Harmonious Economics or The New World Order

Harmonious Economics or The New World Order

Vladimir Emelyanovich Chabanov

Scientific editor: PhD in Economics, Honoured Worker of Higher Education of the RF, Head of the Department of Economic Theory of the S-P State University. Victor Timofeevich Ryazanov

Translator Ekaterina Nikolaevna Bereznikova

Editor Pavel Vladimirovich Tchabanov

Editor Olesya Vladimirovna Gurskaya

© Vladimir Emelyanovich Chabanov, 2018

© Ekaterina Nikolaevna Bereznikova, translation, 2018

ISBN 978-5-4490-4682-6

Created with Ridero smart publishing system

Introduction1

Theory that has reached deadlock opens up brilliant perspectives2.

Ibn Sabey

Estimated readers!

The book you are holding in your hands is about economics. However, its subject is not the economics that we witness today, but economics the way it should be. This book is about economics that would create a stable and violence-free world where all people would have an opportunity to provide a dignified living for themselves and their families. About economics that would conform with the common sense and respect and promote the ideas of kindness and justice. About economics that would benefit all, whether they are strong or weak, bright or not-so-intelligent, elderly or young. Economics that would encourage a healthy lifestyle and not vice versa, and contribute to the development of culture, education and morality, instead of suppressing them.

This is not a utopia or a naïve dream, but a tenable theory based on the laws of the Universe, world experience, and knowledge. This is precisely what economics should be! Such economics has an internal logic, and, peeled off all that is superfluous, artificial or immoral, this is what the modern shapeless and faulty economic doctrines boil down to. Their intricacies do not arise from the complexity of economics as such, but from the unbounded desire of some to make profit regardless of the costs to Nature and the society.

As the result, the majority of the world’s population has trouble upkeeping their dignity, not only in the earthly matters, but in the international relations, too. In the current economic conditions, common people cannot work normally, live decently, eat healthy, or raise their children any more. Today, human beings have turned from clients into yet another resource, another source of income. Unless they are profitable, there is no need to provide them with means of existence.

Consequently, social protests increase, the feeling of discontent deepens, and terrorism gains ground. On the other hand, the number of millionaires grows. And it would be a violation of truth to believe that the more people get rich, the less poor there are. So why does this happen?

The existing economic theory is based on liberal principles that consider the free – that is, uncontrolled – actions of a certain group of persons as the paramount value of the social being. This freedom brings about the inviolability of private property, the freedom of business, and the precedence of the rights of a person over the rights of the society (a person is more important than the state). Besides, these principles exempt people of their obligations before others, and limit, as much as possible, the state and social interference in everyday and economic life of the country. This economics conforms to Thomas Carlyle’s formula “anarchy plus a street-constable’3, which the wellbeing of the state and the society do not fit.

Such economic philosophy in all its forms turned out to be most advanced and thoroughly tested, and has served as the ideological foundation of the modern economic science. That is why all tools, criteria and incentives of the existing structure have been adapted to serve the profitable economics and not the useful economics. For instance, its global indicators, such as GDP, national income, and GNP, are based on the monetary income and not the tangible social improvements. All of the above-mentioned factors have given rise to a global confrontation between the social nature of production and the private consumption of its results. Nevertheless, economics disregards this and continues along the selected path, just as a driver who would navigate by the stars failing to look at the road. It is obvious that in such conditions collapses are inevitable.

Due to these reasons, current economics is incomplete, self-contradictory, and unstable. Its notions cannot withstand reasonable criticism, they have lost touch with reality, and lack unifying logic and clear objective. These notions are obsolete. However, there is no solid structure, and for that matter no science, without a foundation.

Indeed, the chasm separating modern economic studies from economic practice is dispiriting. The way it is interpreted and taught, this subject has little in common with the real situation. As Ronald Coase, Nobel prize winner in economics in 1991, wrote: “The tools used by economists to analyse business firms are too abstract and speculative… Since economics offers little in the way of practical insight, managers and entrepreneurs depend on their own business acumen, personal judgment, and rules of thumb in making decisions… Economics thus becomes a convenient instrument the state uses to manage the economy, rather than a tool the public turns to for understanding how the economy operates’4. [1]

The tone of the modern economics is set by theoretical philosophizing on price formation principles, returns and expenses, interest rates and inflation, demand and offer, rent and preferences, which has supplanted discussion of the ways to increase labour productivity and improve labour organisation. Instead of striving to create conditions for dignified human existence and cultural development, this science is impregnated with acquisitiveness.

Thus, economics turns out to be a fruit of centuries-old delusions, passions and egotism, politics and momentary actions, and not a product of systemized knowledge. It is used to justify and to serve the existing political regime, not to improve it. That is why the crisis we observe today is easy to understand and explain. Besides, a large number of economists are familiar with it (ref., inter alia, [2] – [5]). For this reason, the method of analogies, i.e. the trial and error method, is used in decision-making, which with time renders it ever less reliable and ever more expensive. Another possibility is to recreate blindly the experience of others.

In order to avoid it, a solid fundamental theory is required that would be capable both of forecasting and guiding. It should serve as a compass to indicate the correct and the erroneous direction of development for every specific action. Unfortunately, in modern economics, such a tool does not exist and is not even foreseeable.

That is why the variety of economic doctrines is so wide – they seek to bring some order into this kingdom of chaos. Here anything can be found: from monetarism to Keynesianism and mercantilism, from planned economy to utter anarchy, from conservatism to naïve romanticism. And while mercantilism encourages to save money, physiocracy urges to actively spend it. While metallism considers money an indicator of the nation’s wealth, nominalism regards it as conventional sign. The list of comparisons can be continued.

Thus, the current economic theories do not make up a whole, but are just fragments of science. They are not united by one principle, logic, or managing tools. That is, they resemble the branches of a business entity tree not connected to any single trunk or root. Consequently, the advice based on such studies is not universal. Economy is a complex structure that cannot be simply assembled out of separate fragments, like a puzzle.

It is obvious that economics can turn into a real science only provided that it abides by objective, universal laws and serves every human being instead of just the few. Then the entire arsenal of the limited doctrines will become superfluous, and the only true doctrine based on the laws of the World will survive. Indeed, the man is not a special supranatural creature guided by its personal cravings, but a natural phenomenon carrying out the functions it has been charged with. As the result, if the man tries acting as he wishes, in disregard of the laws of the World he lives in, then the World turns its back on him, and all the powers of Nature take up arms against him. We witness this confrontation on a regular basis. It increases the number of natural catastrophes, earthquakes and tsunamis, anthropogenic accidents, and emergencies. However, there should be no surprise here, as everything in the world is interconnected.

On the other hand, the current economic doctrines, highly controversial as they might be, all have one thing in common: money, as their only tool of analysis and management. This is no coincidence. In full accordance with the liberal doctrine, current economics takes monetary income, and not the actual benefit, as its basic tool. That is why current economics has turned money into its global objective, has made it the main means and source of human wellbeing, their dream and guiding star. The fact that money is more profitable to produce than goods contributes to this situation.

Thus, the existing economy is conditioned by money, and nothing goes by without it. Money generates money, it serves as the yardstick, as a fundamental incentive, and the criterion of perfection for any company or economic transaction. Money subordinates people, nature, and power. It is profit, investment, shares quotations, and interest rates that control production, instead of such factors as production efficiency, possible success, and usefulness. As the result, the objectives of capital owners dominate those of useful items producers. Obviously, this does not contribute to increasing the productivity of economy.

Consequently, the “long money’ has disappeared, and financing is granted only to those projects that bring the fastest profit, and not the biggest benefit. Economics is now guided by short-term activity, thus losing its global objective and ultimate goal. Once money has acquired its unnatural overwhelming importance, it started actively submitting the world to its power. It is the money that causes and directs modern destructive tendencies.

Indeed, money serves as the universal key to open both minds and hearts. That is why, as M. G. Delyagin said, “there is no problem in the world that can be solved without money, just as there is no problem in the world that money alone can solve’ [6].

The vortex created by such “economics’ keeps devouring more countries, peoples and continents only to grind, wring out, and diffuse them. Money ruins the lives of people, nations and states, exacerbating poverty, crime rate, and terrorism. Money as it exists today is an oppressor of the authentic values: honour and conscience; truth and justice; beauty and decency; Nature, freedom, love, and the very life. “What power has law where only money rules!” (Gaius Petronius Arbiter, first century AD)5. All the human troubles, all wars, and all revolutions are, eventually, down to money. Moreover, the process gradually seems to become even more global and less controllable.

The clearer the direction of such development, the darker the situation. Meanwhile, money is the most visible instrument of public relations, produced by social culture and lifestyle. It is a factor formed, for the most part, by the society itself. This makes the situation unpredictable on the global scale, for it is true that by choosing a certain form of money, nations define their own future.

The absence of real value in money entails a currencies struggle, where only the currencies enjoying a strong state support can win and exert an influence. As the result, a parasitic virtual economics evolves; it allows money to bring profit without any benefits for the people, that is, circumventing the real production and goods exchange, through pure speculation, by transfer from one pocket to another.

Furthermore, the income of the virtual economy exceeds the income of the real one. That is why modern money amasses within financial entities, and not manufacturing ones. Consequently, the daily global foreign exchange operations cost reached $5.3 trillion by 2013 and currently continues rising. At the same time, the currency turnover related to goods and services transactions amounted to $55 billion only, that is less than 1% of the total amount of foreign currency transactions [7]. This brought about an unprecedented dominance of the financial market over the goods and services markets. While around $64 trillion circulate in the form of cash, bank accounts and deposits, the direct investment into production does not exceed $1.8 trillion.

On the other hand, economy based on money is inevitably usurious due to the artificial money deficit and the reign of money (obviously, the two processes are interdependent). This is no new phenomenon; it appeared a long time ago. Back then money lenders laid their hands on the major part of the lender’s profit through interest rate. Without creating new production factors, usury degraded production, helped paralyze production forces and promoted parasitic processes. It is no wonder then that economy built on usurious principles fails to be ethical or efficient. Its activity is bound to disregard the rules of common sense.

However, few are disturbed by this fact, and nowadays usury has flourished violently. It has become the basic principle of operation for modern banks, corporations, and other commercial entities. Moreover, it dominates the social and the state sectors. Usury has filled in all the pores of the current economy and has become the rudder of management and planning. The cupidity of individuals has been elevated to the level of state priorities.

That is why, if we believe the world news, it is the results of speculative stock exchange transactions that are significant, and not the economic advances. Consequently, the daily global foreign currency and financial transactions exceed fifty-fold the commerce in goods. For instance, the Russian banking system holds more than 72 trillion roubles in assets, while it invests as little as 1 trillion roubles in production. Obviously, this does not simplify nor render more efficient the economic processes.

Thanks to the global flourishing of usury, the major effort in the present economic system is employed in getting rent (derived from nature, money, property, power, information, intellectual property, the military, etc.); it is the fastest delivering and least demanding source of income, used instead of increasing human creative capabilities. Profits are generated by crime, finance, and corruption, and not through useful production. Everybody strives to create a monopoly by exterminating their competitors, and shirking fair competition. That is, the ultimate goal is profit by any means, not the improvement of the production and moral values of the society.

Consequently, it is no surprise that in the current conditions property and capital bring more profit than the use of work force. This leads to unemployment, as production improvement does not increase the workers’ free time or wellbeing, as supposed, but the number of surplus workers whose labour does not bring a third person the desired income. This could explain why as little as 32% of Americans under 25 are employed full-time, the situation that all highly developed capitalist countries suffer from. At the same time, young people are the most active society members, it will be them who will build families and educate new generations.

On the other hand, virtual economy does not produce other than virtual values. Due to this reason, its flourishing is conditioned by the servitude of the real, productive economy. The result is the reduction of the economy’s financial resources and the recent multiplication of loans. By consequence, the very notion of the money has been corrupted; money no longer serves the exchange of commodities, but has become the key source of usurious profit. The aggregate debt of all countries in the world compared to their aggregate GDP attained 286% by 2014, and developed countries contributed ¾ of this amount [8].

Such situation has led to unprecedented concentration of the capital in the hands of the few. For instance, the annual income of the 200 world’s top corporations exceed the aggregate annual income of the 1.2 billion people living in extreme poverty. The large corporations control 27.5% of the world economy while employing only 0.78% of the world population. Between 1983 and 1999 alone, their profit grew 360%, while the headcount increased by 14% only. They do not simply control economy, they set its direction – they can afford it. It is therefore no coincidence that of the 200 corporations, 82 are located in the US, 71 – in Western Europe, 41 in Japan, 5 in South Korea, and 1 in Canada. The rest of the world has none.

That is why the combined fortune of the world’s 8 richest billionaires exceeds the assets of 3.6 billion people from developing countries. Wealth-X reports that 2,473 dollar billionaires alone possess $7.7 trillion. By 1998, the top 10% in the US owned 90% of business value, 88.5% of bonds, and 89.3% of the public stock. Similar situation is observed in modern Russia and many other post-socialist countries.

On the one hand, the nouveaux riches do not need to produce as many commodities for themselves, as the rest of the population need, which inhibits the social oriented production. On the other hand, this decreases the effective demand of the population, which impedes economic development as a whole. By consequence, the demand drops further and forces supplementary cuts in production, etc.

B. G. Shaw wrote, “If the wicked flourish and the fittest survive, Nature must be the god of rascals’6. However, following the liberal principles, the state must create ever more favourable conditions for the business to have a greater income. “What is good for General Motors, is good for America’, said W. Wilson, the President of the US. This is a cunning logic. Besides, businessmen’s “interest is never exactly the same with that of the public so they have generally an interest to deceive and even to oppress the public’ (Adam Smith).7 For this reason the flourishing of business and the wellbeing of the society do not coincide, in fact, they often contradict each other.

Indeed, in the end, business is a form of activity that generates personal income serving as a source of increasing personal fortune, not the public benefit. On the one hand, business encourages people to develop their talents, sparks energy in them, diversifies production and service forms, and creates new jobs. On the other hand, it promotes profit-making at the cost of Nature and society. In addition, it contributes to manufacturing and sale of low-quality merchandise, drugs, counterfeit medicines, surrogate alcohol, etc. Besides, such economy naturally contributes to gangsterism, corruption and unemployment.

In the current situation, the money that the financial elites have laid their hands on gives them the reign over all global processes, and allows to ruin entire states and social strata for their personal fancies. This weakens the human society, deprives it of the strength to protect itself from aggressions, shocks, phobias and attacks. A good example, here is what Louis McFadden, Chairman of the United States House Committee on Banking and Currency, wrote about the 1930s Great Depression: “It [the depression] was not accidental. It was a carefully contrived occurrence <…>. The international bankers sought to bring about a condition of despair here so that they might emerge as the rulers of us all’8.

But this is not the main point. To prevent people from protecting the values that they create from external encroachments, everything is done to deprive them of independence, render them powerless, psychologically and physically defenceless. Through mass media and the very lifestyle, deformed culture, education, perverted ideology and repressive religious beliefs are imposed on people. They are stripped of their human dignity, crippled by false stereotypes, alcohol, and pushed on the path of further degradation. People left without means of existence, property or good health. Deprived of rights, work tools, money, resources, they cannot provide for themselves any more. Otherwise, would anybody tolerate being a milking cow for the “the select few’? The humans are poisoned with unhealthy foods, admixtures, surrogates and hypnotized by ideology. Their environment is destroyed. However, all this is done in accordance with the liberal economic principles!

As the result, the society often loses the feeling of community, of common roots, as well as the reverence of the values earned through the sweat and blood of their predecessors. The harmonious vision of the world, the understanding of one’s place and purpose within it are gone. For instance, 26% of the Americans have no idea that the Earth orbits the Sun, and not vice versa. People have lost life’s purport and have become an easily mouldable material. They have accumulated suffering and spite, losing confidence and strength, belief and conscience, hope and kindness. And what is a man without them? The man does not live by bread only, not by gold or power. “No man can serve two masters’ (Gospels)9.

Against this background, wild propaganda is under way: human personality would be now freer than ever, human rights would be respected, and the omnipotent democracy would furnish everyone equal possibilities. But then, the human beings are deprived of their most basic right, the right for life. For their life is determined by the profit of the employers. The propaganda has been reinforced by coining of a series of clichés to worship, such as “freedom of personality’, “permissive behaviour’, “independent creation’, “tolerance’, or even “non-traditional sexual orientation’. They obscure the clear reference points, destroy the family, suppress the people’s inner aura, interfere with the link of generations, and let false values supplant the true ones.

Having thus crushed and crippled the person’s inner self, having diverted their energy towards pecuniary objectives exclusively, the present-day rulers have cut the supply from the true sources of well-being: kindness, respect and friendship. The lack of spiritual development is covered up by luxury, entertainment, and pleasures. Instead of love we get sex, instead of friendship – partnership, instead of respect – servility. Thus, spirituality, honour and dignity are being exterminated by all means available.

As the result, all contradictions accumulated in the past are aggravated, and the true values are substituted by the false ones. A considerable share of the fundamental concepts has come under the fire of ostracism; the previously undisputed truths have been questioned; the accrued experience has turned out to be unreliable, and the traditions – lost forever. That is why now it is hard to define what is erroneous and what is correct, where the truth and where the lies are, what the difference between business and crime is, what should be considered progress and what – regress. The society is revisiting the long-standing pillars of morality and culture, religion and science, physiology and psychology.

An unprecedented dissolution of manners has followed. Certain zealous and empowered persons and countries feel entitled to reshape the others’ destinies in accordance with their own petty ideologies and ambitions. The society has answered by the spread of social unrest, protests and revolutions, which claim lives and destroy cultural and material values. The result is the change among men of power, and the rotation of proprietors and social classes. However, as rules remain unaltered, these happenings have no significant consequences.

At the same time, it is widely proclaimed that the liberal economic model is the only possible one and that its key ideas are immutable. We seem to have returned to the Ptolemaic times, when they believed the Earth was born by whales, and no other version would have been accepted. In similar mode, the liberal economic theory is the very essence of the modern economics, while other systems are nothing but the fruits of ignorance. The numerous faults of this model are excused by the errors and the incompetence of the authorities, by the cupidity of certain individuals, and by the money grubbing of the proprietors and the government. Furthermore, there persists a naïve conviction that once these faults are eliminated, the existing economic system will provide for a decent living.