Interesting social sciences/Economics

From Wikibooks, open books for an open world
Jump to navigation Jump to search

Social control in sphere of economy[edit | edit source]

Any production demands by creation of small groups and the organizations of people. But any group or the organization is constructed on some form of social control. Four kinds of social control have been applied in the history of economy consistently. Moral control was applied under primitive‐communal formation in economy, armed control (corporal punishments), was applied under slaveholding formation, administrative control was applied under feudal formation, economic control was applied under capitalist formation. Economic control in sphere of economy was cancelled by the state under socialism, instead that the economic organizations were constructed on administrative control under socialism with help of the system of state planning and economic organizations under socialism were constructed on the armed control in the system of Gulag.

The system of state planning and distribution of goods with help of cards and coupons was applied under socialism instead of the market competition under capitalism. Regress in the field of social control in the sphere of economy has resulted that has led to disappearance of stimuluses to labour and growth of dependant moods. Cancellation of market competition (the prohibition of the economic conflicts) have resulted to backwardness of socialist economy in comparison with market economy of the countries of the West, cancellation of market competition have resulted to falling of competitiveness of producers under socialism because of poor quality of goods, cancellation of market competition have resulted to total deficiencies. Reason of crises of socialist command economy consists in that. The reforms begun at the first President of Russia Boris Yeltsin have allowed to return to the market competition and economic stimuluses in economy though this return cost to Russia of the considerable victims.

Market competition as an economic conflict[edit | edit source]

The market competition is an economic conflict for the right of receiving of economic resources.

Examples of market competition:

  • between hired workers with different level of qualification and experience for a free vacancy,
  • between private firms which offer for buyers goods of different price and quality,
  • between buyers, for example, at an auction, this buyers try to buy the same goods and this buyers offer higher price for goods in comparison with other buyers.

Thus, the positive value of the market competition consists that the market competition forces of hired worker to improve own qualification, the market competition forces of private firm to reduce of prime cost and to increase of quality of goods, the market competition forces of the buyer to raise own income and to offer the highest price for goods. Russian firms were shocked by the market competition from foreign producers after introduction of market prices in 1991, but then russian firms have learned to make goods not worse than these foreign producers. Russian goods is better on quality then Chinese goods, and russian goods is cheaper at the price then European and American goods today. The Russian consumers and producers have benefited from this ratio.

Degree of suitability of personality types on a role of the chief and style of management by collective[edit | edit source]

We can't choose of chiefs, and we can adapt to style of their management only. Each personality type has own degree of suitability on a role of the chief and each personality type has own style of management by collective. What bad and good inclinations does each personality type has when performing of this role of chief? What personality type does approaches for a role of the chief best of all?

The psychologist as the chief has inclination to create a warm microclimate in collective, but the psychologist is the whimsical and unpredictable tyrant, like such psychologists as Ivan the Terrible, Joseph Stalin, Adolf Hitler, Lavrentiy Beria, Caligula or Nerón. The psychologist is inclined to get and change of mistresses on service and the psychologist is inclined to become attached with courtings to own subordinates of an opposite sex. The whole harem is gathered of such mistresses at psychologist-chief sometimes. Psychologist is extremely dangerous in behind the scene fight, psychologist surpasses of other personality types in this art, psychologist surpasses even speakers in this art. Psychologist knows in behind the scene fight perfectly such methods as

  • playing of intrigues,
  • an anonymous denunciation in higher instances,
  • providing sexual services in exchange for a possibility of own career development.

The main shortcoming of the psychologist as the chief is a total absence of pragmatism in affairs and total absence of financial calculation when the psychologist doesn't want to notice that subordinates steal from him under his nose, as a result such psychologist-chief is put on trial for waste or the organization led by psychologist comes to bankruptcy. The psychologist-chief isn't able to punish often, psychologist isn't able to apply "stick" therefore chaos and disintegration comes in the organization when the subordinated speakers begin to command by psychologist-chief. For example, I observed a case at one of schools where the psychologist worked as the director where chaos with discipline has led to the fact that pupils have begun to beat windows impunity, to be rude to teachers, to smoke drugs directly in the schoolhouse. Such bad situation with discipline has led to deterioration of the contingent at school at first, and then to catastrophic reduction of the contingent because most of parents began to be afraid to release of children in such school and most of parents has transferred of children to the neighbour's schools with more acceptable level of discipline. Ruler-psychologist Leonid Brezhnev has led of Russia to falling of discipline, blossoming of bribery, thefts and alcoholism in a workplace. Psychologists Barack Obama, François Hollande and Emmanuel Macron are weaklings too. On the other hand the psychologist-chief can become by tyrant in the country as Joseph Stalin, Adolf Hitler, Kaligula or Neron. Anyway the psychologist-chief can't support the optimum size of reward and punishment at management of the organization, hief-psychologist can't support an optimum ratio between a carrot and stick.

The technician has such inclinations during the performance of the role of the chief:

  • insistence in observance of orders and instructions,
  • inclination to petty control,
  • ability to try to obtain ideal purity in office and to do timely repair,
  • understanding of device of the equipment.

The technician is a born conservator and technician doesn't love risky projects and social utopias. It can trust to promises of the technician though it is impossible to trust up to the end anybody in business. The main shortcoming of the technician in business is a lack of entrepreneurial abilities and a lack of readiness to risk. The shortcoming of the technician as chief consists that the technician prefers to apply only a stick in management of people and the technician isn't able to apply carrot in management of people. This circumstance angers of his subordinates.

The speaker has the following inclinations in the role of chief:

  • Speaker likes to brag and to make empty promises, for example, speaker can lie and promise too much to subordinate when a subordinate gets a job.
  • Speaker can lie and promise too much to the partner in business therefore it is necessary to treat similar promises with a big share of scepticism and the partner of the speaker has to provide sanctions for failure of conditions of the contract because of the speaker in the contract about cooperation. Promises of the speaker and psychologist can't be trusted, and it is impossible to lend money in debt to speaker and psychologist. The vital principle of the speaker is as follows: "Many people will be by fools during my life!". Or as the president of Belarus speaker Alexander Lukashenko has told: "Only cowards repay debts!".

The speaker has numerous acquaintances in higher instances and everywhere. This circumstance is advantage of the speaker in administrative career, in staff recruitment, at establishment of business contacts, in the organization of scientific conferences, in the organization of supply and sales of products, in the course of search of sponsors for educational institution or for the edition of the scientific collection. The speaker tends to fraud and extortion in business. The speaker has acquaintances and communications in criminal world often because the speaker is very not picky in communications and means of achievement of the goal often. Speaker is capable to deceive of partners with big impudence and without any apologies. The speaker doesn't value of old friendship and the speaker gets new friends easily. Subordinates will obey to speaker without tension and protest because subordinates see in speaker of born leader.

The theorist has inclination to turn the operational meeting of subordinates into a lecture, the theorist tries to represent himself as teacher instead to give clear orders and to make categorical remarks. The theorist tries to represent himself as teacher instead to give clear orders and to make categorical remarks.the theorist tries to represent himself as teacher instead to give clear orders and to make categorical remarks. Former mayor of St. Petersburg theorist Anatoly Sobchak held the operational meetings in style of a lecture that caused sneers in his address from former mayor of Moscow speaker Yury Luzhkov. The theorist isn't interested by life and the biography of own subordinates at all, the theorist doesn't know their names even, the theorist doesn't know of prices, rumors and character of the relations between surrounding people in the organization. The theorist isn't inclined to get new friends and the theorist makes contact with new people hardly. The theorist considers of accounting reports and a pedagogical technique too boring routine.

Conclusion consists that the best chief is a speaker, the chief of the second grade is a technician, the chief of the third grade is a psychologist, the chief of the fourth grade is a theorist. In a word, the theorist is not the chief. The speaker has many take-off and falling in administrative career or in commercial career. The technician moves ahead up an administrative ladder slowly and without falling. The psychologist moves ahead up an administrative ladder due to big skilll in behind scene fight, but, having got from subordinates to chiefs, the psychologist finds own full insolvency and the psychologist is waited a total failure in a career of the chief after which it is already impossible to rise. An example of such failure is the sad end of career of such psychologists as Neron, Kaligula, Boris Godunov, Adolf Hitler. The reason of such sad final consists that the psychologist as the chief has inclination to go into two extremes - in tyrannical style of management of people or failure of the manager to exercise of social control in the organization. The speaker approaches for a role of the businessman better than other personality types, and the technician approaches for a role of the official or administrator better than other personality types. A shortcoming of the technician is incompetence in psychology questions therefore technician is capable to make mistakes at staff recruitment. The technician prefers to choose executive subordinates, and technician dismisses of undiligent subordinates without the slightest regret as though technician throws out the used thing, because technician is cold and ruthless in the relations with own subordinates. There is a lot of turmoil and decisions, unreasoned on long prospect in career of the speaker. The speaker has inclination to alcoholism. The full breakdown in career can occur for this reason at speaker. For example, the first President of Russia speaker Boris Yeltsin had such inclination to alcoholism that led to incidents on official receptions sometimes when drunk Boris Yeltsin conducted by orchestra or Boris Yeltsin didn't go out from the plane towards to official delegation. Other great reformer - the speaker Peter the Great had inclination to alcoholism too. For example, Peter the Great have made a feast on all night after Battle of Poltava in 1709 and Peter the Great has sent of cavalry to a pursuit of the receding Swedes only in the morning, for this reason the pursuit has caught up of Swedes only three days later at a crossing through Dnieper, but Charles XII of Sweden and hetman Ivan Mazepa managed to escape and hide in Turkey. Speakers try to be treated for inclination to alcoholism, but speakers have few chances of recovery, the reason of this circumstance is their lifestyle where alcohol is included in a ritual of communication of the speaker with numerous friends. Alcoholism is an professional disease of the speakers. The speaker is able to maintain optimum level of severity of social control and speaker avoids to go into extremes – in weak style or tyrannical style of management of people. Chiefs are speakers in the majority of the cases observed by me in practice and chiefs are technicians much more rare, chiefs are psychologists even more rare.

My empirical research of the reasons of unemployment[edit | edit source]

I carried out this empirical research on the basis of the Berezniki's Jobcenter in 2003, the following results were received. When I started a research, then I tried to check forecast that psychologists and speakers-alcoholics have the maximum problems with job search. As a result of researches I have specified these forecasts. It has turned out that unemployment is a consequence of many other reasons about which it was difficult to guess in advance. 76 unemployed people were subjected to observation. 35% from them were by technicians, 32% from them were by psychologists, 32% from them were by speakers, 1% from them were by theorists.

The following reasons for unemployment were found:

  • Mistake in choice of profession. For example, 10 psychologists worked never on profession, received in educational institution. 5 women-technicians and 1 women-speaker, apparently, couldn't withstand competition from men in such professions as the signaller, instrument mechanic, the mechanical engineer.
  • Low demand in labor market for such professions as the artist-designer and the wood carver. 3 psychologists and 2 speakers had such professions among the unemployed people.
  • Technicians have found total absence of entrepreneurial spirit, full inability to search of work. Many of technicians have worked in one workplace half of life and this technicians fed useless hopes to go back to former workplace instead of searching for a new workplace. Such technicians were found 10 people.
  • Speakers have showed too big ambitions to the desirable size of the salary and speakers have showed too big ambitions to degree of prestigiousness of a profession. I have found 11 such speakers from whom 3 speakers were on the leading posts earlier – director of school, chief of workshop, and this speakers demanded to provide to them prestigious and highly paid work though many of this speakers had no of appropriate level of education for prestigious work. For example, one woman-weaving by education demanded to employ her in the sphere of trade.

Except reasons connected with the personality type there are also other reasons for unemployment – age, sex, outdated level of education, a ratio of supply and demand on various professions in labor market.

According to Berezniki's Jobcenter for the first quarter 2003, there were into the disadvantage the following risk groups among the unemployed people:

  • People of pre-retirement age – 13,8% of total of the unemployed people.
  • Youth at the age of 18-24 years with the diploma about education, but without experience of work on the profession – 20,2% of total of the unemployed people.
  • Women – 67,6% of total of the unemployed people.
  • The workers released through staff reductions with big length of service in one enterprise, but with obsolete baggage of knowledge and with one profession - about 45% of the total number of unemployed people. Technicians find themselves in this position most often.

The structure of vacant workplaces on branches of economy in town Berezniki according to Berezniki"s Jobcenter for 2002 reflects a global trend to outflow of workforce from agriculture (a share of vacancies in Berezniki – 0%) to the industry, construction and transport (37%), and a global trend to outflow of workforce from industry, construction and transport to services industry, finance and management (64%). Generalizing data of Berezniki's Jobcenter for the first quarter 2003 about a ratio of supply and demand by separate professions and considering my recommendations about staff recruitment, it is possible to draw the following conclusions. Labor market has offered 2350 vacancies from which 68% of vacancies can be recommended for technicians, 18% of vacancies can be recommended for speakers, 1,4% of vacancies can be recommended for psychologists, 1,5% of vacancies can be recommended for theorists, 11.1% vacancies refer to unskilled working professions and this vacancies can, as a last resort, be recommended for any personality type.

It is possible to draw the following conclusions. Each personality type has the reasons for unemployment. The technician is most demanded in labor market, but the technician isn't able to look for work. The psychologist is least demanded in labor market. The speaker is demanded on the average in labor market and the speaker shows the highest entrepreneurial spirit in job searches, but the speaker has too big ambitions in the amount of payment and too big ambitions in degree of prestigiousness of work, the speaker does not have an appropriate level of education often. The theorist is demanded on the average in labor market because of equalizing of a low share of demand (1.5% of vacancies for theorists) and a low share of the supply (theorists make 3% in population).

The problem of limitation of natural and other resources[edit | edit source]

 Oil platform in the North Sea 
Bratsk Hydroelectric Power Station


Irrigation canal

The volume of needs exceeds the volume of the economic boons always. But it is necessary to spend some quantity of natural resources for production of these boons – some quantity of minerals, the earth, the electric power, oil, gas, fresh water and so on. Thus, society lacks natural resources for satisfaction of all needs of the person always. That to increase quantity of these resources, the mankind should look for new mineral fields, for example oil and gas fields at the bottom of the sea, fields of shale oil and shale gas. That to increase quantity of these resources, the mankind should reduce their expense on a unit of production, to build hydroelectric power stations, to look for new power sources (for example, to build thermonuclear stations), to develop virgin lands, to build irrigational systems, to use food resources of the World Ocean and so on. The majority of wars has happened because of disputes for possession of natural resources – the earth, gold, oil and so on.

The quantity of a labor resources is limited in the country too. This limitation can be weakened at the expense of the invitation of workforce from abroad, but this step creates new acute problems. For example, many European countries in 60-70 of the 20th century acted this way. The French have invited citizens from the former colonies from North Africa, and Germans have invited of the Turk, as a result descendants of those Muslims prefer to live on unemployment benefits today and to have big family, to organize revolts and riots in Paris, and Albanians have expelled of aboriginals – Serbians - from the Province of Kosovo in general.

Market and right of property    

The limitation of resources has led to the fact that people began to fix of resources in property. Other people have to respect the right of a private property. Any attempt to seize illegally of others resources (theft, fraud, a robbery, extortion and so on) has to be stopped by law enforcement agencies. The owner of resources can provide them for use for a fee or to use resources oneself for the sake of receiving of profit.

Profit is excess of the sum of income from sales of goods over the sum of costs of production of these goods.

Cost is a sum of money which is paid or received upon purchase or sale of goods.

When the owner of resources chooses the boons for production which the owner decides to spend resources, the owner loses an opportunity to make other boons. For example, the most part of resources of the country was spent for production of weapon for protection against the external enemy under the Soviet power, and resources wasn't enough for production of food and clothes, as a result the Soviet regime has failed because of constant deficiency of food and clothes and the discontent with own life of the most part of the population generated by that.        

The labor productivity is quantity of the boons made for a unit of time (for shift, month, year).

The labor productivity in subsistence economy is lower than the labor productivity in conditions of existence of specialization and trade. Specialization and trade has forced of people to do regular exchange of goods, but not accidental activity casual. Specialization and trade has forced of people to turn the boons into goods and services.

The goods are a subject for exchange on other goods.

Services are work on the basis of hiring or in exchange on goods.

Trade is a voluntary exchange of goods and services on money in the form of purchase-sale.

If the person is capable to make any kind of goods or service better than others, then the person is favorable to him to be engaged only to these, exchanging own goods or the services on goods of other producers. The ability to exchange by goods distinguishes of man from other animals as the Scottish economist Adam Smith has told: "Nobody ever saw a dog make a fair and deliberate exchange of one bone for another with another dog".

The right of a private property allows to owners of economic resources to make of decision independently about that how to use of this economic resources, and to get profit or to sustain losses in depending on good luck of this decision, the right of a private property allows to owners of economic resources to receive new resources or to lose own resource. The market actually determines the success rate of this or that economic initiative, the market Forms the amount of profit that property brings to its owners, the market dictates proportions of distribution of resources between spheres of their expenditure. The market forces of each seller to think about interests of the buyer - about quality and the greatest possible reduction of price on goods, but the buyer has to think about interests of the seller also and the buyer will be able to receive of good only after payment of the price for good which has developed in the market. The market is the most successful, though not without disadvantages, way of distribution of resources compared, for example, with the state distribution with help of coupons.

The Division of labour                

Division of labor has arisen only 12 thousand years ago when an agriculture has arisen that it has allowed by person to refuse from nomadic way of life and to build the house. Just then the first division of labor has arisen on hunters, farmers and cattle-farmers. Next the second division of labor has arisen – a craft and trade has arisen. The matter is that emergence of division of labor has caused the necessity of exchange of goods, in other words, emergence of specialization has caused necessity of trade. The subsistence economy is an economy without exchange of goods and without trade by the principle : "Itself man has grown bread, and next itself man has eaten this bread". Modern specialization has led to emergence of many thousands of professions. In order to master these professions, it is necessary to pass a long course of training in special skills and methods of work, it is necessary to have special inclinations for mastering this profession.

In what does the value of specialization consist?

  • Specialization allows to each person to disclose own abilities, specialization allows to self-actualize, specialization allows to receive wealth, prestige and power, and it means to achieve of personal happiness.
  • Specialization allows to improve the quality of the products, specialization allows to reduce the working time and cost of goods, specialization allows to increase labor productivity.

Main questions of the economy:[edit | edit source]

  • What goods and services need be produced?
  • In what quantity need be produced these goods and services?
  • How is it necessary to produce? By means of what equipment and technology is it necessary to produce?
  • How is it necessery to distribute produced goods?

The last question was resolved in the history of mankind with help of the following principles:

  • "The right of strong man" when the goods are received by someone who has a weapon or money, as they say "Who strong man, that man is also right ".
  • "The principle of equalization" when goods are received by all people equally, for example, according to coupons. Stimuluses to labour disappear and economic devastation ensues.
  • "The principle of queue" when the goods get to that who has taken the place in queue earlier, at the same time stimuluses to labour disappear too. It is more important to be in queue in time .

The central ministries, for example the State Planning Committee, decide this questions in command economy, and central ministries decide this questions badly. What generates constant deficiency of separate goods. This questions were resolved in market economy and the market solves this questions much better.

Crisis of overproduction[edit | edit source]

John Maynard Keynes


A solemn crowd gathers outside the Stock Exchange after the crash. 1929.
Franklin D. Roosevelt

But a lot of problems exist in market economy also, in particular overproduction crises when firms are ruined because of impossibility to sell goods – goods are made much more, than the market is capable to absorb. Crises of overproduction have forced of state to interfere in the market relations. Crises of overproduction have forced of state to apply the state economic control in relation to private enterprises. Benefits on the credits, taxes and duties, nationalization of backward branches, modernization at the expense of the state budget and the subsequent privatization became leverages of influence in hands of the state. Nationalization of the enterprises is a repayment or seizure of the enterprises by the state at private owners. For example, Bolsheviks in Russia have seized the plants, shops, banks, the earth, apartments and jewelry at private owners without any repayment.

Privatization is a sale at an auction of the state enterprises to hands of private owners. For example, Anatoly Chubais directed formally by privatization in Russia in the 90th years 20 century, in fact former party officials have led this campaign with big abuses and in a short time. Oligarchs have managed to buy the most big chunks (the oil companies) at strongly cut prices that still generates a talk in society about need to seize this property back in favor of the state.

Crises of overproduction repeated regularly every 10-11 years in 19 century – the beginning of 20 century in the countries with traditionally market economy. There was an excessive accumulation of goods in warehouses during crisis of overproduction. This resulted to a decrease in the number of purchase orders for goods, this resulted to closing of factories, this resulted to dismissal of a large number of workers, this resulted to decrease in their income of and demand in the market, this resulted to accumulation in warehouses of a bigger quantity of goods. As a result it was necessary to throw out grain and coffee in the sea, as a result it was necessary to burn grain and coffee in boilers of steam locomotives against the background of hunger among jobless workers. Such a vicious circle exacerbated problems and such a vicious circle could even lead to the crash of capitalism.

Karl Marx made a forecast in 19 century that world Communist revolution must happen just at the time of world crisis of overproduction. An English economist John Maynard Keynes had became “Savior of capitalism”, President of the US Franklin Roosevelt embodied in the life the proposals of Keynes. Keynes had proposed to increase state’s expenses on allowances to unemployment workers, on social assistance, on the orders to private enterprises (on building of roads, bridges, ports, etc.) during the crises of overproduction. This will enable that the unemployed workers don’t die in reason famine and this will enable to give the orders to industry. It need act with help opposite method, it need reduce state’s expenses on allowances to unemployed worker and it need reduce orders to enterprises during flowering in economy, because too much government’s expenses lead to increase of inflation, but the unemployed workers can find work and enterprises can find  private orders in this time.

The last big world crisis of overproduction was in 1930 and there were no more similar crises until 2008 the process of economic development in the West is accompanied by small cyclical periods of recession and recovery without catastrophic consequences. Crisis of overproduction in 1930 was the heaviest for all history, therefore, Americans still remembers this "Great Depression" also today. The 20th years of 20th century the were an era of economic prosperity for the USA. The president of USA Herbert Hoover promised to each American fast enrichment during an era of prosperity – "a chicken in each pot and car in each garage". TTherefore all Americans were engaged by speculation by stocks for the purpose of fast enrichment with help of a this risky business.

Panic has begun at the New York Stock Exchange on October 24, 1929 because of catastrophic depreciation of securities 4,5 times, huge number of owners of these securities were bankrupts suddenly, some bankers have jumped out of windows of skyscrapers. A huge number of firms was closed, many farms were sold from the hammer. There was crash of a banking system, banks owe to their depositors a huge amount of money, panic has begun, depositors began to storm buildings of banks, demanding to return back the deposits, but banks couldn't make it. The number of the unemployed has reached 17 million people – every third American was without work. The unemployed people didn't receive any benefits at that time and unemployed people could just die from hunger. 2 thousand people has died from hunger only in one 1931 and only in New York. Crowds of the hungry unemployed people went on roads of the USA and this crowds looked for at least some kind of income, unemployed people agreed to any most hard or low-paid work, for example work on cotton cleaning, this work was performed earlier only by African slaves. The unemployed people organized "hungry marchs" to Washington to demand from the government of bread and work.

The American elite believed firmly before this crisis that, according to the principles of social Darwinism, only the strongest person must survive and benefits for the poor people shouldn't exist. However the new president Franklin D. Roosevelt thought differently and Franklin D. Roosevelt has begun policy of "New Deal", Franklin D. Roosevelt has begun to save of country from communistic danger. First of all, Franklin D. Roosevelt has tried to save of banking system from crash, having announced "bank vacation", that is Franklin D. Roosevelt has suspended work of banks till the moment when panic will stop in economy. The economy of the USA began to get out of crisis with great difficulty only in four years.

The new world economic crisis has begun in 2008 which reasons still are not investigated up to the end.

A strike and other administrative kinds of conflict in a market economy[edit | edit source]

The charge by Ramon Casas (1899)


Teamsters, wielding pipes, clash with armed police in the streets of Minneapolis during 1934 strike.


Powerful worker’s strikes shook of Russia in the late 1980s ‐ early 1990s. Employers, on the one hand, and hired workers, on the other hand, conduct among themselves the conflict for the acceptable size of the salary.

Methods of fight which are used employers against hired workers:

  • Drawing up "black lists". If the worker was enlisted in this list for the organization of a strike, then already any employer didn't agree to hire him.
  • The Lockout (from English "to slam a door in front of someone") is a closing of the enterprise for several weeks without pay for employees.
  • Hiring of "strikebreakers" (from German "breaking a strike") is hiring of the temporary employees concordant to work for a former payment. Strikers considered of strikebreakers as traitors.
  • Yellow-dog contract" (so these workers were named in the USA). Employers hired of employee only if employee signed a contract that employee undertakes, under the threat of dismissal, not to unite with anyone with purpose of fight for higher wages. Any court couldn't restore employee to its former workplace.
  • Entrepreneurs in alliance with the police and the mafia did not stop at using gang groups and the army against the workers sometimes.

Fight methods which are used by hired workers:

  • Strike as method of conducting the administrative conflict by hired workers which means termination of work until the employer doesn't agree to salary increase.
  • Work-to-rule. Workers work at slow tempo, as if in a semi-dream that reduces labor productivity sharply and that brings losses to the entrepreneur.
  • Creation of political parties. An example – the Labour Party in Great Britain. These parties try to obtain adoption of laws in favor of hired workers in parliament.
  • Organization of trade unions

Leaders of trade unions conduct negotiations with businessmen about salary increase, improvement of working conditions and increase in safety of labour. Leaders of trade unions will organize a strike in case of failure of similar negotiations. Leaders of trade unions collect membership dues with members of labor union and leaders of trade unions live on this money. One trade union competes with other trade union for a sphere of influence. That trade union wins in this competition which trade union protects interests of workers better. Several trade unions can exist at one enterprise. Trade union leaders in the USA are rather rich people. Trade unions have less and less of members in the developed countries today. Reduction of number of hired workers at the large enterprises, increase in welfare of hired workers, possession of workers by stocks of own enterprise serves as the reasons of the decrease in the number of members of trade unions. If country is richer, then strikes occur less often.

Trade unions have accomplished of own historical mission in the West in increase of salary, pensions and benefits for workers, thereby trade unions have saved of West from communist danger. Reverse side of salary increase for workers in the West is the aspiration of businessmen to transfer the plants from West to China and other developing countries where the level of the salary is much lower. However the quality of goods manufactured in China remains very low because of low qualification of the Chinese workers. Trade unions support restriction of import to the country of import goods often with the purpose to keep workplaces and expansion of domestic production. But import restriction, in turn, leads to decline in quality and competitiveness of domestic goods in the world market. Other countries take similar measures in response to import restriction that can lead to the beginning of customs war between the countries. Trade unions try to obtain from employers of consent to employ only members of trade union sometimes, for example, the Russian actors can't get a job in Hollywood as Russian actors have no permission of the American guild of actors. The trade union signs with the businessman collective agreement on behalf of members of trade union about the salary and working conditions. Requirements of trade unions about salary increase have to be economically reasonable, such increase shouldn't lead to ruin of the employer which isn't favorable also for hired workers because hired workers lose own income source too.

State regulation of inequality with help of taxes[edit | edit source]

Some scientists-economists consider that the revolt of the poor begins to threaten to country in that case when less than 12-13% of total amount of income fall to the share of the poorest 40% of the population. Exactly impoverishment of the population and mass unemployment have brought of Adolf Hitler to power in Germany in 1933. Impoverishment of the population in Russia during World War I has brought of Bolsheviks to power. The difference in income between 10% of the richest families and 10% of the poorest were in Russia in 1998 in 16 times that there is too much even on world measures. This difference were in 16 times in the USA. This difference were in 12,7 times in France. This difference were in 7,2 times in England and Germany. This difference were in 6,26 times in Sweden. 

Progressive tax is gathered on the principle: than the sum of income of the taxpayer is more, that a percent of income tax is more. This progressive tax serves for redistribution of wealth in favor of the poor people. Punishment for evasion of taxes is equated to punishment for theft and this punishment is very severe. Other kinds of tax only for rich taxpayers are taxes on inheritance and the property taxes. The state spends money received thus on benefits in favor of the poor people. There is no progressive income tax and there is a flat tax of 13 percent in Russia today. This flat scale of the taxation was entered in Russia in 2001. The flat tax exists in Estonia, Lithuania, Hungary, Bulgaria and Romania. Income tax is progressive in the developed countries (Japan, France, Brazil, Finland, the USA), the lowest and top levels of tax differ in 2-8 times in condition of progressive income tax as a rule.      

Competition and monopoly.[edit | edit source]

Various ratios of the competition and monopoly exist in the market:

  • The market of the perfect competition when many producers of same goods exist in the market, for example, of producers of vegetables who can't dictate to other producers the sale terms and the goods price. Merits and demerits of the market competition are shown most fully in this case.
  • The market of the monopolistic competition when many producers exist in the market, each of which offers its own, different the goods for satisfaction of the same need, each producer has copyright at the same time and each producer has some opportunity to influence on the price of the goods. Each producer has the trademark, and nobody has the right to use this trademark without the permission of the owner. Violators of this law are obliged to pay damages to the owner of this trademark.
  • The oligopolistic market where there is a small number of the major producers making identical goods. Producers can exert considerable influence to the goods price. For example, only three producers exists in these conditions in the automobile market of the USA – Ford, General Motors and Chrysler. It isn't casual that all these producers have fallen into financial hardship today, actually all these producers have appeared on the verge of bankruptcy because these producers staked on production of big prestigious Sport utility vehicle which consume too much fuel. Petrol prices have grown almost twice at the beginning of 2008 that has made the facilitated small European Japanese and Korean cars more competitive in the American market because these European Japanese and Korean cars consume less fuel and these European Japanese and Korean cars cost cheaper than the American cars. However small cars have the shortcomings too. For example, the statistics shows that in case of accident in the form of head-on collision of the Sport utility vehicle with the facilitated car, passengers of Sport utility vehicle have more chances to survive in comparison with passengers of the facilitated car because the Sport utility vehicle has the bearing frame and big weight unlike facilitated car, and the facilitated car reminds on the form an egg shell without basic skeleton which is easy to crumple under head-on collision, though, of course, if so to argue, then it would be safest to go on highways on the dump truck, infantry fighting vehicle or the tank. Four producers and four brands of cars existed in the USSR: AvtoVAZ as producer of the "Lada", AZLK and its "Moskvitch", GAZ and its "Volga", ZAZ and its "Zaporozhets". As a result of economic reforms only VAZ and GAZ have survived in Russia today. The small number of producers can be explained by complexity of production of cars.
  • The market of monopoly where only one chief producer exists where the competition is absent, where the producer can dictate any price and where the buyer will be forced to buy goods on this price because other producers doesn't exist therefore worst conditions exist here for the buyer. The producer can sell goods on inflated prices and of bad quality here. Such economic conditions existed in the USSR before liberalization of the prices in 1992. Similar problems existed with monopolists in the developed countries of West at the end of 19 – the beginning of 20 century too. But then the government has learned to struggle against monopolists in the market of the West.

Conclusion: Firms strive for economic efficiency only in the conditions of the perfect competition. Need of preservation in the country of free market competition as supreme value means that any of participant of market competition shouldn't have of guaranteed in advance advantages and privileges in fight for a victory therefore the state has to struggle with monopolists in the market.

Methods of fight against monopolies:[edit | edit source]

Central office in Berezniki

Methods of fight against monopolies:

  • The maximum simplification of the procedure for creation of rival-firms for the monopolist.
  • Removal of all barriers for penetration of foreign producers on the monopolist national market.
  • Compulsory division of firm - monopolist on several parts.
  • Introduction of the state control over the procedure of merge and absorption of firms, the government has to agree or forbid of merge and absorption of firms sometimes. There is direct state control over natural monopolies that is shown in control over the prices and the salary. For example, the Uralkali enterprise develops the only in Russia deposit of potash salts in the neighboring cities of the Perm region Berezniki and Solikamsk. These enterprise Uralkali was monopolist in production of potash fertilizers and carnallite as raw materials for production of the titan and magnesium at the VSMPO-AVISMA enterprise and the Solikamsk magnesian plant. Magnesium and titanium, in particular, are used in the defensive industry for production of military planes and submarines. VSMPO-AVISMA exports of titanium to the USA for the Boeing enterprise today. That to liquidate monopoly of the Uralkali enterprise, the EuroChem enterprise has begun to build in the Usolye district of extraction and production of potash fertilizers at EuroChem-Usolskiy Potash Complex (Verkhnekamskoe Deposit, Perm region).    
  • The state issues laws against the firms polluting environment for fight for preservation of the environment and the state creates the organizations watching a condition of this environment, state creates the organizations imposing penalties on this firms and state creates the organizations stopping of activity of these firms.

Dispute exists among economists and politicians about the sizes of powers of the government. One economists and politicians consider that these powers are limited to all above-mentioned methods of fight against monopolies. Others consider that powers of the government have to be much wider. The Soviet economists considered, for example, that powers of the government have to be such big that it is necessary to cancel a private property and the market, to introduce state planning and control over the prices, but the Russian communist experience has shown malignancy of these offers.

Conclusion: the market and economic control as great social inventions will never disappear in the future. Economic control of the government over economy shouldn't destroy market competition.

The theory John Maynard Keynes about control of the Government above the economy[edit | edit source]

The importance of the theory of John Maynard Keynes[edit | edit source]

   The value of his theory consists that John Maynard Keynes became by savior of capitalism and John Maynard Keynes has directed of development of capitalism in a new way. John Maynard Keynes suggested that, on the one hand, the government must regulate of economic life, and to other hand, the government must retain of market competition and private property in the economy.  This ideas are stated in his work "The General Theory of Employment, Interest and Money“ which was written in 1936. His ideas about expanding the functions of the Government could seem to economists of the 19th century as terrible attempt on the basis of individualism, but these ideas have allowed to retain the market competition and a private property. Theoretical views of John Maynard Keynes developed during dangerous crisis of capitalism.

Concentration and centralization of the capital have generated the first large corporations capable to monopolize production and the branch markets. Such monopolization killed the competition and freedom of pricing. On the other hand, positions of trade unions have become stronger. Activity of this trade unions limited sharply market processes in determination of size of salary. Trade unions began to appoint size of salary of workers to some extent that is trade unions destroyed economic control of businessmen over workers. Trade unions destroyed the right of businessmen to give to workers bonus or fine in depending on quantity and quality of work. The economic system of capitalism has lost flexibility. The deepest crisis of overproduction of 1929-1933 became result of this, a long depression followed for this crisis of overproduction. This depression proceeded up before the beginning of World War II.

Essence of theory of John Maynard Keynes[edit | edit source]

John Maynard Keynes has revealed those parameters of economic system which have to become object of state regulation, and John Maynard Keynes has put forward methods of this regulation. John Maynard Keynes's ideas have reversed literally modern to him the theory and this ideas have entered in history of an economic thought under the name "Keynesian Revolution". Essence of the fundamental idea of this revolution: the mature capitalist economy has no inclination to reach automatically of economic balance, that is the mature capitalist economy has no inclination to use all resources which are available for her - production capacities, labor, saving, - and therefore mature capitalist economy is subject to periodic crises, and mature capitalist economy is subject to chronic unemployment often.

The former economic theory (neoclassical school) claimed: it can't be of long violation of balance in market economy because long violation of balance can be never. Namely, the supply of the goods made with use of the existing resources itself gives rise to demand, and equality of supply and demand is established thanks to the flexible system of the prices. If the supply exceeds demand, the prices will fall and balance will be restored; and vice versa if a deficiency of any resources or goods arises, then the prices of them will raise, and economic balance will be established again. This reasoning extended to such resource as workforce also. The mobility of the salary, that is the mobility of the price of workforce, was considered as the main condition of her full use, full employment. What, according to John Maynard Keynes, "has deteriorated" in this ideal market mechanism?

The prices have lost ability to change quickly under the influence of fluctuations of supply and demand. Especially it concerned of salary, the establishment of which has become rather a matter of trade unions, than matter of businessmen, than a result of action of market forces. But if the mechanism of equilibration of supply and demand glitches, then demand is often less than that level which needed that to make full use of all productive resources and that to sell all manufactured goods, therefore demand, according to John Maynard Keynes, has to become the main subject to economic regulation.

John Maynard Keynes chose two main tools and ways of regulation of effective demand - the public expenditures, or is wider - the state budget in general (including taxes), and monetary policy. John Maynard Keynes and his followers considered by public expenditures (including and those that are financed by means of budget deficit) the most convenient and effective way of increase in effective demand during an economic crisis or a depression. Then increase in monetary income of the population is capable to involve, according to them, in active functioning not used production capabilities, to give employment to the unemployed people.

The considerable value was given also to reduction in taxes along with growth of the public expenditures , generally for encouragement of investments. But it has become clear later that growth of the public expenditures and reduction in taxes, eventually, leads to growth of budget deficit only, leads to increase in prices and inflation that creates new economic problems       The release of a large number of new money led to interest rates reduction, that is the businessman had an opportunity to take the credit under low interest for business development, but the release of a large number of new money led to inflation again. It is necessary to emphasize that John Maynard Keynes wasn't by supporter of such direct forms of the state intervention as nationalization, state ownership or the state business because John Maynard Keynes understood that the state property is inefficient in comparison with private property.       

Take-off and falling of John Maynard Keynes’s economic policy[edit | edit source]

The belief in power of Keynesian economic policy became stronger steadily after World War II up to the middle of the 70th years. Keynesians sought to reach of full employment, Keynesians sought to level cyclic fluctuations of economy and Keynesians sought to increase rates of economic growth. And increase in salary and unemployment benefits answered to desires of a general population also, increase of unemployment benefits and salary is doing by similar policy especially popular. Besides, increase in prices was almost imperceptible at the beginning.

Keynesians, of course, have saved capitalism, but then Keynesians began to make one mistake for another:

  • The policy of Keynesians has led to growth of the budgetary deficiencies when expense of the state budget are much more than income of the state budget. Keynesians hoped vainly that balancing of the state budget has to happen not every year, and throughout a business cycle (in 10-11 years) when the surplus of receipts in treasury during period of rise could compensate lack of budgetary funds which has arisen in the conditions of crisis.
  • The deficit of the state budget was covered at the expense of additional currency issue and the state loans.
  • Keynesians have broken by work of the Central Bank that has led to inflation and that has put national currency on a crash side. Keynesians demanded from the Central Bank to increase issue of money during recession and to reduce issue of money in the conditions of economic rise period, but a healthy currency required tough anti-inflationary policies regardless from the economic rise period and recession in the economy.

Conclusion: Adherents of John Maynard Keynes have received an explosion of inflation instead economic growth.

The crisis of theory of John Maynard Keynes: causes and consequences[edit | edit source]

The period of high rates of economic growth has come to the end by the beginning of the 70th of 20 century . Two energy crises have plunged economy of the developed countries in the second half of the 70th into the long period of stagflation - the period when the prices began to grow extraordinary quickly and there was a decline in production at the same time. If the budgetary deficiencies were a rarity in the 60th years, then budgetary deficiencies have accepted already chronic character after the 70th. Not accidentally, fight against inflation and budget deficit became a task number 1 for the governments of all developed countries. People became to accuse inefficient bureaucracy in all sins. People became to accuse John Maynard Keynes's theory. People became to accuse all concept of "Welfare state" - the system of social benefits, public sector of economy, the large public expenditures and the state restriction of activity of private business. As a result, the victorious procession of Keynesianism has come to the end with "a conservative counterrevolution" in the late 70th - the beginning of the 80th years.

The central place was taken again by old neoclassical school in the face of monetarism in the economic theory of the West. Supporters of this theory, contrary to Keynes's theory, considered that it is necessary to limit as much as possible the state intervention in economy, it is necessary to cut down the state taxes and state expenses.According to monetarism, state regulation of demand breaks action of market forces, state regulation of demand leads to inflation strengthening also. According to the proposal of monetarists has occurred for 80th and 90th: Considerable reduction of inefficient public sector of economy thanks to denationalization and privatization, Growth rates of the public expenditures have decreased, share of which reached before 50% in Gross national product in many European countries. But it, nevertheless, didn't mean full refusal of the Keynesian ideas. The policy was pragmatic always and the policy keeps in own arsenal still many and Keynesian, and monetaristic recommendations.

The Keynesian ideas today[edit | edit source]

Keynesians have drawn conclusions from own mistakes, Keynesians offer, as the anti-inflationary recipe, voluntary agreement between businessmen and trade unions about the certain growth rate of salary which isn't exceeding by increase in labour productivity, and Keynesians offer control over the prices of natural monopolies.

Many supporters of state regulation of economy including supporters of the state socialist planning, are ready to rely on Keynes's authority in Russia today. Allegedly, even Keynes was by supporter for regulation! All isn't so obvious actually. That to regulate market, it is necessary to construct market at first. Russia is at a stage of transition to market economy only with all its difficulties.

Monetarism[edit | edit source]


Milton Friedman


1/3rd stater from Lydia, 6th century BCE
Set of three Roman aurei depicting the rulers of the Flavian dynasty. Top to bottom: Vespasian, Titus and Domitian. 69-96 CE

This direction in the economic theory which researches influence of banks and money to national economy. Western Europe suffered hard from the shortage of money in 14-15 centuries before emergence of the American gold. Shortage of money slowed down development of trade and production of goods. Emergence of cheap gold from the American colonies has given a powerful push to development of economy and monetarism. Florentine banker Bernardo Davanzati has writen in the book "La Lezione delle Monete (1588)" (Reading about a coin) in 16 century that the role of monetary circulation and banks in economy of the country is similar to a blood circulation role in a human body.

Adam Smith's friend philosopher David Hume became one of authors of "the quantitative theory of money" from the point of view of which, price level in the country depends only on quantity of money in circulation. High tide of money to the kingdom leads to revival of labour, the industry and trade. But next increase of prices begins in the same proportion, as growth of quantity of money, that is inflation process begins. The 20th century became a century of inflation and blossoming of monetarism as economic theory. Milton Friedman became the head of the Chicago school of monetarists. According to monetarists, inflation begins when the government and banks put too much money into circulation. Only the correct policy – to issue of money into circulation no more, than productivity of economy of the country grows.

The criticism of the views of the followers of John Maynard Keynes lie in the basis of theory of Milton Friedman. Followers of John Maynard Keynes insisted on the state intervention as means of overcoming of cyclic fluctuations in economy. Milton Friedman is the supporter of return to economic liberalism, that is encouragement of free business and the market relations when minimizing the state intervention in economy. According to the monetary theory of Milton Friedman, a key factor in economic processes are money. Change of quantitative mass of money in circulation defines all other sides of economic life.

Milton Freedman attaches paramount importance to the functions of the demand to money in its quantitative theory of money also, Milton Freedman explains cyclic development of economy with help of violations in monetary and credit sphere  and Milton Freedman explains inflation  with help of excessive supply of money which is, in his opinion, a direct consequence of measures for State’s regulation of economy, designed to prevent of inflation, but in practice stimulating inflation.

Milton Friedman limits economic function of the State only to regulation of quantity of money in circulation. The main book of Milton Friedman, written in 1962, in co-authorship with his wife Rosa Friedman was “A capitalism and freedom”, in which Milton Friedman criticized policy of granting benefits for poor people, this policy encouraged, according to Milton Friedman, parasitic inclinations of poor people. Milton Friedman was resolute opponent of legislative fixing of the minimum wage level also. Milton Friedman constantly remained as object of sharp criticism on the one hand scientists (for unilateral exaggeration of value of the monetary and credit sphere in economy), so on the other hand supporters of increase of benefits for the poor people.

The cyclical nature of economic growth and methods of his regulation[edit | edit source]

Economic growth is replaced by economic recession within a world economic cycle. Recession (from Latin Recessus — retreat) is rather moderate downturn in production which is characterized by the zero growth of Gross domestic product or its falling during more than half a year. Recession is one of phases of the economic cycle following after a boom which is replaced by a depression. Recession leads, as a rule, to huge falls of indexes at the exchange and to rise in unemployment. The economy of one country depends on economy of other countries therefore economic downturn in this or that country can lead to recession and even to crash at all world exchanges.

Economic crises of overproduction repeated every 10-11 years. till 1930 throughout century. Economic regulation of economy by the government according to John Maynard Keynes's recipes has allowed "to smooth" depth and height of regular recessions and rises in development of economy within a economic cycle, but Economic regulation of economy haven't allowed to eliminate these recessions and rises completely.

Nikolai Kondratiev as researcher of the “long waves” (economic cycles)[edit | edit source]

Nikolai Kondratiev

Years of his life: 1892-1938. He has found long economic cycles in development of economy of England, Germany, France and the USA lasting 40-60 years. Such long economic cycles carry the name of "Kondratyev's wave" in the West also today. According to Nikolai Kondratiev, large inventions, emergence of new technologies, emergence of new group of the countries in the world market and so on are the reasons of these cycles. Rise of wave accompanied by wars, political shocks and revolutions usually. This theory was successfully developed by John Maynard Keynes further in the West. And Nikolai Kondratyev was repressed in Russia. Nikolai Kondratyev was arrested together with Alexander Chayanov on false charge of creation of "Labor peasants party". Nikolai Kondratyev was shot in 1938. Bolsheviks have acted this way with the Russian genius.

Modern methods and forms of government regulation of the economy[edit | edit source]

These methods have appeared as a result of synthesis of theories of John Maynard Keynes and Milton Friedman. Each of these two opponents was in own way right. The main task of economic science and the government is to learn to smooth periodic crises, it allows to prevent social revolutions. Many countries have learned to solve this problem with help of intervention of the state in the end of the 20th century. Money became the tool for the solution of this problem. The policy of "monetary control" is applied at excessively high rates of economic growth which are followed by inflation explosion when the offer of money on the capital market is reduced. It reduces opportunities for their favorable investment in production expansion, it slows down economic growth and leads to "cooling" of "superheated economy". Such policy was pursued in China in recent years.

To reduce the offer of money, the state uses the following methods:

  • Government raises taxes under the pretext of extension of social programs, to lower the income of businessmen.
  • Government raises reserve requirements for banks that to reduce opportunities for granting of the credits.
  • Government begins to sell more and more state securities so that free money go not to the expansion of production, but to the state budget.

If the economy has entered a recession stage and it needs to achieve the fastest resumption of economic growth, then it is necessary to do everything on the contrary. The similar policy was pursued by Ronald Reagan elected by the U.S. President in 1980. Increase of deficiency of the state budget, increase of a state debt and increase of inflation became a payment for some acceleration of economic growth. It is especially difficult to regulate economic growth in such countries as Russia where market mechanisms are just formed. Wassily Leontief was engaged in macroeconomic regulation in Japan very successfully.

According to forecasts of experts of world bank on 2030 the countries of the world have to take the following places in world economy:

1. China.

2. USA.

3. Japan.

4. India.

5. Germany.

6. Indonesia.

7. France.

8. Italy.

9. South Korea.

10. Brazil.

11. Taiwan.

12. Thailand.

13. Great Britain.

14. Canada.

15. Russia.

For Russia to take a higher place, it is necessary to work more successfully and more tensely. Russia managed to surprise of rest of the world by own success always.

Methods of protection of domestic producers:[edit | edit source]

  • The customs duties as the taxes in favor of the state collected from the owner of goods when owner of goods crosses border with the purpose to sell these goods in Russia. Because of them the seller of import goods is forced to raise prices of these goods. As a result import goods lose a part of the advantage in comparison with domestic goods. Buyers and importers lose at increase of the size of trade duties, but domestic producers and the state win at increase of the size of trade duties. As a result, buyers are forced to pay a tax in favor of some backward domestic industries and agriculture. These domestic producers can not try to increase own competitiveness, these domestic producers need not to reduce internal expenses, these domestic producers need not to increase quality of goods. As a result backward branches become even more backward. Taxes on import cars were raised or went down under pressure of domestic producers or sellers of foreign cars in several times in 1992-1995. Conclusion: target subsidies of the government to backward branches is better, than protectionism and the customs duties. It is necessary to achieve that, on the one hand, branches of the domestic industry became competitive, and, on the other hand, it is impossible to allow full bankruptcy and disappearance of these branches. To win at all branches is an impracticable task, it is necessary to win at least in some branches of production of goods and to specialize in development of these successful branches.
  • Import quotas and licenses. The import quota is an limit size of import in one year from a certain country. The foreign trade license is permission, which Government give out on import or export from the country on certain kinds of goods.

Conclusion: The import quota is most rough method and other countries respond with similar measures usually, "trade war" begins as a result. The example of it is "trade war" between the USA and China in 1992 because Chinese have sold to Americans of goods more, than have bought in the USA on $12,7 billion in 1991.

Refusal from protectionism[edit | edit source]

Last experience shows that both sides lose in trade wars, therefore many countries have refused from protectionism in 20 century. 23 countries have signed the General agreement on tariffs and trade (GATT) in 1947.

Three principles were the basis for this contract:

  • All participating countries will apply on the relation to each other identical measures of regulation of export and import without any discrimination.
  • Member countries will seek to decrease in trade duties. Member countries will seek to development of own relative advantages and international trade.
  • Member countries will refuse from extremes – from import quotas.

This agreement was signed already by more than 100 countries today. the World Trade Organization (WTO) has evolved on basis of GATT where Russia entered in 2012. So far, the effect of Russia's accession to the WTO has not been very significant, because other factors have overpowered - the war of Russian sanctions with Western countries. The average import tariff has decreased in the WTO on raw materials from 2.5% to 1.6%, on industrial production – from 10,5% to 6,4%. The purpose of the WTO is full opening of the national markets by the countries and creation of free trade zones when goods, people and capitals can move without any restrictions and duties within group of the countries. An example of the free trade zone – the European Union created in 1958. The countries entering the EU have cancelled all duties and import quotas in trade with each other completely, the countries entering the EU regulate equally export from other countries, the countries entering the EU have entered free movement of the capitals and people. Frontier guards and customs officers don't protect border between EU countries any more within the Schengen agreement, that is. borders between the countries of the European Union disappear gradually.

Conclusions: It is impossible to hide and run away from the conflict, it is necessary to be able to win in conflicts. The main law of conflictology finds manifestation in economy that it is impossible to hide from the market competition that it is impossible to be protected from more competitive foreign producers with help of the high customs duties, it is necessary to increase competitiveness of domestic producers and to be able to win against foreign producers in the international market.

The world economy. The abyss between rich countries and poor countries[edit | edit source]

Anti-globalization protests in Edinburgh during the start of the 31st G8 summit.


Middle East migrants pass through Slovenia on their way to Germany, 22 October 2015

"Antiglobalists" try to break meetings of leaders of "Group of Seven" - the USA, Japan, Great Britain, Germany, France, Italy and Canada. The Russian Federation has begun to take part in work of this informal association, but in 2014 the Russian Federation has been eliminated from members of this association in connection with the Crimean crisis. Geoeconomics is a science about world economy. The main problem in development of world economy is a growing abyss between the richest countries and poorest countries of the world. The population share in the rich countries in comparison with the population of the whole world makes 17%, but the consumption share which is the share of these rich countries makes 80%. Rapid growth of birth rate in the poor countries is the reasons of it. Growth of birth rate overtakes in many times over growth production in these countries. Though this growth in production in the poor countries (3,2% in year during 1965-1987) overtakes also growth of production in the rich countries (2,3% in the same years).

As a result, according to the UN if income of 20% of citizens of Earth from rich countries exceeded income of 20% of citizens from the poor countries in 30 times in 1960, then this excess has made already 59 times in 1989. Thus, the poor countries have got to "Malthus's trap". The poor countries have lagged behind the rich countries in the development for 400 years. Two civilizations exist on the planet, one civilization has entered in 21st century, and another civilization has entered in the 17th century only. The military conflicts arise in Africa and Asia against the background of poverty, for example, sea piracy of poor residents of Somalia in Gulf of Aden. Refugees from the poor countries became by problem for Russia and the countries of the West.

Conclusions: It isn't possible to achieve of full alignment of welfare of the poor and rich countries. Inequality between people and between the countries is a thing natural and inevitable.

All help of the developed countries to the countries of Africa is spent for further increase in birth rate that leads to aggravation of problems of poverty only. For example, food help to the residents of Somalia suffering from approach of the Sahara Desert leads only to final dying off national agriculture and growth of dependant moods in this country. The USSR spent too many funds for the help to other countries which promised in exchange to go on a socialist way, as a result these countries have refused to repay debts to the USSR, there was financial crash in USSR and socialism has failed as a result of economic problems. The Russian Federation has inherited from the USSR the rights to a debt from these countries for the sum of $150 billion, but these debts had to be written off as hopeless. These debts to Russia make 11% of the sum of all debt of the poor countries. Russia itself owed to western countries of $100 billion and Russia has repaid this debt with great difficulty, and nobody has written off Russia at least a part of this debt.

Russia has to draw conclusions from this fact and Russia shouldn't lend under no circumstances money to those countries which aren't able to return this money with percent. The national interests of Russia consist in that . Such help to the poor countries reminds useless attempts to fill with water a barrel full of holes. There won't be enough resources on all planet that to provide rich existence to all mankind. For example, such type of resources as the earth used for agriculture is limited. About 2 hectares of the processed lands have to fall on each person for ensuring all needs. The Earth's population is approximately 7.9 billion people оn October 2021 on which 11 billion hectares are the share today. This means that people 's land availability has already fallen below critical levels.

The only output, is to lower birth rate in the poor countries, but the population of these countries, except for China, doesn't want to reduce birth rate and population of these countries considers that the rich countries will be forced to help to poor countries all the same. These poor countries encourage by movement of "antiglobalists", the main slogan of this movement is directed to the governments of the rich countries, this slogan comes down to one requirement: "You have to give money!". According to Malthus's forecasts, the mankind has to invent essentially new resource-saving technologies of production of the vital boons, first of all, of food today, or hunger and wars for the earth and vital space will begin in the poor countries soon. By the way, Russia possesses the biggest territory of undeveloped lands, and warming of climate has to make this undeveloped lands more suitable for agriculture. Therefore Russia can become object of aggression, for example from China.

The increase of production of food lags behind an increase of population already today. For example, the increase of production of grain in a year has made 1% for 1985-1991, and an increase of population of Earth has made 2%. As a result, per capita grain consumption fell by 8%. Average consumption per capita of soy and bean cultures, meat and sea fish doesn't grow for the last years .. Food prices have grown sharply in 2008 because price of fuel have grown sharply, many researchers note that the era of cheap food has ended. Hunting even on rats has begun in Africa. Farmers increased productivity by means of entering into the soil of mineral fertilizers in 20 century, but opportunities for further increase in productivity by means of mineral fertilizers today are completely exhausted, besides, it became clear that use of these fertilizers does the grown-up harvest unsuitable for consumption often.