular sector of the economy, low investment attractiveness, insufficient material and technical base, high business risks, hidden unemployment and “shadow” employment, lack of specialists in the implementation and management of intellectual activity. A general negative trend in recent years is the reduction in the number of organizations and in the number of employees in the innovation sector, which together with the lack of young researchers may soon lead to a shortage of specialists in the field of R&D. Based on the results obtained earlier, it can be concluded that in the conditions of strong regional disparities in socio-economic and innovative development, it is advisable to differentially approach structural changes in organizational, financial, economic, information, legal, personnel support of innovative activity, which proves the importance of creating an organizational and economic mechanism for managing innovation that can have a systemic impact on the growth of relevant indicators.

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MODELING OF INTEGRATION MECHANISMS Since the main forms of innovation infrastructure have already existed in the regions to some extent, the attention should be paid to the structure, objectives, tasks and functions of the integration mechanism of all elements and participants of the system. Based on the idea of K. Marx, it is possible to analyze the main elements of the object in their relationship and contradiction, then to reproduce them and to build a system of several objects, taking into account the ongoing economic processes and markets [Kleiner, 2002]: • the subject and object of management, justifying the economic feasibility of the formation of the integration mechanism and the need to create a single coordination authority with a transparent management methodology; • the institutional environment, designed to stimulate innovative development and to improve the relevant institutions; • the conditions of operation and development of economic entities, ensuring the transformation of innovative potential and reproduction of dynamic competencies and competitive advantages. The main objectives and/or priorities of such a mechanism should be identified: • to create an institutional environment that meets the needs and reduces the risks of all parties at the hierarchical levels of innovation (person/household –organization—region—state); • to organize the systems of cooperation, communication and distribution of advanced knowledge of participants, focused on specific tactical and strategic results; • to evaluate the effectiveness of management decisions, aimed at achieving the specified parameters of socio-economic development; • to control the degree of financial and other support for research and development and the involvement of infrastructure institutions; • to perform general management functions for the implementation and the development of the innovative potential of the region with the focus on economic growth; • to provide statistical monitoring of innovative development of participants and the environment. For Figure 42.1 the stages of modeling of organizational and economic mechanism for managing innovation are presented.

Organizational and Economic Mechanism for Managing Innovation    489 Identification of the need for innovation

Assessment of internal and external factors

Analysis of socio-economic policy implementation

Diagnosis of existing approaches to innovation management

Comprehensive assessment of innovation potential

State and regional regulation of innovation management

Analysis of conditions and constraints

Resources

The development of the concept of mechanism Development and calculation of a system of indicators and criteria Identification of the main directions/implementation scenarios in relation to the desired target results Analysis of alternatives and model selection Adjustment of tasks and methods

Management functions (planning, organization, motivation, control

Definition of goals, objectives, and requirements for innovation management

Figure 42.1  The stages of modeling of organizational and economic mechanism for managing innovation.

Among the most typical problems, the emergence of which leads to the need to intervene in the management decisions of the subjects, it is necessary to highlight the directions: • the changes in the external environment (both negative and positive), dictating the need for transformation of the controllable object; • the changes in the internal environment of the controllable object, leading to a conflict between it and the goals of its activities; • the parties’ lack of an agreed and unified approach to evaluating the effectiveness of innovations, capable of ensuring the comparability and reliability of quantitative indicators. THE GENERAL SCHEME OF MANAGEMENT DECISION-MAKING The three main stages of management decision-making (decision preparation, decision-making, implementation of the decision [Lafta, 1999]) on the

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identified problem, considering it as a discrepancy between the actual and desired states of the controllable system, include the following conditional stages [Drucker, 2009]: diagnosis of the problem; setting goals and objectives; collection of necessary information and determination of constraints; selection of performance evaluation criteria; modeling scenarios in dynamics; assessment of the likely consequences and selection of the optimal; specification of the chosen decision to the action plan with responsible persons and executors; management of implementation of the planned actions; monitoring of results; development of corrective measures (Figure 42.2). With regard to the mechanism under consideration, the general scheme of implementation of management decisions acts as an association of two systems: informational, consisting of subsystems of creation, transfer and implementation of competencies, and analytical, including a block of Identification of the problem situation Goal-setting Collection of necessary information and identification of limitations Heuristic Development of the evaluation system

Selection of methods of decision-making

Collective Quantitative

Design of alternative development forecasts and selection of the best option

Economic justification of the chosen solution

Coordination with the authorities and the participants

Problems statement Development of a mathematical model Organization of implementation of the decision Controlling Analysis of the results Development and testing of the guidelines

Figure 42.2  The general scheme of management decision-making.

Organizational and Economic Mechanism for Managing Innovation    491 Formulation of the problem Identification of possible participants Definition of the principles of operation Identification and systematization of the set of functions by mechanisms Mechanism of innovation development and implementation

Mechanism for financing and stimulating innovation management

Mechanism of commercialization of innovations and of protection of intellectual property

Management decisionmaking mechanism

Development of a system of conditions and limitations of relationships and interdependencies Organization of the management structure Development of performance evaluation system

Figure 42.3  Development of the structure of the organizational and economic mechanism.

information monitoring, a block of modeling development options, a block of control—more about the development of the structure of the organizational and economic mechanism in Figure 42.3.

THE APPROACH TO THE ASSESSMENT OF RESULTS OF A MANAGEMENT SYSTEM IMPROVEMENT Despite multiple attempts, there is still no single methodology for assessing the results of such mechanisms and related structural solutions. According to some researchers, such calculations should be based on the most universal indicators [Mil’ner, 2013], expressed both qualitatively (for example, social and other effects) and quantitatively: the ratio of costs and results (including cost price, profit, profitability), the magnitude and probability of risks, project management indicators, the results of tasks in functional areas, etc. However, such a range and diversity of multiple approaches demonstrate the subjectivity and the tension between the criteria, which does not correspond to the goals of creating an organizational and economic mechanism focused primarily on the expansion of the pool of

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opportunities and the growth of the project portfolio, and only then on the direct increase in efficiency. The volume of this publication does not allow us to give a detailed author’s approach, however, we note that the development of criteria should be applied to specific tasks within the framework of the general problem, depending on the object and subject of the study and on the objectives of the analysis, and the efficiency of the entire system is evaluated through the provision of an integral indicator or through the maintenance at a certain level of the indicators of functional subsystems and the definition of conditions for their maximization [Pakhomova, Rozhkova, 2017]. According to K. Marx, the revealed contradictions, or “antagonisms,” considered as potential sources of transition of the system to a new state, firstly, reflect the regularities and the trends of the economic processes, and secondly, correspond to the method of scientific research “from the abstract to the concrete.” CONCLUSIONS Summarizing that “all Marx’s worldview is not a doctrine, but a method, which gives “not ready-made dogmas, but starting points for further research and a method for this research” [Marx, Engels, 1839–1844], we note that attached to the presence this teaching needs to be supplemented with the results of statistical studies, assessment techniques and adequate tools. Recently acquired sharpness of the question about the relevance of “economic theory of the future” [Schumpeter, 2007], K. Marx’s anticipation of many current trends attest not so much to the complex nature of the doctrine, but to that, despite the vast layer of literature devoted to the study of his heritage, the interpretations lay in more ideological than scientific plane, hiding the possibility of applying directly the methodological approach from modern researchers. In this part of our study, the concept of creating an organizational and economic mechanism for managing innovation is compared with the subjective, reproductive and institutional approaches, respectively: • as unity and variety of different types (project, object, process, environment) [Kleiner, 2007] of economic systems; • as a functional and structural scheme of activities aimed at the dissemination of innovation; • as a stage-to-stage identification and assessment of prospects for the development of the institutional environment for compliance with the economic paradigm.

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There is the expediency of the transition in the design of the strategy of innovative development to take into account the factor of regional differentiation, largely affecting the success of the socio-economic programs and the possibility of strengthening the territorial competitive advantages, as well as the actual conflict of scenarios due to the contradictions between the subjects caused by the difference in innovative potentials and development priorities, by occurring disintegration processes, by the lack of standard and specialized mechanisms of administration, etc. Real economic processes take place at the junction of socio-economic micro- and macrosystems, although for theoretical, methodological and applied analysis, the modern science proposes to consider the mega-, macro-, meso-, micro- and nanoeconomic levels and the study of the institutional environment within each of them. The development of appropriate management mechanisms can become a link that will provide additional opportunities for the transformation of economic systems into innovationoriented ones. ACKNOWLEDGMENTS The article was supported by the Russian Foundation for Basic Research as part of project No. 17-06-00301, The Organizational and Economic Mechanism for Managing Innovation in the Consumer Goods Market: Methods, Models, Tools. NOTE 1. Coase R. Save the economy from the economists. Harvard Business Review “Phenomena” // [Internet resource]. Retrieved from http://hbr-russia.ru/ biznes-i-obshchestvo/fenomeny

REFERENCES Burkov, V. N., & Novikov, D. A. (1999). Teoriya aktivnykh sistem: sostoyanie i perspektivy [The theory of active systems: state and prospects]. Sinteg, Moscow, 128 p. (in Russian). Campbell, R., McConnell, Stanley L. Brue (2009). Ekonomiks [Economics]. Infra-M, Moscow, 944 p. (in Russian). Drucker, P. (2009). Praktika menedzhmenta [The Preface of Management]. Williams Publishing, Moscow, 400 p. (in Russian).

494    E. A. PAKHOMOVA and O. V. ROZHKOVA Dzarasov, S. S., Men’shikov S. M., & Popov G. Kh. (2004). Sud’ba politicheskoy ekonomii i eyo sovetskogo klassika [The fate of political economy and its Soviet classic]. Al’pina Publisher, Moscow, 454 p. (in Russian). Kleiner, G. B. (2002). Sistemnaya paradigma i teoriya predpriyatiya [The system paradigm and enterprise theory]. Issues of Economics, Moscow, no 10, pp. 47–69 (in Russian). Kleiner, G. B. (2007). Sistemnaya paradigma i ekonomicheskaya politika [System paradigm and economic policy]. Social Sciences and Modernity, Moscow, no 2 (in Russian). Lafta, G. K. (1999). Effektivnost’ menedzhmenta organizatsii [The effectiveness of organization management]. Russian business literature, Moscow, 320 p. (in Russian). Marx, K. (1867). Kapital [Das Kapital. Kritik der politischen Ökonomie], vol. 1. AST Publishing (2001), Moscow, 565 p. (in Russian). Marx, K. (2013). Proizvodstvo, potreblenie, raspredelenie, obmen (obrashchenie) [Production, consumption, distribution, exchange (circulation)]. Issues of Political Economy, Moscow, no 4, pp. 22–39 (in Russian). Marx K., & Engels F. Polnoe sobranie sochineniy (1839–1844) [Complete works (1839– 1844)]. Publishing house of political literature, Moscow, 1955–1974 (in Russian). Mil’ner, B. Z. (2013). Organizatsiya sozdaniya innovatsiy: gorizontal’nye svyazi i upravlenie [Organization of innovation: horizontal communication and management]. S&RC Infra-M, Moscow, 288 p. (in Russian). Pakhomov, A. V., Pakhomova, E. A., & Rozhkova, O. V. (2017). Differentsiatsiya regionov Rossii na osnove ekonometricheskogo analiza po sotsial’no-ekonomicheskim pokazatelyam, vliyayushchim na potrebitel’skiy spros [Differentiating the Russian regions through an econometric analysis by socio-economic indicators influencing the consumer demand]. National interests: priorities and security, Moscow, vol. 13, no 12(357), pp. 2200–2217 (in Russian). Pakhomov, A. V., & Rozhkova O. V. (2018). Instrumental’no-metodicheskiy aspekt upravleniya regional’nymi transformatsiyami [Instrumental and methodological aspect of regional transformation management]. Problems of configuration of the global economy of the XXI century: the idea of socio-economic progress and possible interpretations / collection of scientific articles, Krasnodar, pp. 117–124 (in Russian). Pakhomova E. A. (2010). Metodologicheskie osnovy otsenki vliyaniya vuza na effektivnost’ regional’nogo razvitiya [Methodological principles for evaluating the university’s impact on the efficiency of regional development]. MEILER Publishing, Moscow, 725 p. (in Russian). Pakhomova E. A., & Rozhkova O. V. (2017). Aktual’nost’ mezhdistsiplinarnykh issledovaniy v izuchenii sovremennykh ekonomicheskikh sistem i institutov [The relevance of interdisciplinary research in the study of modern economic systems and institutions]. Institutional and financial mechanisms for the development of territorial clusters and technological platforms / proc. of the International Scientific and Practical Conference (November 11–12, 2016, Dubna State University), DirectMEDIA, Moscow-Berlin, pp. 402–423 (in Russian).

Organizational and Economic Mechanism for Managing Innovation    495 Schumpeter J. A. (2007). Teoriya ekonomicheskogo razvitiya. Kapitalizm, sotsializm i demokratiya [Theorie der wirtschaftlichen Entwicklung. Capitalism, Socialism and Democracy]. Eksmo, Moscow, 421 p. (in Russian). Vazyulin, V. A. (2002) Logika «Kapitala» Karla Marksa [Karl Marx’s Logic Of Capital]. Modern Humanitarian University, Moscow, 30 p. (in Russian).

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CHAPTER 43

NATURE OF “THE CAPITAL” AND THE MODERN RUSSIAN ECONOMY’S GROWTH Marina L. Alpidovskaya Financial University under the Government of the Russian Federation, Moscow Vasily I. Kornyakov Pushkin Leningrad State University (Yaroslavl Branch), Yaroslavl, Russia Natalia A. Vakhrusheva Yaroslavl State Technical University, Yaroslavl, Russia

The economy of the Russian Federation inherited non-competitiveness, depressed economy dynamics of the late USSR and has even aggravated both factors. Today this fact is perceived as ordinary even by Government officials. We believe that the problem requires a broader approach. From the public reproduction resource perspective the entire postwar Russian economy represents the integrity, formed by two opposing dynamics. The

Marx and Modernity, pages 497–506 Copyright © 2019 by Information Age Publishing All rights of reproduction in any form reserved.

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first fifteen years were marked by an economic growth unique to Russian post-war history, with an exceptionally triumphantly high growth rates and all the attributes of a genuine heyday (expressions of Khanin G.). The understanding of this phenomenon as a mobilization economy is unrelated with its creative role: a new country has been successfully built, a country free from poverty, resourced in accordance with world standards, with increased life expectancy, with qualitative improvement of social substance. The cliché of “mobilization economy” does not explain anything and only hampers the identification of a resource (reproductive) miracle, which clearly shows an increase in 1945–1960. The first upraise and recovery years were truly almost a Biblical miracle of hundreds of thousands of destroyed objects recovery over just 2.5 years (without any help from abroad) instead of 70 years, predicted by the West. It has grown organically into a miracle of a powerful frontal continuous reproductive increase of all resources for unprecedented productivity growth, large-scale construction and mass housing buildings, social benefits and defense. And then suddenly everything disappeared without a distinguished transitional period. Almost sixty years of a depressed development, which main feature is the opposite to the abundance and prosperity of the 1945–1960, started (and endure up to present days). Over 1961–1990 period a gradual continuous loss of resources and growth rate was observed, which led to an almost zero stagnation in Soviet Union at the edge of its collapse, and in Russia, after the 1990 ‘s disaster, 2000 ‘s growth recovery, 2010’s blatant lack of resources, ended up with a state abysmally opposite to the rise of 1945–1960. This fact was recognized and vividly described by A.Ulyukaev, the former Minister of Economy of Russia [Ulyukaev, 49]. In 2014 he proclaimed the country’s inability to perform high rates of economic growth, not only over the current period, but also over the next fifteen years (two years later, his colleagues “corrected” their Chef: not over fifteen, but already over a twenty- year period) as a “new normal” reality. PROBLEM STATEMENT: PRODUCTIVITY GROWTH AS AN IMPERATIVE A case study led us to a conclusion that these two polar reproductive situations—resource miracle of 1945–1960 and modern resource collapse—are not only logical, but at the same time are anthropogenic. Resource reproduction regulator “turn on mode” was the first to have been defined but not yet explained scientifically. In the late 1950 ‘s this resource content regulator has been inexplicably “turned off.” A depressing trend of resource starvation started, sweeping all attempts of its reformation, and a modern resource situation of resources devastation was established.

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In the course of our search for a hypothetical reproductive resources regulator we decided to model the merge of productivity increases with a resource center for public reproduction—namely its I unit. We started searching in what economic shape of productivity growth, created in the production process, organically merge with I unit, becoming the accessory of the economy. Here is where we fell happiness to find a helping hand in the Marx’s point of view. It was a decisive moment for all our studies, our findings and suggestions. In “The Capital” Karl Marx addressed a related problem: How what is being done with a product during production, remains in the economy after the end of its production as well? The classic does not mention productivity growth, but this is not required. In fact, his entire book is devoted to the opening of a surplus value, while productivity under capitalism is its social existence. Marx could not have in mind nothing else. The answer to this question Marx considered to be of particular importance, so, in order to attract attention to it for the first time revealed to them the economic relationship-construct name theological term “transubstantiation.” Taking into account the above-mentioned, the construct of Marx can be represented as follows. Just as bread and wine become sacred only in the Eucharist, individual productivity growth (in production) becomes public (possession of social reproduction) only when they appear price reductions on relevant goods and, more importantly, their sale on these low prices (see, for example, [Marx; p. 116–118]). Here a well-known idea of public nature of labor producing goods, through its equation to money is implied, as well as the a new to many economists provision that only those performance improvements become public that are displayed through price cuts of sold goods. This Marx’s s provision has never been a subject to debate and analysis by Russian economists. Meanwhile, it opens the main secrets of post-war economic development of the country (the post-war increase and modern resource deterioration), and defines a strategy for our future economic ascent. ECONOMY OF DECLINING PRICES Everyone can remember that some time ago we used to live according to Marx’s postulates, under “the economy” of declining prices in the period of 1945–1960. Everyone who remembered about immediately faces an entire system of undoubtedly wonderful obvious coincidences, or hidden patterns, as it was called by A. Einstein. The central one is: Economy of declining prices ( and according to Marx, public labor productivity) coincide with Russian economy increase period of 1945–1960. For the first time it is showed that lowering prices is not a consumer, but a productive action,

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which included resource provision of economic ascent. This came as a surprise to specialists, which cannot be an accident, as it is underpinned by the other, related coincidences. So, the second one is a conjunction of dismantling, termination of economy of declining prices, start of economic descent. In 1958 the main indicator of Economy of declining prices was canceled, in 1959 and 1960 the increase suspended and since 1961 has ceased altogether. The same hidden pattern is detected in the third coincidence. Since the dismantling of the Economy of declining prices there has been no return to growing (quantitatively and qualitatively) resourcing, not even at least for a short-term period (limited regenerative growth of 2000ies was not one of them). On the contrary, it was resource desertification and devastation. These coincidence can be interpreted only in one way. It is undeniable that the Economy of declining prices is a regulator of the resourcing of the economy. In accordance with the Marx construct of economic “transubstantiation” in 1945–1960 Russian economy under the influence of the Economy of declining prices transferred increasing productivity into the public reproduction thus generating resources for economic uplift. A sudden Economy of declining prices dismantling immediately stopped the process. Naturally a diametrically opposite depressive and contributing to resource starvation process was established . In a series of articles, published by a number of editions [Alpidovskaya, Kornyakov, Vakhrusheva], we prove that both resource ascent of 1945– 1960, and subsequent long-term resource degradation are related and even have similar natural and social roots. They are located in a public reproduction resource center, which is a natural circulation of the I division, and in Marx’s perception, accumulating all resources of embodied and 2/3 resources of direct labor. Firstly it is identified how price reductions (given productivity growth), merging with a mentioned circulation, generates a fold mass of supplementary resources of not only not direct, but mainly embodied labor. ECONOMY OF DECLINING PRICES AND NATURAL CIRCULATION OF I DIVISION: ECONOMIC ESSENCE OF THE MERGE So, in a separate enterprise, productivity growth, releasing a direct labor, does not release all the resources needed for the establishment of employment (means of production) of redundant employees. Therefore, in enterprises a productivity growth is seen, mostly, in connection with only direct labor saved. The release of embodied labor does not occur within a separate enterprise, but throughout I division. The head of a separate entity

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does not see it. Everything happens over him, out of his vision and competence in public reproduction. Thus, the full merge of performance enhancements with I division circulation occurs in long-term invisible to a separate enterprise national economy circulation movements. As a result of these movements, at different levels and points of this circulation production means are released. They have indeed provided employment to released (increased productivity) redundant employees. Such resources are enormous for a mass of the released production means is defined by its organic structure, and, for example, according to Marx’s reproduction model they amounted to 300 per cent addition to the direct labor. Such a release occurs for immediate re-usage of resources that have already boosted productivity. Consequently autonomic increase of the productivity growth resource base and the growth of productivity itself is created. In 1945–1960 it was accompanied by productivity growth stimulation on enterprises through reduction of cost-price. It worked, and worked at the global level. In 1960 Russian enterprises production efficiency exceeded the achievements of the developed European countries enterprises, only the United States remained ahead. An almost unattended change of the indicators for evaluating of enterprises activities in 1958 turned out to be a maneuver that radically changed the development of the modern world, the collapse of the USSR and the country’s current loss of its place in the world economy. ECONOMY OF DECLINING PRICES: IMPLEMENTATION AND SOCIAL REPRODUCTION RESOURCING REGULATOR For many years Russian (Soviet) economy has been striving for the Economy of declining prices with reflections and experiments. In 1927 already among decisions of XV Conference of the ruling party it is recorded that the price rise slows down the scientific and technological progress. What should be done in case of supplementary material resources generation across the whole field of social reproduction? Firstly, something like economic net for their “catching” and consolidation should be organized. Secondly, a system of their organic involvement in operating or planned production processes should be formed. And it was done: economic growth itself is the proof. It is known that in Soviet economy of declining prices centralized system for the identification, accounting and use of economy of material costs were created. Material costs economy was even mentioned in political economy coursebooks as one of the determinants of national income growth [political economy].

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Thus, although the Soviet Economy of declining prices was a success, its maintaining (in the course of economic growth, expansion of reproduction) in the mode of economic growth required a great effort from the part of management and planning bodies. Nevertheless, successors of Stalin I. germinated the idea to shift that work from the Centre to the enterprises. In the pursuit of profit they had to accumulate and use generated resources. This idea was initially ill-conceived. As if the enterprise operated not with its suppliers and buyers, but around the whole reproductive field and could dispose of it. But there was no discussion, this idea got acknowledged and golden goose of economic ascent was successfully stabbed. Thus resourcing regulator of social reproduction was turned off, to be more precise, “switched.” Labor productivity growth was no longer public in reproductive sense. Not reflected in prices reduction, it ceased to affect the value expression of social reproduction, the circulation of I division. It would seem, a system would have reached a kind of equilibrium with simultaneous traits of depression and recovery, even with an emphasis on recovery. Because, starting with the reforms of Kosygin, changes and events for improvement were proclaimed one after another, even in post-Gorbachev Russia. However, reality appeared to be completely different: depressed monotonous movement led to modern inefficient and inactive condition. After the murder of the Economy of declining prices the country entered an era of losses of everything gained during the 1945–1960 ascent, with a general trend to the current resources absence. This development was attempted to be ceased by lots of means, even through the pivot that changed socio-economic formation. This attempt failed: after formation disaster and recovery, the country resumed not even a movement, but a depressive drawing. It leads to an inevitable conclusion: public reproduction is operated by an unnoticeable force, which breaks it. Our conclusion does not deny any other scientific development for the prospects of economic growth in the Russian economy. All these research may well have a place, all of them will be “ in work.” Our conclusions do not contradict them, but rather complement them. In our view, all of them still lack the reality explaining force and those qualities of “fulcrum,” required for the lever of economy shift towards growth. ECONOMY OF DECLINING PRICES VS IMITATION OF PRODUCTIVITY LOWERING The material force, that reduces to zero resource provision for Russian social reproduction, is represented by innovations that have not been identified by science in the circulation of its resource center—I division. Its actual elimination as reproductive aggregate of Russian economy in the 1990s had

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a significant influence. Currently, a crucial part of main capital is imported from abroad by Russian companies. But this fact does not change the objective natural resource role of I division. Circulation of the I division remains a force of Nature, obeying her and implementing her laws, as well as a public man, his work, production, reproduction. Obeying Nature, circulation of I division “responded” to productivity growth by removing (through prices reduction) a part of direct labor from the current production, through the even premium withdrawal of embodied labor, and creating a new productive force from them. However, according to universal laws, the same circulation has a symmetrical effect, “responding” not to the rise, but to the fall in productivity. If productivity grows circulation intensifies it by additional resource allocation, if productivity falls circulation restrains this fall. Supplementary direct labor engagement corresponds to prices increase that merges with the establishment of supplementary of production means, which contributes to production level maintenance. The same public product is created involving supplementary resources of direct and embodied labor. It is easily determined through modeling. But what does that have to do with the Soviet economy and Russian Federation where no sustainable productivity decrease was detected? Moreover, given that the USSR, as well as especially Russian Federation is involved into objective economic imitation of productivity lowering. It is created by our inflation, which (in the “eyes” of I division circulation) is as like as two peas indistinguishable from the monetary value of productivity growth. These two processes have nothing in common in terms of content. But in both processes, the same product value is displayed by a growing mass of nominally the same money, as if its creation required ever-greater quantities of public labor. The facts of the long-term oppression of social reproduction show that circulation of the I division and the Nature presented in it “perceive” monetary inflation growth just as an obstacle to normal social reproduction, as a decline in productivity, as an introduction (and not elimination, as opposed to an increase in labor productivity) of substantial resources to the economy. Scientific confirmation, in addition to the laws of symmetry, is another coincidence—the entire period of approaching mismanagement and waste (Soviet and Russian) coincides with the period of post-war inflation in Russia. What happens exactly? How does the inflation destroy public reproduction? THE DESTRUCTION OF SOCIAL REPRODUCTION OR THE PHANTOMS OF INFLATION The decisive moment it that inflationary process “deceives” public reproduction, pretending to introduce a supplementary labor substance.

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Circulation of the I division, recreating the compensation fund compelled in normal case, is forced to create production means for this supposedly supplementary labor. And there is no real substance addition. There is void of inflation instead. Circulation has no options: it must, it is obliged, it is forced to (in performance reduction mode) “sculpt” supplementary production means (for allegedly supplementary labor) using those resources that really exist. So, the part of naturally generated vital compensation fund is “torn apart” from its natural reproduction purpose to be allocated by reproduction movement . . . in the middle of nowhere. It is failed to be used as intended, or even is wasted. For in reality there is neither systematic, long-term productivity decline, nor new employees involvement. All of this are mirages, phantoms of inflation. In the conditions of a moderate inflation rate annual damage to compensation fund may be unnoticeable. It is not that high. But with the strength and stability of the process it is accumulated. Persistent during last 30 years of the USSR, it turned into a significant ballast, burdening once-powerful economy. A burst of inflation in Russia has logically transformed a resource starvation, already accumulated in the USSR, into mismanagement, serious illness of our social reproduction. CONCLUSIONS In conclusion, it is necessary to specify that our judgments are referable only to the Russian economy. The whole western economy, concentrated in the largest TNCs, as it was found in the 2011 by Swiss scientists, is consolidated by the ten the most powerful of them into a global communion of the developed countries economies, which must have its not yet identified doppelganger that monopolize all world scientific and technological development. This is a strong global force able to guide world circulation of I division, to adjust them. But this fact requires special studies. Thus, we connect the entrance of Russian economy in economic growth period not only with purely social, but also with especially natural-social relations, related and even merged with natural force, and aimed at fullest possible realization of the latter. Today abstract knowledge that social relations inherit invisibly lurking implementation of designed Nature is not enough. Development, the increasing complexity of society as a universal natural forces reached the stage when its natural determinacy has started to require the relevant knowledge, goal-setting, direct targeted support by dominant conscious social relations. Today society is required to assist directly to the implementation of the Nature regulations concerning the performance of a direct human labor.

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It is necessary to base on the Podolinsky S. opening of productivity negentropy. It is the only process throughout the known universe that accumulates energies and thus specially monitored by the Nature. Hence, there emerges a hypothesis of Kuznetsov P. [Library], that the Nature has created intelligent life in Solar system to possess universal space productive force of living human labor. The goals of Nature are now inscrutable, but they are certainly large-scale, for the Nature has spent 4 billion. years on the establishment and development of labor productivity, thereby saving an object in creation from multiple devastating disasters and cataclysms. So it’s not surprising that the Nature has created an optimal way to increase productivity. We have no doubt that the rise-breakthrough, removing blockages of the past decades, can be exercised by Russian economy only in harmony with the Nature, not against it. ACKNOWLEDGMENTS The article was made with the financial support of the Russian Foundation for Basic Research, project No. 18-010-00877 A “The Problems of The Configuration of The Global Economy of The XXI Century: The Idea of The Socio-Economic Progress and The Possible Interpretations” REFERENCES Al’pidovskaya, M. L., Vakhrusheva, N. A., & Kornyakov, V. I. V chem mogla by sostoyat’ smena modeli rossiyskoy ekonomiki [What a change of the Russian economy model could be]. Teoreticheskaya ekonomika, 2015, No. 6 (30), pp. 8–15 (in Russian). Biblioteka: nauchnoye naslediye P.G. Kuznetsova [Library: scientific heritage of Kuznetsov P.] Retrieved from http://xn-80adbkckdfac8cd1ahpld0f.xn-p1ai/ index.php?id=230 (in Russian). Kornyakov, V. I., & Al’pidovskaya M. L. O «dorozhnoy karte» Rossii i eye meste v mirovoy ekonomike: preodoleniye prepyatstviy [On the “road map” of Russia and its place in the global economy: overcoming obstacles]. Vestnik Tverskogo gosudarstvennogo universiteta, Seriya: Ekonomika i upravleniye, 2015, No. 1, pp. 49–56 (in Russian). Kornyakov, V. I., & Vakhrusheva, N. A. Prirodnoye regulirovaniye obshchestvennogo vosproizvodstva: skol’ko mozhno pomykat’ im? [Natural regulation of social reproduction: how long it can be pushed?] // Filosofiya khozyaystva, 2016, No. 4 (106), pp. 108–127 (in Russian). Marx, K., & Engels F., Sobraniye sochineniy. Vtoroye izdaniye. T.23. [Marx K., Engels F., Collection of works Second edition. Vol. 23]. Moscow, Izdatel’stvo politicheskoy literatury (in Russian).

506    M. L. ALPIDOVSKAYA, V. I. KORNYAKOV, and N. A. VAKRUSHEVA Podolinskiy, S. A. Trud cheloveka i ego otnosheniye k raspredele-niyu energii. Izdaniye 2-e / Seriya «Mysliteli Otechestva». Predisloviye I.YA. Vyrodova, A.A. Novotochinova, G.A. SHilina. Predisloviye k 1-mu izdaniyu P. G. Kuznetsova. [Human labour and its relation to energy distribution. Second Edition / Series “Thinkers of the fatherland.” Introduction by Vyrodova I., Novotochinova A., Shilina G. Introduction to Second Edition by Kuznetsova P.] Moscow, Belyye Al’vy, 2005, 160 p. (in Russian). Politicheskaya ekonomiya. Uchebnik / K.V. Ostrovityanov [i dr.]; otv. red. K.V. Ostrovityanov. [Political economy. Coursebook/ Ostrovityanov K. [and others]; Ed. Ostrovityanov K.] Moscow, Gosudarstvennoye izdatel’stvo politicheskoy literatury, 1954, 620 p. (in Russian). Ulyukayev, A. Privyknut’ k real’nosti [Adjust to reality]. Rossiyskaya gazeta, 30.12. 2014. (in Russian).

CHAPTER 44

THE MARX THEORY OF ECONOMIC SYSTEM DEVELOPMENT AND THE ISSUE TO SUBSTANTIATE THE RUSSIAN PATTERN OF ECONOMIC DEVELOPMENT Sergey V. Laptev Financial University under the Government of the Russian Federation, Moscow Faina V. Filina Moscow State University of Humanities and Economics

ON THE UNDERSTANDING OF THE RATIO BETWEEN THE OBJECTIVE AND THE SUBJECTIVE IN EXPLAINING ECONOMIC SYSTEM DEVELOPMENT Marx theory of economic systems is important because it found out satisfactory time-rational explanations of economic system development, transition Marx and Modernity, pages 507–516 Copyright © 2019 by Information Age Publishing All rights of reproduction in any form reserved.

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from one type of economic systems to more progressive one. Fundamental ideas hereof are as follows: 1. Arrangement and development of economic systems is explained by the interaction of the productive forces and production relations; 2. The source for the development of economic systems is a conflict, collision between productive forces and production relations; 3. Production relations as a basis of socio-economic systems are objective and independent on the will and consciousness of the people, but are determined by the condition and developmental level of productive forces; 4. The economic base of society is a combination of production relations predominated by base-determined superstructure of legal, political, social, and cultural ones; 5. Production relations are developing more slowly than the productive forces and at some stage of their development don’t meet them any more—then the era of social revolution is coming; 6. The main thing changed by revolution is property relations. Whereupon, other economic relations suffer changes as well; 7. The historical significance of social revolutions consists in replacing out-of-date production relations. Marx enumerates five types of economic systems: primitive-communal production, slave-holding, feudal, capitalist, and communist one. Moreover, the development is carried out intermittently: from one mode of production, or economic system, to another one [K. Marx, F. Engels]. In general, the Marxist theory of economic systems hadn’t been thoroughly developed and had been enunciated in fragments. It is some kind of individual sketchy thoughts and promising ideas. Today we should evaluate this theory not so much from the standpoint of whether specific details thereof true or not (although it’s of importance), but from the standpoint of understanding the depth of the issues of theory and social practice that were discovered and put on the agenda by K. Marx. In this chapter we can touch upon only the most important and interesting of them to our opinion. In the Marx’ concept a great role is played by the understanding of the interaction between the objective and the subjective in the development of economic systems. Narrowed or broadened understanding of the subjective boundaries herein is the basis to argue what extent and what way the people may influence on the process of development of economic systems, what things they can (not) change. According to Marx, the objective thing in the development of economic systems is a change and development of productive forces that can’t be

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stopped. Production relations (form of productive forces’ development) are also not subject to the influence of human factor. Therewith, production relations as a form of some stage of every economic system development begin to be behind on the development of productive forces and thwart the progress. It is obvious that the faster the productive forces develop, the deeper the gap between the development of productive forces and production relations from the moment of its emergence. If it is impossible to influence production relations within a given economic systems (since production relations don’t depend on the will and consciousness of people), then an intermittent change is inevitable. According to Marx, property relations play a principal role in the structure of production relations. That are they restrain required and urgent changes in the production relations that can ensure further progress in the development of productive forces. Besides, it is implicitly assumed that it won’t be possible to change property relations without social conflict. Therefore, an expanding gap between dynamic development of productive forces and lagging development of production relations is inevitable. Increasing gap also leads inevitably to a violent change in property relations, i.e., to social revolutions (because it is contemplated that a non-violent way is impossible). If social revolutions are unavoidable method to bridge the gap between the advanced development of the productive forces and restraining lagging change of production relations, it appears that revolutions are not only inevitable, but also progressive, because they eliminate circumstances preventing cultural and historical progress, dynamic changes in economic systems. Since Marx doctrine the real historical practice has seemed to confirm these conclusions at least partially. Indeed, over this time many social revolutions had took place in the world, and at least some of them had a positive effect on economic development in the respective countries; anyway, at certain stages of development this result can’t be denied. However, the general concepts of economic development are very abstract. The actual facts related to economic development in these countries may be influenced by many others indirect to the essence of the general concept of economic development. Therefore, there is always an abstract opportunity to attribute downs in the development of individual countries to other factors, and ups to associate with the practical application of concept thereof. The opponents will try to do the same things to excuse the concepts put forth. Therefore, to uncover an actual value of K. Marx’ concept we need to investigate its internal logic and contradictions, and try to explain occurred events, intending to determine (if possible) whether these events are due to the practical development of a particular economic system in accordance with Marx general concept or not. First of all, we should study the issue of

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fair and true distinction between the content of the economic system and the process of development thereof in the objective and the subjective. Is it right to refer an entire process of changing productive forces to the objective aspect? Practice and our personal experience show that in application of elements of productive forces or economic resources there are elements of the subjective, since every employee makes his own contribution to his work and functions. Related companies manufacturing the same product do it differently from each other. From the objective area here we have some average result and the highest possible one that may be achieved in specific condition with given resources. The specific effect of subjective factors can explain the actual deviations of the results obtained from their average and limit values. “From a technical or economic point of view, to produce is to combine the things and forces at our disposal. Every production method means a certain combination” [Schumpeter J., P. 60] The activity of special economic entities, i.e., entrepreneurs whose efforts significantly exceed average predetermined values of the results obtained can be referred to the subjective. On the other hand, entrepreneur’s activity has an objective element, since they fulfill the opportunities existing in the economic system. Subjective element in the structure of productive forces increases the number of possible development options and makes the latter more successful, because there are opportunities to repeat and consolidate the best practices, for example, on the basis of competition. The number of options for the development and application of productive forces can be strictly limited, for example, on the basis of tough administrative planning or revolutionary practice; then an arrangement of productive forces seems to be monovariant and utterly objective. Obviously, K. Marx’ political preferences affected the interpretation of the development of the productive forces as a purely objective process. We see that practically there are many options also in the arrangement of economic systems based on nearly the same forms of industrial management. Consequently, in the structure of production relations there are subjective elements. The actual practice of coexistence and development of various economic systems based on productive forces with nearly the same composition in the 19th, 20th, and 21st centuries show us that different methods of economic management, market and planning tools, government regulation measures can exist in the arrangement of economic systems in very different combinations. The concepts and contents of economic policy in different countries are also quite different. Combinations of tools and means of economic policy remain purely subjective within the choice of a particular doctrine or ideology. The choice gets an objective sense and content when it is based on the principle of efficiency.

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K. Marx had been building his theory from the standpoint of one doctrine the essence hereof he expressed very briefly: the destruction of private property. He hadn’t tried to apply exclusively a pragmatic approach to economic arrangement: combining different methods of economic management with no regard to ideologies within which they had been developed, on the principle of compatibility and the highest efficiency. Such a combination of methods could be recognized objective. In the 19th, 20th and 21st centuries, new unordinary methods of combining various management tools within the company and government macroeconomic policy has been acquiring an objective importance when they were based on the principle of the highest efficiency. The combination of Marx methods has been kept in the history of individual countries that have followed the path of social revolutions. Herewith, Marx toolkit has never been used in its pure form, but has been combined with other methods. Summarizing the above said, it can be argued that the study of the ratio of objective and subjective elements contained in economic processes alone doesn’t yet make it possible to explain the development of economic systems. Both productive forces and production relations have either element. Actual combinations of elements of productive forces and methods of economic systems management are implemented on the principle of efficiency. Nevertheless, to push the boundaries of economic area it is important to keep on researching the aspects of the objective and the subjective in the economy as well as to understand our opportunities of influence on economic development to be increased or decreased. ON THE ROLE OF THE LAWS OF THE DIALECTIC IN UNDERSTANDING THE PROCESSES OF ECONOMIC SYSTEMS’ DEVELOPMENT Understanding the role of general laws of the dialectic and interpretation of their operation in economic systems is of great importance for our ideas of the processes of economic systems’ development. It is time to reinterpret the operation of these laws in the economy. The law of the unity and struggle of opposites is designed to explain the source and the general course of development of economic systems. According to Marx, economic development takes place due to tension, the mutual gap between economic phenomena and processes. For example, if there had been a harmony between the needs of people and available resources, and the tension had disappeared, then development would have stopped: the economy would have become a routine use of the same means of production for the manufacture of the same sets of products, the pursuit of welfare would have ceased. There is no doubt that existing elements

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of gap between parties of economic processes is a necessary condition for development. For example, if a particular individual or some community of people lose the needs, then their economic activity is decreased and development is interrupted. But do we have a right interpretation of difference (imbalance) as a source of economic development? This is not about words, but about sense. The source is a supplier of development when its value increases. But can we say it about contradictions? When the latter deepen in the economy, we have a crisis or shock, but not an acceleration of development. The same can be told about the class struggle. Maintaining differences between social classes is a necessary condition for individual economic functions in the economy to be performed efficiently. If all people don’t care what specific function to perform in the economy, the efficiency of their joint activities will decrease, since nobody wants to undertake the most difficult and responsible functions. However, if the tension between classes increases, this situation won’t accelerate an economic development, but on the contrary, the elements of mutual understanding and cooperation essential for daily proper operation of the economy will disappear. They will be replaced by mutual hostility decreasing the overall results of production. And in further escalating a civil war may arise that exactly won’t contribute to economic development. It rather should be recognized that proper operation and, moreover, the development of the economy requires at least a minimum level of mutual consent between all participants of economic processes, minimal order in the relations between the main economic variables. Consequently, an initiating and promoting source can be just de-escalation of contradictions, achievement of higher order in relationships, transition from hostile confrontation to cooperation. If it be so, then the results of the law of the unity and struggle of opposites in economic development that are important for human civilization should be recognized meeting extremes previously incompatible within individual economic systems instead of bloody revolutions, wars, and mayhems: effective combinations of market self-organization and planning, private entrepreneurship and social policy, private property and social cooperation, economic freedom of citizens and expansion of government economic activity. The true economic result of the development of particular civilizations, their mutual coexistence, and struggle is to make something that had limited application within individual economic systems work for the development of human civilization. In other, non-Marx understanding of the above-mentioned law there is a logic to revise and interpret the operation of the law of the negation of negation. In Hegel’s understanding of this law of the dialectic, negation in complex processes of nature and society doesn’t mean a full destruction of

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an object or process; otherwise, it won’t appear again at a new stage of development. Therefore, in these processes the negation means alteration or conversion of the form with the current content, for example changing the grain’s shape and turning into a plant bringing new grains. But in nature processes are repeating, while in a society processes and phenomena get new useful properties in the course of double negation without losing their content. That’s the whole point of the development. However, in practice, when interpreting the development and historical destinies of capitalism, K. Marx leaves a really dialectical understanding of the negation in the study of the category of private property. As one of the effective forms of arrangement of economic processes it passes through several stages of development: from private slave-holding property and private feudal to private capitalist one, turning into more advanced tool of influence on economic development. But in the course of transition from capitalism to socialism, and communism as a more advanced system Marx definitely talks about the actual destruction and abolition of private property. Such negation of private property can’t be called dialectical. Here, Marx’s commitment to the political ideology of communism is prevailing over Marx views as a scientist. For proper understanding of the processes of economic systems’ development we need to address a dialectical understanding of the negation in complex economic and social processes. In modern societies of developed capitalism, the processes of dialectical negation of private property really happen. At the same time, the forms of private property change much: private property is developed into group, joint-stock, and corporate one, involved into complex processes of mutual participation and control in many organizations. Private property has become a tool to increase economic responsibility for the results of labor and management of a wider staff of companies on the basis of participation thereof in profits and property. Indeed, classic individual private property is subject to negation of form. But at the same time its economic content is maintained and passed to a new, higher stage of development. Share in property and acquisition of income therefrom is a necessary tool of efficient management of economic life. Those people who receive only payment for their labor can’t regard the arrangement of wide-scale business processes with due responsibility and concern. Because the labor of an individual worker or manager is a small integral part thereof. But only taking an interested part in the management and control of business processes as a whole, it is possible to carry out them appropriately and take responsible decisions. A partial worker is directly interested in his individual benefit miserable within the entire economic process of manufacturing a finished product, or packages of finished products, and can’t make reasonable management decisions.

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Since an overall content of arranged and managed business processes is beyond an individual enterprise, the groups of enterprises or even big economic complexes, cross-contribution in the joint capital and management of several complexes become a form of economic arrangement. But to bring the arrangement of efficient management and control to the primary level of enterprise, workshop, and site we need to expand the composition of those who perform the functions of owner by some managers and even employees. These processes not only express the erosion of property, but the transfer of the functions of arrangement and control of efficient economic processes to ever higher levels, i.e., levels of complex strategic management. Here the main role is played by major owners. To extend the owner’s functions to lower levels of management we need to enlarge their composition. These changes in the content of property relations increase the quality of economic management on a wider-scale basis. Therewith, the processes of democratizing share in property introduce a wider population to the processes of property management. Thus, conflicts between private owners and other social members have been gradually mitigated. Probably in the future the functions of private property will embrace the whole society. Such a result can’t be interpreted as a disappearance of private property. Likely, it is a higher level of development of property relations. At the same time, owners assume a responsibility for a wider range of economic and social processes. Eventually, the formal changes in the relations of private property are also expressed in the fact that opportunities of benefiting from the use of property items have become regulated by an increasing number of rules and legal enactments. It looks like that degrees of freedom in the owner’s behavior is decreased. But, on the other hand, it happens because the property rights of other owners (small shareholders and investors, consumers, owners of labor force) are elaborated and protected in a more detailed and consistent manner. As a result, the external social effects of the transfer of benefits and costs on uninvolved people disappear, and property relations influence on the economy more deeply and effectively. With a clearer definition and recognition of property rights and arrangement of their circulation in the market “they will be acquired, subdivided and combined in such a way that the activity admitted thereon will produce income featured by the highest market value” [R. Coase, P.14]. This can be also interpreted in a way that property relations over the years has been deeply socialized and transformed into a tool of social action for all participants, while non-social actions (without social rules and regulations typical for property relations) are limited to enforcement. “A social fact is any course of action, established or not, able to enforce a person externally” [Durkheim E., P.39].

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WHAT THEORETICAL CONCLUSIONS SHOULD BE MADE WHEN UNDERSTANDING THE RUSSIAN PATTERN OF ECONOMIC DEVELOPMENT In accordance with the developed in this chapter understanding of the relation between the objective and the subjective in economic processes at least ideology, forms, and tools of economic processes arrangement (it they were adopted from the best practices of other countries) are subjective in fact, if they don’t ensure the operation of the principle of efficiency, i.e., the achievement of the highest benefits for our country in specific historical conditions; that is the main objective in the study of international experience and its possible application in our country. From the standpoint of interpreting the laws of the dialectic to understanding the development of the Russian economic system, neglect of own past experience is its non-dialectical negation, which in practice means refusal from the application of forms and methods of economic management to boost and add it positive features. To take an advantage of them we need to understand what is their dialectical negation in specific historical circumstances and how they can have a constructive influence on our development through it. To understand what way we can successfully use the practice of strategic planning or the practice of social policy, which had took place in our country in the 20th century and had produced good results, we need to understand how this practice should be subject to dialectical negation in terms of market economy. And finally, we draw the main conclusion that increase in the rate and improvement in other performances of economic development of our country is related to mitigation of acute latent social conflicts and establishment a constructive socio-economic cooperation between all classes and groups of Russian society. REFERENCES Durkheim, E. Sotsiologiya. Ee predmet, metod, prednaznacheniye [Sociology. Its subject, method, purpose] Translation from French, Moscow, Publisher: Canon 1995. -352 p. (in Russian). Coase Ronald. Firma. rynok i pravo [Firm, market and law]- translation from English, Moscow, Delo Ltd publishing House, 1993, 192 p. (in Russian). Marx, K. To criticism of political economy. Preface [To criticism of political economy. The Foreword] Marx K., Engels F. Compositions, 2nd edition, Volume 13. Moscow, State publishing house of political literature. (in Russian).

516    S. V. LAPTEV and F. V. FILINA Schumpeter, Y. A. Teoriya ekonomicheskogo razvitiya. Kapitalizm. sotsializm i demokratiya [Schumpeter, J. A. Theory of economic development. Capitalism, socialism and democracy] translation from German, Moscow, Eksmo Publishing house, 2007, 864 p. (in Russian).

CHAPTER 45

FORECAST, FORESIGHT, AND UTOPIA IN THE INNOVATION DEVELOPMENT Ekaterina Pogrebinskaya Sechenov University, Moscow, Galina Rybina Bauman Moscow State Technical University, Moscow Valentina Kuznetsova Lomonosov Moscow State University, Moscow

As a fundamental science, political economy allows not only to reveal the current problems, but also to determine the strategy of development of society, people and enterprises. Political economy of Marxism for the first time introduced a human into the subject of political economy triune as a subject of economic relations, and as an active participant, and as a result of economic processes. Therefore, it is Marxism that is able to consider projections of production results in historical retrospect and forecast. The inductive-deductive relationship of these methods is noted In. Sombart said:

Marx and Modernity, pages 517–524 Copyright © 2019 by Information Age Publishing All rights of reproduction in any form reserved.

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“The Historical approach is an approach to a single, inimitable, but sociological approach is an approach to a repetitive, or to the typical” [3, p. 8]. Predictive methods for constructing utopias, forecasts and foresights help to understand the possibilities and boundaries of innovative development. Thoughts about the future of humanity occupied the minds of scientists since ancient times. The interest in utopia is not transient, it occurs in anticipation of periods of crisis, when society is ripe for a new relationship, so utopia harbingers of the new phenomena of reforms in the socio-political, religious, economic, etc. areas. The understanding of utopias by different authors is somewhat different, but in general it is not far from the exact translation of the Greek term, introduced into scientific use by Thomas More: “A place that does not exist.” Utopias means arbitrary ideas about the desired future of mankind, not directly related to providentialism, but not based on scientific understanding of the laws of nature and society. Utopian concepts are purely speculative good wishes, contrived artificial structures, which find themselves in irreconcilable contradiction with reality (which usually causes the collapse of these utopias when trying to implement them). One of the newest formulations is in the fourth volume of “The new philosophical encyclopedia”: utopia is “The image of an ideal social system either in an allegedly existing or existing somewhere in the country, or as a project of social transformations leading to its implementation”[4, P.632]. Most utopias show a peculiar view of economic dynamics: on the one hand, it is not static, but, on the other, almost everything in utopian worlds is reproduced in constant proportions. The theory of building a Communist society, proposed by Marx, was reflected in practice [1]. In 1856 in the USA the Kansas vegetarian organization founded the Octagon—a city near Humboldt. The city was intended to be inhabited by vegetarians. The design of the settlement was influenced by the ideas of the phrenologist Orson Fowler, according to which the octagons were the most practical form of houses, because they get the most sunlight to enter. The city plan was developed by Henry Clubb, a vegetarian and a Puritan. In addition to the octagonal houses in the city was an octagonal square and eight roads. The settlement consisted of four octagonal villages. All people lived in their own houses, engaged in agriculture and crafts. Leisure and culture were in public buildings. Sixty families came to the city of Octagon vegetarians. They were put into a public log house. In spring of 1857 the snowless winter dried up the river and wells, then the settlers were struck by dysentery and fever, including deaths. By the end of 1857, the surviving settlers of the Octagon had left. The famous French-Swiss architect Le Corbusier in the early twentieth century developed a plan of an ideal city. The architecture of such a city, he believed, should be as efficient and simple as industrial machines. He devised a plan of two cities-utopias: Ville Radieuse and Ville Contemporaine.

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They both had to have massive skyscrapers in which millions of people should live. Parks and green areas should divide these massive cities into industrial and leisure areas. Residential buildings had to become the center of public life, with gardens on the roofs and beaches, and on their lower floors would be located catering and kindergartens. Le Corbusier calculated that 2700 people will live in each building. Their work will take 5 hours a day. Personal cars in this city will not be, they will be replaced by developed public transport. Le Corbusier built only one such house, which had to become the main unit of his city-utopia—in Marseille. In 1902 a social reformer Ebenezer Howard published his treatise “The Garden is the city of the future.” He described the city, which occupies 2400 hectares of land, with buildings for 32 thousand people. Residential buildings would occupy only one thousand hectares. The rest of the land in the city would be given to public parks, farms, and wide roads. Howard was able to partially realize their dreams in the construction of two towns in England, in the County of Hertfordshire—Welwyn Garden City and Letchworth Garden City. The essence of Howard’s idea was not so much in architectural-planning and artistic-figurative, but in socio-economic, sociopolitical and organizational decisions involving equal and free participation of each resident in the management of the social organism of the city. Although Howard was unable to fully realize his utopia, he became the first developer of the principles of residential suburbs (later implemented mainly in the United States). In the twentieth century, a series of revolutionary upheavals around the world led to new attempts to put utopian ideas into practice. Interesting Russian experience, which had deep religious and historical roots [2, p. 6]. Thus, the center of Barnaul in the early twentieth century grew rapidly. It is based on a different kind of “dissent” of the Empire—the old believers, exiles, ethnic and religious minorities. It is clear that in a city with such a population Russian utopianism had a real chance to be embodied in practice. In Barnaul, one of the first cities in Russia adopted the General Plan—in the spring of 1914, which provided for the development of the entire urban infrastructure, the construction of power plants, water supply and Sewerage, paving of streets, tram, double growth of educational institutions. The first world war and “the Great fire of Barnaul” in May 1917 frozen the implementation of the General Plan. This was the reason for the development of Russia’s first plan utopian “garden city.” The city would be in the form of the sun, boulevards would be its rays, people would live in their own houses with a large plot of land, factories would be brought to the countryside. In 1922, the Soviet government began to build a “garden city,” but under Stalin the project was stopped. The city authorities refused to Finance new urban development. In the end, only the contours of the

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streets were planned according to the plan of the garden city, which finally collapsed after about ten years. In 1930 car industrialist G. Ford bought a plot in the Brazilian jungle, where he decided to build the perfect city, calling it his name, Fordland. The main activity of the settlers was to be improved through labor: the cultivation of Heves and the production of rubber from them. Ford moved here about 300 workers from the United States, setting strict rules in Fordland—prohibition of alcohol, premarital sex and etc. The people had to work 5 days a week for 9 hours, in return for free housing, medicine and leisure (library and watching movies “correct orientation”). Hard work and strict orders forced the settlers to revolt against the Ford administration that ruled the city. As a result, Ford moved the workers from Fordland back to the United States. “Southern commune”—another paradigm of utopia, embodied in life. Established in 1955 in Uruguay, the commune in the 60s had a great local influence as an example of intensive work in the publishing industry. After a coup d’état in June 1973 and an unsuccessful attempt to continue its activities in Peru, the commune emigrated to Sweden, where it became part of the Scandinavian community tradition, causing a wave of imitations. In 1985, the municipality returned to Montevideo, retaining a branch in Sweden. Since the 60s of 20th century, the genre and practice of utopia have become relevant in a number of works praising the “revolution of mind,” “alive utopia” of the United States and the “power of imagination,” for example, during the events of May 1968 in France. At the same time with the requirements of a complete and universal revolution in Europe, in the United States, particularly in California, there were commune hippies, and in Europe and Latin America grew the movement for self-government. These trends—the pursuit of utopia through the perfect location inside of the real society. Considering the contribution made by the many utopians who worked in a great variety of genres, we can agree with V. Chalikova [5], that the twentieth century has gone from the classic utopian complex “matida”—a philosophical start, which began with all the utopian journey. In the twenty-first century, utopian concepts no longer absolutize the ideals on which utopia stood in previous centuries, but highlight the most problematic aspects of reality and the most understandable ways to solve them. At the same time, utopia as a vision of the future, as a kind of cognitive model, allows to consistently identify and take into account: problems in society on the basis of search forecasting and comparison with the model characteristics of utopia; possible ways to solve them, taking into account the interests of all stakeholders in the future; the phenomena of globalization; possible ways of transition to a civilization alternative to the existing

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one; choose the optimal management scenario taking into account externalities. In practice, utopias give impetus to the emergence of new Sciences, the emergence of new projects, prevent new threats. Examples of such utilitarian use of utopia are futuristic projects: Computopia by Masuda, Universitas program, compiled by a group of American and French social architects, designers, culturologists and philosophers; project “building a sustainable society” N. Brown. The prognostic function determines a very important practical section of economic theory. Prognostics as a scientific discipline that studies the General principles and methods of forecasting the development of objects of any nature, the laws of the forecasting process, was formed in the 1970– ’80s of the twentieth century. In addition to the concept of “prognostics,” the term futurology is used in modern literature. Historically, there has been a traditional ideological influence on the forecast framework: it can be a short-term forecast for the local market (for example, microeconomic theory Marshall and neoclassics), medium-term forecast for a number of sectors of the national economy and the economy as a whole (for example, the theory of cycles and macroeconomic theory of Keynes), the long-term limited only by technical and economic parameters at the admission of preservation of the existing social and economic relations (for example, works of V. Leontiev, F. Fukuyama). Finally, the global forecast is focused on an attempt to predict the prospects of the existing economic system, the likely ways of development of socio-economic relations in case of denial of this system. In such a forecast interested class, which “closely” within the existing formations, which interested in a change of formations. Such a forecast for the class of the bourgeoisie (including both capitalists and small producers) in the most complete form was given by A. Smith, and for the class of the proletarians—by K. Marx, and for the class of creative creators claiming the future domination—so far no one. For example, the club of Rome organizes large-scale research on a wide range of issues, but mainly in the socio-economic field. A wide range of particular scientific developments giving rise to the emergence of such new areas of research, as global modeling, global problems, prospects of development of mankind, the study of the negative trends of Western civilization, debunking the myth of a technocratic economic growth as the most effective means of solving all problems, search of ways of the humanization of man and the world, ways of resolving ethnic conflicts, methods of preservation of the environment, the tools for improving human well-being and improve quality of life. Economic forecasting has been widely developed in all developed countries of the world, as the state is forced to anticipate the consequences of decisions. The quality of life, the degree of economic freedom, the share in the production of high—tech products, the index of creativity, tools and methods to reduce uncertainty-such economic indicators are of interest to

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the modern state. Economic forecasting broadens the basis for sustainable and long-term relations between economic entities and public authorities, coordinating their long-term economic policy. Many countries have successfully implemented national and regional programmes and strategic economic development plans based on economic forecasts. Today, there are numerous examples of situations involving social, technological, economic, political, environmental and other risks. It is in such situations that forecasting is usually necessary. Modern statistical methods of forecasting also include models of exponential smoothing, autoregression with moving average, systems of econometric equations based on both parametric and nonparametric approaches. Computer statistical technologies are used to determine the possibility of using asymptotic results for finite (so-called “small”) sample volumes. They allow you to build simulation models, use the method of data reproduction (bootstrap method). Forecasting based on data of non-numeric nature, in particular, forecasting of qualitative features is based on the results of statistics of nonnumeric data. The regression analysis based on interval data, including, in particular, the definition and calculation of the note and the rational sample size, as well as the regression analysis of fuzzy data, are very promising for forecasting. The General formulation of regression analysis in the framework of non-numeric data statistics and its special cases—analysis of variance and discriminant analysis, giving a unified approach to formally different methods, is useful in the software implementation of modern statistical forecasting methods. In applied management forecasting, a key role is played by the concept of planned assumptions, the probable environment (for example, the whole set of conditions, factors, circumstances) in which the organization’s plans will be implemented. Therefore, the planned assumptions are the result of forecasting, its final product. But at the same time, the planned assumptions are both the basis and the initial base on which the system of the organization’s plans is developed and further detailed. They thus serve as a bridge between forecasting and planning. Planned assumptions can affect the expected future state of the organization as a whole, and then they take the form of General or consolidated (global) forecasts. But they may also be more local, affecting either a unit of the organization or an indicator of its performance. All the main types of forecasting are closely interrelated, because an effective forecast in any of these areas necessarily requires the consideration of information in all other areas. In turn, foresight is General and can serve as a background against which forecasts, foresight or utopian modeling of the future are used. N. D. Kondratyev singled out three kinds of foresight: prediction of specific events that are irregular, largely random; foreknowledge of events, which detect the frequency of occurrence or recurrence (for example, a cyclical change

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in economic conditions); identification of common trends of the future dynamics of the object. Forecast (in a broad sense)—a system of representations about the future state of the object, which are probabilistic in nature, and forecasting-one of the forms of indirect impact on the economy of the future. The revealed regularities of retrospective dynamics help to foresee changes in this system within different cycles. Principles of sociogenetics allow to reveal the logic of self-development of social systems. Unlike other techniques and methods of forecasting, foresight is most similar to the production process in its broadest sense. Any production works to meet human needs, for the sake of human life. Considering foresight as the production of an intangible product, we can note the use of human and social capital, information resources and as traditional factors of production as carriers, producers and producers of new information or as an independent resource, with close to zero marginal production costs. In the case of foresight, a person is not only a condition for the production of a valuable intellectual and information product, but also the ultimate goal. The development of the productive forces of society is accompanied by an increase in opportunities to solve social problems of society, to improve the well-being of each person. This leads to the social orientation of social reproduction due to the possibilities of foresight. In the case of foresight, consumption is transformed into use, since in the process of consumption of foresight results the owner does not transfer the entire bundle of rights to the counterparty, and the foresight itself as an information and communication product is characterized by inexhaustibility. The ultimate goal of foresight, as well as the production process is to meet human needs, in this case, the need for certainty. At the consumption phase, foresight is characterized by replication of the results of the implementation of information resources, which leads to the effect of increasing returns, non-exclusivity, non-competitiveness and indivisibility of the results of foresight. This understanding of foresight allows to take into account the changes taking place in the content of economic phenomena and processes, their evolutionary, revolutionary or bifurcation nature, the principles of synergetics, irregular effects, qualitative jumps; to take into account the peculiarities of economic cyclicity caused by its synergetic nature; to reflect the processes of self-organization and self-organizing structures; to reflect phase transitions, the phenomenon of hysteresis (the dependence on past paths), the nonlinearity of the trajectories of economic development with nonlinear feedbacks. Summing up, it is necessary to note new opportunities and limits of application of economic planning and forecasting. In a dynamic and not always planned changes plays a huge role methodology foresight and foresight. At the same time, the world scientific literature gives us an invaluable approach to the vision of the future—utopia. The modern economy has

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a methodological apparatus that allows to combine elements of forecast, foresight and utopia and extend them to the vision of the innovative environment of enterprises. It is no coincidence that even advanced formats (for example, Russian foresight “Education”) on the far frontiers of forecasting amaze readers with their utopianism and novelty. REFERENCES 1. Devyat’ gorodov-utopiy [Nine utopian cities]. http://ttolk.ru/?p=19738 (accessed: 20.02.2018) (in Russian).​ 2. Egorov B. F. Rossiyskiye utopii: Istoricheskiy putevoditel’ [Russian utopia: a Historical guide]. St. Petersburg: Publishing “Art-SPB,” 2007. 416 p. P. 6. (in Russian).​ 3. Zombart V. Sotsiologiya [Sociology]. Moscow: Publishing URSS, 2003.–246 p., P. 8. (in Russian).​ 4. Novaya filosofskaya entsiklopediya [New philosophical encyclopedia]. Moscow: Publishing Thought, 2010. Vol.4. P.632. (in Russian).​ 5. Chalikova V. Maski utopii v XX veke: praktopiya i eye sopernitsy [Mask of utopia in the twentieth century: procopia and her rival]. URL http://chalikova.ru/ maski-utopii-v-xx-veke-praktopiya-i-ee-soperniczyi.htmlReferences (accessed: 02.02.2018) (in Russian).​

CHAPTER 46

COLLABORATION IN THE ASPECT OF FORMATION OF INNOVATIVE ECONOMY OF RUSSIA Svetlana Nosova National Research Nuclear University, Moscow Galina Kolodnyaya Galina Kolodnyaya Financial University under the Government of the Russian Federation, Moscow Sergey Bondarev Plekhanov Russian University of Economics, Moscow

In the modern economy of developed countries, incentives to create an innovative economy are becoming sustainable, as business entities can freely join networks and develop collaboration (“work together,” cooperate). Business entities put forward joint initiatives and find a vector of “smart specialization”in the course of cooperation. Therefore, it is no coincidence

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that in the works of well–known foreign economists the emphasis was placed on a special innovative process of management-the process of collaboration, which is based on a sustainable partnership of interrelated economic entities in order to constantly search for new opportunities for the growth of innovative entrepreneurship, focus on innovation as a result of the practical use of innovations and the spatial development of the economy. Thus, it turns out that with the development of cooperation of economic institutions through the formation of stable vertical and horizontal links that determine the effectiveness of all its components, innovative processes are stimulated within the same territorial zone and the country as a whole. In the context of turbulence (uncertainty) of economic development in the less developed countries, fundamentally new, real-time systems and methods of “rapid response” to something new that will ensure the growth of innovative entrepreneurship are even more required. It is in this context that economic development in Russia is now directly linked to the development of CTI, which localizes the interaction of such components as science/education, business, development institutions and authorities (Federal and local). The effect of such cooperation is the growth of innovative entrepreneurship by increasing intellectual capital, expansion of cooperation between economic entities, completion of production value chains, development of import-substituting competencies and industries, increasing the investment attractiveness and competitiveness of companies and their home regions. (Nosova S. S., 2014) In this aspect the development and justification of new models of development focused on the solution of problems of collaborative strategic management is of interest. This development involves solving problems in several areas-the creation of a new digital and high-tech support for economic development and decisionmaking based on the new management methodology both in the external environment and in the internal territorial and sectoral environment. The purpose of this article is to show how, on the basis of the existing international experience of collaboration in the aspect of formation of TIC, it is possible to ensure the growth of innovative economy in the conditions of global competition. CONCEPTUAL APPROACH TO THE ANALYSIS OF THE COLLABORATIVE NATURE OF THE FORMATION OF INNOVATIVE ECONOMY Theoretical Analysis The world practice shows that it is possible to provide dynamic balance (growth stability) at ultrahigh uncertainty only on the basis of innovations

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created in a format of networks where legally independent participants develop collaboration. The better developed the system of collaboration that forms the network environment, the higher the innovative potential of the system and the better its competitive position. In the modern economy, this format is an innovative territorial cluster (TIC). With the successful deployment of joint initiatives, CTI develops collaboration to the level where there is a unique network effect of innovation synergy (in-line innovation), which causes: 1. dynamic stability under uncertainty (self-adaptation to external changes), 2. continuous creation of a new product or technology (by complementary combination of assets), 3. collaborative governance as a new way of interaction between economic entities, 4. overcoming technological “traps” ( innovation lock–ins): every third player adjusts the trajectory of the other two, directing them towards continuous updates. 5. continuous productivity growth Collaboration in the ITK System M. Porter [Porter, 2003] defines the cluster as “geographically concentrated groups of interrelated companies, specialized suppliers, service providers, firms in their respective industries, as well as organizations associated with their activities (e.g., universities, standardization agencies, trade associations) in certain areas that compete, but at the same time they work together.” Among the characteristic features of collaboration in the TIC system are: 1. A wide range of participants, sufficient for the emergence of positive effects of their interaction. Indicators that characterize the high level of employment in enterprises and organizations belonging to the cluster can be considered as indicators. 2. Presence of strong competitive positions in international and / or Russian markets and high export potential of cluster members (supply potential outside the region). High level of multifactor productivity, high level of exports of products and services (and/ or high level of supplies outside the region) can be considered as indicators of competitiveness. [Nosova S. S., 2014] 3. Availability of specialized human resources, suppliers of components and related services, specialized educational institutions and

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research organizations, the necessary infrastructure and other conditions. Indicators that characterize the high level of specialization of the region can be considered as indicators. 4. Geographical concentration and proximity of enterprises and organizations of the cluster, as Makar S. V. correctly asserts[2013], provides opportunities for their active interaction. 5. Effective interaction between the cluster members, including the use of subcontracting mechanisms, partnership of enterprises with educational and research organizations, the practice of coordination of collective promotion of goods and services in the domestic and foreign markets. Initially implemented in practice, the cluster collaboration was studied from the perspective of the development of specific areas as a necessary foresight management technology in decision-making. This management approach did not include an innovative or creative component. The adoption of the innovation cluster, according to a number of authors [Nosova, S. et. al., 2017], as a new economic management tool, required an in-depth study of the collaboration between R&D, business and public administration. TIC involves sustainable collaboration (partnership) of interrelated economic entities in order to obtain a synergetic effect as a result of effective interaction of partners capabilities. RESULTS Collaboration as a Tool for Growth of Competitiveness of the Economy With the successful deployment of joint initiatives, innovation clusters develop collaboration to a level where there is a unique network effect of innovation synergy (in-line innovation), which ensures continuous productivity growth, sustainable partnership of interrelated economic entities in order to obtain a synergistic effect as a result of effective interaction of partners ‘ opportunities through cooperation. All TIC are built on the same principle: on the basis of the interaction of different activities to ensure the market launch of a new product or service, the introduction of a new production process, the development of a new business model, the creation of new markets. The level of novelty of the product, technology, business model and market should not be lower than the national Russian market. [Enright, M. J.,1993]

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Collaborationist innovations, as a source of innovation growth, contribute to: • domination of horizontal network communications; • creation of favorable conditions for structural changes in the economy, • increase in the skills of the employed population, • search for new production and commercial ideas, • creative analysis of internal and external information. In this aspect, the basis of modern IE is “ direct participation of economic entities in innovation, which takes place in the system of interacting economic and non-economic structures.” [Nosova, S. S. et. al., 2017]. The procedure for selecting priority areas for the development of science, technology and critical technologies in Russia can be carried out through the collaboration of innovative companies, suppliers and organizations (development companies and manufacturing companies; suppliers of equipment, components, specialized services; infrastructure: research institutes, universities, technology parks, business incubators and other organizations) that complement each other and enhance the competitive advantages of individual companies and the cluster as a whole as a result of the synergetic effect, additional benefits from intra-cluster competition and cooperation arising due to the specifics of the interaction of the cluster core firms with other auxiliary organizations involved in the cluster through vertical and horizontal links. Practice shows that IE: • it is closely related to innovative forecasting and, accordingly, to the choice of breakthrough technologies; • it synthesizes: a. long-term and strategic vision, b. scenario approach, relying on the interaction of the state with science and business; • it assumes an active influence on the future and consists in the search for alternative technological ways to achieve it; • identifies, evaluates and promotes the development of collaborative projects within and across industries to fill technology gaps and capture opportunities that meet national and global needs; • it helps to coordinate ideas about the future development of many possible participants. These are usually large-scale and long-term projects or the development of fundamental technological directions. In this case, a set of alternative projects and consensus of participants ‘ views are considered for

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decision-making, despite the differences in their aspirations. [Rosenfeld, S. A., 1997]. A distinctive feature of IE is to try to answer the question not only about what will or may be, but also what to do. In this aspect, the process of collaboration allows us to assess the availability and timeliness of access to the necessary resources, the difficulties of entering the markets of future products, to identify real, promising ways and necessary actions to enter these markets, to increase its presence in the market. The specificity of IE is the possibility of coordination of cooperation interactions of participants, clarification of the financial component and linking the interests of technology developers, industry and the social sector. Despite the fact that elements of collaborative innovative entrepreneurship are making their way in our country, however, there is still no regular and unified mechanism for selecting, clarifying and implementing priority areas of science and technology development. The list of priority areas and technologies currently in force is poorly linked to state priorities and the needs of innovative development of the economic system of Russia, which entails inefficient use of budgetary funds. Unfortunately, the authorities do not understand that the choice of scientific, technical and technological priorities should not be limited to the periodic compilation of a list of research topics to determine the directions of innovative financing. The current situation of rapidly increasing complexity and alternative ways of penetration of innovations in various fields of activity, their interaction with other components of society development determines the need to develop a new approach to the formation of the IE model in the cluster collaboration system. The purpose of this structure is to assist in working out the network nature of business interaction with the territories and industries that implement state priorities. In this context, it seems appropriate to accumulate the functions of the national innovation system for the development of priority scientific and technical areas. DISCUSSION The Russian economy as a whole has already joined the “race of cluster collaboration.” Specialists and managers of companies understand that without the use of collaboration they will no longer be able to compete successfully either in the domestic or foreign markets. They appreciate the effectiveness of the collaborative solutions they have already implemented. [10] however, companies are approaching these solutions are very pragmatic, focusing on something without which it is impossible to run a business, do not hurry to invest in fundamentally new directions. The bottlenecks

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and problems in the implementation and use of cluster collaboration were found. “First of all, according to Milner [Milner,2013], the lack of investment resources for the implementation of innovative projects.” No less acute was the problem with the staffing of the “innovation revolution”: there is a lack of both specialists and users who are able to properly and effectively use innovative technologies. The process is also hampered by the fact that” advanced solutions “ do not always find a response from suppliers and consumers who continue to work the old-fashioned way. In some places, the limiting factor is the lack of infrastructure (low bandwidth, lack of access to mobile Internet, lack of data centers, etc.). Finally, a significant number of companies believe that a certain state support could seriously encourage them to use high technologies more widely. The strategy of innovative development of the Russian Federation in the future focuses on the formation of innovative territorial clusters. “Strategy of innovation development until 2020” [2016]. For TIC to develop, it is necessary to use both breakthrough (radical) innovations and supporting (improving) innovations. Their development is due to the growth of the network nature of business, key competencies, innovative infrastructure. They help to balance the three activities-investment, innovation and Finance. In modern Russia it is necessary to create a network nature of economic processes aimed at innovative development. This leads to a faster transition to modern technological structures. The revealed methods of cluster collaboration formation are different in their economic content, but the algorithm of sequence of actions for its formation is almost homogeneous. This allows for targeted, interrelated management of a set of rules and regulations conducive to economic growth [Cheshire, P. C., & Malecki, E. J., 2004]. We must highlight the objective of the innovation cluster in relation to the business environment, namely, in helping to overcome a short planning horizon (to increase the interest of the business to long-term planning) and “systemic myopia” (with the aim of stimulating the interaction of economic agents in the socio-economic sphere). [Nosova, S. S. et. al., 2018]. In the growth of IE, infrastructure objects play an important role: technoparks, business incubators and other organizations that complement each other and enhance the competitive advantages of individual companies and the cluster as a whole as a result of the synergetic effect, additional benefits from intra-cluster competition and cooperation arising due to the specifics of the interaction of firms (core) of the cluster with other auxiliary organizations participating in the cluster through vertical and horizontal links. There is no doubt that the institutional framework for innovative entrepreneurship should be flexible enough to capture new technological opportunities and adapt them to the needs of society. The design should be preceded by an analysis of the systems of formation of priorities of critical

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technologies available in developed countries, and the identification on its basis of modern trends in the methods of their choice and implementation. The choice of priority directions of development of IE is expedient to carry out, based on the following criteria: • correlation with the goals and objectives of the innovative development of the economic system; • achievement of a relatively high level of R & d in comparison with the level of world technological leaders; • ensuring technological safety; • development of the national scientific base; • access to high-tech products (services) markets); • readiness of the market to consume the results of the implementation of science, technology and technology; • increasing the interest of Russian business in the implementation of technological solutions; • quality of life growth. In this context, it should be pointed out that the system of collaboration in the Russian economy contributes to: • selection of priority areas for the development of science, technology and critical technologies as an element in solving strategic problems of improving the technological structure of production; • effective integration of the Russian scientific and technical potential in the planetary system of innovative relations; • ensuring the continuity of the transition from basic research to innovation; • development of an integrated, cross-cutting system and institutional mechanism of state support for innovation. We agree with Glazyev S. Yu’s statement [2018] that the Russian state should “support the growth of innovative economy.” This is, above all, the promotion of competition. IE is developing simultaneously in such a wide range of areas that it is impossible to build through the efforts of a limited number of companies with special powers and resources of the state. Therefore, the Central role in this economy will be played by private business with a strong entrepreneurial start. Public authorities involved in the development of programs for the development of innovative economy share this approach and see their main task in creating favorable conditions for private initiative. All actions on the part of the state, it seems, are planned and taken carefully. However, practice reveals sustainable technological and sectoral simplification of the production structure, as well as the problem of chronic

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“investment hunger.” In the end, it is necessary to attract private investment to priority projects for the growth of the innovation economy in Russia, which means to stimulate the process of collaboration of economic entities. CONCLUSIONS 1. The author proposes theoretical and methodological approaches to the definition of collaboration as a new direction in economic development, which will eventually allow Russia to turn the country’s economy on an innovative path of development, to bring it to the trajectory of rapid and sustainable growth on an advanced technological basis. 2. The conceptual prerequisites of Russia’s transition to an innovative type of economy, including the generation and dissemination of innovative processes in the activities of economic entities, increasing subsidies in R&D, the formation of a competitive and at the same time connected network environment, which will contribute to the renewal of the growth model, the development of a new (digital) way of life and technological breakthrough. 3. The emphasis is placed on the role of collaboration in the formation of regional innovation territorial clusters. It is revealed that TIC is considered to be the most convenient ecosystem for in-line innovations. But the real innovation to be the only ones that reach the synergy of innovation. Then they can fulfill their mission-to become a pole of growth of innovative economy for the region, maintaining the competitiveness of local economies, and through them—and national. Hence the Golden rule of cluster policy: to stimulate not the cluster members themselves, but the process of their collaboration. the network nature of the formation of the Russian innovation economy. These problems are of serious concern to business and individual citizens, and it is from the Russian state that they expect active actions and decisions in this direction. REFERENCES Cheshire, P. C., & Malecki, E. J. (2004). Growth, Development and Innovation: a Look Backward and Forward. Papers in Regional Science, 249–267. Enright, M. J. (1993). Regional clusters and economic development: A research agenda. Boston, MA: Harvard Business School. Glazyev, S. (2018). Strategy and concept of socio-economic development of Russia until 2020: Economic analysis. Retrieved from http://www.km.ru/glavnoe/2008/03/26/

534    S. NOSOVA, G. KOLODNYAYA, and S. BONDAREV Makar, S. V. (2013). The development of the theory of the organization of the regional space Economy. Tallage. Right. No. 6.P. 23–27 Milner, B. Z. (2013). Organization of innovation: Horizontal communication and control : monograph / B. Z. Milner, T. M. Orlova.—M. : INFRA-M,– 286 p. Nosova, S. S. (2014). The Concept of development of innovative clusters: theoretical and methodological aspect// Innovations and investments. No. 1. P. 23–31 Nosova, S. S. et al., (2017). Regional Clusters are in Strategy of Achievement of Technological Leadership of Modern Economy of Russia.// International Journal of Applied Business and Economic Research, 15(11). Nosova, S. S. et al., (2018). “The digital economy as a new paradigm for overcoming turbulence in the modern economy of Russia”// Espacios, 39(24) Nosova, S.S. et al., (2017). New Management Model of Modern Russian Economy: Regional Aspect. International Review of Management and Marketing, 6(S6). Porter, M. (2003). Competition. Per. with English. M.: Izd. house “ Williams» Rosenfeld, S. A. (1997). Bringing Business Clusters into the Mainstream of Economic Development. European Planning Studies, 5(1).Strategy of innovation development until 2020. (2016). Retrieved from http://www.economy.gov. ru/wps/wcm/connect/.

CHAPTER 47

THE ROLE OF MONETARY POLICY IN ENSURING THE PRIORITY OF THE REPRODUCTIVE MODEL OF THE DEVELOPMENT OF THE RUSSIAN ECONOMY IN THE NEW GLOBAL CONTEXT Viktor Y. Pishchik Financial University under the Government of the Russian Federation, Moscow Aleksei V. Kuznetsov Financial University under the Government of the Russian Federation, Moscow Petr V. Alekseev Financial University under the Government of the Russian Federation, Moscow

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Globalization, as a process of merging the markets of goods produced by transnational companies [1], revealed the inefficiency of the dominant model of global economic governance. This is due to the contradiction in the political organization of the world, based on the concept of the national state, and its economic structure, which is global in nature [2, p. 480]. According to D. Rodrick, professor at Harvard University, the political trilemma of the world economy is that in order to maintain high rates of globalization it is necessary to significantly reduce the transaction costs of TNCs. This is achieved either by abolishing national states and transferring powers to manage the global economy to the world government, or by curtailing the system of social guarantees and abandoning the gains of democratic politics. The third alternative provides for the restoration of control over the international movement of capital and the regulation of exchange rates, which, as the experience of the Bretton Woods system indicates, imposes restrictions on the processes of financial globalization [3, p. 413]. From the point of view of the authoritative British economist, the leading economic observer of the Financial Times newspaper M.Wolf, the process of liberalization of global financial flows is completely reversible in the case of dismantling of the global financial system [4]. In turn, the scientific director of the Institute of Economics of the Russian Academy of Sciences, R.S.Grinberg, sees the root of the problems of the global financial system not so much in the dominance of the US dollar, as in the freedom of crisis-based transboundary movement of speculative capital [5, p. 183]. It should be emphasized that one of the key provisions of the modern reform of the global monetary and financial architecture is the development and implementation of a set of supranational rules of control over the international movement of capital [5, p. 183]. The chapter is to analyze the structural imbalances of the reproduction model of the global economy, as well as the role of Russia’s monetary policy in the process of re-industrialization. THE IMBALANCE OF WORLD TRADE CAUSED BY COMPETITION BETWEEN DEVELOPED AND DEVELOPING COUNTRIES In addition to the imbalance associated with the global nature of the market and the national level of its regulation, two other types of imbalances evolve in the world economy—the imbalance of savings and consumption and, arising from it, the imbalance of external debt [6, p. 131]. After the financial crisis of 2008–2009 structural changes have occurred in the imbalance of savings and consumption. So, in the pre-crisis period, the combined current account looked at two poles of countries: developed

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countries with a characteristic current account deficit and developing countries and countries with emerging markets with a clear surplus. After the crisis, the situation changed to the opposite: in 2012, developed countries had a surplus of the current account, which in 2017 increased to 396.2 billion dollars, while in developing countries the deficit amounted to 96 billion dollars. This happened mainly due to a reduction in consumption in the Eurozone countries, in which a significant current account deficit of 233 billion dollars in 2008 was replaced by its noticeable surplus of 442 billion dollars in 2017. The last one was the result of deteriorating borrowing conditions for Eurozone countries at international capital markets and the ensuing deep debt crisis and tight fiscal consolidation. According to IMF forecasts in 2023, the surplus of current operations in developed countries will reach 414 billion dollars, while the deficit in developing countries and emerging markets will be 346 billion dollars [7]. In the United States, which became the epicenter of the financial crisis, the consumption of imported goods almost did not decline. The trade deficit in goods, which reached its peak in 2008 (832.5 billion dollars), decreased in 2009 to 509 billion dollars, but in subsequent years it continued to increase and in 2017 amounted to 807.5 billion dollars The main global trade imbalance is formed in the US trade with China. The volume of trade in goods and services of these countries in 2017 amounted to almost 700 billion dollars, while the US trade deficit with China reached a record 375 billion dollars, which is more than half of the total US trade deficit [8]. The active inclusion of China in the global value chain has entailed a complex change in the global balance of power, weakening US international influence. After the collapse of the world economy in 2008–2009, with China’s proactive participation a number of alternative international financial institutions, not under the control of the United States, have been involved, including the Silk Road Fund, the Asian Infrastructure Investment Bank, the New Development Bank (BRICS). These financial institutions are designed to help the countries of the Asia-Pacific region become more actively involved in servicing the global value-adding center by mediating the movement of the center of world economic development from West to East. However, the weak point of integration processes in the Asia-Pacific region is the use of the US dollar as the key currency of international loans. In the first quarter of 2017, 79% of the total outstanding international debt securities of the main Asian developing countries were denominated in US dollars. The concentration of foreign borrowing in one currency makes the regional financial systems vulnerable to external shocks due to unexpected changes in the liquidity of foreign currency and the associated capital outflows [9].

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DEBT NATURE OF THE MODERN MODEL OF THE WORLD ECONOMY Over the past decades, a type of reproduction model based on the debt nature of financing has evolved in the global economy. The financialization of the economy has exacerbated the problem of global imbalances. The structural imbalance in the sphere of reproduction is due to the transformation of the world economy from the traditional savings (productive) model to a predominantly consumer (financial-soviet) paradigm based on the debt nature of financing the reproduction process. In this new paradigm, households are involved in the reproduction process, meeting the demand for real estate, goods and services due to the rapid growth of mortgage and consumer lending at a very small percentage. Corporations and banks also have almost free access to the financial resources of stock markets and the liquidity of central banks in the framework of quantitative easing programs. These funds are invested primarily in highly profitable speculative operations, and not in the real economy. In the period after the crisis of 2008– 2009 The average rate of economic growth in the world is at a lower level than before. At the same time, the regulating activity of the IMF is mainly aimed at correcting the imbalances in the current account of the balance of payments, while the much more destructive consequences of the rapid growth of financial imbalances remain outside the scope of its close attention and control. According to the Institute of International Finance (IMP) of the International Monetary Fund, in the first quarter of 2018, the total global debt amounted to 247 trillion. dollars (318% of world GDP), an increase of 24.5 trillion. dollars compared to the first quarter of 2017 (see Figure 47.1). According to the US Treasury, the US national debt increased by the middle of 2018 to 21.5 trillion. In Canada, France and Switzerland, historical highs for the growth of corporate and household debt have been updated. In the first quarter of 2018, the total foreign currency debt of developing countries reached a peak of 8.5 trillion dollars with the obligation to repay their debts on bonds and syndicated loans by the end of 2019 in the amount of 2.7 trillion. In some of the largest developing countries (Argentina, Brazil, Mexico, Egypt, Turkey, South Africa, Nigeria), between 50 and 75% of all external borrowing is expressed in US dollars, which increases the risk of non-payment of obligations due to the Fed’s policy of raising interest rates . The total Russian debt of the IMF is estimated at 89.4% of GDP, with a share of foreign currency debt of 20% of GDP, which is slightly higher than in India and China. In the face of growing risks of inflating the global financial “bubble,” the system of world economic relations and the global financial market as its most important constructive element have to change in the paradigm of

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1 q. 2018 247.1 318.0% GDP

222.6 317.8% GDP 46.5 Households

41.4

Corporations

73.5

Governments

60.2

Banks

55.6

73.5

66.5

60.6

Figure 47.1  Dynamics of world debt for the period from March 31, 2017 to March 31, 2018 (in $ billions). Source: [10].

abandoning the globalization model of functioning that has exhausted its capabilities and transition to the use of tools of the trade and economic and financial protectionism. D. Trump’s administration has directed efforts to implement US re-industrialization programs aimed at stimulating domestic productive investment, developing the energy sector of the economy, including increasing its export opportunities, increasing employment, reducing internal and external deficits. At the same time, in the area of ​​monetary policy, the Fed’s efforts are aimed at gradually blowing off financial “bubbles” and neutralizing the risks of the stock market. For the period from December 14, 2016 to June 13, 2018, the Fed’s key interest rate increased seven times, from 0.25–0.5% to 2.0%. At the same time, in the sphere of the budget policy of the United States, in order to stimulate economic growth, corporate income tax was reduced from 35% to 21% under the Comprehensive Tax Reform Act signed by President Trump in December 2017. The law also provides for a tax reduction on funds that are returned to the country from the activities of legal entities abroad: up to 15.5% for cash and for non-cash to 8% instead of the previous 35%. A new differentiated scale of taxation

540    V. Y. PISHCHIK, A. V. KUZNETSOV, and P. V. ALEKSEEV

of individuals has also been introduced—from 10% to 37%, depending on the size of income. In October 2018, it is proposed to move to the second stage of tax reform and reduce the size of corporate taxes from 21% to 20% [11]. The flip side of the sharp and significant reduction in tax rates was the exacerbation of the problem of budget deficit. The US state budget deficit in May 2018 increased by 66% over the same period last year and amounted to $ 146.8 billion, which was the maximum monthly deficit since 2009. During the first eight months of the 2018 fiscal year, which began on October 1, 2017, the budget deficit increased by 23% and amounted to $ 532.2 billion compared to $ 432.9 billion in the same period a year earlier. [12]. THE ROLE OF MONETARY POLICY IN THE REPRODUCTION MODEL OF THE RUSSIAN ECONOMY A new geopolitical context, economic sanctions against Russia, a change in the development paradigm of the world’s leading economy—from financial globalism to re-industrialization with the help of new forms of protectionism—exacerbated the topic of revising the country’s national financial and economic strategy, the role of monetary policy in the reproduction process. In the new global context of the functioning of the Russian economy, the current full liberalization of the currency and financial market makes it vulnerable to the conditions of a painful restructuring of international trade and the global financial market with unpredictable consequences for economic growth and monetary and financial sustainability. The Bank of Russia Report on Monetary Policy, published on September 14, 2018, presented a risk scenario, which allows in 2019 “the output of GDP growth to a negative area” in case of sanctions expansion, the fall in oil prices to $ 35 per barrel, worsening terms of trade with the countries—Russia’s main trading partners and increasing the outflow of capital from the country [13]. But even in the baseline scenario, on which the Bank of Russia is based, a slowdown in economic growth in 2019 was laid from the previously forecast 1.5–2% to 1.2–1.7%. Among the main destructive transmission channels of monetary factors on the economy, inflation has been highlighted (up to 5–5.5% in 2019) and the increase in monetary instability. In order to neutralize these risks, the Bank of Russia from September 14 of this year increased the key rate from 7.25 to 7.50%, thereby further limiting the access of enterprises in the real sector of the economy to borrowed funds. Under current conditions, the risk of a gain in the country’s exchange rate and currency-but-financial instability in general seems to be the most dangerous. Expected introduction by the US administration in November with a new round of financial sanctions leads to a weakening of the Russian ruble and strengthens the withdrawal of non-residents’ funds from

The Role of Monetary Policy    541

Figure 47.2  Dynamics of the US dollar exchange rate against the Russian ruble in the period from November 10, 2014 to September 13, 2018. Source: Bank of Russia, Moscow Exchange. https://www.cbr.ru/hd_base/micex_doc/

the Russian OFZ. For the period from January 3 to September 13, 2018, the weighted average rate of the Russian currency decreased by 27.9% against the US dollar (from 57.39 rubles/dollar to 79.58 rubles/dollar, see Figure 47.2). The main channel for the weakening of the ruble is becoming a factor in the output of foreign investors from Russian financial assets (OFZs, corporate bonds and shares), with the subsequent conversion of rubles in the currency. At the beginning of August 2018, the volume of investments of non-residents in OFZs decreased to 2 trillion rubles compared with 2.35 trillion rubles in early April of this year. According to expert estimates, the growth in the dynamics of the yield of long-term OFZ issues on the secondary market (up to 9% as of September 6 of this year) suggests that over the past month and a half, the position of nonresidents could have decreased by another 0.6 trillion rubles to 1.4 trillion rubles. This level is rather close to the volume of nonresident investments in OFZs that took shape on the Russian market after the first wave of sanctions in 2014 (about 1 trillion rubles). Significant pressure on the exchange rate of the ruble has a rapid growth in the negative balance of the financial account of the country’s balance of payments. According to the Bank of Russia, the net outflow of capital from Russia in January—July 2018 increased 2.5 times over the same period last year and reached $ 21.5 billion [14]. In the September report of the Bank of Russia on monetary policy, the estimate of the negative balance

542    V. Y. PISHCHIK, A. V. KUZNETSOV, and P. V. ALEKSEEV

of the financial account in the private sector was significantly increased in 2018 from $ 30 to $ 55 billion [13]. Companies from the real sector of economy oriented to foreign markets consider the main criterion of the effectiveness of monetary policy to be the relative stability of the exchange rate and its preservation within the limits determined by fundamental economic factors. This will ensure the predictability of the activities of Russian enterprises and foreign partners, will help support the growth of the Russian economy and carry out structural changes. The stability and predictability of the ruble exchange rate is also important for solving the actual problem of the transition to mutual settlements in national currencies with the main foreign economic partners. In the modern Russian economy with a high degree of openness and dependence on the world prices for domestic exports, vulnerability to the risks of free floating of the ruble exchange rate, including through the channels of influence of imported inflation on price increases in the country, is the most significant. The unwillingness of countries with developing markets to risk free floating is confirmed by the sharp devaluation of national currencies against the US dollar in January—September 2018 (by 30–40%) in leading developing countries, including Argentina, Brazil, India, Turkey, and South Africa. The acuteness of the problem is associated with the high share of dollar liabilities of these countries, combined with the practice of using floating exchange rate regimes of national currencies. International experience confirms the need to regulate the exchange rate in the interests of national security. As noted in the National Security Strategy of the Russian Federation, approved on December 31, 2015, in order to counter the threats to the economic security of the country, it is necessary to pursue a policy that includes “strengthening the financial system, ensuring its sovereignty, the stability of the ruble’s exchange rate, and regulation and control . . . “[15]. It seems logical in the current situation to pursue an inflation targeting strategy in combination with a controlled floating exchange rate regime. In practical terms, in order to maintain price stability, it is proposed to use a non-point target benchmark for the rate of inflation and its interval value of the target benchmark for the rate of inflation (for example, within 4–6%). Such target point values ​​provide both price stability and the necessary level of profitability of small and medium businesses. At the same time, it is necessary to switch to targeting the exchange rate in certain limits (for example, 59–65 rubles / USD) with a possible correction of the boundaries of the corridor in the event of significant sharp changes in external economic conditions. This will reduce the exchange rate volatility of the ruble and foreign exchange risks of counterparties, reduce the risks of imported inflation, increase the predictability of long-term foreign economic contracts for business entities, and ensure a relative balance between

The Role of Monetary Policy    543

competitive exports and costs of importing foreign equipment and modern technologies. The transition to a regulated exchange rate will increase confidence in the Russian ruble as a means of international settlements with major trading partners from developing countries. An important condition for the observance of the regulated exchange rate of the ruble in modern conditions is the strengthening of the role of currency regulation and control, which raises the problem of forming a rational monetary policy that would contribute to the development of both export-oriented sectors of the economy and industries oriented to the domestic market, in particular import-moving production. Measures to improve the stability of the exchange rate and the predictability of its dynamics will create favorable macroeconomic conditions for consistently reducing the level of the Bank’s key interest rate, thereby enhancing its stimulating role in supporting economic growth. Prime Minister of Russia D.A. Medvedev, speaking on September 6 of this year. at the Moscow Financial Forum, drew attention to the need to move “from neutral to stimulating regulation of the sphere of lending” This implies, in his words, “to seek further reduction in the cost of loans . . . in order to create conditions for more confident growth of the economy as a whole” [16]. In general, the proposed solutions in the new geopolitical and geo-economic context and in the context of increasing sanctions regime in relation to Russia are fully justified and able to provide favorable conditions for industrial capital to develop industrialization and ensure sustainable economic growth in the country. CONCLUSION In the world economy, the signs of a change in the dominant economic paradigm and a shift in the center of economic development from West to East are becoming more and more visible. An objective response to the accumulated structural imbalances in the world reproduction processes is the transition to integral methods of managing economic processes. The economic model, combining the principles of state regulation and market selforganization, has been actively practiced for decades in China and a number of other countries that are leaders of the Asia-Pacific region [17]. For Russia, one of the key conditions for successful implementation of structural reforms and ensuring sustainable economic growth rates is the stabilization and strengthening of the national currency. In turn, a prerequisite for the full integration of Russia into regional value-adding chains is the creation of an effective system of foreign economic settlements, which pre-empts the formation of structural trade and financial imbalance in the future.

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ACKNOWLEDGMENTS The chapter was prepared within the framework of the research under the grant of the Russian Foundation for Basic Research No. 17-02-00347. REFERENCES 1. Levitt T. The Globalization of markets. Harvard Business Review, 1983, No. 5. URL: https://hbr.org/1983/05/the-globalization-of-markets 2. Kissindzher G. Mirovoy poryadok [World order]. Moscow, Publishing House AST, 2015, 512 p. (in Russian). 3. Rodrik D. Paradoks globalizatsii: demokratiya i budushcheye mirovoy ekonomiki [The Paradox of Globalization: Democracy and the Future of the World Economy]. Per. s angl. N. Edel’mana; pod nauch. red. A. Smirnova. [Trans. from English N. Edelman; under the scientific ed. A. Smirnova]. Moscow, Gaidar Institute Publishing House, 2014, 576. (in Russian). 4. Vulf M. Sdvigi i shoki: chemu nas nauchil i eshche dolzhen nauchit’ finansovyy krizis [Shifts and shocks: what we have been taught and should learn from the financial crisis]. Per. s angl. A. Gusev; nauchnyy redaktor perevoda E. Golovlyanitsyna. [Trans. from English A. Gusev; scientific editor of the translation E. Golovlyanitsyna]. Moscow, Gaidar Institute Publishing House, 2016, 512 p. (in Russian). 5. Bretton-Vuds. Sleduyushchiye 70 let. Sbornik statey [Bretton - Woods. The next 70 years. Collection of articles]. Nauch. red. V.V. Popov [Scientific. ed. V. V. Popov]. Moscow, International Relations, 2017, 592 p. (in Russian). 6. Zvonova E.A., Kuznetsov A.V. Fundamental’nyye disbalansy v mi-rovoy finansovoy arkhitekture [Fundamental imbalances in the world financial architecture] Russian economic journal, 2016, no. 4, pp. 19–31. (in Russian). 7. International Monetary Fund, World Economic Outlook. Retrieved from https://www.imf.org/en/Publications/WEO/Issues/2018/03/20/world -Economic-outlook-april-2018#Statistical%20Appendix 8. Bureau of Economic Analysis, International Data. URL: https://apps.bea. gov/iTable/iTable.cfm?isuri=1&reqid=62&step=2&0=1#isuri=1&reqid=62&st ep=2&0=1 9. Asian Economic Integration Report ( 2017 ) . Asian Development Bank. 10. Institute of International Finance, Global Debt Monitor. URL: https :// www.rbc.com/economics/11/07/2018/5b44b4489a7947f483d526e8?from= newsfeed 11. Tramp anonsiroval vtoroy etap snizheniya korporativnykh nalogov v SSHA [Trump announced the second phase of reduction of corporate taxes in the United States]. URL: https://www.rbc.com/economics/29/06/2018/5b369b9e9a79 47d162456058 (in Russian). 12. Gosdolg SSHA dvizhetsya k istoricheski vysokim urovnyam [US national debt moves to historically high levels]. URL: https://www.vestifinance.com/articles/ 103160 (in Russian).

The Role of Monetary Policy    545 13. Bank Rossii. Doklad o denezhno-kreditnoy politike [Bank of Russia. Monetary Policy Report], Moscow, No. 3 (23), September 2018. https://www.cbr.ru/publ/ ddcp/2018_03_ddcp.pdf (in Russian). 14. Pod gnetom sanktsiy. Kakim budet kurs rublya v blizhayshiye me-syatsy [Under the yoke of sanctions. What will be the exchange rate in the coming months], RIA “Novosti.” 13.09.2018. URL: https://news.mail.com/economics/34722798/ ?frommail=1 (in Russian). 15. Strategiya natsional’noy bezopasnosti Rossiyskoy Federatsii. Utverzhdena Ukazom prezidenta Rossiyskoy Federatsii ot 31 dekabrya 2015 g., No. 683 [ National Security Strategy of the Russian Federation. Approved by the Decree of the President of the Russian Federation of December 31, 2015, No. 683], p. 20. [Electronic resource]. URL: http://www.rbc.com/politics/31/12/2015/56853c5f9a7947 96c5eeca1b (in Russian). 16. Medvedev rasschityvayet na aktivnuyu pozitsiyu TSB po snizheniyu stavok kreditov dlya biznesa [Medvedev is counting on the active position of the Central Bank to reduce the rates of loans for businesses]. TASS, September 6, 2018. URL: https://tass.ru/ekonomika/5531329 (in Russian). 17. Sergey Glaz’yev: SSHA teryayut gegemoniyu v mire [Sergei Glazyev: The US is losing hegemony in the world]. KM.RU. 08/24/2018. URL: http://www. km.ru/economics/2018/08/23/ekonomika-i-finansy/828424-sergei-glazevssha-teryayut-gegemonmonuu-v-mire (in Russian).

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CHAPTER 48

MARX’S CONCEPTUAL VIEWS AND DIRECTIONS FOR IMPROVING THE TAX SYSTEM IN THE STRUCTURE OF THE ECONOMY Irina A. Zhuravleva Financial University under the Government of the Russian Federation, Moscow Semen Y. Bogatyrev Financial University under the Government of the Russian Federation, Moscow

The process of reforming the tax system of the country to a higher level of functioning has a constant tendency to improve, which has an important financial and economic importance and a relevant social component. The tax system of the state is one of the management vectors in the structure of the country’s economic system. The tax system is an integral part of the

Marx and Modernity, pages 547–558 Copyright © 2019 by Information Age Publishing All rights of reproduction in any form reserved.

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national economy, the effective functioning of which has a significant impact on its sustainability, especially in a recession, when the possibilities for using alternative taxes by the state to accumulate financial resources are limited. The dilemma is relevant: the influence of the tax system on economic development or institutional economics ensures the sustainable development of the tax system. The problem in question about the study of the potential for the tax system to become more attractive to taxpayers and as progressive as possible in terms of finances for the state is relevant. At the present stage of development of the tax system traditionally take into account the value of three indicators of its effective functioning: • the amount of tax payments; • time spent by companies on fulfillment of tax obligations; • total tax rate. Table 48.1 shows selected indicators and positions of Russia in the ranking of Paying Taxes and Corruption Perception Index in 2012–2017. Analyzing the indicators of table 1, the tax system of the country can be characterized as a system that is in a consistent development, with a positive direction. But the fact of influence on the development of the economy, these data do not reflect. Studies of the potential and real impact of the tax system through tax regulation measures on the dynamics of economic growth are relevant today for the polemical discussion of modern economics. MAIN PART In the classic work of J. Brenann and J. Buchanan, “Towards a tax constitution for Leviathan” (1977), it is said that “the constitutional choice among TABLE 48.1  Indicators and Positions of Russia Year Indicator The ease of paying taxes in the Russian Federation (rank/number of countries in the ranking) Number of tax payments

2012

2013

2014

2015

2016

2017

102/183

64/185

56/189

49/189

47/189

49/190

9

7

7

7

7

7

The time spent on the fulfillment of tax obligations

290

177

177

168

168

168

Total tax rate (%)

46.9

54.1

50.7

48.9

47.0

47.4

Source: compiled from The World Bank and PwC

Improving the Tax System in the Structure of the Economy    549

tax instruments is analyzed. . . . In other words, we examine the individual between tax rules and instruments, “thus the tax system is thought of as a tax institution based on rules and instruments. At the same time, it is noted that “tax institutions are usually intended to be within reasonable limits permanent components of the political system: they create a context within which decisions on the provision of public goods are made in each period” [J. Brenin, J. Buchanan; 449]. Among the many economic levers with which the state influences a market economy, a certain financial and economic place is occupied not only by taxes, but also the entire tax system. It should be noted that the stabilization of economic growth is impossible without the creation of an appropriate market infrastructure and the protection of private property rights, the promotion of fair competition. It is already becoming obvious that economic development should not conflict with the fiscal interests of the state; this is possible with the joint solution of the main tasks in the state. The main task of the tax system is to replenish the state treasury in order to implement the basic functions. K. Marx, in his book “Capital,” wrote that “since government debt relies on government revenues, due to which annual interest and so on payments must be covered, the modern tax system has become a necessary addition to the system of government loans. The loans allow the government to cover emergency expenses in such a way that the taxpayer does not immediately feel the full burden of the latter, but the same loans require, in the end, tax increases. On the other hand, the tax increase caused by the consistently increasing debts forces the government to resort to new and new loans with every new emergency spending. Thus, the modern fiscal system, the axis of which is the imposition of the most essential means of living (hence, their appreciation), in itself carries the germ of automatic increase in taxes. Excessive taxation is not an accidental fact, but rather its principle “[K. Marx]. The proof of these words in today’s economic realities is the fact that, in accordance with the Federal Law “On Amendments to Certain Legislative Acts of the Russian Federation on Taxes and Fees” No. 303-FZ of 09.08.2018, from 01/01/2019, the VAT rate of 18 % will be replaced by a new rate of 20%. But for a prosperous state, progressive taxes, incentive rates are needed, wrote in his scientific writings Marx. “It is impossible to give one class without taking it from the other” [“The Eighteenth Brumaire of Louis Bonaparte”]. Marx said that “we are not interested in the destructive influence that the modern fiscal system has on the position of wage workers, but on the violent expropriation of peasants and artisans—in a word, all the components of the petty bourgeoisie. There are no two opinions about this, even among bourgeois economists. The expropriating effect of the fiscal system is further enhanced by protectionism, which itself is one of the constituent parts of the fiscal system “[K. Marx]. Continuing Marx’s thought, it can be noted that the fiscal system, if it gains

550    I. A. ZHURAVLEVA and S. Y. BOGATYREV

strength precisely in terms of raising tax rates, or increasing the number of taxes, tends to increase the tax burden on the economy as a whole. 150 years have passed, and the situation has not changed. A rhetorical question arises: is there a prospective development of the tax system in a positive way, as a system that does not burden citizens of the state, economic entities, but as a system that stimulates the development of economic segments that contribute to raising the standard of living, solving social issues, promoting fair competition. Taxes, as K. Marx believed, are “the source of life for the bureaucracy, the army, the priests and the court—in a word, for the entire apparatus of the executive branch.” He said that “strong government and high tax are identical concepts” [K. Marx]. We will make an attempt to refute this idea of Marx by proposing to the scientific community to consider the development of the tax system, its elements based on a systematic approach, namely the “Periodic System of Special Nalogonomy Laws” (hereinafter referred to as PS SNL), compiled and opened by the author in 2017. Elements of the tax system–its basic and component parts (rates, facility, base, tax incentives, payment deadlines, etc.). They are not by nature endowed with the qualities inherent in the whole system; they are inherent in the unity of relations and the composition of the tax system that they form, which, in its structural and functional activity, is striving to achieve a certain goal, the priority is the collection of the budget. It can be said that the system is emergent with respect to the elements, i.e., it has qualities that its individual elements or their groups do not possess. Next, we look at the abstract evolution of the tax system in a positive way. Based on the analysis of Table No. XVII “Periodic System of Special Laws of Nalogonomy,” compiled on the basis of “Periodic System of General Laws of the World,” open by academician N.V. Maslova in 2005, shows the evolutionary path of development of the tax system of the country according to the levels of being and the group of laws [N. Maslova; 184]. The concept of Nalogonomy by the author has already been considered in a number of scientific works. Nalogonomy is a scientific system that studies a self-organizing structural-functional composition of the primary elements of taxation with the aim of creating, developing and evolving the tax system of a country [I. Zuravleva; 377]. For easier understanding it is necessary to mention that the levels of existence (stages of taxation system development) are a complex of increasingly complicating levels of existence in the material World (it’s energy base); in the periodic system of the laws they are the following: 0—precedence; I—elements; II—energy;

Selforganization

Variability

Structural and functional consistency

Unity and infinity

Evolution principles

Variability of evolution of precedence of nalogonomy

Self-organization of composition of the system of elements of nalogonomy

Variability of evolution of elements of nalogonomy

Structural and functional consistency of hierarchy of elements of nalogonomy

Self-organization of composition of the system of energy of nalogonomy

Variability of evolution of energy of nalogonomy

Structural and functional consistency of hierarchy of energy of nalogonomy Variability of evolution of self-organization of nalogonomy

Structural and functional consistency of hierarchy of selforganization of nalogonomy

Self-organizaSelf-orgation of comnization of composition of position of the system of selfthe system of information of organization of nalogonomy nalogonomy

Variability of evolution of information of nalogonomy

Structural and functional consistency of hierarchy of energy of nalogonomy

Self-organization of composition of the system of evolution of nalogonomy

Variability of evolution of nalogonomy

Structural and functional consistency of hierarchy of evolution of nalogonomy

Self-organization of composition of the system of Hierarchy of the systems of nalogonomy

Variability of evolution of Hierarchy of the system of nalogonomy

Structural and functional consistency of hierarchy of systems of nalogonomy

(continued)

Self-organization of composition of the system of the Highest potential of nalogonomy

Variability of evolution of the highest potential of nalogonomy

Structural and functional consistency of hierarchy of the highest potential of nalogonomy

Unity and infinity of the highest potential of nalogonomy

Unity and infinity of the highest potential of hierarchy of nalogonomy

Unity and infinity of the highest potential of evolution of nalogonomy

Unity and infinity of the highest potential of selforganization of nalogonomy

Unity and infinity of the highest potential of information of nalogonomy

Unity and infinity of the highest potential of energy of nalogonomy

Unity and infinity of the highest potential of the elements of nalogonomy

Unity and infinity of the highest potential of precedence nalogonomy

Structural and functional consistency of hierarchy of precedence of nalogonomy

H Highest Potential

G System hierarchy

F Evolution

E Selforganization

D Information

C Energy

B Elements

Self-organization of Composition composition of of the system the system of 4 precedence of nalogonomy

Evolution 5

Hierarchy 6

Highest Potential 7

Levels of existence

A Before the tax period

Groups of Special Laws

Periodic System of Special Laws of Nalogonomy  Table No. XVII

Improving the Tax System in the Structure of the Economy    551

Evolutionary– cyclic initiation

Necessity

Sufficiency

Controllability

Evolution principles

Precedence 0

Elements 1

Energy 2

Information (energy information) 3

Levels of existence

Necessity of elements of nalogonomy

Necessity of elements of energy of nalogonomy

Sufficiency of Energy of nalogonomy

Necessity of elements of information of nalogonomy

Sufficiency of Energy of information of nalogonomy Necessity of elements of selforganization of nalogonomy

Sufficiency of Energy of selforganization of nalogonomy

Controllability of energy information of self-organization of nalogonomy

E Selforganization

Necessity of elements of evolution of nalogonomy

Sufficiency of Energy of evolution of nalogonomy

Controllability of energy information of evolution of nalogonomy

F Evolution

Necessity of elements of Hierarchy of systems of nalogonomy

Necessity of elements of the highest potential of nalogonomy

Sufficiency of Energy of the highest potential of nalogonomy

Controllability of energy information of the highest potential of nalogonomy Controllability of energy information of Hierarchy of systems of nalogonomy Sufficiency of Energy of Hierarchy of systems of nalogonomy

H Highest Potential

G System hierarchy

EvolutionaryEvolutionaryEvolutionaryEvolutionaryEvolutionaryEvolutionaryEvolutionaryEvolutionarycyclic initiation cyclic initiation cyclic initiation cyclic initiation cyclic initiation cyclic initiation cyclic initiation cyclic initiation of precedence of precedence of precedence of precedence of precedence of precedence of precedence of precedence of the highest of Hierarchy of evolution of of self-orgaof information of energy of of nalogonomy of elements of potential of of systems of nalogonomy nization of of nalogonomy nalogonomy nalogonomy nalogonomy nalogonomy nalogonomy

Necessity of elements of precedence of nalogonomy

Sufficiency of Energy of elements of nalogonomy

Controllability of energy information of nalogonomy

Controllability of energy information of energy of nalogonomy

Controllability of energy information of elements of nalogonomy

Controllability of energy information of precedence of nalogonomy

Sufficiency of Energy of precedence of nalogonomy

D Information

C Energy

B Elements

A Before the tax period

Groups of Special Laws

Periodic System of Special Laws of Nalogonomy  Table No. XVII

552    I. A. ZHURAVLEVA and S. Y. BOGATYREV

Improving the Tax System in the Structure of the Economy    553

III—information; IV—structure of the system; V—evolutionary dynamics of the systems; VI—hierarchy; VII—highest potential system [N.Maslova; 207]. Philosophical principles of Nalogonomy define and guide the hierarchy the location of the laws in the Periodic system of specific laws of Nalogonomy (see Table 48.2), which were considered by the author in the article “Nalogonomy—the doctrine of the evolution of the tax system” [I. Zhuravleva; 141]. These principles: 1. 2. 3. 4. 5. 6. 7.

The principle of evolutionary cyclic initiation; Principle of necessity; The principle is sufficient; Principle of control; Principle of self-organization; The principle of evolutionary variability; The principle of structural and functional hierarchy.

Further in Table 48.3 we will carry out an explication of the Law(s) of the elements of Nalogonomy, where for the example of a group of laws we consider the components of the elements of Nalogonomy applying the system approach, which in the field of taxation has been applied relatively recently. In the 1930s, L. Bertalanffy considered the system as an independent scientific category, defining it as a complex of interacting elements or subsystems that have their own needs to be satisfied. At present, a methodical system can be understood as a set of techniques and methods oriented towards disclosing the integrity of complexly oriented objects and revealing the relationship of interdependence between its components. It should be emphasized that a systematic approach is needed to study the completeness of the functioning of the tax system. It should be noted that, in essence, the problem being addressed by the author is applying the SYSTEMONOMIC APPROACH and the METHOD, since the tax system is the brainchild of systemonomy. “Systemonomy is a scientific tool for motivating the cosmic, inspired worldview of mankind. Systemonomy is the next evolutionary step in the comprehension of the World system “[Maslova N. V., No. p. 14] In Table 48.3, the explication of the laws of Nalogonomy is made on the example of three laws of taxonomy, giving an idea of ​​the formation and development of the tax system on the basis of PS SZN. Speaking about the elements of taxes, it should be noted that Karl Marx wrote in his work

554    I. A. ZHURAVLEVA and S. Y. BOGATYREV TABLE 48.2  Laws of Nalogonomy elements Evolutionary principles

Levels of being

Unity and infinity Higher Potential 7 Structural and functional system

Hierarchy 6

Variability Evolution 5

Laws of Nalogonomy elements A. The law of the embodiment of the highest potential elements of Nalogonomy B. The law of destination components (elements) of Nalogonomy C. The Law of Higher Potential for Nalogonomy Components A. The Law of the Hierarchy of Higher Potentials of the Components (Elements) of Nalogonomy B. The Law of the Hierarchy of Destinations Higher Potentials of the Components (Elements) of Nalogonomy C. The law of the hierarchy of components (elements) of Nalogonomy A. The law of evolutionary-cosmic systemic complication of the components (elements) of Nalogonomy B. The law of the necessity of the emergent qualities of the components (elements) of Nalogonomy C. The law of dynamic variability of the components (elements) of Nalogonomy D. The law of conservation of evolutionarily mature structuralfunctional components (elements) of Nalogonomy

Selforganization

A. The law of self-organization of the components (elements) of Nalogonomy System B. The law of genetic potential of the components (elements) composition of Nalogonomy 4 C. The law of individual choice of components (elements) of Nalogonomy D. The law of self-organization of the components (elements) of Nalogonomy in the social system of society E. The law of conformity of the components (elements) of Nalogonomy to the evolutionary level of organization of the functioning of the tax system

Manageability Sufficiency

A. The law of energy information management components (elements) of Nalogonomy Information B. The law of genetic asymmetry of the components (elements) of Nalogonomy (energy information) C. The law of choosing the direction of development of energy information of Nalogonomy 3 D. The law of increasing Nalogonomy potential E. The law of wave resonances in Nalogonomy Energy 2

Necessities Elements 1 Evolutionary cyclic initiation

Precedence 0

A. The law of sufficiency of interaction of elements of Nalogonomy B. The law of interaction between the creative and stimulating energy of the components (elements) of Nalogonomy (the taxpayer and the state) A. The law of the necessity of the elements of Nalogonomy (the object of taxation, the base, the rates, the terms of payment, etc.) A. The law of evolutionary cyclic initiation of Nalogonomy elements

Improving the Tax System in the Structure of the Economy    555 TABLE 48.3  Components of Nalogonomy Code

Law and its content

Order rule

B0

title

Evolutionary cyclical initiation of the preceding elements of Nalogonomy

content

The system of Nalogonomy elements is preceded by a multi-phase evolution of 4 components: • elements of taxation • relation of unity of elements and their interactions • law of composition of components of Nalogonomy elements • goals and objectives of taxation

The rule of structural and functional phase cyclicity

title

Necessities for Nalogonomy

content

The necessary components of Nalogonomy elements are: • objects, subjects, processes and their interconnection and interdependence • man–society–economy • relationship of unity and adequacy of processes in the economic community and the tax system • structural composition of Nalogonomy in which harmonious relations of unity of the systems of the knowable with the knower are achieved • goals and objectives for the development of Nalogonomy elements

title

Sufficiency of interaction of Nalogonomy elements

content

The interaction of the components of the taxonomy elements is enough to obtain the basic energy of social adequacy and budget-based system—Nalogonomy.

title

Creative-creating and stimulating energy of the components of Nalogonomy

content

The quality of the energy of Nalogonomy is determined by the quality of the formation of genetic energy prevailing in the components of the elements of taxonomy and its subjects: creative—creating or stimulating

title

Energy information management of components of Nalogonomy

content

The management of the dynamics of Nalogonomy is carried out through the reception and transmission of energy information synchronized with the goals, components of the elements, interconnections, interdependence, structure

title

The law of genetic asymmetry of the components of Nalogonomy elements

content

The creative-creating and stimulating components of Nalogonomy are asymmetrical, which allows you to constantly replenish its energy.

B1

B2A

B2B

B3A

B3B

Nalogonomy composition rule

The basic energy rule of the components of Nalogonomy elements Energy of Nalogonomy quality rule

Rule management of Nalogonomy components

Energy of Nalogonomy replenishment rule

(continued)

556    I. A. ZHURAVLEVA and S. Y. BOGATYREV TABLE 48.3  Components of Nalogonomy (continued) Code

Law and its content

Order rule

B3C

title

The law of choosing the direction of energy-informational development of Nalogonomy

content

The concentration of creative-building energy information components of the Nalogonomy elements corresponds to the concentration of alien, harmful or destructive energy information (tax evasion, dilution of tax bases for income tax, aggressive tax planning and yes.) Stimulating the tax system to a constant and dynamic choice of development directions.

The rule of vector orientation

title

The law of increasing of Nalogonomy potential

content

As the energy information is concentrated in the components of the Nalogonomy elements, the activity of its potential increases.

B3D

The rule of energyinformational activity of the components of the elements of taxation.

“Capital” that “the main element of state taxes is production relations. But for them there are special conditions, such as the timing of payments. In part, these terms of payments are based on the natural conditions of production associated with the change of seasons, not taking into account the cyclical nature of reproduction. There is also a feature of taxing types of relations of production, since, for example, an umbrella is assembled from heterogeneous components. Their parts can be a separate branch of production. And it burdens the payer twice. “So, the umbrella” collects “6% of the tax on the price of each of its elements and another 6% on the price of the finished product” [K. Marx]. It can be said that production relations underlie the development of economic processes in society, and taxes are the economic consequence of such relations. The elements of the tax system are based on the private elements of each tax and administration mechanisms. The tax system is dynamic, evolving and improving over time. In this regard, we can distinguish the evolutionary principles of the development of the tax system: 1. 2. 3. 4. 5. 6.

Unity and infinity; Structural and functional consistency; Variability; Self-organization; Manageability; Self sufficiency.

Improving the Tax System in the Structure of the Economy    557

CONCLUSION The tax system is one of the main elements of a market economy. It has a strong influence on the development of the economy, determining the priorities of economic and social development. In this regard, it is necessary that the tax system of Russia be adapted to new public relations, consistent with world experience. The instability of the tax system today is the main problem of tax reform, on the one hand, and on the other, it’s a positive thing, since the changes and additions to the tax law norms reflect its development under the already established and open Periodical system of special Nalogonomy laws. The world is developing as a whole: in its production technologies, in payment systems, in the transmission of information, the economic interaction of countries, and the expansion of the legal field. The problem of choosing a strategy for developing the tax system is not only to introduce taxation that is favorable for the development of entrepreneurship at the same time as maximally filling the country’s budget system, but also provides for organizing the optimal transformation of tax revenues for the distribution and consumption of public goods. Summarizing the above, we can say that Nalogonomy is the doctrine of the tax system, which provides an opportunity based on its comprehension and knowledge, to reach the country’s tax system of its Highest potential, which will allow in the future to create a world tax-free space that is self-sufficient in its economic and financial potential REFERENCES 1. Brenen J., & Buchanan J. «K nalogovoy konstitutsii dlya Leviafana» / V .N.; Vekhi ekonomicheskoy Mysli. Ekonomika blagosostoyaniya i obshchestvennyy vybor. [To the tax constitution for Leviathan / V .N .; Milestones of Economic Thought. Welfare economics and social choices] T.4. SPb.: School of Economics, 2004. P.449–450. (in Russian) 2. Eighteenth Brumaire Louis Bonaparte (1852) 3. Zhuravleva, I. A. Nalogonomy, a model of the tax system. Global economy in the XXI century: dialectics of confrontation and solidarity (2018) (p. 377). 4. Zhuravleva, I. A. «Nalogonomiya–doktrina evolyutsii nalogovoy sistemy» [Nalogonomy–the doctrine of the evolution of the tax system] /V-VI systemonomic readings. Collection of articles, reports, research papers (2017) p. 141–145. (in Russian) 5. K. Marx. “Capital” Book One. Chapter six “The results of the direct productionprocess (1864) 6. Maslova, N. V. «Sistemonomiya. Nauchnoye izdaniye» [Systemonomy. Scientific publication] .- M.: NANO,KANON, 2015. P.207 (in Russian)

558    I. A. ZHURAVLEVA and S. Y. BOGATYREV 7. Maslova, N. V. «Periodicheskaya sistema Vseobshchikh zakonov Mira» [Periodic system of the Universal Laws of the World].-M., 2005, p. 184 (in Russian) 8. Maslova, N. V. Periodic system of the Universal Laws of the World.-M., 2005, 184s. 9. S. Yu. Bogatyrev, S.S. Dobrynyn. (2015). Takeover premiums and discounts for lack of marketability in banking valuation: data from emerging markets International Journal of Economic Perspectives, 9(2), 85–90.

CHAPTER 49

MANAGEMENT OF COMPETITIVENESS THROUGH THE PRISM OF MARX’S IDEAS Evolution of the Russian Models Alexey M. Tsikin Financial University under the Government of the Russian Federation, Moscow Azamat B. Berberov Financial University under the Government of the Russian Federation, Moscow Ali B. Berberov Financial University under the Government of the Russian Federation, Moscow

Karl Marx in his studies paid special attention to increasing the competitiveness of national economies, which he placed in direct dependence on renewal of fixed capital. To increase competitiveness, according to K. Marx, it is necessary that new products become better and cheaper, and Marx and Modernity, pages 559–572 Copyright © 2019 by Information Age Publishing All rights of reproduction in any form reserved.

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technologies more capital-intensive. However, the target in capitalist and socialist societies are diametrically different: “The machine itself shortens the working time, while its capitalist application lengthens the working day . . . in itself it marks the victory of man over the forces of nature, the capitalist use of it enslaves the forces nature . . . in itself, it increases the wealth of the producer, in capitalist application it turns him into a pauper . . .” (Marx 2017). This distinction is associated with the contradictions in the very essence of the capitalism phenomenon, namely, the fact that technical progress in a overproduction crisis only increases the gap between supply and demand, the production and the market, not only not easing the sales crisis, but even exacerbating it (Tivel 1928). Understanding the evolution of Russian competitiveness from pre-revolutionary approaches to modern mechanisms makes it possible to determine the strengths and weaknesses of each model, to offer sound methods for increasing the Russian economy’s competitiveness as opposed to the capitalist conceptions that have been forcibly imposed from the outside. This problem has become especially topical in recent times in connection with the significant loss of productive capacity after the collapse of the USSR, the integration of Russia into the world chains of the added value formation as a supplier of raw materials, limiting development through financial and technological restrictions. PRE-REVOLUTIONARY MODEL OF NATIONAL COMPETITIVENESS Pre-revolutionary model of the Russian economy’s competitiveness suggested the existence of a self-sufficient system capable of satisfying needs through internal reserves. Many researchers agree that the use of a selfsufficient economy model, coupled with authoritarian state policy, allowed high GDP growth rates in some periods and significantly eliminated the competitiveness gap from leading foreign states (Graham 2014). The basis of the Russian economy in the pre-revolutionary period was composed of food and agricultural goods, textiles and related products, mineral products, timber, leather raw materials, furs and related products. The structure of the Russian agricultural sector exports in 1901–1905 (Figure 49.1) shows the overwhelming superiority of agricultural products in gross exports. At the same time, it should be noted that the balance of foreign trade by means of agricultural production (Figure 49.2) was negative and generally reflected the pre-industrial model of competitive advantages’ implementation that was used in pre-revolutionary Russia.

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Figure 49.1  Structure of Russian exports in the early 20th century (1901–1905). Source: calculated on the basis of collection (Agriculture 1923)

Figure 49.2  Balance of foreign trade in Russia in 1901–1905. Source: collection (Agriculture 1923)

The innovative activity necessary for the development of industrial production and the transition to a new growth model in pre-revolutionary Russia was initiated at the top level when identifying the lag of domestic producers from foreign competitors. Having reached the development goals set, innovative activity was not stimulated and actually stopped, only fixing the level achieved. In this regard, the change in the time of competitiveness of domestic production in tsarist Russia resembled a saw blade with sharp upsets after the decision-making on the innovation’s activation and subsequent falls due to the lack of supporting activities.

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One of the most striking examples of such a course of events is the development of the Tula Arms Factory. After the Patriotic War of 1812, the country’s leadership realized the need to modernize the defense industry complex and invited foreign specialists to carry out these tasks. The result of their work was a significant expansion of capacity, the introduction of advanced technologies, as Nicholas I noted (Hamel 1826). However, the absence in the future of significant innovations in the technological process led to the fact that already during the Crimean War the backlog of Russian armaments was obvious. A similar situation evolved with the development of railway communication. Initially, Russia stood at the head of technological progress in this field. But immediately after the technological breakthrough, stagnation came: the Cherepanov’s steam locomotive remained in a single copy and the construction of railways completely stopped for 12 years: from 1844 to 1855 (Westwood 1964). One of the main elements of the policy for increasing competitiveness in pre-revolutionary Russia was customs and tariff regulation, which provided protection of the national market from foreign competitors. With the adoption in 1891 of new customs tariffs, the list of high-tariff goods and the amount of deductions increased significantly, which led to an even greater decline in the competitiveness of Russian industries (Smirnov 2010). The second reason for the lack of a stable increase in competitiveness is directly related to the excessive coverage of protectionist policies. In the absence of sufficient intensity of competition in the domestic market, when entering the foreign market, national producers met extremely active competition and were objectively unprepared for it. As an example of an unsuccessful attempt to gain a foothold in foreign markets, one can cite the experience of the domestic oil industry, which failed to compete with the largest US companies (Yergin 1991). Finally, the third reason was the lack of favorable conditions for small and medium-sized enterprises and, in general, for doing business. Scientists and engineers, developing and implementing innovations, in fact received nothing in return. Russian innovators were strongly dependent on managers at various levels and often could not implement their proposals because of the bureaucracy’s disinterest in changing the current state of affairs. An indirect indication of the low attractiveness of Russia in the pre-revolutionary period for doing business is the migration dynamics (Figure 49.3). The share of immigrants (as well as emigrants) in the structure of Russian population has been at an extremely low level for centuries, mainly for Russia, internal migration, or resettlement, was characteristic. Among the international immigrants, the largest share was made by agricultural, industrial and transport workers, i.e., low-skilled specialists (Osinsky 1928). In fairness, it should be noted that the laws of the Russian Empire also did not favor immigration to the developed territories. An exception was made

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Figure 49.3  Structure of Russian migration in 1911–1915 (European border). Source: collection (Yearbook 1918)

only for new undeveloped regions, which was due to geopolitical necessity (Vorobyova et al. 2016). SOVIET MODEL OF NATIONAL COMPETITIVENESS Soviet model of the national economy’s competitiveness should be divided into several development models, only one of which can be called traditional, consistent with the Soviet principles of economic organization. The historical development of Russia, reinforced by the dynamics of per capita GDP change (Figure 49.4), indicates the need to identify four models of the Soviet economy (Katasonov 2018). For the formation of a perspective model of Russian competitiveness, the analysis of the “traditional Soviet model” of competitiveness and the reasons for the transition in the 1960s to a new model, accompanied by a sharp decline in economic growth rate is of great interest. The USSR in 1930–1960 can be represented in the form of a giant TNC whose activities are aimed at maximizing the full use of resources through a scientifically grounded system of domestic prices, interregional and intersectoral links, investment in the production development, human and scientific potential (Bratishchev and Krasheninnikov 1999). Specialization,

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Figure 49.4  Indices of GDP per capita changes in the USSR. Source: compiled on the basis of article (Easterly and Fisher 1994)

cooperation and the international division of labor in TNCs correspond to the system of productive forces’ distribution in the USSR. The beginning of the formation of production clusters in Russia was laid in the USSR in the period 1960–1980, when the territorial production complexes were theoretically explained and practical implementation was found (Kolosovsky 1971). Thus, before the studies of M. Enright (Enright 1990) and M. Porter (Porter 1990), Russian scientists laid the basic concepts of increasing the national economy’s competitiveness on the basis of the territorial concentration of enterprises. Most of the modern domestic industries, which form Russian exports, import independence and competitiveness in general, received its technological implementation on the basis of production territorial location in the USSR. The concepts of the concentration of industries developed in the USSR (in the modern interpretation of production clusters), according to many scientists (Ryabchenuk et al. 2007), should be used to shape the self-sufficiency and competitiveness of the Russian economy today. The most significant difference between the economic model of the USSR and modern major TNCs is the main objective of its activity. TNCs today operate to maximize profits for shareholders. As a result, private interests come first, that lead to market externalities associated with environmental pollution, the creation of harmful and dangerous working conditions in the workplace,

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the exploitation of women and children labor, corruption, and others. The corresponding features of modern social reproduction models have been considered in the work (Tsikin 2018). One of the main purposes of the Soviet economy was to reduce the unit costs of production and increase the population welfare. The Soviet economic system removed one of the main contradictions characteristic of the private business of Western capitalist countries, namely the contradiction between the social nature of production and the individual character of appropriation (Engels 2016). For comparison, one can give an example of the relationship between an employer and an employee in the pre-Soviet capitalist period, reflected in a letter from St. Petersburg tobacco merchants: “The manufacturers thought only how to tightly fill their pockets. They did not care about the health of the workers at all. The shops were damp, dark, without sufficient airflow. Very often smoke from furnaces and gases were produced directly into the shop. All their working time, the workers were held in intolerable conditions. Therefore, they quickly exhausted, fell ill, aged, prematurely died” (Ingulov 1937). It is obvious that in the Soviet economic model such a problem could not exist. To understand the concept of increasing the competitiveness of Russia in modern Russia, it is important to understand the reasons that led to a significant reduction in growth rates in the USSR. Many authors point to the low elasticity of labor in capital substitution in the Soviet economy (Popov 2008, Ofer 1987). Another reason for the economic stagnation after 1960 is the extremely high physical deterioration and obsolescence of equipment that tended to grow (Collection 1987). During this period, it was necessary to increase the technological level and the share of production of Group B’s products, the accelerated development of industries producing personal and household goods was required. Instead, “thanks to” the dynamics of oil prices (Figure 49.5), the rate was taken to import consumer goods. In addition, the Soviet leadership was drawn into a number of deliberately unprofitable projects (for example, the construction of the Baikal-Amur Mainline), the effectiveness of which still raises many questions. POST-SOVIET MODEL OF NATIONAL COMPETITIVENESS A modern model for increasing competitiveness in Russia is referred to a pre-industrial or early industrial society. Today we should state that the competitive advantages of the national economy accumulated in the Soviet period in the industrial sphere and many other areas were lost. In the 1990s, after the collapse of the USSR, privatization of state property was carried

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Figure 49.5  Dynamics of world oil prices in 1947–2011. Source: Article (Williams 2018)

out in Russia, which was associated with the destruction of existing production and economic ties and the liberalization of prices. Among all the plans of privatization, the most radical was chosen, not taking into account the technological and sectoral ties that had been developed between the enterprises of different republics, the diversity in the economic efficiency of activities and the competitive advantages of individual enterprises that previously formed a closed economic system (Olsevich 1999). The result of economic reforms was a decline in production, standards of living and income of the population. Foreign practice shows that the basis for increasing national competitiveness is the development of science-intensive industries, the enhancement of scientific and technological potential and the development of human resources (Delgado 2012). The development of science-intensive industries is a mechanism for creating competitive advantages through scientific discoveries. The most relevant indicators of official state statistics are the share of innovative enterprises and their products in the overall structure (Figure 49.6). Given the current level of the Russian economy, the development of science-intensive industries requires stimulation through state regulation, but in the future, the growth of innovative industries should be provided through a competitive mechanism.

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Figure 49.6  Analysis of Russian science-intensive industries development. Source: statistical yearbooks (Yearbooks 2001–2017)

The increase in the scientific and technical potential of production is one of the most important elements of the modern economy’s competitiveness management. This is reflected in the fact that the expenditures on R&D of developed countries are 2–3% of GDP and in the last 20 years tend to increase (Figure 49.7).

Figure 49.7  Dynamics of R&D expenditures as a percentage of GDP. Source: Report (OECD 2016)

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Figure 49.8  Indices of business (BERD) and state (GOVERD) R&D costs. Source: Report (OECD 2016)

It should be noted that Russia is characterized by chronic underfunding of R&D, the imitative development of an innovation system aimed at borrowing innovations, rather than developing its own breakthrough technologies. The low growth rates of business expenses for innovative developments (Figure 49.8) are a consequence of policies that can be changed by harmonizing the economic interests of the state and business. The last considered direction of increasing the national economy’s competitiveness is the development and effective use of human resources. Highly qualified workers are the basis for solving most of the economic growth issues and the basis for increasing competitiveness at every level, as A. Sherudilo described: “. . . we must be guided not only by the present requirements . . . but also on further technical progress, because the education system that we can now supply will be felt only after 10–15 years” (Sherudilo 1928). Analysis of the Russian population’s structure (Figure 49.9) shows a high level of education and qualifications. Most of the population has a full higher or secondary professional education. However, the bright figures of education do not reflect the gap in Russian education with science and industry. To overcome this circumstance, various models of transfer of science to universities have been proposed, which, however, still do not show positive results (Dezhina 2011). Current trends in the Russian educational sphere (Figure 49.10) do not inspire optimism. In modern conditions, a real threat is created for the implementation of programs for the development of industry, which is an

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Figure 49.9  Structure of Russian population’s education, pers. for 1,000 people. Source: Statistical Yearbook (Yearbook 2013)

Figure 49.10  Indicators, characterizing Russian education in 2000–2016. Source: calculations based on statistical data (Yearbook 2017) * normalized values of indicators are presented.

indispensable element in modern models of competitiveness. Such negative indicators are also characteristic for graduates with a higher education, and for coverage of youth by educational programs, which in the future will lead to difficulties in competition based on knowledge with other countries. The solution of this issue is especially topical given the fact of Russia’s accession to the digital age and the onset of potential “turbulence” in the

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labor market. Nowadays, pre-industrial models of competitiveness are close to sunset. Calculations show that the transformation of the agricultural sector can free more than 80% of those employed in Vietnam, Cambodia, which will definitely have a negative impact on the economic standard of living of the poorest countries (Chang et al. 2016). In modern conditions, the emergence of a “regulative” factor of progress as a factor of the competitiveness of the Russian economy and a special kind of value that determines the goals and values ​​of economic development become particularly important. In other words, it is time to attach to the development of “high technology” and “higher intelligence,” since without considering humanitarian problems, cultural, value and ethical dimensions, the upcoming high-quality technological leap can radically and negatively affect the level of competitiveness of the Russian socio-economic system. CONCLUSIONS In modern Russia, Karl Marx’s ideas are still relevant, in part because the observed capitalist mode of production is now characterized by the concentration of the means of production in the hands of the capitalists and the sale to the workers of “their labor as a commodity” (Marx 2017). Such a sale of labor to the capitalist does not lead to an improvement in the material or cultural conditions of workers’ lives. The opposite situation is observed: the more efficient the labor force functions, the more added value is created, the more the owner of the production means is enriched. For the period from 2006 to 2015 the profit of enterprises in the world (i.e., in fact, its owners) grew significantly faster than the earnings of employees (13 % and 2 % respectively) (Oxfam 2018). The statistical data indicate that 1 % of Russians own 20 % of the national income, which is mostly kept abroad, incl. in offshore zones (Novokmet et al. 2017). These facts directly point to the low competitiveness of the Russian economy, which requires emergent actions for development. REFERENCES Agriculture (1923) Statisticheskiy sbornik «Sel’skoye KHozyaystvo Rossii v XX veke» [Statistical collection “Agriculture in Russia in the 20th century”], Publishing house “New Village,” Moscow, 340 pp. (in Russian) Bratishchev IM, Krasheninnikov SN (1999) Rossiya mozhet stat’ bogatoy! [Russia can become rich!] Grail, Moscow, 192 pp. (in Russian) Chang J-H, Rynhart G, Huynh P (2016) ASEAN in transformation: textiles, clothing and footwear refashioing the future, ILO, URL: http://www.ilo.org/actemp/ publications/ WCMS_579560/lang—en/index.htm

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Collection (1987) Narodnoye khozyaystvo SSSR za 70 let. YUbileynyy statisticheskiy sbornik [National economy of the USSR for 70 years. Jubilee statistical collection], Finance and Statistics, Moscow (in Russian) Delgado M, Ketels C, Porter ME, Stern S (2012) The determinants of national competitiveness, National Bureau of Economic Research, Cambridge, 47 pp. Dezhina IG (2011) Razvitiye nauki v rossiyskikh vuzakh [Development of science in Russian universities], IFRI, Paris, 27 pp. (in Russian) Easterly W, Fisher S (1994) The Soviet Economic Decline. Historical and Republican Data, Macroeconomics and Growth Division, Research Department, World Bank, 60 pp. Engels F (2017) Anti-Dyuring. Dialektika prirody [Anti-Duhring. The dialectics of nature], Publisher E, Moscow, 832 pp. (in Russian) Enright MJ (1990) Geographic concentration and industrial organization, PhD dissertation, Harvard University Graham L (2013) Lonely Ideas: Can Russia Compete? MIT Press, Cambridge, 216 pp. Hamel IKh (1826) Opisaniye Tul’skogo oruzheynogo zavoda v istoricheskom i tekhnicheskom otnoshenii [Description of the Tula Arms Plant in historical and technical terms], Agust Semyon Typography, Moscow, 380 pp. (in Russian) Ingulov SB (1937) Politbesedy [Political conversations], Partizdat TsK VKP (b), Moscow, 358 pp. (in Russian) Katasonov VYu (2018) Sovetskaya ekonomika dlya nashey strany okazalas’ boleye konkurentosposobnoy, chem rynochnaya zapadnogo obraztsa [The Soviet economy for our country turned out to be more competitive than the Western one], MyWebS, URL: https://mywebs.su/blog/cccp/17639/ (in Russian) Kolosovsky NN (1971) Territorial’nyye sistemy proizvoditel’nykh sil [Territorial systems of productive forces], Thought, Moscow, 437 pp. (in Russian) Marx K (2017) Kapital [Capital]. T8Rugram, Moscow, 638 pp. (in Russian) Novokmet F, Piketty T, Zucman G (2017) From Soviets to Oligarchs: Inequality and Property in Russia 1905–2016, URL: http://piketty.pse.ens.fr/files/NPZ2017WIDworld.pdf OECD (2016) Main Science and Technology Indicators, Organisation for Economic Co-operation and Development, URL: http://www.oecd.org/sti/msti.htm Ofer G (1987) Soviet economic growth: 1928–1985. J Econ Liter 4:1767–1833 Olsevich Yu (1999) Sovety postoronnego, ili K chemu prizyvayet nas Zapad? [The advice of an outsider, or What does the West call us for?] Issues of economics 5:19–27 (in Russian) Osinsky VV (1928) Mezhdunarodnyye i mezhkontinental’nyye migratsii v dovoyennoy Rossii i SSSR [International and intercontinental migrations in pre-war Russia and the USSR], Central Statistical Office, Moscow, 136 pp. (in Russian) Oxfam (2018) Richest 1 percent bagged 82 percent of wealth created last year—poorest half of humanity got nothing, Oxfam International, URL: https://www.oxfam.org/en/pressroom /pressreleases/2018-01-22/ richest-1-percent-bagged-82-percent-wealth-created-last-year Popov V (2008) Zakat planovoy ekonomiki. Pochemu sovetskaya model’ poteryala dinamizm v 1970–1980-e gody [Sunset of the planned economy. Why did the Soviet

572    A. M. TSIKIN, A. B. BERBEROV, and A. B. BERBEROV model lose dynamism in the 1970–1980s], Expert, URL: http://expert.ru/ expert/2009/01/zakat_planovoi_ekonomiki (in Russian) Porter M (1990) The competitive advantages of nations, Harvard Business Review, URL: https://hbr.org/1990/03/the-competitive-advantage-of-nations Ryabchenyuk YuV, Shestopalov AG, Markov LS (2007) Klastery i otechestvennyye traditsii kompleksoobrazovaniya [Clusters and domestic traditions of complex formation]. Strategy and competitiveness 2(14):85–87 (in Russian) Sherudilo A (1928) Perspektivy truda i obrazovaniya rabochey molodezhi [Prospects of labor and education of working youth], Molodaya Gvardiya, Moscow, 37 pp. (in Russian) Smirnov SA (2010) Pravovoye regulirovaniye inostrannogo predprinimatel’stva v Rossii v XIX—nachale XX vv. [Legal regulation of foreign business in Russia in the XIX—early XX centuries]. Power 4:106–109 (in Russian) Tivel AYu (1928) Voprosy mirovogo khozyaystva i mirovoy politiki [World economy and politics issues], Gosizdat, Moscow, 177 pp. (in Russian) Tsikin AM (2018) Formy proyavleniya izmeneniy modeley obshchestvennogo vosproizvodstva pri razvitii konkurentosposobnosti [Forms of emergence of social reproduction model changes in the development of the competitiveness]. Economy. Business. Banks 2(23):22–32 (in Russian) Vorobyeva OD, Rybakovsky LL, Rybakovsky OL (2016) Migratsionnaya politika Rossii: istoriya i sovremennost’ [Migration policy of Russia: history and modernity], Publishing house “Econ-Inform,” Moscow, 192 pp. (in Russian) Westwood JN (1964) A history of Russian railways, G. Allen and Unwin, London, 326 pp. Williams JL (2018) History and Analysis—Crude Oil Prices, WTRG Economics, URL: http://www.wtrg.com/prices.htm Yearbook (1918) Statisticheskiy ezhegodnik Rossii 1916 g. [Statistical yearbook of Russia in 1916], Central Statistical Committee, Moscow, 121 pp. (in Russian) Yearbook (2001) Rossiyskiy statisticheskiy ezhegodnik. 2001 [Russian Statistical Yearbook. 2001], State Statistics Committee, Moscow, 672 pp. (in Russian) Yearbook (2006) Rossiyskiy statisticheskiy ezhegodnik. 2006 [Russian Statistical Yearbook. 2006], Federal State Statistics Service, Moscow, 806 pp. (in Russian) Yearbook (2011) Rossiyskiy statisticheskiy ezhegodnik. 2011 [Russian Statistical Yearbook. 2011], Federal State Statistics Service, Moscow, 795 pp. (in Russian) Yearbook (2013) Rossiyskiy statisticheskiy ezhegodnik. 2013 [Russian Statistical Yearbook. 2013], Federal State Statistics Service, Moscow, 717 pp. (in Russian) Yearbook (2017) Rossiyskiy statisticheskiy ezhegodnik. 2017 [Russian Statistical Yearbook. 2017], Federal State Statistics Service, Moscow, 686 pp. (in Russian) Yergin D (1991) The Prize. The Epic Quest for Oil, Money and Power, Simon & Schuster, New York, 945 pp.

CHAPTER 50

THE MODERN COLLECTIVE INVESTMENTS MARKET OF THE RUSSIAN FEDERATION AS A GUIDED ECONOMIC SYSTEM Irina Yu. Shvets Financial University under the Government of the Russian Federation, Moscow Yu. Yu. Shvets Financial University under the Government of the Russian Federation, Moscow Ya. N. Radzievskaya Financial University under the Government of the Russian Federation, Moscow

Marx and Modernity, pages 573–586 Copyright © 2019 by Information Age Publishing All rights of reproduction in any form reserved.

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COLLECTIVE INVESTMENTS MARKET—RETROSPECTIVE Each generation rethinks the problems of the essence of its existence, purpose and role in history, while seeking to find its own “philosopher’s stone” that will make mankind happy. In this sense, K. Marx’s statement that “. . . a theory becomes a material force as soon as it takes over the masses. A theory is able to take over the masses when it proves ad hominem,1 and it proves ad hominem when it becomes radical,” acquires an almost magical coloring. (Karl Marx, . . .  P. 462, 2014). One of the ways that allows mankind to become happier is the way of collective realization of the well-being dream. The collective investment mechanism allows to realize this dream for a person with almost any wealth level. The collective investment market began to develop from a simple idea of combining small amounts of resources of small, disparate investors to invest in large, highly profitable projects. The period of its origin is debated from the era of Roman law (when buyers managed the state property in construction, receiving the corresponding income) to the XIII century (the beginning of the stock market formation in Europe)—the end of the XVIII century (the stage of active development of stock exchanges, companies and manufactures in Europe). Funds and institutions of collective investment are both a powerful driver and resource for economic development in modern socium. The International Investment Funds Association (hereinafter—IIFS), lobbying the interests of investors, also monitors all the system participants’ compliance with the standards. Since 2015 IIFS has expanded the published statistics on regulated open funds (ROEF), which include: mutual funds, exchange traded funds, institutional funds (IIFS, 2018). Thus, at the end of 2017, the assets of open regulated funds in the world amounted to 61.07% of the world GDP.2 The systemic leader of such investment, throughout the period of its development, is the United States (at the end of 2017, their share in the assets of the mentioned world funds amounted to 44.93%).3 The funds invested in the system of collective investment for long periods of time allow the country’s economy to develop confidently, make long-term plans and implement targeted strategies. The collective investment system in Russia has a relatively short history of its development. Its beginning can be attributed to the second half of the XIX century.—the period of cooperative movement development. In the future, the market and the environment of collective investment in Russia continued to develop in parallel with the formation of its stock market— from the ’90s of the XX century. (the stage of creating check funds during privatization). However, at this stage, “pyramid-scam” schemes began to develop actively, which undermined the investors’ confidence in them. Later, in 1996, the Russian Federation approved a Comprehensive program of

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measures to ensure the rights of depositors and shareholders (Order . . . , 1996), which legislated the beginning of collective investment development. However, the share of such funds assets in the Russian Federation amounted to only 0.007% of the world assets of the corresponding funds and only 2.09% of its GDP at the end of 2017, which is significantly inferior to the positions of both recognized market participants and countries that are actively involved in it. For example, the market in China—a country with a relatively low level of GDP per capita, and a very short history of collective investment—is growing rapidly. The share of Chinese investment funds assets in the world funds increased by 2.5 times for the period of 2012–2017 and amounted to 3.4%; assets of Brazilian funds increased by 3.2 times, their share in world assets is 2.5 % at the end of 2017. And the share of Russian funds assets decreased by 1.6 times during this period.4 In this regard, the study of the possibility of directed development of the Russian Federation collective investment system, that is, such development, which meets the desired direction and pace of growth is of interest. STRATEGY OF COLLECTIVE INVESTMENTS MARKET DEVELOPMENT IN RUSSIA The success of any event requires not only the ultimate goal, but also a strategy for its development, which is based on the start-up capital. According to Marx. capital “. . . is not a thing, but a certain, public, belonging to a certain historical formation of society production relation, which is represented in a thing and gives this thing a specific social character.”(Marx To. . . .  p. 887, 1961) Modern transformed forms of capital that mimic while surviving, transformed into: intangible, glamour, virtual, etc. capital, require special strategic approaches. The Russian Federation has developed and operates legislative, regulatory and advisory series of documents that form the strategic direction of its financial market development, whose component sector is the collective investment market. Such documents are systematized in Table 50.1. Based on the need to accelerate the development of the financial market and its component—the collective investment market in Russia, the Russian Government approved the “Strategy for the Russian Federation financial market development for the period of up to 2020”—hereinafter the Strategy—back in 2008. (Order . . . , 2008).5 The state authorities were set an ambitious goal—“. . . to ensure the accelerated economic development of the country through qualitative improvement of competitiveness of the Russian financial market and formation of an independent financial center on its basis . . .” (Order . . . , 2008). The Strategy draws attention to the need to ensure the long-term competitiveness of the financial market and, consequently, of all its sectors, that is, the collective investment market included.

Document

Federal law “On strategic planning in the Russian Federation”

Strategy of the Russian Federation financial market development for the period of up to 2020

RF State program “Management of public finances and regulation of financial markets”

Developer

The RF Government

The RF Government

The RF Government

Resolution of the Government of the Russian Federation dated April 15, 2014 N 320

Order of the RF Government dated December 29, 2008 No. 2043-R

Adopted by the State Duma on June 20, 2014 and approved by the Federation Council on June 25, 2014

Name and number of the approving document

04/15/2014

01/21/2009

06/25/2014

Date of entry into force

March 29, 2018 r.

Order of the Government of the Russian Federation dated September 17, 2018 N 1963-p On recognition of the Order of the Government of the Russian Federation dated December 29, 2008 N 2043-p invalid

None

Date of latest modifications

(continued)

Subprogram 7 “Effective functioning of financial markets, banking, insurance activities, investment scheme and pension savings protection”

The collective investment market is considered as a sector of the financial market

Establishes the legal basis for strategic planning in the Russian Federation

Notes

TABLE 50.1  Legislative Support of the Strategic Development of the Collective Investment System in the Russian Federation (author’s development)

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Document

Main directions of the Russian Federation financial market development for the period of 2016–2018

Main directions of the Russian Federation financial market development for the period of 2019–2021

Strategy of long-term development of the pension system of the Russian Federation up to 2030

Strategy to improve financial literacy in the Russian Federation for 2017–2023

Strategy for improving financial accessibility in the Russian Federation for the period of 2018– 2020

Developer

The Bank of Russia

The Bank of Russia

The RF Government, The RF Ministry of labour

The RF Government, The RF Ministry of Finances

The Bank of Russia

09/25/2017

03/26/2018

Approved by the Board of Directors of the Bank of Russia on March 26, 2018.

12/25/2012

01/15/2019

01/01/2016

Date of entry into force

Order of the RF Government dated September 25, 2017 N 2039-R

Order of the Government of the Russian Federation dated December 25, 2012 No. 2524-R (edited on December 6, 2017)

Project of the Central Bank of the Russian Federation dated June 1, 2018

Project of the Central Bank of the Russian Federation dated June 1, 2018

Name and number of the approving document

None

December 6, 2017

None

None

Date of latest modifications

Indirectly affect the collective investment market development

Formed on the basis of the requirements of the Federal law “On the Central Bank of the Russian Federation” with a periodicity of 1 every three years

Notes

TABLE 50.1  Legislative Support of the Strategic Development of the Collective Investment System in the Russian Federation (author’s development) (continued)

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Following this goal, the main tasks were formulated as well: • “. . . increasing capacity and transparency of the financial market; • ensuring the efficiency of market infrastructure; • improvement of legal regulation in the financial market” (Order . . . , 2008). Besides, the Strategy provided that as a result of the reforms, certain indicators of the Russian Federation financial market development, in terms of collective investment, will be achieved by 2020. Special attention was paid to the need to intensify efforts aimed at attracting the population to cooperation in the field of collective investment, since “Insufficient involvement of the population in the financial sphere” was recorded with a significant investment potential (Order . . . , 2008). The Strategy also highlighted “ Raising awareness of citizens about the possibilities of investing in the financial market.” as a priority (Order . . . , 2008). Thus, the Strategy established a number of tasks and priorities for the development of the collective investment system and formed targets as well. However, despite the fact that the implementation of the established tasks and priorities is quite rigidly brought into life and controlled by the Bank Of Russia, as the market mega-regulator: it monitors the market consistently and periodically, monitors the implementation of the established restrictions by its participants, in case violations are identified, it takes measures of influence, up to the revocation of licenses etc., the implementation of the set targets leaves much to be desired (Figure 50.1). The data show that the growth rates of the previously established indicators (although they were nominated in the national currency, i.e., they practically did not take into account the influence of exchange rate fluctuations) are insufficient and a breakthrough in the development of collective investment is necessary for their successful gradual implementation by 2020. In April 2014, the Government of the Russian Federation developed and approved the state program of the Russian Federation called “Management of public finances and regulation of financial markets” (Resolution . . . , 2014), which includes subprogram 7—“Effective functioning of financial markets, banking, insurance activities, investment schemes and pension savings protection.” The purpose of subprogram 7 is “. . . providing legal conditions for improving the efficiency of the financial market, including the banking and insurance sector, the securities market, the pension savings formation and investment system, the creation of an international financial center . . .” (Resolution . . . , 2014). The amount of budget allocations for the implementation of the subprogram at the expense of the Federal budget is 2.14 billion rubles, in stages, up to 2020 (Figure 50.2).

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Figure 50.1  Targets for the Russian Federation financial market development (in part of collective investment). Source: Author’s development on the basis of the data by (Main . . . 205; Main . . . , 2018; Federal Law  . . . , 2002).

Figure 50.2  Budget allocations for the subprogram 7 implementation from the Federal budget of the Russian Federation. Source: Author’s development on the basis of the data by (Resolution . . . , 2014).

The data show a planned distribution of Federal funds, however, without taking into account possible fluctuations in the national currency exchange rate. Subprogram 7 also provides for the control and target indicators that mainly reflect the ability and opportunity to carry out inspection of the market activity by competent authorities, assess the transparency and quality of such a control, rank the quality of the results of external inspections, etc. In addition, the Bank of Russia, according to the law “On the Central Bank of the Russian Federation (Bank of Russia)” (Federal law . . . , 2002), develops “Main directions of the Russian Federation financial market development . . .” every three years for the relevant period. (Main directions . . . , 2015), (Main directions . . . , 2018).

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For the period of 2016–2018, the CBR, along with the Main directions of the Russian Federation financial market development, provides: protection of the financial services consumers rights, increasing financial literacy of the population and simultaneous increasing availability of financial services; suppression of unfair behavior in the financial market; increasing attractiveness of public companies equity financing for investors; application of proportional market regulation, optimization of the regulatory burden on market participants and other tasks; separate strategic “tasks for the development of the collective investment and trust management sector” (Main directions . . . , 2015). The Bank of Russia focuses on improving, first of all, the pension system and its non-governmental pension funds. It also provides for measures aimed at improving the investment attractiveness of investment funds. The development of appropriate standards, criteria and rules was chosen as a method of implementing such plans. The CBR also continuously monitors the stability of financial markets through a system of leading indicators. These are risk indicators: the ruble money market, the currency money market, the currency market, the government borrowing market, the corporate borrowing market and foreign markets. At the same time, the Central Bank of the Russian Federation also monitors the ratio of the funds’ assets dynamics to GDP and compares these figures with the world ones; analyses the shares of savings in the structure of the RF households funds use, as well as the amount of pension savings in % of GDP; investigates the structure of assets of Russian and international pension funds. It can be stated that the CBR achieved a number of goals for the period of 2016–2018: cleared the market of unscrupulous and insolvent participants, worked out mechanisms for the withdrawal of troubled companies from the market, increased the requirements for the participants’ corporate governance, introduced the behavioral supervision system, switched to electronic interaction with market participants, increased the infrastructure stability, laid the basis for the widespread use of financial technologies in the provision of financial services, actively contributed to the development of integration processes, for example—creating a single financial market of the Eurasian Economic Union (Main directions . . . , 2015). The Bank of Russia identified three priority goals for the development of the Russian financial market for the period of up to 2022: 1. “Improving the level and quality of the RF citizens’ life through the use of financial market instruments. 2. Promotion of economic growth by providing competitive access to debt and equity financing and risk insurance instruments for the subjects of the Russian economy.

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3. Creating conditions for the growth of the financial industry” (Main directions . . . , 2018). While maintaining continuity with respect to market development in 2016–2018, the CBR also set a number of strategic priorities for its development up to 2022: • • • •

D1. Development of competition in the financial market D2. Building a trust environment D3. Maintaining financial stability D4. Ensuring availability of financial services

These goals are fully correlated with the goals of the Main directions (Main directions . . . , 2015). The CBR also notes that the situation in the Russian financial market system directly depends on “the fundamental characteristics of the country’s socio-economic development, the most important of which are: structure (type) of its economy, diversification of economic agents’ activities, indicators of the population welfare, overall level of state and legal institutions development, degree of integration into global markets” (Main directions . . . , 2018). The Russian market model is based on the predominance of the banking sector, mainly based on its own resources, whose main source of income is the income of raw materials exports, resource flows, which mainly move from the budget to firms and between large companies, prevail, while in world practice the use of financial intermediaries prevails, which only successfully complement the banking sector in developed countries. The strategic development trend of the collective investment system in the Russian Federation is indirectly affected by such standards as:” Strategy for long-term development of the pension system of the Russian Federation until 2030 “(Order . . . , 2012), already mentioned Strategy (Strategy . . . , 2018) and “Strategy to improve financial literacy in the Russian Federation for 2017– 2023” (Order . . . , 2017). These strategies, their main provisions significantly contribute to the development of the market and the environment of collective investment. Especially strong is the influence of “fluctuation” movements (multidirectional changes) regarding organization and operation of non-governmental pension funds, their reserves, which does not contribute to the stabilization of the collective investment market system. In order to clarify the situation regarding the opportunities of the Russian market system regulation and the results of such regulation, we will further analyze the trends of its development.

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TRENDS IN THE DEVELOPMENT OF THE RUSSIAN COLLECTIVE INVESTMENT MARKET AS AN ECONOMIC SYSTEM Let’s start from the current situation, that is, assess the position of the Russian collective investment market among the world markets (Figure 50.3). The rating data indicate that the Russian market clearly does not use its full potential, which is represented by both trends in the population’s savings and its mentality, and trends in the savings of legal entities. These savings are concentrated mainly in the banking system, and are transferred across the borders of the Russian Federation (World investment report . . . , 2017), (Main directions . . . , 2018). While other countries’ markets are already focused on solving other current problems, for example, they decide how to resolve environmental issues best (Richard Harrison, 2018), the Russian market is still “thinking.” There is also a need for a more careful attitude of the mega-regulator (which also initiated and developed its Strategy for increasing financial accessibility in the Russian Federation for the period of 2018–2020 (Strategy . . . , 2018)) towards market participants, in particular—investment funds, non-governmental pension funds, provided their integrity (Stanisław Urbanski, 2016). Next, we are going to analyze the dynamics of the funds’ assets development in relation to the size of the RF gross national income (Figure 50.4). The above data show a significant lag of the Russian market not only from the leading market—the USA, but also from the markets of Argentina and Turkey, which do not rely on such financial support of the state (Fiza Qureshi, . . . , 2016). It should be noted that after the collapse of the Russian market in 2014, there is a tendency of its comparative stabilization and growth.

Figure 50.3  Ranking of the size of the open regulated funds assets in the world at the end of 2017. Source: Author’s development on the basis of the data by (Investment Company Fact Book, 2018).

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Figure 50.4  Ratio of fund assets to IRR in current USD rate in some countries. Source: Author’s development according to the data by (Investment Company Fact Book, 2018; Public Data World Development Indicators, 2018)

A number of questions arise: • why, in the presence of such a solid strategic and legal framework, as well as state support in the form of financing from the Federal budget, does the collective investment market system in the Russian Federation underutilize its own potential? How to accelerate this market’s development in Russia? According to Marx: “Even from a historical point of view, theoretical emancipation has specific practical significance for Germany. After all, the revolutionary past of Germany is theoretical, it is a reformation. Just as the revolution began in the monk’s brain then, so now it is starting in the philosopher’s brain.” (Karl Marx, . . .  P. 462, 2014). Thus, to implement qualitative changes in the collective investment market system of the Russian Federation, the legislators and the regulator should realize the need to redirect it towards the main potential consumer—the population. We believe that 1. We need a very flexible, generalized and unified strategy for the market development with the only clear goal: to make it public, that is accessible, transparent, understandable and convenient for the majority of the population. This task is closely intertwined with the tasks of stabilizing the economy and continuing to eradicate

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corruption, as well as “de-globalization” of the financial and economic systems of the Russian Federation. 2. Regulation of the pension system changes, its “Strategy,” should not make anxiety in the population expectations due to frequent and sometimes contradictory changes, but, on the contrary, should occur in full relationship with Resolution . . . , 2014 and Main directions . . . , 2015, 2018 of the collective investment market development. 3. It is desirable to transit the systems of public administration of the Russian Federation from the globalism level to the minimalism level. It should be such a transition, which would allow to solve global problems and issues without looking at the problems of the lower levels, for the “small” problems not to become obstacles to the qualitative understanding and resolution of the higher orders problems. NOTES 1. evidence in relation to the person 2. Calculated by the author on the basis of data by (Investment Company Fact Book, 2018) and (Public Data World Development Indicators, 2018). 3. Calculated by the author on the basis of data by (Investment Company Fact Book, 2018). 4. Calculated by the author on the basis of data by (Investment Company Fact Book, 2018). 5. On 17.09.2018 this Strategy is canceled by Order of the RF Government dated 17.09. 2018 N 1963-p “On recognition of the order of the gov-ernment of the Russian Federation dated December 29, 2008 N 2043-p invalid”.

REFERENCES 1. Marks K. (1955) K kritike gegelevskoy filosofii prava. Vvedeniye [To criticism of Hegel’s philosophy of law. Introduction] // K. Marks, F. Engel’s. Sochineniya. Moscow: Politizdat. T. 1. S. 414–429. (in Russian) 2. Marks K., Engel’s F. (1961) Kapital (III tom) [Capital (III)] ]Soch. 2-oye izd. T. 25. CH. 1. Moscow: Gosudarstvennoye izdatel’stvo politicheskoy literatury, P. 231–232. (in Russian) 3. Marks Karl, Engel’s Fridrikh (2014) Sobraniye sochineniy. T.1 (Sobraniye sochineniy Marksa i Engel’sa) [Collected works. T. 1 (Collected works of Marx and Engels)]—Moscow: Direkt-Media. –736 p. ISBN: 978-5-4475-3115-7. (in Russian) 4. Osnovnyye napravleniya razvitiya finansovogo rynka Rossiyskoy Federatsii na period 2016–2018 godov [Main directions of the Russian Federation financial market development for the period of 2016–2018](2015).URL: https://

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www.cbr.ru/finmarkets/files/development/onrfr_2016-18.pdf (accessed: 01.09.2018) (in Russian) Osnovnyye napravleniya razvitiya finansovogo rynka Rossiyskoy Federatsii na period 2019–2021 godov [Main directions of the Russian Federation financial market development for the period of 2019–2021]. URL: http://www.cbr.ru/ statichtml/file/41540/onfr_2019-21(project).pdf (accessed: 07.09.2018) (in Russian) Postanovleniye Pravitel’stva RF ot 15 aprelya 2014 g. N 320 (2014) “Ob utverzhdenii gosudarstvennoy programmy Rossiyskoy Federatsii “Upravleniye gosudarstvennymi finansami i regulirovaniye finansovykh rynkov” (v red. ot 29.03.2008). [Resolution of the government of the Russian Federation dated April 15, 2014 N 320 (2014) “On approval of the state program of the Russian Federation “Management of public finances and regulation of financial markets” (as amended on March 29, 2008)]URL: http://base.garant.ru/70644234/cd98ab1fca801603076b28cae50a9b35/#ixzz5S5u0GMHC (accessed: 03.09.2018) (in Russian) Rasporyazheniye Pravitel’stva RF ot 25.09.2017 N 2039-r