The Property

General Theory of the State and Social Evolution

Part I. Property relations and social evolution

Chapter 1. Exclusive Property Rights

Chapter 2. Property Rights Imperfections

Chapter 3. Self-interest Oriented Human Nature and Socialization

Chapter 4. Social Evolution

Chapter 5. Strength and Elimination of Monopoly

Chapter 6. Economic Inefficiency and Economic Injustice

Part II. The State

Chapter 7. State as Production Factor Monopoly

Chapter 8. Dictatorship and Democracy

Chapter 9. State Functions

Chapter 10. State Bureaucracy

Chapter 11. State and Communism

Chapter 12. Capitalism, Socialism and State Monopoly

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PART I. PROPERTY RELATIONS AND SOCIAL EVOLUTION

“Property is the creative and conservative principle of society. Property is one of those basic institutions, new theories concerning which cannot be presented too soon; for it must not be forgotten, and the publicist and statesman must know, that on the answer to the question whether property is the principle or the result of social order, whether it is to be considered as a cause or an effect, depends all morality, and, consequently, all the authority of human institutions.”

M. Hennequin

Chapter 1. Exclusive Property Rights

Amongst economic categories and definitions, property perhaps is the most fascinating and the most global one in terms of the explanation of societal processes and economic realities. Relying on property relations, we can draw an essence of any particular economic and social phenomenon. Property at the same time is one of the most popular categories in social science. Everybody possesses one or another type of property beginning from beggar’s clothe and ending up with a space shuttle. Any object, material or immaterial, tangible or intangible can be considered as a certain type of property. Intellectual property, patent, State or public property, income, salary, house, clothe, exclusive rights upon utilization of certain production facilities, education – those are concrete examples of a general category of “property”. Even such idealistic intangible assets as our ideas, feelings, emotions, sentiments and even our own life also represent particular types of property. Just as any material property these types can also be influenced or controlled by other people; majority of them can even be appropriated by the other people. One’s own property upon his feelings, emotions, ideas and upon one’s own life is an essence of what we understand under definitions of "human rights", "freedom" and "liberty".

 

People often think about property as about an economic category or as about something, what can be sold, bought, exchanged, etc. All that makes sense, but this is only a part and absolutely not a determinative part of the general phenomenon of property. Truth is that the property is essentially a social category rather than economic one, because there is no property without its foundation on power and coercion. Without at least minor degree of power, we would be unable to acquire and to hold any property and even our very own life would belong to the other powerful people – we would simply be slaves without any bit of power. Any proprietorship, first of all, is based on power; power is a foundation of proprietorship. There is no any proprietorship apart from its reliance on power. Law, which allegedly guarantees us our property possessions, is nothing else as a mere reflection of the balance of power in society. What kind of property and to what extent particular private individual in any particular society can possess and use at the end of the day is being determined by only two factors – his personal power or his personal relation to the social mechanisms of coercion and a balance of power in this particular society based on counteraction between all private interests. Whatever system of property rights and property relations we are having in modern times in economically developed countries, it is based exclusively on the balance of power in our society, and only thanks to that particular balance of power we are able to acquire property, to use and to hold it. People are not struggling and fighting in society just on their own; quite often they are grouping or formally and informally uniting for promotion of their special interests. Because of that and also because of the general commonness and uniformity of basic human needs and basic human interests a person does not have to fight for his rights and privileges only on his own, he can do it in association with the other people with similar interests. More than that, as we all know, sometimes he can even be a “free rider”. Therefore, besides private component of our social power, there is also an inbuilt or embedded in every person – group component of power, which is uniting particular private individual with a particular power group, with a particular interest promotion group or with a particular social group. 

Usually we think about property as about something, which belongs to concrete individuals or to groups of people. This can be attributed to the understanding of property in economic or in legal sense and at the macroeconomic level. At the economic level property rights are realized by their direct proprietors who are simultaneously their main beneficiaries – beneficiaries, first of all, in terms of income. From economic point of view, any economic proprietor is realizing his property rights through different types of economic activity. Property rights include as well a right to freely manage one’s property and to use according to one’s wish any benefits arising from utilization of the particular type of property. Economic or legal property rights, their applications and appropriations are the most explicit ones not only for professionals and practitioners, but for a general public as well. They are lying on a surface of everyday economic activity and of everyday social life. On the other hand, owing to their interconnection with real tangible economic interests, economic property rights are often generating a significant controversy, discussions while quite often even more severe types of social counteraction. They are also directly connected with a distribution of income and property in any particular society.

At the social level things are relatively different and first of all what concerns a definition of property. Economic property rights and connected with them distribution of income are realized by their economic, private or lawful proprietors only up to a degree limited by the existing in society at a particular point in time balance of power or balance of counteraction between all private interests expressed in a system of societal or property relations. Without understanding of social - based on mechanisms of power and coercion - property rights we cannot describe different types of social formations such as slavery, feudalism, capitalism, socialism and communism. On the other hand, without understanding of property relations at social or societal level we cannot describe any social phenomenon generally, because property relations are determining not only particular fixed in time social processes, but also social processes in their evolution or the very social evolution as well. We can go even further and say that economic or legal definition of property is not enough for understanding of property and property relations and therefore is not enough for an overall understanding of social relations in any society and as a matter of fact without the idea of "social” property rights we cannot describe anything in society. A feeling of multidimensionality of societal relations related to production of material wealth occurs far back in history.

 

“There are two fundamentally opposed means whereby man, requiring sustenance, is impelled to obtain the necessary means for satisfying his desires. These are work and robbery, one's own labor and the forcible appropriation of the labor of others…

I propose … to call one's own labor and the equivalent exchange of one's own labor for the labor of others, the “economic means" for the satisfaction of needs, while the unrequited appropriation of the labor of others will be called the "political means."” (Franz Oppenheimer. The State)

Property is a very complex and exceptionally influential category what concerns both social and economic processes as well as social and economic behavior. Property is having a double nature. First part of its nature is connected with personal consumption and utilization of property for satisfaction of personal needs. In such quality property serves as a reproduction factor for labor force or for entrepreneurial capacities. Its second part is connected with industrial or economic consumption and in such quality property serves as a reproduction factor for capital. Property as labor force reproduction factor is utilized for personal or private consumption, which under normal circumstances never troubles other people either socially or economically. In this sense few limitations can be attributable to personal consumption or to this form of property utilization. On the contrary, production utilization of particular property or more precisely its utilization in value creation process is directly connected with interests of the other people and because of that property is acquiring a coloring of social phenomenon. Uniting and connecting various private interests, production utilization of property is bearing a seal of social counteraction and a potential of becoming a social phenomenon.

Entering into production or economic relations, property is loosing its personalized or personified character and starting to be related, in addition to its direct proprietors also to a certain number of other people. Any act of property exchange represents at least two-dimensional deal. Simple exchange transaction at least can be considered from the point of view of buyer and from the point of view of seller.

 

“The buyer depends on the seller and the seller on the buyer” (Ludwig Von Mises. Economic freedom and interventionism)

Every one of them is having his egocentric interest in particular transaction and tends to extract from such transaction as much benefits as possible. Despite this fact, main visible outcome of the economic utilization of private property is the reduction of a general level of prices or increase of the aggregate level of income in society. Such outcome forms the entire nature of the process of property accumulation. If we have more property today than we used to have yesterday or a year ago we can speak about property or capital accumulation. Single intensive (not directly connected with discovery of new resources) method of capital accumulation leads either to decrease in prices or to increase in aggregate income, which are the two different effects of the very same economic or value creation process, as we shall see.

Property, especially in its application to economic activity is not something fixed, constant or steady. Quite opposite, the very logic and reason for any economic activity is to make property work and move. If from the legal point of view or from the point of view of common understanding of property, it probably more corresponds to the former characteristics, from economic point of view property rather represents a constant process of movement, flows and reallocation of resources. It influences and concerns not only separate economic proprietor, but rather closely fits into the framework of macroeconomic and societal relations. Any social (based on mechanisms of power and coercion) obstacle on the way of free property flows is allowing certain people and social groups to obtain exclusive property rights and is bringing along both inefficiency and appropriation of monopolistic income. Based on that, economic operations are under a great deal of social pressure and quite often also represent a social phenomenon, which is uniting, counteracting or cooperating more than one interest. Economic property possessions as well as capital or property flows can be limited or restricted at the societal level or by certain social (based on mechanisms of power and coercion) property claims. Since property is not something fixed, but vice versa is something, which must constantly move and flow in order to bring any value - universal status of social property rights presumes unrestricted property flows in correspondence with the maximum economic efficiency requirements. If somebody does not have an access to any particular property, it means that somebody else is utilizing this property on exclusive basis and is benefiting from such utilization in an exclusive way. Any non-exclusive economic property possession and moreover economic utilization of such property also represents an act of socialization. Any non-exclusive economic property possession is beneficial both for its proprietor and for society as a whole or for every single member of society. Economic non-exclusive utilization of property is not a private process (even though property is called “private”) because it involves and concerns a certain number of people and because it is being carried out without creating any exclusive property rights at social level with implication of the mechanisms of power and coercion.

 

“Private property of the material factors of production is a public mandate, as it were, which is withdrawn as soon as the consumers think that other people would employ the capital goods more efficiently for their, viz., the consumers', benefit” (Ludwig Von Mises. Economic freedom and interventionism)

Economic utilization of property is nobody’s merit or nobody’s accomplishment from the point of view of moral or justice. Proprietor is benefiting in terms of income and therefore already is receiving an award from people for his actions. On the other hand, people are benefiting in terms of new products, in terms of lower prices or in terms of growth in aggregate income or what is the same in terms of growth in aggregate property's value. Consequently non-exclusive or non-monopolized property possession is not only allowing property accumulation for the owner of this particular property, but also through its economic utilization is increasing a value of property of the other members of society. This is the highest economic expression of socialization of the private interest. Under perfect competition or under monopoly-free environment, any member of society is having an access to the same economic resources as all other people, and if somebody does not succeed, it is merely because he is not so smart, not applying himself enough or because he prefers leisure. Therefore, nobody can say that a winner is getting an unfair or exclusive reward (income) on account of the other people. On the other hand, under monopoly free environment any proprietor always has to think about his customers or potentially about every particular individual since only serving their preferences to their utmost satisfaction he can benefit from his property. Permanent dependence and interconnection with economic property rights and with the other people are keeping separate private interest within an aggregate framework of interests of all other people thus socializing it.

 

“The market does not directly prevent anybody from arbitrarily inflicting harm on his fellow citizens; it only puts a penalty upon such conduct. The shopkeeper is free to be rude to his customers provided he is ready to bear the consequences” (Ludwig Von Mises. Economic freedom and interventionism)

 

We have a completely different picture if somebody managed to obtain particular exclusive property rights, exclusive social property claims or exclusive privileges based upon social mechanisms of power and coercion. Such rights and privileges are freeing particular proprietor from economic interconnection and interaction with the rest of society. First of all, this proprietor simply has fewer incentives to satisfy demands of every particular individual in this particular society since people do not have a choice in terms of procurement or utilization of this particular property. From the other side, exclusive proprietor is becoming independent from the rest of society in evaluation of his property in terms of the other people’s property and therefore is becoming to be able to evaluate on his own both his property as well as other people’s property and economic contribution in terms of his property. This is another big step away from socialization. Both factors are bringing self-interest oriented human nature of exclusive proprietor in contradiction with interests of other people and moreover with the requirements of macroeconomic and social efficiency. Carrying a human self-interest all the way to exclusive social property rights, such statement of things creates disturbances in the entire system of social and property relations.

Social property rights are closely connected with and relying upon macroeconomic or social evaluation of property or upon price influence situation. Marx, for example, had demonstrated rather explicitly that the process of exchange represents a complex social relation (Karl Marx. The Capital). It is not just a matter of particular seller and of particular buyer. It goes much deeper in its social essence and influence. Every particular transaction is inseparable from an overall societal process of exchange. Clearly, those are the compound claims of all market operators upon any particular commodity what is driving and determining exchange ratios and not just the narrow preferences of particular seller and buyer. On this basis an exchange value of any particular commodity is being established. This implies that all individuals in society have an influence or have a right to vote on any particular exchange transaction according to their preferences, being at the same time able to repeat it, if they wish, with their own financial resources in the very same way. This also implies, that if somebody for one reason or another is unable to reproduce a desirable kind of transaction owing to social (based on mechanisms of power and coercion) factors, he is automatically excluded from particular process of economic bargaining or from economic formation of a price of particular commodity. Speaking otherwise, this person is becoming unequal or inferior in his economic voting rights related to expression of his consumer preference. Not only he is unable to “vote” on price of particular property (commodity) of certain other people, but he is equally unable to participate in a formation of price of his own property in terms of certain other people’s property as well. Those “other people” acquiring exclusive property rights based on power and coercion are violating his social property rights and are determining instead of him the price or economic contribution of his property in terms of their property. This is a major underlying reason of monopolistic injustice from the point of view of economic exchanges.

Generally speaking, any commodity is not bound to be exclusively utilized since the entire economic network by and large is directed towards maximization of revenues and therefore towards maximization of sales. Only certain specific commodities can be subject to exclusion from the market and to their exclusive utilization. These commodities are called production factors. What is so special about them that make them so desirable in terms of their exclusive utilization? First of all, it is their nature based on impossibility of any economic, social and therefore of any life supporting activity without their implication. And if this is the case, then their withdrawal from exchange will give their proprietors exclusive rights on their utilization and first all will provide them with a possibility to receive exclusive or monopolistic income. Accordingly, it will make other people, who are left out of price voting influence upon economic contribution of particular production factor, to pay certain exclusive prices, which exceed economic or market value of these resources.

Let us consider a simple case of exclusive rights - monopoly on production and distribution of matches in particular city, which has emerged, for example, as a result of bribing of city council officer by matches’ production and distribution company. Such circumstances are making people in this particular community to pay monopolistic price for matches. However, consequential exclusive income is not distributed equally among owners of each production factor, which has participated in manufacturing of matches. Since production of matches is sufficiently simple and does not require sophisticated skills and qualifications, workers who are employed to produce matches are easily exchangeable for other people. Value of labor in this case is determined by the market or by the price voting mechanism with participation of every single consumer of matches. Particular employee cannot influence the price of his labor. Let us suppose that land affiliated to this factory is rented from a local landowner. There are hundreds of other plots of land and hundreds of other landowners in town and in its neighborhoods. Price of land, therefore, is also determined solely by the market. Consequently all production factors employed in this particular economic activity are subject to formation of their value through market exchange process, with an exception of capital. In other words, an overall economic voting is involved in the process of price formation for all production factors employed except for the capital. It is not only the voting of particular people engaged in these particular transactions what counts. Every member of society is voting on values in this particular economic activity. Price or value formation process involves all people in equal manner even if due to certain reasons some of them do not want to or simply cannot buy particular commodities. All land market participants or landowners determine a price of land including the price of land for this particular project. All labor market participants are determining a price of particular labor input at our matches’ factory. Speaking otherwise, every member of society is taking part in determining economic value of this deal. Here lies a connection between economic and social nature of the value (price) identification process. If every single member of society is able to participate in price formation for any particular exchange transaction, we have a case of economic and social justice and we do not have any exclusive property rights or property rights violations. On the other hand, if only particular individuals or particular social groups are able to determine economic and social value of particular property or of particular economic transaction on their own, discriminating or excluding the rest of society, then emerge both exclusive property rights and associated economic injustice. In our example of matches’ factory, concrete economic process of value identification is violated. People are not able to effectively participate in the process of price formation for matches or more precisely in identification of the economic value of capital as of production resource for this particular commodity or for this particular economic agent. Access to matches’ capital is closed for the rest of society. Nobody can use capital to produce matches. Social property rights of every particular individual are violated and simultaneously exclusive social property rights are appropriated by the proprietor of matches’ factory. People are excluded from the market voting or from the process of value identification for this particular commodity. They are also excluded from identification of value of the participation of this particular structural capital in overall economic activity - of its general economic contribution. Exclusive property rights represent in this case a social phenomenon - imperfection in the system of property relations, which arises as a result of self-realization of an egocentric interest through utilization of the mechanisms of power and coercion (City Council) and not on account of any economic factors. These particular exclusive property rights are not emerging from economic competition, but vice a versa they are emerging owing to a direct violation of such competition and therefore this kind of property rights is bearing purely social and not an economic nature. Nature of social monopolization is essentially different from the nature of economic monopolization - those are two absolutely different types of monopolization.

Price of property or of commodity is not a private matter of buyer and seller or even of both of them - it is rather an economic phenomenon, which depends on every member of society. Every particular individual is evaluating his property in terms of other people’ property. He does not fix price just in terms of monetary units, but rather marks it in terms of a certain amount of other people’s property. If people accept his price, by selling his property (commodities) he is acquiring economic claims upon their property. The same is valid in terms of other individuals’ claims upon his property.

“This is what is meant by those who call the market economy a democracy in which every penny gives a right to vote” (Ludwig Von Mises. Economic freedom and interventionism)

Even if somebody does not want to buy or does not have enough money to buy particular property he is also voting by saying “this price is too high for me and I vote it should be reduced” or even “I generally do not need this commodity even for free”. This is his influence upon property of the other people or his social property right. Although he is not participating in a particular transaction and may not even own any property (which is very unlikely) nevertheless he has a social right to vote just like anybody else. Through economic voting he is acquiring the right on evaluation of anybody’s property in terms of his own property. One’s own property, at the end of the day, is not expressed in some mythical or mysterious monetary units, but only in terms of other people’s property. If a large number of people will articulate their claims upon particular property or commodity in the same negative way, then under the pressure of market competition an owner of particular property or of particular commodity will have to reconsider his price. By doing so, he will contribute to economic efficiency requirements, which claim that the price of his commodity is too high and therefore the cost of his property to the society is too high as well. Society or any actor on behalf of society within the process of exchange neither have any ability nor any justification to coercively persuade the owner to reconsider a price of his property. If the owner does not want to respond to social property claims of the other people and to reconsider his price and therefore also to reconsider the cost of his property to other people, then his competitor or proprietor of similar commodity will reduce the price in order to increase sales and profits. By doing so, he will be able to extend his property possessions, because buyers will now vote for his price and therefore for his commodity. By responding to social property claims of the other people this particular proprietor will be able to sell more or what is the same will be able to increase an amount of his property.

But what if within the system of property relations appear some kind of imperfections and owing to certain social factors, which we will consider later, there are no more any substituting property possessions while the proprietor of certain commodity is becoming to be a single supplier of this particular commodity on the market? Correspondingly this particular proprietor is acquiring exclusive social property claims accompanied by violation of the price voting mechanism. Price voting mechanism and social property rights cannot anymore influence the value of his property and its cost to every particular individual in society, simply because there is no any other price and no any other similar property (commodity) offered. There is no any alternative price option; there is only one option established by this exclusive proprietor. People, therefore, will loose their social rights upon this particular property, even though they are still able to acquire this property (commodity) within the process of exchange through a simple exchange transaction. On the other hand, people will not be able anymore to participate in evaluation of their own property in terms of this particular proprietor’s property. As a result their rights on evaluation of their own property or their own social property rights are violated. In other words, if somebody is acquiring social possibility to determine a price of his property only on his own independently from other people, it means that this individual is not only denying for other people a possibility to participate in value formation process related to his property or to determine his economic contribution, but simultaneously he makes it impossible for them to evaluate their own property in terms of his particular property. This phenomenon, which we call price influence situation, is essentially important for understanding of the nature of problems and imperfections arising in the system of property relations – very important first of all on account of associated patterns of income distribution.

Normally, any proprietor is eager to obtain exclusive rights for utilization of his property and for associated appropriation of exclusive income or, otherwise, is eager to limit an influence of the other members of society upon evaluation of his particular property and upon the resulting pattern of income appropriation. Since it is quite difficult to accomplish this task on one’s own, sometimes it is more profitable for a group of exclusive proprietors to unite their efforts and to form a social group in order to acquire and to maintain exclusive property rights on utilization of particular property. Such incentive moreover exists in case of monopolization of the entire production factor.

Exclusivity of social property rights is a rather quantitative phenomenon. Whenever certain social group succeeds in obtaining exclusive property rights, we are having a case of social property rights violation or a case of appropriation of exclusive social property rights. Such situation generally implies a restricted social (based on mechanisms of power and coercion) access for individuals and social groups to a certain type of property. Violation of social property rights simultaneously implies that particular individuals or particular social group owing to certain social circumstances together with ordinary economic property rights are simultaneously acquiring certain exclusive social property rights. In order to realize their exclusive social property rights, proprietors need some kind of macroeconomic or social entity – a source of coercion - for protection of their exclusive privileges as well as for facilitation of the distribution of associated exclusive income. Accordingly, exclusive social property rights for one particular social group and property rights violations for other members of society are normally coming together at the social or societal level and with direct participation of the State – main or even single social entity empowered with coercion and forcible social persuasion.

Unlike economic property rights, exclusive property rights can be realized only on account or in detriment to the other individuals and social groups and objectively against their interests. It is exactly at the social or societal level exclusive property rights are being generated and the main reason for their emergence is power, while the main tool for their maintenance is coercion, both existing only at the societal or mostly at the State level. Perfect competition simply means that nobody in society is having exclusive social property rights based on power and coercion or otherwise that everyone is having full-fledged unlimited social property rights based on universal price voting mechanism. Unrestricted non-exclusive social property rights presume equal opportunities for realization of socialized interests through various types of economic activities. Under economic property rights we will understand rights, which are not having any determinative influence upon societal processes, which are not based upon mechanisms of power and coercion and which do not lead to emergence of any exclusive privileges and benefits. Under social property rights we will understand general social accessibility of any particular type of property for every particular individual in given society. Social property rights have to be appropriated by all people and by every single individual separately. Unfortunately, they are not fallen from sky and never belong to people automatically. Initially, only the most fitted, the strongest and the most powerful individuals directly associated with the mechanisms of coercion are acquiring social property rights. While if property rights are appropriated only by a certain group of individuals or by a certain social group, they are right away becoming to be exclusive and inaccessible for other members of society. Originally exclusive property rights are very strong and therefore social property rights violations are very strong as well. And only with the time passing by, those “other people” counteracting existing exclusive rights are gaining little by little their own social property rights, for which they have to fight permanently and continuously. Any social property rights including exclusive social property rights imply underlying them power and coercion - that is why we call them “social”. Violation of social property rights generates exclusive social property rights and simultaneously creates a social opposition or social counteraction to any exclusive rights.

If at the economic level we have one particular beneficiary of any private property – a proprietor, at societal level the situation is rather different and normally we can identify other social beneficiaries of the same property, which owing to certain social circumstances are able to profit, in one way or another, from property possessions of the other people. Exclusive social property rights therefore represent another way of benefiting from economic property possessions. However, on the contrary to non-exclusive private property rights and to non-exclusive social property rights, particular individuals and social groups can benefit from exclusive social property rights only on account of the other individuals and social groups. Particular individuals and social groups are becoming social beneficiaries of property possessions of the other people owing to existence of exclusive property rights, which are established and maintained with utilization of the mechanisms of power and coercion. Only the socially strongest and the most fitted individuals, usually united in social groups, are acquiring exclusive property rights based on mechanisms of power and coercion and are becoming property and income beneficiaries on account of the other members of society as well as on account of general economic efficiency.

 

Besides direct social beneficiaries sometimes we can also identify indirect social beneficiaries, who are benefiting from income redistribution, rather than from income distribution. They are nevertheless social beneficiaries, because any redistribution of once earned income is only possible through application of the mechanisms of power and coercion. Difference between income distribution and income redistribution is very simple and straightforward. Income expropriated from its direct proprietors and received in a “non-market” way through application of the mechanisms of power and coercion represents income redistribution or unearned income. Indirect social beneficiaries can be of a very different nature, origin and social characteristics, beginning from kings’ mistress and up to the elder people, disabled, unemployed and different other groups of population varying throughout particular countries and particular historical epochs. With emergence of globalization and with growth of international aid appears a process of income redistribution at international level where beneficiaries are not only represented by particular individuals and social organizations, but much rather by particular governments and States.

 

Any income redistribution similar to distribution of exclusive or monopolistic income can only be realized relying on force, power and coercion. In order to redistribute resources, it is necessary to possess certain power and to be able to force and to punish those who are not willing to give up their property. Income redistribution being possible only through application of power and coercion is always coming along with associated exclusive rights on utilization of the instruments of coercion, with appropriation of exclusive or monopolistic income and therefore with imperfections in an overall system of property relations.

Social groups normally have to be defined according to a relation of particular individuals to certain types of property possessions and to certain income appropriation patterns. Since income appropriation is the most significant and the most influential part of property rights, the definition of social groups, first of all, has to rely on property relations and on exclusivity of property rights. Exclusive property rights and especially exclusive property rights upon particular production factor are a single reason for existence of any social groups. Exclusive property rights of particular social group upon particular production factor are determining and differentiating social formations – slavery, feudalism, capitalism, socialism and communism. Within each social formation we can identify two fundamental types of social groups – monopolistic social group, which possesses exclusive property rights on particular production factor and monopoly dependent social group, which has to pay for these exclusive property rights of the first group at least in terms of property and income. Besides financial or monetary payments per se, normally monopoly dependent individuals and social groups also have to pay in terms of their social or human rights, in terms of their freedom and liberty. It is very difficult to maintain exclusive property rights without at least some limitation of social rights of the monopoly dependent individuals and social groups. One needs to rely heavily on mechanisms of power, coercion and forcible persuasion in order to make people pay for his exclusive rights. Otherwise, nobody will voluntarily agree to pay exclusive or monopolistic price. In order to acquire exclusive property rights from one side and in order to persuade monopoly dependent social groups to pay some extra price from the other, one needs extraordinary power as well as immense material and financial resources.

Income received from economic utilization of non-monopolized property is not making people to unite in social groups - at most in special interest groups (which are typically being formed in order to fight for certain exclusive rights and privileges - not in order to maintain already gained rights). What creates social groups is either a necessity to support and to maintain existing patterns of income appropriation or, vice a versa, a need to counteract exclusive income appropriation rights of the others. In the first case social groups are monopolistic (ex. slave-owners), in the second - monopoly dependent (ex. slaves). Normally nobody in society can escape direct or indirect payments for existence of exclusive property rights. At the same time, besides monopolistic and monopoly dependent social groups by and large in any society exist also certain other groups of people, which are neither really paying monopolistic price from one side nor having any exclusive rights from the other. These people (for ex. doctors, artists, etc.) in fact do not represent any social group, because their property and income appropriation patterns are not associated with any exclusive rights while their social rights not always and not directly are being limited by the mechanisms of power and coercion.

Only income appropriation and income distribution connected with exclusive property rights is a key for identification of the social groups. We cannot define social groups according to their line of occupation or to their relation to particular non-monopolized property. Writers, lawyers, doctors, farmers, entrepreneurs cannot be considered as social groups. At most they might form professional interest groups, which usually (though not always) are not organizationally designed in order to manage exclusive economic or exclusive income interests and in order to organizationally influence or even to control instruments of coercion. Taken separately people of a particular profession within their professional way of income appropriation do not even have any reasonable common interest to fight for - in their non-monopolistic nature they are simply selling their services as anybody else. More than that, normally they are competitors among themselves. However, if only those people are somehow uniting in order to impose a certain pressure towards specific patterns of income distribution and redistribution and moreover if they are succeeding in that, then they are automatically acquiring exclusive property rights. Any exclusive income or any exclusive property rights are simultaneously generating social opposition or social counteraction. Social counteraction is what social groups are all about. Any social structure based upon exclusive property rights, power and coercion is leading to social counteraction and simultaneously creates social groups.

 

“Political power, properly so called, is merely the organized power of one class for oppressing another”(Karl Marx and Frederick Engels. Manifesto of the communist party)

Definition of social group does not imply any caste alike stubborn system of social relations. Generally speaking, what makes people’s transition from one social group to another difficult is the level or degree of exclusivity of particular property rights. Pursuit of exclusive rights is making monopolistic proprietors eager to limit an overall number of owners of the monopolistic property and therefore to increase their personal share in total monopolistic income. Monopolistic social groups simply do not like to share their exclusive income with the other people. Such statement of things is explaining rigidity and inflexibility of social groups. However, certain opportunities for transition from one social group to another or rather from non-monopolistic and monopoly dependent social groups to monopolistic ones exist even under the most severe types of exclusive property rights. The less exclusive are property rights - the larger are the possibilities for such transition.

In order to assure long-term social privileges, permanent wealth or even means of subsistence at the earliest stages of the formation of human society, socially stronger individuals, which afterwards had formed a foundation of ruling social groups, were not only eager to possess some kind of property on exclusive basis, but also to assure for this possession to be of a long-term hereditary character. It is exactly the exclusive property rights, what creates social groups and not people's relation to private property as Marx once assumed. The closer is an aggregate national market to perfect competition or the lower is domination of exclusive property rights in a particular society, the less significant are economic, social and even cultural differences between social groups. Social groups are distinguished based on their relation to certain types of exclusive property rights and not based on their relation to different types of property or even to different types of production factors. Particular individuals are beginning to recognize their common interests as those of a social group whenever they have something in common to hide, to protect and to maintain (for example exclusive property rights and privileges) on the one hand or whenever they have something in common to fight for, on the other hand. Under monopoly free environment or under perfect competition, every single individual is having his own, quite independent from other people, interests. Under these circumstances, there is no need or what is more important there is no sense to unite such interests in one common social interest. Generally speaking, any political and social interests are, first of all, uniting on the basis of common ideas about income distribution and redistribution, i.e. owing to purely economic or financial reasons even though they are uniting socially i.e. relying on mechanisms of power and coercion.

General declaration of universal non-exclusive social property rights can be referred to something like - to assure for every member of society a social opportunity to benefit from every single property possession through unrestricted non-exclusive social access to any type of production factor and to any kind of property. Under the non-exclusive property regime, every member of society is benefiting from every single property possession of all the other people through their economic and production activity simultaneously participating in an overall property evaluation process. In order for this statement to hold, every person or every business organization must have a possibility to realize their social property rights through the free flows of economic resources in any economic sector or in any type of business activity according to maximum economic efficiency requirements and in correspondence with market indicators. If for certain people an access to particular type of property or moreover to particular production factor, for one reason or another, is restricted or denied, or otherwise, if capital flows are limited, then their social property rights are being violated. While certain other people in this case are automatically acquiring exclusive property rights.

“The principal cause of the evil lay in the accumulation and immobility of capital of all sorts, -- an immobility which prevented labor, enslaved and subalternized by haughty idleness, from ever acquiring it” (Proudhon. What is property? An inquiry into the principle of right and of government)

Chapter 2. Property Rights Imperfections

All people are born equal in their natural rights, one of the principal fundamental rights being a right to possess any kind of property. Right to possess property without any restrictions, at the same time represents a right on realization and development of one’s natural capacities. But, since natural capacities are not equal and since human nature at least so far is having mainly self-interest oriented character, people with the strongest and more suitable for particular stage of social development abilities are naturally inclined to benefit on account of their weaker in the social sense compatriots. The only way possible for that are exclusive property rights, property rights limitations and social restrictions to possess and to use certain types of property. Otherwise everyone is in the same conditions. These limitations may well have a variety of forms starting from a simple forcible expropriation and up to exclusive property rights upon particular production factor, upon other people’s labor and even upon other people’s life. Such outcomes, which are somewhat familiar to general public under a concept of "monopolization", we will call property rights imperfections. At certain stage of social evolution people came to realize that simple compulsory expropriation is a too rough and a too short-term pleasure. It is also too bad for an overall economic performance. More suitable as well as more long-term means have to be discovered in order to get an exclusive monopolistic income.

 

“…it begins to dawn on the consciousness of the wild herdsman that a murdered peasant can no longer plow, and that a fruit tree hacked down will no longer bear. In his own interest, then, wherever it is possible, he lets the peasant live and the tree stand.

…principally in accordance with a developing customary right - the first germ of the development of all public law - the herdsman now appropriates only the surplus of the peasant.” (Franz Oppenheimer. The State)

Self-interest oriented human nature is having an overall inclination to direct any activity towards maximum possible level of exclusivity. Such inclination is not based merely on idealistic assumptions of pride, self-esteem or others of a kind. Exclusivity is having a very specific and very tangible economic expression, allowing carrying out of particular economic activity on certain exclusive or monopolistic basis. The higher level of exclusivity is assuring a higher level of income of a longer-term character as well as all resulting social benefits and privileges. Generally speaking, property rights imperfections are a direct consequence and are totally in line with the self-interest oriented and exclusive in its self-interest human nature. However, not any type of human exclusivity is yet creating property rights imperfections, but only the one, which is manifesting and maintaining itself through utilization of the instruments of power and coercion

Property acquisition or property exchange represents an essence of economic activity and not necessarily creates property rights imperfections. It is natural that people want to acquire any kind of property in order to satisfy their needs or in order to carry out certain economic activity. There is equally no sign of exclusive social property rights in a desire to acquire higher level of education, which sometimes is also allowing for a certain degree of exclusivity. All these aspirations can be accomplished within purely economic process of exchange. It is not the property itself, what creates problems and inefficiencies in economic and social systems, but vice a versa the imperfections in system of property relations. Property rights imperfections can occur only at the societal level, because in order to gain and to maintain exclusive property rights, their proprietors need social mechanisms of power and coercion, which exist only at this level. In other words, they need an instrument of force and coercive persuasion, which will allow their interests to remain exclusive or non-socialized and to be in a direct contradiction with the interests of other members of society. This is an essential difference between property rights imperfections and conventional non-monopolistic or non-exclusive property possessions. The latter are generally subject to microeconomic or business transactions, rather than to social ones based on power and coercion.

Disturbances or imperfections in system of property relations are widely familiar under the term “monopoly”. However, as we shall see, not every kind of monopoly is leading to exclusive property rights. Term “monopoly” in its common understanding unites a variety of phenomena both of economic and social nature. Exclusivity starts from forcible property expropriations of a one-time character such as robbery for instance if we consider robbery as an exclusive possibility for burglar to expropriate certain kind of property based on force (which is giving him a shotgun, for example) and as a violation of economic property rights. Difference between general robbery and other types of property rights imperfections stands in the fact, that under those other types a process of property (income) expropriation is always legal, of a long-term nature, more dispersed in terms of “robbed” or monopoly-dependent individuals and a way more hidden by social infrastructure.

“If, then, the State takes more from me, let it give me more in return, or cease to talk of equality of rights; for otherwise, society is established, not to defend property, but to destroy it. The State, through the proportional tax, becomes the chief of robbers; the State sets the example of systematic pillage: the State should be brought to the bar of justice at the head of those hideous brigands, that execrable mob which it now kills from motives of professional jealousy” (Proudhon. What is property? An inquiry into the principle of right and of government)

 

or else…

 

“A robber who justified his theft by saying that he really helped his victims, by his spending giving a boost to retail trade, would find few converts; but when this theory is clothed in Keynesian equations and impressive references to the "multiplier effect," it unfortunately carries more conviction” (Murray N. Rothbard Egalitarianism as a Revolt Against Nature and Other Essays)

Indeed, short-term or single time forcible expropriation of property also represents property rights imperfections, moreover that it directly violates legal property rights. Forcible or coercive expropriation of property implies exclusive utilization of force or power, which an opposite side due to certain social circumstances either does not possess or possesses to a somewhat smaller extent than the side expropriating property. Let us consider a simple case of robbery when criminal is threatening his victim with a shotgun. Let us suppose that due to a variety of reasons the victim does not carry a gun. In that case the burglar is acquiring exclusive opportunity to use particular property (such as would be a force or a shotgun) and therefore to appropriate some property based on the certain degree of force. It does not really matter whether this is an in-law or an out-of-law action, since we are not talking here about any legal rights, but rather about real social opportunities arising on account of the utilization of force, power and coercion. We may use a word “opportunity” or “possibility” instead of “right”. In order to differentiate this kind of actions from property rights imperfections connected with economic activity, we will call them – property rights violations. This particular type of property rights imperfections is different from exclusive property rights mainly on account of its short-term character. Indeed, it is not so easy to find any other differences between property rights violations and long-term property rights imperfections. Robbery represents private violation of property rights or property rights violation of private nature. Another type of property rights violations – property rights violations of social nature. The word “social” tells us that this type of property rights violations is relying upon mechanisms of power and coercion rather than upon force of one particular individual as in the case of robbery. In order to better understand property rights violations of the social nature, let us examine a simple historical example - coercive expropriations of wheat during the so-called “war communism” in Russia in 1918-1920th. Farmer, whose crop is being confiscated, may well possess a shotgun, but it is quite unreasonable for him to use it, if in front of him he is having five State appointed expropriators with five shotguns. Therefore in this case expropriators are having an exclusive authority or force over this particular farmer and over his property sealed by the power of State. This authority stands for exclusive social rights based on instruments of coercion and is realized through a forcible expropriation of property carried out by one social group on account of another or on account of separately taken private individuals.

Normally property rights violations of the social nature, which for simplicity we might call “social expropriations”, are being carried out by social groups, which come to power as a result of social revolutions or of some significant qualitative social changes. However, sometimes yet in our recent history, such uncivilized acts had been employed by the governments of fairly civilized nations under the so-called “nationalization” policies. Fortunately at least in economically developed countries all such absurdity has ended by now. Expropriations being in their nature inexcusable and barbarian acts, in order to be accepted and tolerated by society normally have to be based on certain underlying ideologies - none of them, of course, deserves any attention from the point of view of property relations or from the point of view of common sense. From the point of view of property relations only an expropriation of exclusive property rights and elimination of different types of social monopolies based on power and coercion can be justified and moreover are absolutely necessary. Expropriation of any kind of property, even of the property associated with exclusive property rights, not only unable to create any value, efficiency or justice, but vice a versa always brings along inefficiency, injustice and moral degradation and represents a direct violation of property rights. Not only property expropriations are deteriorating property regime, social rights and economic freedom, but quite often they are also taking away the very peoples’ lives.

Property rights imperfections are not the only kind of imperfections, which is appearing as a result of a contradiction between self-interest oriented human nature and general social and economic progress requirements. Together with imperfections in system of property relations, another social process, which in our days we call violation of social or human rights, is simultaneously taking place with a different intensity at various historical stages of social evolution. Since economic freedom is a determinative element and a necessary precondition for social freedom, any violation of economic property rights and therefore also of economic freedom is indispensably accompanied by violation of social freedom. Even more than that, violations of social rights do not represent merely unscrupulous brutality, but are normally being carried out rationally in order to achieve certain social and economic results. Under social rights violations we will understand property rights violations of a long-term, persistent and usually mass character associated with restrictions and limitations of personal freedom. Nature and reasons for violations of social (human) rights are based solely on exclusive property rights. No matter what are objectives and motives of particular individuals and social institutions committing social rights violations, the fundamental cause, which lies underneath such actions, is an appropriation of exclusive property rights and of exclusive income.

In his critics of capitalism, Marx referred to property relations at the economic level, where they represent a source of simple exchange transactions (Karl Marx. The Capital).  He had a feeling that something is not right, he even had a feeling that it is exactly an exclusive character of certain property possessions what is not right, but he connected this exclusivity with private property. During Marx’s epoch, certain degree of monopolization or certain degree of social exclusivity in property relations might have existed. Capital flows were very much constrained by a lack of financial resources for procurement of industrial property on behalf of the “working class” and of certain other groups of population. Property rights were concentrated with a relatively narrow group of wealthy people. Few among the “capitalists”, as Marx called them, probably did obtain in certain cities, towns or regions certain exclusive rights, which were out of reach for other groups of population. Term “reach” or “access” is actually connected with another very important social concept directly related to property rights imperfections, which is having a rather wide application and a significant influence upon the entire spectrum of social and economic relations. This concept is very important for our further analysis and, first of all, for understanding of the phenomena of State, society and social evolution. In order to better capture a nature of this concept let us imagine the economic conditions and property relations of Marx’s historical time frame. It is exactly exclusive property rights monopolized at societal level and absolutely not a private property, are responsible for possible appropriations of monopolistic income, which might have existed at that time and which are described by Marx. Of course, overall level of income and economic development was rather low comparatively with the modern ones and that well could be a main reason (which is more of economic nature rather than of the social one) why quite a narrow group of population had an exclusive access to a certain type of property (capital), while, on the other hand, for a lot of people such an access was denied. No matter what political and social circumstances were shaping this situation, it gave to quite a narrow group of people more or less exclusive possibility to utilize particular type of property. At the same time, large part of population simply did not have sufficient financial resources in order to acquire necessary productive capital. Such kind of monopolization, which is emerging owing to purely economic or economic development factors, we will call economic monopolization. On the other hand, now and then a social access to a circle of “bourgeoisie” or to some particular capital in a particular town, province or even at the national level might has been relatively, to one degree or another restricted for newcomers and outsiders. Local and national “bourgeoisie” was certainly eager to oppose any attempts of new business entries employing social ties and personal connections, overcoming of which might prove to be fairly difficult. Sometimes even the social attributes of individual personality – his social origin, religion, nationality, origin of wealth, family status and family members, education, morality, etc - were exploited in order to jeopardize new market entries. If there ever were any problems for potential entry into “bourgeoisie” as a social group they much rather were represented by occasional application of some power and authority in order to limit a freedom of capital flows either at national or at local level. At the same time those were in no way comparable with the restrictions upon the social entries into a “narrow circle” of the nobility or of the landowners as a social group under the feudalism. This type of property rights imperfections, which is emerging and being maintained relying on utilization of the social mechanisms of power and coercion we will call social monopolization. Social monopolization is a corner stone of the political economy and the most fundamental social concept for understanding of the nature of our society, State and social evolution. 

Property rights violations and social monopolization taken together are embracing all types of property rights imperfections, which might exist in any particular society. Property rights violations (especially those of the social nature), being the roughest form of property rights imperfections, historically are emerging when social counteraction is rather weak. Property rights violations usually can be of one time or at most of the short-term nature. Length and intensity of property rights violations depend exclusively on the level of social counteraction to these violations and on the social power of counteracting individuals and social groups. On the contrary, social monopolization because of its reliance on particular social and ideological infrastructure, which is designed to uphold and to preserve particular social formation and particular type of property relations, is normally having a much longer-term character. Connection of social monopolization with economic or production activity is a main factor differentiating it from property rights violations. Such connection is not changing the social nature of property relations too radically, but it is creating more obstacles for understanding of social monopolization and concealing the real essence of this phenomenon in a more profound way. Property rights violations imply only coercive or forcible expropriation, which is not connected with any type of economic or production activity. In this sense property rights violations represent a purely social type of property rights imperfections, which is emerging only as a result of weak social counteraction or as a result of a profound social weakness of particular individuals and social groups. Social monopolization, on the contrary, is uniting in itself both economic and social nature. It cannot occur without at least some kind of economic activity, even though similarly to the property rights violations, social monopolization is based primarily on social mechanisms of power and coercion.

Social monopolization usually represents a much more wide scale and longer-term phenomenon comparatively with property rights violations, including in terms of its disturbing influence upon the general system of property relations. Even though property rights violations are more intolerable and unjustifiable from the point of view of justice or general morality, while their influence upon economic development and economic efficiency is more disastrous, their authority and scale are usually of a rather short-term nature comparatively with those of social monopolization because normally people do not tolerate any plain violations for too long. Interconnection between property rights violations, social monopolization and violations of social rights is a significantly complex and a very important social phenomenon. Property rights violations of the social nature similar to any other property rights imperfections are unavoidably infringing on social or human rights. Property, overall, represents a fixed and concentrated realization of particular feelings, emotions and ideas and simultaneously an accomplishment of lifetime hopes, aspirations and objectives of the people. While realization of human feelings, emotions, sentiments, ideas and objectives (including such objectives as freedom, liberty and life) is exactly what we understand under the social rights. If property rights are violated while property is being expropriated such situation simultaneously represents an act of expropriation of particular social rights.

“Property is a real right, jus in re, -- a right inherent in the thing, and whose principle lies in the external manifestation of man's will. Man leaves his imprint, stamps his character, upon the objects of his handiwork. This plastic force of man, as the modern jurists say, is the seal which, set upon matter, makes it holy. Whoever lays hands upon it, against the proprietor's will, does violence to the latter's personality.” (Proudhon. What is property? An inquiry into the principle of right and of government)

If certain property rights are socially monopolized and certain people have to pay specific monopolistic price, it means that these people have to give up more of their emotions, sufferings, feelings and intellectual efforts for the same amount of property of those who possess exclusive property rights.

Fundamental difference between social and purely economic monopolizations stands in the fact that economic monopolization in its pure form is not based on exclusive property rights. In its pure form economic monopolization is being generated within the market competition and does not bring along exclusive rights based on mechanisms of power and coercion as well as a long-term appropriation of monopolistic income associated with social monopolization. This type of monopoly rather represents a microeconomic monopolization, which is arising from natural economic competition and which is not connected with exclusive property rights, power and coercion. If there are no power and coercion involved then there is nothing social in any phenomenon. Under economic monopolization coming from purely economic competition, anybody can enter particular market as well as can participate in economic price formation of any particular property or as economists would say - there is always a possibility of potential market entry, although the latter concept we are applying here in a purely social sense meaning a “potential social entry”. Potential possibility of social entry implies that there are no any social barriers based on application of the mechanisms of power and coercion for free capital flows or simply that there are no any exclusive property rights. Just as in the economy we have an economic competition, the very same way in society we are always having a social competition between all individuals and between all private interests for social property rights as well as for exclusive property rights. And even more than that - as long as exist mechanisms of power and coercion economic competition does not represent a key determinative part of an overall competition for production resources and for particular social privileges.

“Wherever opportunity offers, and man possesses the power, he prefers political to economic means for the preservation of his life.” (Franz Oppenheimer. The State)

Social competition mostly all the time brings along exclusive social and property rights. Monopolies of economic nature equally embrace property rights upon certain sophisticated activities, knowledge or information. In this sense, all intellectual property rights and industrial patents can be attributed to this category. Actually a phenomenon of knowledge or information as well as its role both in value creation process and in property relations deserves a special attention, which is out of the purpose of this book. Since knowledge, information and technology sooner or later are becoming obsolete economic monopolies usually do not last long. Besides, being short-term in their nature, they do not contain price influence situation of the social character. Special short-term price can be considered as an award for accumulated knowledge and information and for their productive utilization. However, particular individuals and organizations are always eager to maintain their economic advantages relying on the mechanisms of power and coercion, even if those advantages are emerging under a purely economic competition. Accordingly all economic monopolies incorporate a certain potential to acquire exclusive property rights and may lead to social monopolization.

Preservation of social monopolies is not an easy task, because other things equal people are not very much eager to pay for somebody’s exclusive rights. We have mentioned already that one the most fundamental tools for maintenance of exclusive property rights is the mechanisms of power and coercion. However, it is quite difficult to maintain exclusive rights only relying on such a primitive tool, first of all because people are always inclined to counteract and to destroy those mechanisms of coercion. Rather fortunately for monopolistic social groups there is another influential instrument in order to persuade people to support or at least to tolerate a presence of exclusive rights. This instrument is an ideology. The single purpose of any ideology is to persuade people to buy certain social monopolies and to pay certain monopolistic prices. Any ideology is benefiting either ruling social groups or social groups eager to get in power. Ideology is a very dangerous phenomenon, which represents a primitive appeal to human feelings, sentiments and emotions aiming, first of all, to downgrade rational apprehension of reality. At the same time, ideology may include a conventional logical appeal to rationality as well. However, the grounds for argumentation or basis of the social assumptions are always grounded on the emotional apprehension of reality. If particular ideology is capable to change or to shift certain societal assumptions it can draw whatever conclusions one wants. Any ideology is rationally and logically inconsistent because there is no such thing in the whole world, which can justify exclusive property rights. From the point of view of monopolistic social groups employing of any ideology besides logical inconsistency incorporates another essential negative feature - any ideology is rather costly and inefficient social phenomenon, which is usually connected with significant income redistribution for its direct and indirect funding. Inefficiency and costs associated with particular ideology quite often are leading to economic bankruptcy of social regimes, which is very much linked with their political bankruptcy.

Together with dissolution of primitive societies, an assurance of relatively comfortable standard of living as a key scope of social monopolization from the point of view of monopolistic social groups, is substituting in superiority an assurance of the means of survival and becoming to be a predominant reason of property rights collisions and imperfections. At the same time, with further social and wealth differentiation and with emergence of social groups, maintenance of social status and social privileges arising from social monopolization is becoming equally important for monopolistic social groups. Underneath various types of artificially imposed limitations for capital flows there are always the clearly defined material or financial interests of particular individuals and social groups. Quite often such interests are not even being recognized by the advocates and promoters of particular property rights restrictions or of particular capital flows’ limitations.

Similar to Marx, Lenin also had a feeling of the problems inherent to his particular society and to his particular time period (Vladimir Lenin. Imperialism, the highest stage of capitalism). Deriving his vision from Marxism, he naturally considered that those problems are connected with the private property and represent the immanent characteristic definitions of capitalism. However, property rights imperfections described by Marx and monopolization portrayed by Lenin in his “Imperialism, the highest stage of capitalism” are two different types of property rights imperfections. Though both belong to the social formation, which is usually being called “capitalism”, their nature and origin are utterly different. Property rights imperfections described by Marx, in their ideal version or much rather in his view, are based upon exclusive property rights of a certain social group (capitalists) on particular production factor – capital, and upon limited access to this production factor for certain other social groups (workers). This particular type of property rights imperfections connected with the exclusive property rights upon the entire production factor we called previously production factor monopoly, though this Marxian monopoly have hardly ever existed under capitalism. Alternatively, monopolization described by Lenin is related to the exclusive property rights upon all the capital within particular economic sector or sector monopolization. Such type of monopolization is characterized by a limited access to capital in particular economic sector on behalf of all other social groups, but also on behalf of all other “capitalists” (outsiders for this particular economic sector). Exclusive property rights in this case are violating social rights of the rest of society to participate in evaluation of an overall economic contribution of this particular economic sector. Property rights imperfections connected with the exclusive rights upon all property in particular economic sector or on particular geographic area we will call structural monopoly. Under the production factor monopoly on capital an access to various economic sectors for all capital proprietors is relatively free, while under the structural monopoly it is being either limited or restricted. In case of the structural monopoly, flows of economic resources between labor and capital as well as access of the social group represented by labor to capital and to social group represented by capital might be significantly less restricted (or even might not exist at all) than in the case of production factor monopoly on capital. Within the Lenin’s lifetime it becomes less and less difficult for other social groups to become capital proprietors, but not in structurally monopolized industrial sectors. Origin of structural monopolies may have purely economic reasons (such as economies of scale, for example). Nevertheless afterwards these structural monopolies might easily transform into social monopolies with the potential market entries being opposed by monopolists through application of the social mechanisms of power and coercion.



 

 

 

 

 
 


Diagram 1. Property Rights Imperfections

In application to production factor monopolies the phenomenon of price influence situation is having a much more complex nature and must be understood in a much broader sense, than merely an influence upon the price of particular commodity under an ordinary microeconomic transaction. Price influence generally is a very complicated and diversely significant phenomenon and not only from economic point of view, but what is far more important - from the point of view of its social influence and underlying this influence types of economic and property relations. Price influence is determining not only people’s economic contribution, but also the entire social structure and social relations as well. Price influence situation at macroeconomic or at the societal level embraces a variety of property and exchange relations, which only on a surface are expressed by interconnection and fluctuations of price indicators. Very simple price influence situation is determining price levels at monopolized potato market in a small town. Much more complex social and property relations are determining the mechanism and the level of monopolistic income appropriation by land aristocracy under feudalism including redistribution of national income through the State, where aristocracy is benefiting from an alliance with the state bureaucracy. These types of property relations are much more hidden and much more difficult to trace; especially taking into consideration a huge social infrastructure designed to conceal any appropriation of monopolistic income. Nature of price mechanisms related to both production factor and structural monopolies we will examine in more details in chapter 6. At the end of the day both social monopolization and social rights violations are built upon price influence situation.

Price of any commodity simultaneously represents a measure of this particular commodity’s value in relation to all other commodities, services and production factors. Being subject to economic evaluation process, price is an objective category, which cannot be influenced by direct human interference. At the same time, we have seen already, that under certain social circumstances appears a price influence situation connected with some kind of exclusive property rights. In this case particular commodity is acquiring a non-economic or social value, which is reflecting an appropriation of exclusive or monopolistic income and which is based on social mechanisms of power and coercion. Price of a particular commodity incorporates payments for all production factors employed in manufacturing of this commodity including for the monopolized ones. Every producer and every proprietor is generally trying to make his commodity, service or technology exclusive in satisfaction of certain human needs – exclusive in terms of quality, price, design and numerous other characteristics or in terms of a combination of these characteristics. Such statement of things represents a fundamental motivation for potential exclusivity of practically any type of property. But only when this exclusivity is starting to materialize based on social mechanisms of power and coercion and when it begins to interfere with the production factors’ flows, it does generate social monopolization.

While structural monopolies can have either economic, arising from competitive environment, or non-economic social nature, production factor monopolies are always of the non-economic nature. They are the social monopolies of artificial origin in a sense that their emergence is only possible at the social level owing to the general orientation of human self-interest towards power and associated with it possibilities of exclusive benefits and privileges. On the other hand, elimination of production factor monopolies is a natural or evolutionary process, which is happening outside of the economic domain through people’s counteraction to any exclusive rights. Extinction of social monopolies is mainly connected with inefficiency of property relations, which is accompanying any exclusive property rights and which essence we will examine later in chapter 5. Sometimes serious man-planned efforts directed towards elimination of production factor monopolies do not succeed because property relations have not yet came to a sufficiently sharp contradiction with economic or production factors’ development (such as, for example, numerous slaves rebellions in ancient Rome including Spartacus). On the other hand, sometimes very few efforts or none at all might be enough in order to overthrow a degraded system of property relations (for example, peaceful revolutions in communist Hungary and Czechoslovakia). Even though, at the end of the day they serve the interests of certain social groups, production factor monopolies do not appear as a result of the will of particular individuals, but rather as a result of the significant differences in social strength and social power of particular individuals and social groups. Everyone wants to be a king, but originally only the strongest or the best socially fitted individual is becoming one. On the other hand, if his social strength or power fails somewhere or sometime or if the king fails to remain the most fitted individual, there are plenty of others, who are ready to replace him, at least what concerns the governance if not what concerns an actual title. It is exactly the system, rather than its concrete beneficiaries what matters when we are dealing with exclusive property rights. It is exactly the system of property relations what creates inefficient and unfair outcomes and not concrete individuals who are benefiting from exclusive property rights - they are just children of fortune or better to say children of natural selection – the most fitted to particular societal systems individuals - and it does not really matter who they are personally. People can destroy one particular social construction, but it will always be emerging another one in its place, because self-interest oriented human nature will always fight its way through to the highest degree of power, coercion and exclusive property rights. Because of that it is quite difficult to imagine the anarchism in its pure version or a general State cancellation under the self-interest oriented human nature. Normally property rights imperfections always appear when the interests of certain number of people are strong enough in their unification under one common social cause, while interests of all the rest of society or of the other social groups are too weak to counteract such cause. Similar to their emergence, the social maintenance of production factor monopolies is also relying on power and coercion. Particular production factor monopoly is dominating social and economic relations in any particular society up to a degree defined by the power of associated with it social groups comparatively to a compound social power of monopoly dependent individuals and social groups.

Once being established, production factor monopolies are not only shaping the entire social infrastructure, but are also starting to influence personal characters and social behavior of particular individuals and social groups. Social nature of production factor monopolies is equally portrayed by the fact that exclusive property rights do not belong to particular individuals or groups of individuals, but much rather to the social groups. Monopolistic social groups represent groups of people united in their social, economic and political interests by exclusive, forbidden for any other individuals and social groups, types of property possessions and social privileges and, first of all, by the benefits of exclusive income, which are emerging from this kind of possessions. Social monopolization being a part of the property rights imperfections is having its roots in social and property relations and cannot be described relying merely on conventional economic property rights. In fact, quite possible is a situation when there are no any particular superficial disturbances in economic property rights associated with an existence of social monopoly. If we address our previous example of matches’ factory - an owner of this company can sell it to another proprietor just as any other property. Actually, the social monopoly as a property is separated from economic possessions of any type of capital or of any economic resource. Generally speaking, from the point of view of its proprietor, monopoly itself is already a capital or a property. Ideally, in its pure version social monopoly is able to bring income without any associated property or without any associated capital. Monopoly is having its own value – quite separate from the value of associated property. Owing to that, sometimes, it can be bought and sold without the associated property as, for example, structural monopolies in England in 17th and in France in 18th century. If social monopoly not necessarily has to be associated with a particular property, equally not necessarily it has to be associated with only one proprietor or with only one economic agent. Since social monopoly does not suppose any underlying property, it can be established and carried out by a group of individuals with rather different property possessions if only this group will somehow manage to obtain certain exclusive rights. This is opening a wide horizon and comprehensive possibilities for materialization of the production factor monopolies, which are socially uniting several or multiple proprietors of separate economic property possessions. Members of particular social group are gaining exclusive income not from their land, from their capital or from any other economic resource (if these resources are not socially monopolized they do not bring any exclusive value) but only from the exclusive property rights per se or from the very fact of social monopolization of a particular production factor, such as, for example, slaves’ labor under slavery or land under feudalism.

In our example, a selling price of the matches' factory besides other factors will be also influenced by a higher return on capital as a result of embedded possibilities for appropriation of monopolistic income. But, nevertheless, it will still be determined according to a market rate-of-return on capital as any other investment transaction. There is no any violation of economic rights of various proprietors. Those are only the social property relations, which are violated and which violation is explaining an exclusive condition of this particular property. Monopolized property economically, technologically and financially may perform just like non-monopolized property. Oil refinery equipment, which forms fixed costs or fixed capital, is having the same microeconomic nature with or without monopolization. If one single manufacturer manages to monopolize the entire oil industry, appears a situation when nobody else can sell oil products. Or, what is the same, as a result of the presence of exclusive property rights, nobody else can invest capital in oil production and in industrial utilization of oil refining equipment. Price influence situation and changes in income appropriation patterns connected with this monopolization are associated with the social nature of exclusive rights and are certainly not connected with microeconomic or technological nature of particular property or of particular equipment. Exclusive property rights owing to certain social factors are attributing specific social nature to ordinary microeconomic property possessions.

Throughout the entire human history have existed and still exist a lot of different and sometimes not even clearly identifiable property rights imperfections, or different kinds of restrictions, regulations and limitations related to possession of particular types of property or, what is the same, various restrictions on carrying out of particular economic activities. All these imperfections according to their scale, economic nature as well as to their economic and social influence can be divided into two basic categories – production factor monopolies, which are defining the very essence of social and economic formations and structural monopolies, which are extensively investigated by economic science and are abundantly described in economic literature. Such division not only is connected with the differences between particular types of property relations under affiliated exclusive rights, but also with the degree of influence of a particular social monopoly upon social, political and economic environment in any society and within any social formation. Production factor monopoly, which we endeavor to understand here, is a very complicated and simultaneously a rather fascinating social and economic phenomenon as well as a fundamental reason or rather a very nature of all social and economic disturbances and disarrays. Production factor monopoly is also a much more persistent throughout the entire human history as well as much more socially influential phenomenon than any structural monopoly.

Different types of monopolies of different sizes are surrounding us starting from that shop around the corner and up to a national gas or electricity supply monopoly in certain countries. Not all of them, however, embrace property rights imperfections. Even though in our days almost everywhere in the world exist antitrust laws, which have to fight  monopolies and monopolization, those laws are mainly aiming at economic structural monopolies, which do not comprise any property rights imperfections and therefore in their pure version hardly ought to be counteracted at all. To counteract or to fight social monopolies is rather difficult because their very emergence and maintenance is always backed up by the same social institution, which delivers the entire antitrust regulation – by the State. Social monopolies are emerging only relying on the power of State – the final source of coercion both in modern world and in almost any historical retrospective.

 

“In practice, monopoly frequently, if not generally, arises from government support or from collusive agreements among individuals.” (Milton Friedman. Capital and Freedom)

To fight social monopolies is also very difficult because of the advantages, which such monopoly offers to its proprietors in terms of additional or monopolistic income. Considerable part of such income normally is being spent on consolidation of power of this particular monopoly and on its ideological support. On the contrary to structural economic monopolies, production factor monopolies, are never pursued or counteracted by law. Vice a versa, they are the law and they are establishing all laws in the world as well as shaping all other elements of society or the entire social infrastructure. If explanation and analysis of certain structural monopolies sometimes (whenever they are of economic nature) represents the task of microeconomics, the discovering of nature of the production factor monopolies, owing to their reliance on power and coercion and resulting from this fact overwhelming influence upon economy, politics and society, is within the purview of sociological and political theory. Similar to structural social monopolies, production factor monopolies cannot be realized without significant social support based on power and coercion at the societal level. General understanding and analysis of structural social monopolies and moreover of the production factor monopolies is impossible without implication of the conception of social property rights. Only structural economic monopolies, which are not based on mechanisms of power and coercion, represent a purely economic phenomenon and do not violate social property rights.

Social monopolies are rarely identifiable within legislative systems or within social infrastructure. Throughout the entire history social monopolies hardly ever represent explicit and clearly designed social entities; vice a versa they are always hidden in order to conceal their non-socialized nature. Legal or legislative systems quite rarely are establishing rights and privileges of social monopolies explicitly and comprehensively. Structural monopolies, especially structural monopolies within the modern history, are frequently hidden by the entire social infrastructure. According to the spirit of antitrust laws the structural monopolies overall have to be counteracted by the government. Production factor monopolies, among other things, emerge owing to an inadequate societal knowledge and particularly owing to a lack of understanding of their very nature. This normally happens when the level of social and economic development is comparatively low and people are having more emotional rather than rational apprehension of life, society and economy. Monopolistic social groups are certainly not inclined to explain to the people where exactly the problem stands and are hardly inclined to mention exclusive rights in laws explicitly thus helping people to understand the nature of society they are living in. Together with evolution of human society, it becomes much more difficult to maintain particular production factor monopolies, not in the last instance thanks to expanding understanding of their true real nature and to rising human intelligence. With higher levels of social and economic development is also intensifying social counteraction to any exclusive rights. Social counteraction is trying to annihilate existing social infrastructure, which serves to maintain particular production factor monopoly relying on legal, moral, educational, political, social and cultural settings and prejudices. It is becoming more and more difficult to conceal and to justify social monopoly owing to more advanced level of human, social and economic development as well as owing to more advanced level of human (including social) knowledge. At this stage, maintenance of social monopoly becomes quite problematic. With further social evolution and economic development it is becoming more and more difficult to sell to the people particular social monopoly. Social infrastructure associated with this particular monopoly under the pressure of social counteraction is disintegrating up to a point of its complete elimination. Unfortunately, after all that comes another social monopoly with its own social and ideological justification and with its very own social infrastructure. Even more unfortunately is that people do buy these social monopolies again and again. Probably until sociality or anything social in society - based on power and coercion - will disappear completely, if it ever will.

Chapter 3. Self-interest Oriented Human Nature and Socialization

Property is having its deep down roots in human nature. Property in fact is the most advanced expression of the human interests and of these interests’ realization. Particular human beings may have different kinds and groups of interests. Those interests can be, for example, of cultural, educational, social, political and of any other nature, which can only come to mind. However, when we are talking about social and economic processes and moreover about social evolution we are rather concerned with the social and economic interests of human beings. We are primarily concerned with these types of interests also because apart from determining the system of property relations and its evolution, they are equally shaping a social behavior of particular individuals and at the same time to significant degree are defining all other types of human interests. Self-interest oriented nature of human beings originally is directed towards economic goals and, first of all, towards assurance of the means of survival, while the strongest expression of economic interests is the property. Since vast majority of people to one degree or another are moved by material considerations and besides since material considerations represent the basic type of human needs and interests (ex. Maslow's pyramid or any other pyramid of human needs) then in order to understand anything in society we must take them into the most serious consideration. Besides, almost all our non-material interests are based on rough material foundation. If we like reading – books are quite expensive these days; if we like music – CDs, opera, concert halls unfortunately are rather expensive as well; if we like to travel and to experience different cultures – that is even more expensive; and if we like to supervise and to control people – that is getting ever more expensive as well – we need to somehow convince them that we know more than they do or have better managerial skills based on some very expensive trainings, experience or education. As a matter of fact, our non-material interests by and large cost even more and quite often much more than our material interests. Fortunately or unfortunately, everything costs money and everything in this world depends, first of all, on money (if not for particular individuals personally, then definitely for societies and nations) – culture, education, health care, literature, arts, etc. Poor countries have absolutely negligible culture, education, health care, literature and arts. Because of almost indivisible interconnection between economic and social (based on mechanisms of power and coercion) aspects of any human activity, the property simultaneously represents an strong concentrated expression of the social interests of particular individuals. 

Property and property accumulation are those substances in which such fragile and even somewhat idealistic categories as human nature and human interests are materializing under social and economic activity. Generally speaking, all what we want, wish or desire form human interests. Those interests or rather their practical materialization can be either of socialized or, vice a versa, of non-socialized nature. Interests of particular human being, which do not contradict or do not harm interests of the other people, are acquiring a certain degree of socialization. A simple example of interests' socialization is family, where husband and wife are normally having quite a lot of common or shared interests of financial as well as of non-financial nature. Family represents the most natural but at the same time the lowest level of socialization initially uniting only two separate self-interests. The larger is a number of people with common interests the more socialized are the actions of a particular self-interest oriented human being. Any kind of corporation or association of people represents the next level of socialization quantitatively (in terms of a number of people with common interests) superior to family, but qualitatively inferior because the correlation between the interests of particular individual and particular corporation normally is not as strong as the one between all interests within the family. After the corporation or association of people, the next and the highest level of interests’ socialization is society. Society presumably assimilates the interests of particular individual with interests of all the other people. Though again, a coincidence of interests between individual and society is even lower than between individual and corporation bearing in mind that corporation normally represents a main source of income or of living subsistence for a person. Although society as a whole may occasionally or permanently redistribute in favor of individual one or another type of social benefits, overall, these benefits do not represent individual’s basic source of income unless he is unemployed or retired. He may also have certain expectations of future potential benefits both from society and from a particular corporation. From society people normally expect certain social benefits and guarantees including insurance in case of retirement, unemployment, disability, etc. Main potential benefits, which one can expect in the future from corporation or from their own business, are growing salaries or growing revenues. Potential benefits from corporation may also include certain future carrier expectations.

Overall, the quantitatively more superior (in terms of a number of people with common interests) or, for simplicity, the “higher” is a social level of individuals’ unification or the larger is a number of individuals united under certain kind of social or economic structure, the lower is a correlation of interests between every particular individual and the other people at this level. Lower degree of interests’ correlation associated with higher social level is also the fundamental cause or the nature of a very important social phenomenon – dispersion of interests, which we will consider in the second part of this book. Self-interest oriented human beings are normally pursuing their own interests, however, we cannot exclude that some of those interests may coincide or at least may not contradict to the interests of other people. If actions of particular individual coincide with the interests of a number of other people and social groups or at least do not contradict them, then this individual is acquiring a certain degree of socialization. If all actions or all interests of particular individual benefit or at least do not harm all other members of society, this individual’s overall social behavior or social interests can be considered as socialized.

When we are talking about self-interest of particular human being from social or societal point of view, we must not be confused by moral considerations and must not rely on moralistic approaches. Moral is merely a part of social infrastructure and depends completely on the system of social and property relations. Even though moral is certainly influencing human behavior, it never determines people's social and economic interests - at most only their superficial expression. At the same time, not always people do understand or recognize their best interests, though nobody can judge about that better than them. Self-interests are defining a single cause of social morality – the system of social and property relations. Moral is merely a product of the system of social and property relations. The more perfect is the system of property relations the higher is a general level of morality in society, or simply the more moral or rather the more just and fair this particular society is. There is no direct relation between financial prosperity or national income and morality. However, since the system of property relations is shaping a level of morality while imperfections in this system and particularly exclusive property rights based on power and coercion are the one and the only impediment for economic efficiency and societal justice, we can say that the richer is particular society the more “moral” it becomes. First of all, rich affluent society contains less property rights imperfections and therefore less of economic and societal injustice, which is a single scientific expression and simultaneously a foundation for any morality. We can equally say that poor society is generally less moral or even immoral. All poor nations are poor exactly because of the huge level of either historically dominated or currently existing property rights imperfections accompanied by significant violations of social rights, by elevated economic and social injustice. All people and all nations are originally endowed with equal development opportunities, all of them regardless of the race or nationality are the representatives of a human species. Therefore any society is bound by the same development and evolutionary tendencies, all of them initially being in the same start-up conditions as well as being originally equally endowed. Some nations are richer than the others because due to a variety of objective and subjective reasons they succeeded in fighting property rights imperfections and violations better than the others.  Historically, mechanisms of survival and development of mankind have been and still are based on self-interest oriented human nature, whatever imperfect those mechanisms might be, and it does not matter whether those self-interests are moral or immoral. If self-interest is economically and socially fair or if it is not based on property rights imperfections or on exclusive social and property rights then it is moral and socialized, alternatively it is immoral and non-socialized. However, from the point of view of political economy, overall self-interests are egocentric in terms of their first incentive since initially they satisfy particular individual, then may be his family, afterwards probably some social or economic association and in the last instance – society as a whole. Particular individuals may have rather different interests – even absolutely altruistic or self-denying. However if we are talking about human sociality, society as a whole as well as about social evolution all separate vectors of particular human interests are directing us towards consideration of human behavior in terms of the coincidence of egocentric human interests within the societal structure. Otherwise, we cannot understand either the current stage of societal development or social evolution as such. We are not considering mankind or human species as it is, but rather as we want it to be. Since this book is about general principles we will not exclude, however, an overall possibility of some qualitative evolution of the human nature. Even if something like that will happen one day, this will not spread its influence upon the past and will not affect earlier and contemporary development tendencies. There is no guarantee, however, that qualitative evolution of the human nature towards less egocentricity is overall beneficial. Vice a versa there are all kinds of indications, threats and experiences that it might be not. We will study those later.

Under classical economic tradition as well as under Marxian materialistic approach to social evolution and human history, it is being assumed that historically human beings are following their particular private interests in a mode of priority comparatively with the interests of any other people. Though not necessarily all separate human beings, but rather human being overall as species. This, in fact, is a basic common assumption both of Marxian and of classical liberal visions of society and economy as well as a common hypothesis both of the Marxian and of the Adam Smith’s political economy. Rather notable is the fact that fairly extreme schools of economic and political thought share this view. Sufficiently original view of human nature was advanced by the communist tradition, which believes or used to believe in a possibility of formation of the self-socialized human beings of a new type. At the beginning, however, it is considering social evolution from the point of view of originally self-egocentric human nature (as classical economic tradition does), which as a result of the communist organization of society finally will become self-socialized and evolve to some new type of human specie - to something called in former Soviet Union - a “Soviet man”. But even in non-communist societies, egocentricity of human nature was attributed by Marxism only to the so called “exploiting” social groups or classes, while “exploited” masses of population presumably are of a much more “socialized” nature. In reality more socialized nature of “exploited” or of monopoly dependent social groups is connected rather with their social, physical or intellectual inability to obtain any exclusive social rights and to establish or to enter in any monopolistic social group. Monopoly dependent individuals and social groups or any non-monopolistic individuals for that matter are simply socially weaker than the monopolistic ones; otherwise overall they will not hesitate to become “exploiters” and to loose their “socialization”. Lack of exclusive rights with particular individuals and social groups can only be explained by their general social weakness. Lack of social monopolization normally is not conditioned by the respect of laws, social order or of any other elements of social infrastructure. People may be frightened to break a law and in fear of punishment do not commit crimes or acts of property rights violations. But we are not talking now about illegal property rights violations, which represent only a part of all property rights imperfections. We are talking about social monopolization, which on the contrary to property rights violations has nothing to do with legal responsibility. Social monopolization is always beyond and above the law, moreover it is the law and it is protected by the law exactly because it emerges and exists at the highest level of societal structure. Social monopolization dictates and creates the law, the entire legal system and the entire social infrastructure. Legislative barriers can serve as limitations for personal behavior. But there are usually no any legal barriers for social monopolization, vice a versa the latter is normally being protected and praised by the entire social infrastructure, and therefore people in this case are much less limited by any principles, laws or moral considerations in realization of their self-interests related to absolute power and exclusive property rights. The only thing, which is limiting their appetites, is their own social, physical or intellectual inability. In this sense, Marxism and several other ideological currents are mistaking equalizing socialization and morality with “exploited” social groups. Some people are poorer, while the others are richer not because the former are more moral and the latter are less moral, but only because the former are socially weaker and cannot fight for economic and social benefits in the way the others can. 

Self-socialization generally implies a voluntary self-limitation of a particular self-interest and subordination of the actions of particular individual to the interests of some social corporation or even to the interests of society as a whole (whatever society is). Actions of particular individual can acquire a self-socialized nature, among other things, on the account of misunderstanding of the nature of social and property relations and of dominating in society mechanisms of income appropriation or alternatively as a result of the belief that any exclusive non-socialized rights are missing in particular society. A simple example will illustrate how exclusive property rights always fit in the law and do not remain outside of it. Let us consider a proprietor of some company, which is manufacturing steel and which his father or may be even his grandfather used to own. Our proprietor is quite a common character without exaggerated ambitions and even without any real choice in life and in his line of occupation inherited yet from his father. In no way he is self-socialized. He is pursuing his own quite pragmatic interests in the first place. And in no way he is non-socialized; he has no any exclusive rights and every day he is struggling with his competitors, which are quite numerous. He is socialized owing to a non-monopolized free market of steel and steel products. His activity besides bringing benefits to himself as a proprietor is also directly benefiting certain other people through taxes and salaries. It is also benefiting every member of society indirectly through lower prices or higher incomes as a result of this particular industrial activity under the competitive environment, technological innovations and economic growth. Even people who are not buying his steel are also benefiting because those who are buying steel, thanks to the market competition, technological improvements and economic growth every year are paying lower relative prices for his products and therefore they have more money left to buy other goods and services. Even more than that, with the time passing by, the final products made from his steel are becoming comparatively less expensive on account of the factors above. This is spreading all over economy raising aggregate demand, output or raising everybody’s real income. But let us suppose that one day our steel manufacturer receives an invitation to join a steel cartel, which is trying to monopolize steel distribution in this particular country. Our man understands that if he will not join the cartel he probably will be forced out of business. He has two options now. First one is to join the cartel – a monopoly of the social nature (organized for ruling out potential market entries based on mechanisms of power and coercion) - and in this case due to associated exclusive property rights, price influence situation and appropriation of monopolistic income he will harm, to one degree or another, all the people left outside of the steel cartel. His financial or material interests will be in direct contradiction to the interests of the other people. Therefore his interests will become to be non-socialized. On the other hand, he can refuse to join the cartel, stay out of social monopolization and damage his own business or rather ruin it completely. Instead, in this case his actions will bear a self-socialized nature. He cannot maintain or continue his previous status quo or his previous position of the market-socialized individual. There is no any third option when people are staying in front of the social monopolization. Overall, people are not doing anything non-socialized either (i) because they are frightened by responsibility (mostly under the property rights violations of private nature), or (ii) they are socially weak or (iii) because they are self-socialized.

If we are considering human nature to be of the self-socialized and not of egocentric and self-interest oriented nature, we have to assume that people (not some of them and not several of them, but all of them or human species as a whole) are pursuing the interests of a higher societal level in the mode of priority to the interests of the lower social level and first of all to their own interests. We can distinguish two types of socialization. First one is self-socialization, which implies that a particular individual voluntarily, according to his personal convincement or according to his own personal vision of reality, is pursuing interests of the higher social level in a mode of priority superior to his own interests. Second type of socialization implies that interests of a particular individual are getting so close to the interests the of highest social levels, or what is the same to the interests of all other people, that egocentrically pursuing his own interests, at the same time he is acting in the interests of more universal societal structures or even of society as a whole. This type we call simply “socialization” or “market socialization” or even “social socialization”. Socialization also implies that there are no any real social (based on power and coercion) opportunities for a particular individual to generate exclusive social and property rights or otherwise that there are no any real social opportunities to implicate mechanisms of power and coercion in value creation process.

Definitions of higher and lower levels of societal structure are certainly fragile because any property at any social level always belongs to concrete individuals or to groups of individuals. In reality every social level or every social stage is having its own proprietors, income appropriators and sometimes even appropriators of exclusive or monopolistic income. Every level of societal structure or every association of individuals is having its own direct or indirect, explicit or hidden proprietors. Since underneath every people’s association are concrete private and first of all material interests, the notions of socialization as well as of self-socialization can be applied not only to particular individuals, but to all levels of societal hierarchy as well. In the very same way as the interests of particular individuals, interests of family, of corporation, of the State and even those of society can be non-socialized. Actions of the State, which also represents a particular type of social association and of associated with the State social groups, as we shall see in the second part of this book, can be and in fact to one degree or another always are non-socialized.  

Socialization in a broader sense implies that the interests and actions of particular individuals, social groups, corporations and those of the State at least do not contradict to interests of the outsiders of these societal structures. Thanks to a God given unique opportunity of market socialization, economic actions of any particular individual can benefit all other members of society and even the entire mankind. Social and economic competition between self-interest oriented human beings is generating social and economic preconditions for socialization as well as for the perfect competition or for elimination of the property rights imperfections. Market, unlike institutions of power and coercion, is a single substance, which is generating a truly economic cooperation - on the contrary to all other prominent forms of social “cooperation”, which deep down inside are based on coercion.

Market, being an objective category, always exists, whether we want it or not – it exists even when we try to suppress or to completely destroy it. Market is a direct expression of natural (independent from mankind’s overall will) economic laws and tendencies and, first of all, of the maximum economic efficiency requirements, which are materializing exclusively through the market mechanisms. Nobody can abolish, destroy or even restrain the market. It is absolutely superior and independent from humanity and human subjectivity, human desires, from egocentric non-socialized interests. People cannot destroy, not even “slightly” suppress the market, but market violations and artificial regulations can and always do destroy any society. Market or market laws are absolute and immanent to the human society and always exist as long as society exists. Market is not buying any ideologies, which are designed to conceal somebody’s egocentric, non-socialized, unfair and inefficient patterns of income appropriation. Market will always show how much worth any commodity, any State, any ideology or even any society. Even in the Soviet Union, where monopolization reached its highest level throughout the entire human history and price influence situation was extreme, market laws and market forces were working in the very same way as they did in the United States and in other market economies. Social monopolization and exclusive property rights have created enormous inefficiencies of different kinds as well as a huge social injustice and have finally ruined communism as well as hopeless, disgusting and inefficient society.

Laissez-fair explanation of the social and economic development is embedded in the very fundamentals of the human nature. To change it - takes to change the human nature. Communism tried once with a total failure at a cost of tens of millions of human lives worldwide. Marxism and other communist ideologies overall suggest that overall the human nature (not just separate particular individuals) can be converted into the self-socialized one and that people in their vast majority will prefer interests of the higher social levels to their own interests. However, the very same communist ideology was exploiting this thesis in purely egocentric interests based on particular patterns of monopolistic income appropriation associated with the communist society, which we will discuss later in details. Whether it is possible to change human nature under the natural process of social evolution and economic development – the time will show. But, overall, the evolution of human beings and changes in human psychology are happening throughout the entire history of mankind. Profound and complex social and economic metamorphoses are influencing human psychology all the time. A fundamental reason for the evolution of human beings is economic and social development, and more specifically important changes within the system of economic, property and social relations brought up by this development. Due to these changes in social and economic conditions are emerging all transformations in self-apprehension or self-recognition of the human beings as well as all new social perceptions and societal ideas.

Metamorphoses of human nature do not materialize without certain effects upon society and societal processes. If human nature will ever evolve to some kind of new self-socialized species, then people will be exposed to a risk of losing recognition of their true real interests and thus also of losing capacities of social counteraction. It is hard to say whether mankind generally will finally win or lose from such developments. Particular individuals experiencing self-socialization for a long period of time and, furthermore, generations of people experiencing self-socialization may gradually become completely self-socialized beyond their will. Throughout the entire history we are witnessing certain notable manifestations of the self-socialization of particular individuals in different societies. Normally such manifestations are having strictly materialistic foundations underneath - financial prosperity and relatively low level of the visible property rights imperfections within the systems of social and property relations. With a comprehensive and all-embracing globalization many people are starting to think globally and to perceive that there are certain universal problems, which nobody can solve just on his own no matter how wealthy, or how fortunate he is. Self-socialization trend is not all that evident, because all these developments are not happening at once but rather represent a permanent evolutionary process.

A modern organization of economy and society being in many instances based on reason and rationale is influencing accordingly the human nature. Accelerating level of comfort along with economic and social welfare, with long-term confidence in future, with industrial organization of business processes without too severe or too visible social problems, without much of the revealed social controversies are creating preconditions for more and more rational and reasonable motivation of our actions on account of long time dominating human nature emotional one. Mankind is moving further and further away from animal instincts, passions and emotions, which basically form our self-interest oriented nature and is approaching to predominantly rational or analytical apprehension of reality, which in itself is generating a certain degree of self-socialization. In some distant or not so distant future this process might influence in some more radical way human brain and human genetics. Such transformations may well bring some qualitative changes in human nature and mankind will be in a position to rely upon this new human nature in social and economic affairs. However, the disparities in pace of scientific and technological progress as well as the disparities in social and economic development between various countries and nations are influencing different individuals, social groups and even different countries to a rather different extent. Here lies another dangerous potential for a rather crude social monopolization - an opportunity to profit from the different levels of individual self-socialization. Some people may have more self-socialized nature, while the others less self-socialized one – the level of self-socialization is never the same for all people. Those of the less self-socialized nature will certainly try to benefit on account of their more self-socialized compatriots (they actually always do). Coming down to our realities - so far, human nature remains to be of a predominantly self-interest oriented and egocentric kind and in order to describe any economic and social relations in our society we have to build our deliberations exactly upon this type of human nature. The better are the social and property relations or the less imperfections exist within particular system of social and property relations, the more socialized are all self-oriented interests in this particular society.

Not only we have to assume that under the self-socialization human beings are rejecting their own interests in favor of the interests of some higher social level, but also that the higher is the social level the higher priority people are attributing to it in terms of their interests. Speaking otherwise we have to assume that, for example interests of society are of higher priority to a particular individual than those of his family or of his own self. If they are not - then he is not self-socialized, though he might be socialized owing to particular social conditions. A person can be, for example, a good father and a good husband but a “bad” person for the rest of society if he possesses particular exclusive rights and appropriates exclusive income. On the other hand, if he rejects his chance to acquire exclusive rights and exclusive income – he can be “bad” for his family (at least from material or financial point of view) and “good” for the other people. There is nothing in-between. One can be a perfect husband and a farther, but also a gangster and a crook; one can be an excellent self-denying employee, but a company he is working for may steal and squander public money; one can be an excellent professional in public finance but the State he works for may slaughter its citizens. Only particular individuals can be self-socialized, but not the entire society, nation, state and moreover not the entire mankind. Otherwise self-socialization of the nation would mean that in society there are no any property rights imperfections, no anything social and no any mechanisms of power and coercion. Not even mentioning that self-socialization might be rather controversial in terms of its social value. Historically up until now people are quite in counteraction with each other and first of all in the counteraction in terms of interests related to property. Human nature has no limits for its desires and appropriation interests. Particular individual within the societal perspective would envy almost everything what other people have and only counteraction on behalf of those other people is not allowing him to acquire a total control over the entire property in this particular society. Since self-socialization mainly emerges when person is considering social reality to be free from property rights imperfections, exclusive property rights and social injustice, it is quite difficult to imagine a wide-scale self-socialization under the violent social counteraction. For wide-scale self-socialization to take place on a societal level the social and economic conditions must rise on such a height that violent social counteraction would significantly diminish or even disappear completely. This is only possible when imperfections in the system of property relations and resulting social and economic injustice (which is a main visible cause for social counteraction) are considerably reduced. From psychological point of view there are two fundamental reasons why mankind, as specie, cannot escape social counteraction. First one is connected with a combined logical and emotional apprehension of reality on behalf of particular human beings or with the unique two-dimensional rational and emotional type of human nature. Even though within a process of social evolution people are abandoning emotional image-based apprehension of reality and are more and more leaning towards the domination over their behavior of reason and rational, nevertheless emotional element continues to be significantly present in human nature. It represents one of the main causes of human egocentric self-interest and self-recognition, which basically are leading person towards non-socialized types of behavior. If one-day emotional apprehension of reality will disappear completely - this may well create a strong case for evolution of mankind to some new specie. The second reason for social counteraction from socio-psychological point of view is connected with uneven and non-simultaneous socialization and self-socialization of human beings. It takes only one non-socialized individual to spoil the entire social harmony and to establish personal or group domination (dictatorship for example) with implication of the mechanisms of power and coercion. And such outcome is much easier to achieve under the conditions of wide-scale self-socialization of a large number of people.   

In reality, any economic activity of every single particular individual either benefits the other people or harms them. It is never neutral. It is benefiting society and all the people if this activity is socialized by the market and by social competition and if it is not based on exclusive social rights. In fact only those types of economic activity, which are benefiting all members of society, may be considered as socialized. If actions of particular individual coincide only with the interests of certain number of people united in some prearranged social corporation or social group we cannot say either they are socialized or not without further investigation of the entire societal structure and of the interests associated with its every level. Interests and actions of particular corporation or of the association of individuals at any given social stage can be non-socialized as well and can embrace social monopolization or exclusive social and property rights. In this case they are in a direct contradiction with the interests of society as a whole as well as with the interests of every single individual outside of this association in particular. Let us take an example of a particular individual who is a hard-worker, highly qualified professional and a very nice human being. He is employed by some corporation in a legal department and his contribution is highly appreciated by his superiors and therefore by the company as a whole. There is one problem – this company owing to certain social circumstances is having exclusive property rights – it is a social monopoly. Because of complex social and economic relations, the company enjoys price influence situation on particular market and therefore every single individual has to pay exclusive or monopolistic price for the company’s products. Social property rights of the people are being violated. Economic activity of this particular corporation is neither socialized by social and economic competition nor self-socialized. Let us also suppose that job responsibilities of our man under consideration are connected with a legal support and public maintenance of company’s exclusive social and economic position. Under these circumstances company’s operations are directly contradicting to interests of the other people - outsiders. A real professional contribution of our individual is upholding and protecting the non-socialized social corporation and therefore cannot be considered as “socialized”, particularly if he is participating in appropriation of monopolistic income from this particular commercial undertaking. 

Just like social monopolization or exclusive property rights are having nothing to do with a matter of legality (or of illegality), socialization as a concept is also absolutely independent from legal infrastructure. One can most solemnly respect the law during his entire life and still be non-socialized. A person can possess absolutely legal exclusive social rights absolutely legally based on mechanisms of power and coercion and be a perfectly non-socialized or anti-social individual. In this respect, we might think of a slave-owner in ancient Rome, who is a highly respected citizen. However, having exclusive social rights not only upon other people’s property, but also upon other people’s lives (slaves) he is nothing else as an absolutely non-socialized individual. On the other hand, if we think about the overthrowing of communists regimes in Czechoslovakia or Romania in 1989 we can see absolutely illegal yet mostly socialized actions as they were directed against exclusive social rights of the communist dictators. Therefore, human actions can be illegal yet socialized and vice a versa - legal but not socialized. This is rather straightforward coming from the very nature of social monopolization and of exclusive social and property rights. At the end of the day it is exactly the property rights imperfections what makes individuals, corporations, states and societies non-socialized.   

Sometimes happens that people associate their interests with the higher levels of social structure and for that reason self-socialize themselves to one degree or another, at least in their intentions if not in their deeds. For example, a volunteer, who is sacrificing his life for his own country at some war, pursues interests of a higher level of social structure to his own interests and even to his instinct of survival. But this does not mean at all that people who are associated with this higher social level or people who are true real proprietors of some social association at this higher social stage will act in the same manner, sacrificing their own interests for the sake of his. In reality it may easily happen (and most of the time it does happen), that what this soldier is sacrificing his life for, are egocentric and non-socialized interests of the people connected with particular exclusive types of income appropriation. It is just that those interests are remarkably hidden from an outside observer. 

“The first glance at History convinces us that the actions of men proceed from their needs, their passions, their characters and talents; and impresses us with the belief that such needs, passions and interests are the sole springs of action — the efficient agents in this scene of activity. Among these may, perhaps, be found aims of a liberal or universal kind — benevolence it may be, or noble patriotism; but such virtues and general views are but insignificant as compared with the World and its doings. We may perhaps see the Ideal of Reason actualised in those who adopt such aims, and within the sphere of their influence; but they bear only a trifling proportion to the mass of the human race; and the extent of that influence is limited accordingly. Passions, private aims, and the satisfaction of selfish desires, are on the other hand, most effective springs of action. Their power lies in the fact that they respect none of the limitations which justice and morality would impose on them; and that these natural impulses have a more direct influence over man than the artificial and tedious discipline that tends to order and self-restraint, law and morality.” (Hegel. The philosophy of history)

Particular individuals may well self-socialize themselves without a strict reliance on concrete social infrastructure, without taking into account exclusive social rights and sometimes even without taking into consideration social and property rights violations existing in society. However, the general tendency of social evolution is generating self-socialized individuals in bulk only in strictest correspondence with the level of property rights imperfections persisting in society. By and large, the less of property rights imperfections exist in particular society, or to be more precise the less property rights imperfections people think exist in society, the higher is an absolute number and a share of self-socialized individuals in total population. Unfounded on social realities self-socialization may actually be harmful not only for self-socialized individuals themselves, but for the entire society as well. Self-socialization implying an ignorance or disregard of property rights imperfections normally tolerates or even motivates egocentric non-socialized actions of monopolistic individuals and social groups making society as a whole worse off in terms of social justice, economic efficiency, while quite often also in terms of tyranny and violent social coercion.

People do not always recognize and behave in their best interests, even if they are not intentionally self-socialized. This is happening because of the two fundamental reasons. First is insufficiency of knowledge and information available to particular individual. Rather often, especially in historical retrospective, people are having problems with an adequate apprehension of what is really the most efficient behavior in the best of their interests. Second stands in the fact that certain individuals and social groups in their own egocentric (mostly material) interests are always eager to obstruct an adequate apprehension of reality as well as the truth about what is in the best interests for the other people. For such purpose exist various ideologies, which overall are trying to convince people that their interests stand in following egocentric social ideas and societal policies benefiting particular monopolistic individuals and social groups. Both causes are being seriously influenced by economic development and social evolution. With higher level of social and economic development people are becoming more educated and more intelligent and are able to better realize what is in their interests and what is against those interests. Unfortunately, changes in apprehensions of the self-interest do not necessarily lead to the most efficient macroeconomic or societal outcome. Quite often they are leading to a regress in social and property relations. To mention communist society, communist ideology and associated with them models and patterns of social behavior and of self-interests’ apprehension. Communists initially forcibly seize the power or change the system of property relations and only afterwards are trying to influence a people’s apprehension of their self-interests. It is merely a forcible or coercive attempt to change self-interest apprehension and because of that this attempt is always so painful. Historically, self-interests’ apprehension is evolving together with advancement of knowledge and availability of information. There are normally different ways to improve particular societal system, nevertheless only the closest to existing realities or the least destructive methods brings the best or the least painful and the most efficient results. The most cardinal way to change societal realities is social revolution or violent forcible transformation of the existing system of social and property relations into some new one. This is a very painful process, first of all because it does not change a bit the underlying fundamentals of any system of property relations – an overall people’s apprehension of their self-interests. It is rather taking many people’s lives, than changing their apprehension of their interests. Even the lasting radical exercise undertaken by communists in order to modify self-interests apprehension was able to alter the real statement of things very relatively. This exercise neither had shifted nor even was it designed to shift self-interest apprehension of individuals and social groups in power, of those who were benefiting from the entire communist system of property relations. It takes a significant amount of time to change human psychology and people’s apprehension of their interests – it is an extremely long-term and painful process. Nevertheless, such changes are happening all the time. For example, after the Russian revolution in 1917 a significant number of people, not only in communist countries, but also in economically developed ones were associating their aspirations with the communist organization of society. Fortunately, such an extravagant perception of interests afterwards was in permanent decline. Modifications in people’s perception of their interests are connected with economic development, with evolution in the system of social and property relations as well as with expansion of knowledge and with accelerating accessibility of information. Knowledge and information are making people better understand their interests and see them under a rather new angle owing to the removal of different ideological dogmas, which are hampering a clear recognition and appreciation of their interests.

Understanding of human self-interests has significantly varied historically and is still quite different today among various cultures, countries and nations. In almost each historical period a perception of human self-interests by people in the West and by people in the East, for example, were quite different. “West” traditionally is more relying on individualism, freedom and self-sufficiency, while “East” is more favoring collectivism, subordination and cooperation. Overall, the West historically much less believes in any “big ideas” or in any societal ideologies. It used to place a man or a private individual and private interest higher than any kind of social structure. East, on the other hand, was eager to subordinate personality to interests of the higher stages of social hierarchy - of a clan, of some social and economic corporations and of the State. Our days everything has changed. East employed a lot of western social ideals, while the West acquired a lot of eastern values, and today we have a more or less standardized global eclectic mix of social principles and values. Generally speaking it is exactly the higher level of property rights imperfections in society and associated with them poverty what creates preconditions for collectivism, for reliance on other people, on cooperation, on social corporations, social groups and finally on the State. The richer people and nations are the more individualism is gaining over collectivism. Money, wealth and economic development are destroying collectivism. On the other hand, the more advanced is the level of knowledge, of informational and technological development - the higher is the level of people’s recognition of their real true interests and the lower is the possibility to enslave them in favor of some “big idea”. Speaking more trivially, the higher is person’s income the less he needs any kind of assistance from the other people and from some outer social structures. Most importantly - the higher is his income the less he needs those outer coercive social structures.

 


Chapter 4. Social Evolution

Property is an objective single source of self-realization of the human nature. Particular human being can express himself in different ways and accumulate proceeds of his self-realization in a variety of different forms such as for example intellectual property, masterpieces of arts, scientific discoveries, college graduation, construction, manufacturing, etc. - all of them in the last instance being united under one definition of property. Social and economic relations between private individuals arising in the process of creation, exchange and appropriation of property we call property relations. Property relations manifest a course of interaction between different proprietors in creation and accumulation of material wealth. Property relations, as we have seen before, are also a single criterion, which is exhibiting the level of socialization of particular individuals, groups of individuals, corporations and of social associations. It is exactly the system of property relations what is determining an aggregate level of socialization of all private interests in any particular society.

Marxist vision of society and social evolution traditionally includes three fundamental concepts – interconnection and contradiction between production factors development and system of property relations, a theory of basis and superstructure (or of property relations and social infrastructure) and a theory of “class struggle”. Marx revealed in the most explicit way an evolutionary approach to history and the fact that social evolution is rooted in economic motives, economic interests and first of all in property relations. Main problem of his hypothesis is his fascination with certain political conclusions to which he adjusted not only his entire analysis, but also several basic assumptions of his theory. Unfortunately, Marx failed to understand the very nature of property relations, which represent a key factor of his approach to history and upon which his entire theoretical construction is built. Without such an understanding his practical conclusions were doomed to be inconsistent with reality and with human nature. Nevertheless, he clearly pointed out two very important ideas – first, that there is such thing as social evolution and second that social evolution is having a rather materialistic nature being rooted in socio-economic and property factors.

“The materialist conception of history starts from the proposition that the production of the means to support human life and, next to production, the exchange of things produced, is the basis of all social structure; that in every society that has appeared in history, the manner in which wealth is distributed and society divided into classes or orders is dependent upon what is produced, how it is produced, and how the products are exchanged. From this point of view, the final causes of all social changes and political revolutions are to be sought, not in men's brains, not in men's better insights into eternal truth and justice, but in changes in the modes of production and exchange. They are to be sought, not in the philosophy, but in the economics of each particular epoch. The growing perception that existing social institutions are unreasonable and unjust, that reason has become unreason, and right wrong, is only proof that in the modes of production and exchange changes have silently taken place with which the social order, adapted to earlier economic conditions, is no longer in keeping.” (Fredrick Engels. Socialism: utopian and scientific)

Even though, Marx’s perception of social groups in their relation to private property is inconsistent with reality, nevertheless he was very close to understanding that it is exactly the people’s affiliation with certain exclusive types of property rights what procreates social groups or as he called them “classes”. Marx believed that the basic immanent societal contradiction stands in counteraction between monopolistic and monopoly dependent social groups as we have defined them previously, or between “exploiting” and “exploited” classes according to his definition. Just like Darwin suggested that competition for survival between biological species represents an engine of natural evolution, Marx thought that in application to human society the counteraction between private individuals and social groups represents an engine of social evolution. As we have seen before, particular material interests are uniting in social groups either in order to obtain exclusive property rights or in order to counteract them. From this point of view, social opposition or social counteraction between social groups is crucially important for understanding of social evolution. Only through social counteraction property rights imperfections can be removed or diminished, while a system of property relations exchanged for more efficient one.  

Counteraction between social groups with exclusive property rights from one side and between all the rest of society from the other, but particularly between monopolistic and monopoly-dependent social groups is the main tool, which makes property relations to evolve. Apart from this process, but at the same time in strict interconnection with it, another evolution is having place – the development of production factors – of Capital (including technology), Land and Labor. Production factors development based on accumulation of property is a dynamic trend, which is not only moving ahead our civilization, but which is also influencing evolution of property relations. On the other hand, property relations or rather property rights imperfections immanent to any property relations represent the one and the only impediment on the way towards perfection and development of our society and our civilization. Deep down inside this impediment is based on self-interest oriented egocentric human nature. Human nature is not directly oriented or not directly interested in pure economic development and in macroeconomic efficiency, but only in satisfaction of personal desires, wishes, wants and necessities or in personal microeconomic efficiency. Such satisfaction often happens on account of the other people as well as on account of the overall macroeconomic efficiency. Individual and group behavior based on universal egocentric human nature generating imperfections in system of property relations is producing the above mentioned obstacles for production factors development or for economic and social evolution of our civilization. Obstacles on the way of production factors development are manifesting themselves in economic inefficiency and in economic injustice (which natures we will consider in chapter 6). Economic inefficiency and economic injustice are slowing down both economic development and social evolution.

Attempts to benefit on account of the other people are simultaneously causing a counteraction on behalf of those people. On the contrary to evolutionary engine of property relations, which is basically having an entirely social nature (based on mechanisms of power and coercion), the underlying reason for production factors development - property or capital accumulation - is being connected with less social or ideally with non-social production and economic activity. Production factors development is always restrained and diminished by existing in society property rights imperfections, which direct outcome is that certain people are getting exclusive or monopolistic income on account of the other people and on account of an overall macroeconomic efficiency. If the system of property relations would be perfect or if there would be no property rights imperfections in society, then social evolution would be determined only by a permanent development of production factors. However, as a result of existing in any society property rights imperfections a certain part of economic resources is simply being wasted on account of economic inefficiency. Such waste, among other things, occurs because actions of particular individuals and social groups are often driven by objectives, which are rather distant from purely economic motivation and which are pursuing generation and preservation of the social (based on power and coercion) methods of distribution and redistribution of property and material wealth created by other people. Normally such situation is not only diminishing or sometimes completely annihilating real economic actions of monopolistic proprietors, but is also reducing economic incentives for monopoly-dependent social groups. The latter are being forced to give up certain amount of their property or income as a payment for exclusive property rights.

Social counteraction between social groups with exclusive property rights and the rest of society is not only continuously improving a system of property relations but, first of all, it is providing an impulse for production factors development eliminating social obstacles and barriers on its way. In this sense we can talk about counteraction between monopolistic and monopoly dependent social groups (which Marx called a “class struggle”) as about the engine of social evolution.

 “Freeman and slave, patrician and plebian, lord and serf, guild-master and journeyman, in a word, oppressor and oppressed, stood in constant opposition to one another, carried on an uninterrupted, now hidden, now open fight, a fight that each time ended, either in a revolutionary reconstitution of society at large, or in the common ruin of the contending classes.”(Karl Marx and Frederick Engels. Manifesto of the communist party)

Even though social counteraction is always there wherever exist property rights imperfections, it is equally evolving together with accumulation of property and wealth. The latter two are bringing along accumulation of knowledge and higher levels of social education and human self-recognition. Such evolutions are making people more and more sensible to any kind of injustice, however, normally directing them against visible or perceptible economic and social injustice rather than towards elimination of its causes, fundamentals and deep down roots.

Production factors development simultaneously is another fundamental factor contributing to elimination of particular property rights imperfections. As a result of production factors development the social counteraction is advancing and becoming more sophisticated. On the other hand, social counteraction improving system of property relations and removing social barriers for the free flows of economic resources is influencing economic or production factors development. At certain point in time production factors development resulting from people’s economic activity is coming in contradiction with the existing system of property relations. From that very moment existing system of property relations is doomed on disintegration and destruction. This destruction can be either forcible or peaceful. If social controversy or social contradictions are strong enough while economic inefficiency and injustice are rather intense and persistent – elimination of the current system of property relations is taking aggressive and even violent forms such as revolutions for instance, otherwise it happens peacefully. Production factors development immanently is always a positive element; it is bringing along improvements in all societal domains but, first of all, it brings prosperity and economic development. From societal point of view, production factors development is stimulating progress in man’s and society’s self-recognition and self-apprehension, in social justice, morality, law, education, etc. From economic point of view, production factors development is leading to an accumulation of capital and accumulation of knowledge, to more sophisticated skills and qualifications, to improvements in technology and in entrepreneurial skills. On the contrary to production factors development, property relations represent a rather conservative element, which normally is in opposition to a natural process of social evolution. Property relations tend to preserve and to protect an outdated social structure and social relations. At some point in time property relations are coming in such a contradiction with the requirements of social and economic development, that they can only be removed either by a total elimination or at least by a fundamental modification of the inefficient societal system and of the obsolete property regime.



 

 

 

 

 

 

 

 

 

Diagram 2. Social Evolution

Social counteraction is a very important and comprehensive social phenomenon, which deserves a special separate analysis. Constantly generating economic development production factors are at the same time influencing system of social and property relations. Stimulating and intensifying social counteraction production factors development is providing a permanent impulse for qualitative changes in society, social and property relations. Tearing apart dominating exclusive property rights (or dominating social monopolies), these qualitative changes supply a new extraordinary motivation for further development of the production factors. This is a very nature of never-ending cyclical process of social evolution. Peaceful social counteraction is not necessarily always free from particular acts of violence. Non-violent counteraction is rather an ideal than a real outcome. In reality peaceful social counteraction implies non-forcible or non-coercive improvement of the existing system of property relations and of the existing societal structure through a permanent and gradual evolutionary process rather than through any kind of social revolt. Particular acts of violence are not excluded even in the case of environmental or anti-war demonstrations, which by no means represent forcible social counteraction. We also have to differentiate between organized or planned and natural social counteraction. Peaceful social counteraction to any imperfections in social and property system is not only tolerable, but vice a versa is absolutely essential for economic development and social evolution. Organized forcible social counteraction or planned violent overthrow of the existing system of property relations and of the existing societal structure is a very dangerous occupation. It might happen that property relations, which such kind of counteraction is planning to destroy, have not yet came into a sharp conflict or contradiction with the necessities and objective requirements for production factors development. On the other hand, there is no guarantee whatsoever, that newly emerged as a result of organized forcible counteraction property relations and newly emerged societal structure will be any better than the previous ones. Another threat coming from violent elimination of the existing system of property relations is connected with the human nature and human interests. Particular systems of social and property relations as well as their elimination are closely linked with a lot of interests. While each and every interest, as we have seen by now, is eager to become exclusive with intermediation of the mechanisms of power and coercion at societal level. There is no guarantee, that people promoting the newly emerged system of property relations will not employ and abuse social counteraction in their own non-socialized, ambitious and egocentric purposes. Actually there is always a guarantee that at least somebody will try to utilize social counteraction and its outcomes in his own egocentric and non-socialized purposes. Even, if not exactly those people who are planning and organizing forcible social counteraction and social insurrections, relevant individuals with such ambitions will always come along. People, who are eager to benefit from new societal structure, from new system of property relations and from new emerging perspectives of property redistribution will always try to make the most out of social counteraction, out of new social conditions and out of the idealistic views passionately and impartially promoting those new conditions.

Social counteraction is an extremely complex and equally important phenomenon for understanding of sociality and of human society. In a broader sense counteraction embraces any contradictions between private interests. Since so far property rights imperfections represent an immanent part of human society, social counteraction is also an immanent for human society social phenomenon. Social counteraction is leading to and is materializing in certain balance of power between all private interests or between all individuals and social groups in society. From one side, the socially strongest individuals are always eager to acquire and to maintain exclusive social rights. From the other side, socially weaker individuals and social groups who are normally unable to obtain any exclusive rights are always trying to annihilate exclusive rights and privileges of the strongest and to get some exclusive rights for them shall the possibility arise. Definition of the social strength or of the social power of particular individual or of particular social group covers all types of human capacities (physical, intellectual, educational, material wealth, social status, inheritance, etc.). These capacities are helping a person or a social group in the contest or in competition with other people and social groups for one’s own exclusive social and property rights or, vice a versa, against exclusive rights of the others. The socially stronger are particular individuals and social groups the higher are their abilities to counteract or to struggle with other individuals and social groups. Social strength, first of all, depends on two fundamental factors – (i) on the relation to mechanisms of power and coercion and (ii) on the material wealth of particular individuals and social groups. Since material wealth of particular individuals, groups of people, social groups and of the entire nation is determined by both social and economic factors, an achieved level of economic development and social evolution are the main causes, which are shaping intensity of social counteraction and an overall balance of power in society. The more advanced or the more sophisticated is social counteraction to any property rights imperfections, to exclusive social rights and to societal injustice the more just and more civilized is particular society. Together with accumulation of material wealth or together with economic development, monopoly dependent social groups are becoming richer and better off, more educated, more knowledgeable and more powerful. Simultaneously are growing their capacities to counteract monopolistic social groups.

Social monopolies generally and production factor monopolies in particular cannot be maintained and supported by purely economic tools. They cannot be maintained naturally exactly because they are based on macroeconomic inefficiency and social injustice, which are always calling for social counteraction. Both their formation and their preservation can only be realized by non-economic means, such as power, coercion, ideology, law, habit, cultural and educational prejudices, etc. All these elements we unite under the term “social infrastructure”. Sometimes, it seems that social background or social infrastructure is shaping economic behavior or that embedded social behavioral patterns and motives prevail over economic ones. For example, sometimes people imagine that laws, moral sentiments or existing societal structure is determining social and even economic behavior or that some people may prefer social rewards or social recognition (such as different honors, titles, positions, privileges, etc.) to economic ones. Even though certain people might prefer now and then social rewards to economic ones, in the long-term all those are either directly aiming at concrete economic benefits and concrete patterns of income appropriation (in which case they represent pure investments) or they simply represent luxury goods when a person is having so much money that he can buy social recognition just like he would buy some piece of art or some fancy car for example. In this case we cannot say that he prefers social rewards to economic ones – this is being merely a one way of spending his fortune.

In reality social infrastructure, though is having certain influence upon personal behavior, education and values, is far less strong motivation for any human actions especially at the aggregate societal level than social (based on mechanisms of power and coercion) and material interests. Sociality and social motivation are one hundred percent correlated with exclusive property rights and with exclusive income; otherwise there is nothing social in motivation and there is nothing social in society. Something is social only if it is based, in one way or another, on the mechanisms of power and coercion and that is exactly what society or social infrastructure is all about. In the long-term, any social infrastructure is deteriorating and cannot explain either economic or social behavior of particular individuals simply because of the continuous emerging and dismantling of the entire row of social structures, which are qualitatively changing and challenging one another. On the other hand, such categories as property, mechanisms of power and coercion and human interests (first of all human economic or material interests) are there with us all the time; they are immanent to human society and to human beings and almost never change or even never evolve. It cannot be denied that social infrastructure is having a certain influence on economic and social behavior of concrete individuals and even on the entire system of property relations. In the short-run particular individuals and social groups can benefit much more (including economically or in terms of income) from compliance with existing societal structure and with accepted norms of social behavior, than by breaking any rules, norms and regulations. Strategically it might be rather profitable for us to follow some predetermined patterns of economic and social behavior, even if we do not like them or do not believe in them. This is the case when societal structure is relatively favorable to our economic and social interests. However, if only people are getting a feeling that social infrastructure is not satisfying them anymore, does not benefit them (first of all financially) or that they can expect more significant gains by obstructing or trying to obstruct social rules, right away they will be inclined to forget about any social requirements. If such feeling is strong enough with a large number of individuals, at one point in time they might be even able to destroy existing societal structure or, what is the same, to destroy existing type of society. Interconnection between property relations and social infrastructure is by and large accurately described by Marx.

 

“…in every historical epoch, the prevailing mode of economic production and exchange, and the social organization necessarily following from it, form the basis upon which it is built up, and from that which alone can be explained the political and intellectual history of that epoch …” (Karl Marx and Frederick Engels. Manifesto of the communist party. Preface to 1888 English edition)

Balance of interests and primarily the balance of material interests of all members of society is determining particular system of property relations. Property relations built on the balance of people’s interests or more precisely on the balance of strength and intensity of those interests are shaping all elements of social infrastructure, which is usually called “society”, even though this term is being understood mostly in a rather sentimental, moralistic, biased, ideological and unscientific way. Social infrastructure incorporates law, politics, culture and education, ethics, moral, religion and anything else what comes to mind in connection with society. Social infrastructure is playing a dual role in terms of its influence upon economic development and social evolution. During emergence of particular social formation, social infrastructure normally helps to support and to establish the new, more progressive system of property relations. Later on closer to disintegration of particular social formation, it is starting to play a conservative or even reactionary role aiming at maintenance and preservation of inefficient and obsolete type of social and property relations. It is rather difficult to determine when social infrastructure is accomplishing its protective role and when it is becoming to be an obstacle on the way of social progress, economic development and social evolution. It is also difficult to say if this cyclical process ever ends and if one-day humanity will be able to overcome all property rights imperfections or at least all forms of social monopolization in society.

To destroy production factor monopolies is rather difficult, not only because they are convenient and profitable for certain individuals and social groups, but also because they are providing those individuals and social groups with exclusive or monopolistic income. The latter is a very powerful tool for maintenance and support of any social order. Maintenance and the very existence of social monopolies are always relying on the interests of particular social groups, which are participating in distribution of monopolistic income either directly from their economic or legal property or sometimes indirectly through different forms of income redistribution. Because exclusive income associated with production factor monopoly is much more complicated phenomenon than the one associated with structural monopoly, essential role in maintenance and preservation of production factor monopolies as well as in distribution and redistribution of associated monopolistic income is playing the State.

Microeconomic efficiency is usually being defined as a correlation between output and input. Following this principle, an understanding of macroeconomic efficiency can be derived from a relation between achieved level of economic or production factors development from one side and between the level of economic inefficiency represented by exclusive property rights - from the other. In abstract macroeconomic efficiency formula, we can consider a level of production factors development as a macroeconomic output, while the payments to proprietors of various economic resources or of various production factors as macroeconomic input. Under conditions of social monopolization, additionally to the payments to all proprietors of economic resources, people have to pay additionally to monopolistic proprietors for their exclusive property rights. Therefore, the level of social monopolization or of social exclusivity, being an additional cost to the people, simultaneously represents a denominator for the level of economic development. Equally we can conclude that in society free from any social monopolization (if such kind of society ever exists), even and constant development of production factors will actually be a single cause of social evolution.

To constantly deliver on social evolution mankind has to accomplish simultaneously two tasks. First, we have to work in order to develop production factors, and, second, we have to fight any property rights imperfections generated by self-interest oriented and egocentric human nature. We do not have any choice and we are doomed to do both things together, whether we want it or not. Particular person can be a “free rider” under either of these tasks or even under both of them, but mankind generally cannot.

 


Chapter 5. Strength and Elimination of Monopoly

Monopolies generally and production factor monopolies in particular essentially emerge owing to a self-interest oriented character of human nature. This fact in itself is determining a social nature of monopolization. However, in real life economic and social monopolizations are significantly interconnected. Foundation for this interconnection is in the very same self-interest oriented human nature. In the best interests of a particular monopolistic proprietor is to maintain his privileged situation (which may have emerged owing to purely economic reasons) as long as possible while preservation of economic monopoly by social means based on power and coercion is providing him with the possibility to receive an extra income and associated higher social status in the longer-term perspective.

Comparatively with structural monopolies, production factor monopolies normally are more dispersed in terms of their proprietors. Monopolization of particular production factor is being carried out by people united in specific social group and not by separately taken individuals or by groups of individuals. Slave owners under slavery and land barons under feudalism are the examples of real true proprietors of the production factor monopolies under these particular social formations. This brings us to another crucial point for understanding of property rights imperfections and equally for understanding of ways and means for their elimination. It is connected with social and economic strength or power of monopoly and with an overall level of property rights imperfections in society. Since property rights imperfections are expressed by exclusive social rights of particular individuals upon certain types of property on the one hand, and by a limited or restricted access to the same property for the rest of society on the other hand, we can assume that the level of this exclusivity or of this limitation is determining the strength of monopoly. We also have to understand a difference between the strength of one separately taken monopoly and between the general level of property rights imperfections in particular society or within particular social formation. In reality in any particular society usually exist or are about to emerge more than one kind of property rights imperfections or rather a multiple variety of them. General level of property rights imperfections within the system of property relations is characterized by a compound strength of all exclusive social and property rights existing in particular society. Without social counteraction, social monopolies would emerge permanently in different kinds and in significant numbers, because almost every single individual is eager to establish and to maintain his own monopoly or his own social and economic exclusivity. Overall, a level of property rights imperfections in any particular society is characterized by a compound strength of all existing social monopolies - both production factor and structural ones.

Strength of monopoly, its social power, its price influence potential and its ability to determine income distribution and redistribution patterns in society depend on two fundamental factors. First one is the size of monopolized property or the size of monopoly. The larger is a size of monopoly both in absolute and in comparative (to the entire economy) terms and the higher is a level of appropriated monopolistic income, the stronger is the particular monopoly. This dimension relates to material and quantitative characteristics of property and we will call it economic strength of monopoly. Second factor is of a much more social (based on mechanisms of power and coercion) nature. It is being connected with an access to monopolized property on behalf of particular individuals and social groups. The less individuals and social groups are integrated into social and economic claims upon monopolized property the more socially exclusive it is and therefore the higher is its power and its strength. This dimension mostly comes from imperfections in system of property relations as well as from social and power characteristics of monopoly and we will call it social strength of monopoly. The two dimensions of monopoly’s strength are not only determining a level of property rights imperfections generated by particular monopoly, but are also exhibiting a balance of power between this particular social monopoly and between other monopolies existing in society from one side, and between this particular monopoly’s proprietors and the rest of society from the other. Both these factors determining monopoly’s strength are in a quantitative or scale relationship in terms of the level of access of individuals and social groups to monopolized property in case of the social strength of monopoly, and in terms of a quantitative or material dimension of monopolized property and of monopolistic income in case of the economic strength of monopoly. Social and economic strength taken together and in their combination or in their compound influence are determining an overall strength of particular social monopoly. The higher is the social strength of monopoly the more possibilities for exclusivity and first of all for exclusivity in income appropriation it generates, simultaneously creating preconditions for the expansion of this monopoly’s economic strength.

Since social strength of monopoly is based on exclusive property rights and since property relations are determining the entire legal, political and social infrastructure as well as all social rights in society, concentration of exclusive rights with the narrowest circle of private individuals describes a nature of what we usually understand under the term “power”. Generally speaking, understanding of “power” is rather attributable to the State level (especially in modern world), where all the instruments of power and coercion are concentrated. Since any exclusive property rights or any social monopolization is generally possible only through utilization of the mechanisms of power and coercion, which exist almost entirely at the State level, one needs a certain degree of power or a certain degree of association with those mechanisms of coercion in order to establish and to maintain any social monopoly. The narrower is a circle of individuals who compose particular monopolistic social group, the more social power and the higher monopolistic incomes are getting people inside it. Definitions of the strength of monopoly and of the general level of property rights imperfections in society are crucially important for understanding the nature of economic inefficiency and economic injustice. Actually, an overall strength of particular monopoly simultaneously represents a quantitative expression of both economic inefficiency and economic injustice. The stronger is the social monopoly, the more economic inefficiency and economic injustice it creates. Owing to such correlation monopoly’s strength allows us to quantitatively determine or simply to measure a level of property rights imperfections in any particular society. On the other hand, understanding of monopoly’s strength is a key for identification of the balance of power in any given society.

Concept of the strength of monopoly is not just an abstract logical definition, but it rather represents an essential tool for understanding of the ways, methods and possibilities for elimination of social monopolies. Since overall strength of monopoly is determined by two types of factors – social and economic ones - we can equally imagine that elimination of any social monopoly is feasible either through eradication of its social strength or through annihilation of its economic strength. The less property both in comparative and in absolute expressions is associated with particular social monopoly as well as the more individuals and social groups are having social access to monopolized property, the “weaker” is this monopoly. Whenever, every single member of society is gaining an unlimited social access to particular property (not an actual property possession per se, but rather a social opportunity to acquire it or to become proprietor of particular property) or to particular production factor, or whenever no social barriers are being left for each and every individual in order to acquire particular type of property or particular type of production factor, then the social strength of monopoly is disappearing and monopoly is vanishing. Here lies a nature of the social elimination of monopoly or of social property rights dispersion. Decline of the economic strength of monopoly connected with a permanent decrease of exclusive property possessions in economic, material and monetary expressions up to a zero level or simply elimination of monopolistic property in terms of its quantitative physical characteristics we will call economic elimination of monopoly. Even though complete economic elimination of monopoly is not entirely impossible, it is not at all easily achievable and we can hardly think about numerous historical examples of this kind of outcome. However, diminishing of monopoly’s strength in economic and financial terms is absolutely indispensable for its annihilation.

The more individuals and social groups are having macroeconomic or social access to particular monopolized property or the more dispersed particular property is in terms of a number of proprietors, the “weaker” is monopoly and vice a versa. On the other hand, under the same conditions, the “weaker” is particular monopoly - the less imperfections exist within the system of property relations. For example in France before the revolution of 1789-1794 within the period of dissolution of the feudalism and of emergence of the capitalist property relations, social situation of land aristocracy clearly exhibits a dispersion of this social group’s exclusive property rights upon land as a production factor. This period is characterized by declining power of land aristocracy and by assimilation into the network of production factor monopoly on land of other groups of population such as financial magnates, bourgeoisie and even peasants. Given historical period is exemplifying opening for these categories of population of previously rather limited opportunities to own agricultural land. This process marks the dissolution of feudalism or the dissolution of land monopoly of the landlords and aristocracy as well as an emancipation of access to private possession of land for other social groups on account of social property rights dispersion. Under social property rights dispersion we understand a social access for rising number of individuals to proprietorship of previously exclusive property possessions accompanied by consolidating economic competition within monopolized production factor or within monopolized economic sector. Social property rights dispersion therefore is diminishing the level of exclusivity of property rights. Even though some degree of property rights exclusivity remains until complete dissolution of production factor monopoly since certain groups of population and certain social groups remain to be handicapped in their social access to particular type of property longer than others. Speaking otherwise, the social access to monopolized production factor might still not be entirely free for everyone in society; dissolution of any production factor monopoly is a rather long-term process.

Examining social strength and social elimination of monopoly we have to draw a clear division line between social (macroeconomic) and microeconomic or conventional property rights dispersions. Social property rights dispersion, as we know by now, means growing social access to monopolized property on behalf of particular individuals and social groups. Conventional property rights dispersion (we will call it so in order to differentiate from social property rights dispersion) is quite a common socio-economic phenomenon, which stands in expanding number of proprietors of particular economic agent, corporation or association. Conventional property rights dispersion can be realized either by economic means within the process of exchange or by social means based on mechanisms of power and coercion.

Natures of social and conventional property rights dispersions differ significantly and are having rather dissimilar practical applications. First of all, this is connected with the fact that social property rights dispersion is applicable to production factors and social groups, while conventional property rights dispersion is mostly applicable to particular microeconomic or business units. Let us illustrate this difference between social and conventional property rights dispersions on a simple example – let us assume that there is only one steel supplier in particular economy and therefore the steel industry is being monopolized. Let us also assume for simplicity, that only one person owns this particular monopolistic company, which is producing and distributing steel. At some point in time owing to social counteraction it is becoming rather difficult for our proprietor to socially maintain his exclusive rights and privileges. He decides to unite his overall social and economic efforts related to maintenance of this particular monopoly with certain influential investors and politicians offering them a certain stake in his company and consequently in his monopolistic property and in his monopolistic income as well. Such an act represents conventional property rights dispersion, i.e. an increase in number of proprietors of this particular monopolistic enterprise. Conventional property rights dispersion concerns only economic side of the property and is applicable both to monopolized and to non-monopolized property, though in this book we are interested mostly in its application to monopolistic proprietorship. No matter how much will increase the number of proprietors, monopolistic nature of the company cannot be influenced by conventional property rights dispersion. Even if every single member of society will acquire a certain stake in the company’s property, the company will still remain to be a monopoly and will appropriate monopolistic income under the lack of social property rights dispersion as long as exist interests associated with other types of property. With the time passing by, the situation of our original monopolistic proprietor changes to the worse – even together with his new influential co-proprietors he cannot maintain anymore his exclusive rights and privileges and has to allow access to the steel market to other companies. Steel market is becoming duopoly or oligopoly and starting to embrace fundamentals of economic competition. Such statement of things exhibits the social property rights dispersion concerning the monopolized property. Social property rights dispersion, being a fundamental cause of monopoly’s dissolution can be achieved only through the mechanisms of social counteraction to social monopolies and to other property rights imperfections on behalf of monopoly dependent and non-monopolistic social groups. Both social and conventional property rights dispersions are determining social strength of monopoly as well as levels of economic inefficiency and economic injustice associated with particular monopoly.

Counteraction between monopolistic and monopoly dependent social groups depends upon the balance between social and economic strength of monopoly dependent social groups from one side and between social and economic strength of monopolistic social groups from the other. Similar to social monopolies, social groups can also be described in terms of their strength and power owing to their nature of social associations based on mechanisms of power and coercion. The more wealth or the more property owns particular social group (either monopolistic or monopoly dependent), the more economically strong it is. On the other hand, the more exclusive are affiliated property rights or the more power is associated with monopolistic social group the more socially strong it is. In reality economic and social strengths of monopoly are absolutely inseparable and are contouring a single social phenomenon. Economic strength is significantly contributing to the social strength, while social strength from the point of view of particular monopolistic proprietor is worthwhile only for consolidation of monopoly’s economic strength and first of all for appropriation of larger monopolistic income. Economic elimination of social monopoly is contributing to social property rights dispersion related to this particular monopoly, because decreasing physical or quantitative volume of monopolistic property is diminishing material interests connected with this type of property and thus is downgrading its power. Only a compound effect of the two strengths of monopoly (social and economic) or, otherwise, only a compound effect of economic elimination of monopoly and of the two types of property rights dispersions (conventional and social) defines an overall real strength of social monopoly and of relevant social groups.

Strength of monopoly is fundamentally interconnected with the strength of human interests, with achieved level of their exclusivity under particular monopoly and with an overall level of power of particular individuals who represent this type of interests under particular system of property relations. Correlation between economic strength of monopoly and between affiliated with it human interests stands in the fact, that the larger is physical or financial volume of monopolized property the stronger is every particular human interest associated with this property. Correlation between social strength of monopoly and between affiliated human interests stands in the fact, that the less individuals or social groups are having potential social access to particular property, the larger are monopolistic incentives (and, first of all, monopolistic income) and therefore the less socialized or the less counteracted and the more powerful is every single interest associated with this property. On the other hand, conventional property rights dispersion reveals that the larger is a number of separate private interests associated with particular social monopoly - the more dispersed are exclusive claims upon the income from this monopoly, the smaller is the share of each monopoly’s proprietor in total monopolistic income and therefore the weaker is every particular interest towards this particular social monopoly.  

Social property rights dispersion is generally more leaning to the management, administration and control claims over monopolized property. Conventional property rights dispersion, on the other hand, is more directed towards income distribution and redistribution claims, property management being an auxiliary consideration. Such statement of things is based on the dispersion of interests. Private property possessions, when property belongs to one single proprietor are associated with very strong and concentrated private interests. Incorporated property is exhibiting more dispersed individual interests, taking into account that people are normally diversifying their investments in different companies, corporations and social associations and therefore disperse their interests as well. On the other hand, a lot of people who do invest their money in incorporated property, in fact are not considering investment income as their principal income – they might have, for example, salary or entrepreneurial income as their primary source of income. In vast majority of cases people do invest their money in incorporated property only for the sake of income and not in order to acquire any management or administrative rights. Quite often they do not even want any management and administrative responsibilities either because they do not have time or simply because they are not interested in management and control. On the other hand, one always has to administer and to control exclusive property rights and, first of all, one needs to constantly influence and interact with the mechanisms of power and coercion for preservation of his social monopoly; otherwise not only his monopolistic income, but the entire monopoly itself might collapse. Any social property rights dispersion is associated with a certain degree of interests’ socialization, which is expanding together with the diminishing level of property rights’ exclusivity or together with a declining strength of monopoly. The concept of property rights dispersion is very important for analysis of the State property and we will significantly rely on it in the second part of the book. 

 


Chapter 6. Economic Inefficiency and Economic Injustice

If somebody owns a product, which physically, intellectually, politically, socially, culturally or in any other way cannot be supplied by other people, then this person will have an absolute advantage in provision of this particular product on the market. How should one use such an advantage? Economically coming from self-interest oriented human nature in only one way – trying to benefit from this situation as much as possible, knowing that there are no any alternative suppliers whatsoever. Every time this will happen through the price influence situation, which is a basic immanent outcome and at the same time an essential material reason for social monopolization. Any extra income or any income outside of the balanced development of production factors is only possible through the price influence situation, otherwise every production factor is getting its own objective market determined price in accordance with this factor’s contribution to an overall economic process of production and exchange.

From the point of view of particular monopoly holder, price influence situation makes sense only if monopolized property is having limited substitution possibilities. Otherwise according to microeconomic price-demand correlation higher price will always lead to a lower demand for particular commodity and lower demand will simply annihilate the effect of higher price in terms of monopolistic income. From the point of view of particular monopoly holder latter statement of things simply means microeconomic inefficiency. From the point of view of particular monopolistic proprietor, his monopoly makes sense only if he can pass this inefficiency on other individuals, social groups or on society as a whole. That would only be possible if he will find some way to persuade other people to enter with him in exchange relations without strict dependence on a price of his product. Such persuasion can only be successful based on restricted or limited alternatives for procurement and utilization of particular property (of commodities or of capital). Social monopolization can only occur if for certain individuals and social groups exist limited property exchange or property substitution possibilities. Price influence situation associated with limited substitution possibilities is a purely social phenomenon; it can only be introduced by non-economic or by social means based on mechanisms of power and coercion.

Price influence situation for structural monopolies is limited to certain degree by existence of the entire row of different substitutes for particular commodity or sometimes even by an overall opportunity not to buy or not to use particular commodity at all. If we go back to our previous example of matches’ monopoly, the higher is a price of matches solicited by particular monopolist, the more consumers will be willing to use gas or electric lighters instead of matches. However, supply monopolization of more strategic and global commodities, such as steel for example, which hardly can be substituted as easily as matches, is embracing a much stronger price influence situation. Steel monopoly is certainly more comprehensive, economically stronger and socially more influential than the matches’ monopoly, but, on the other hand, it takes much more social efforts and much more financial resources in order to establish and to maintain it. At the same time, as a result of lower immanent substitution possibilities, steel monopoly will most probably bring much higher monopolistic income to its proprietors.

On account of diverse and severe opportunities for social persuasion, on account of dominating social infrastructure and social ideology as well as on account of certain other factors, normally the substitution of employer under production factor monopolies is also rather limited. Slave, owing to social coercion cannot freely choose a mode of application of his labor. Medieval peasant is also quite limited in his choice of occupation by a variety of factors of social and economic nature. The same is pertinent to an aggregate labor force under communism and probably even under the earliest stages of capitalism. Under production factor monopolies limitations and restrictions for alternative types of property possessions and property exchanges are not only violating social property rights, but also represent main cause for limitations of personal freedom generating strong cases of social injustice. The stronger is monopoly, the higher is its ability to create and maintain limited substitution or limited application opportunities for certain types of property (including labor) and therefore the stronger is its influence upon particular prices and the higher is the level of appropriated monopolistic income. Limitations for property substitution and property utilization represent a purely social phenomenon because they can only be established through implication of the mechanisms of power, coercion and forcible persuasion.

Social limitations for property exchange opportunities manifest the nature of slavery as of social phenomenon, which may actually exist not only under the social formation of slavery in ancient world but anytime and anywhere. Slavery appears there and then where and when social monopolization is creating social (based on power and coercion) barriers for an alternative implication in the production process of one’s property of the last resort or of one’s single productive income generating property. Ultimately basic reason for violation of personal freedom at the societal level is dispossession of any property related alternatives. In order to make one human being a property of another human being, the former has to be deprived from all means and opportunities to freely realize any kind of production activity. This can only happen through utilization of the mechanisms of power and coercion. Of course, slavery is only an opposite social condition to complete personal freedom – another extreme point on the liberty-slavery scale. What is moving a pointer of this scale closer to the slavery extreme is a diminishing level of alternative opportunities for the property implication in production process. Labor usually represents a property of the last resort, because no matter how poor a person is or how little property one possesses – at the end of the day one still has his labor. Labor, regardless of how unqualified it may be still represents the property, which can be applied within the value creation process in combination with different other production factors. If one can apply his labor as property of the last resort merely with one single economic agent or with one single enterprise in the entire economy, this immanently generates slavery-like social arrangements. From these arrangements there is only one step to slavery in common sense of the word – to deprivation of any social rights and coercive execution of orders and routine responsibilities. It is not the slavery producing social monopolization, but vice a versa strong social monopolization generates slavery. The stronger is social monopoly the more severe is limitation of economic and social choice, of any alternatives, of freedom at the end of the day, and therefore the higher is a risk of slavery. Normally structural monopolies are socially weaker comparatively with the production factor ones and overall they accumulate a lower share of monopolized property in overall national property possessions. Owing to that, structural monopolies rarely if at all generate slavery. Under production factor monopolies, on the contrary, various violations of personal freedom including slavery are quite a natural phenomenon. Vivid example of the violations of personal freedom under production factor monopoly is the communism. Under communism we have only one economic agent, one producer and one capital proprietor – the State. This generates rather severe situation not only what concerns limitations for personal freedom, but first of all in terms of advanced potential for emerging of slavery-like relations. When somebody is socially dictating to particular individuals and social groups were to apply their property, including their labor – we are having the case of violation of the personal freedom. If people are not only unable to change their employer, but are also limited in their choice of the line of occupation as it used to be a case at earlier stages of Russian communism - this is exactly what slavery is all about. Self-oriented, egocentric human nature in its desire to appropriate monopolistic income engenders social monopolization. Strong monopolistic social groups and weak monopoly-dependent social groups are making social monopolization rather powerful. Strong powerful monopoly is always exploring new opportunities to raise monopolistic income, simultaneously generating higher limitations for economic and personal freedom. All these tendencies are working together and in parallel towards emergence of slavery.

Under structural and production factor monopolies influence of monopolistic income appropriation upon overall social and economic conditions varies not only due to  differences in social characteristics of the two types of monopoly, but also due to differences in nature of generated by them price influence situations. Under the structural monopoly exclusive property rights, price influence situation and monopolistic income appropriation are connected with an output side of production process or of particular economic agent. Structural monopolies are primarily output monopolies – they, first of all, monopolize a product or a service. Under the production factor monopolies, price influence situation as a result of specific type of limitations for property substitution and for property utilization mostly applies to an input side of the production process of multiple economic agents within one single production factor or of multiple proprietors united in one monopolistic social group. This is a rather complicated phenomenon, but it explains the entire nature of the production factor monopoly and therefore requires a special examination. Because of this difference in the nature of price influence situations it is necessary to examine production factor and structural monopolies separately in order to investigate patterns of monopolistic income appropriation appearing under social monopolization as well as in order to understand affiliated economic inefficiency and economic injustice. Naturally, violations of social or human rights are much more severe under monopolization of production factor since production factor monopolies are generally stronger and much more socially influential. Therefore they are limiting to a much larger extent economic freedom, alternative opportunities for property utilization and a choice of occupation. Not a single production factor can be employed in production activity independently without simultaneous implication of the other production factors. On the other hand, monopolization of one particular production factor is generating significant economic inefficiencies and social problems for proprietors of all other production factors. Some of them or even all of them have to pay certain monopolistic price (expressed in different ways) to proprietors or to an aggregate proprietor of the monopolized production factor. But this is not yet the whole story. People or social groups, which have to employ monopolized production factor in their economic activity or production factor monopoly dependent social groups, have to suffer the most both from appropriation of monopolistic income by monopolistic proprietors and from violation of their social rights. Exclusive property rights, as we know by now, can only be realized within economic activity. If there is no economic activity, any property is idle and is not bringing any income. However, since neither one production factor can participate in any economic activity just on its own without involvement of all other factors, in order to make monopolized production factor to work or in order to receive monopolistic income, monopoly-holders somehow have to integrate this monopolized production factor with all other production factors into a unified production process. And, vice a versa, all proprietors of non-monopolized production factors have to connect them within the economic activity with monopolized production factor. From point of view of monopolistic individuals and social groups, such connection is necessary, first of all, in order to charge monopolistic price from other people for economic utilization of monopolized production factor. In economics monopolization (economic science does not differentiate between economic and social monopolies) and price influence situation are normally being related to an output side of the production process. However, yet Marx portrayed (Karl Marx. The Capital) that problems within the system of property relations might also arise on account of social and economic processes connected with an input side of economic activity and particularly on account of non-economic or social formation of the price of labor. Indeed, if we consider work of a slave on his master’s mine, social relations underlying this kind of labor exhibit the input side monopolization with appropriation of monopolistic income on the input side of production process. Because of certain social circumstances based on application of coercion, slave has to apply his labor exclusively with this particular master. Since under slavery, particular master or slave-owner represents an economic agent, while slave’s labor at the same time represents a part of economic input to particular production process of this particular economic agent, this type of monopolization is being attached exactly to the input side of particular economic activity. Even though, for slave it is an output side of his single productive property – labor, which is being discriminated or coercively expropriated by his master. While expenditures connected with reproduction of the slave’s labor, whatever insignificant they might be, represent a net cost for the master.

Price influence situation attached to the input side of production process is pushing prices of monopoly’s input down, while price influence situation attached to the output side of production process on the contrary is driving prices of monopoly’s output up. Generally speaking, for understanding of universal social and economic mechanisms related to appropriation of monopolistic income there is no particular difference on which side of the production process - on input or on output side – such appropriation is taking place. However, there is a significant difference in terms of the level of social rights violations coming from particular social monopoly. Level of social rights violations connected with price influence situation is significantly higher on the input side of production process than on the output side. It is being higher under the input side price influence situation owing to a superior social strength of production factor monopoly comparatively with a structural one and also owing to lower substitution opportunities for monopoly dependent individuals and social groups in application of their property of the last resort. On the input side of production process particular individuals under production factor monopoly are facing only one buyer of their labor and what is more - not merely a buyer but actually also a single socially existing supplier of their entire income and of all vitally important life necessities. Such situation is granting to production factor monopoly proprietors a rather elevated power over monopoly dependent individuals. In case of price influence situation on the output side of production process, this vital economic dependency on monopoly holder is considerably diminishing. Monopolistic price influence situation in this case is being reflected in fact upon the entire society and not merely upon particular individuals and social groups. Entire society has to pay the price for limited property substitution possibilities, entire society is transforming into monopoly dependent social group and the entire society normally does not tolerate such situation for too long. Under the price influence situation in structurally monopolized economic sectors normally people are having an overall social opportunity to change their employer, profession or even line of occupation. Even though in reality it might be not so easy to accomplish, it is still much easier than to change occupation under the production factor monopoly. To change line of occupation under production factor monopoly normally is rather difficult owing to the persistent violations of social rights based on oppressing social mechanisms of power and coercion. Without violations of social rights, to maintain production factor monopoly overall is quite difficult because if people are absolutely free in their choice of occupation and in application of their labor, one has to try really hard in order to collect from them any exclusive above-the-market income.

Price influence situation associated with social monopolization is having a certain negative economic and social influence, which is based on appropriation of exclusive property rights and particularly on appropriation of exclusive income. First of all, under any social monopolization an aggregate level of national output and economic growth normally would be lower comparatively with non-monopolized economy. Higher monopolistic prices despite of all limitations for alternative possibilities to exchange particular property or particular commodity, are leading to a decline in monopoly’s output because of the substitution effects of economic and social nature. In case of structural monopoly people might partly ignore monopoly’s products and partly switch to the substitutes, while in case of production factor monopoly - monopoly dependent individuals will simply work less or worse since naturally they are not too motivated to produce more as a result of social rights violations as well as owing to particular methods of the appropriation of exclusive income by monopolistic proprietors. From the point of view of monopoly’s proprietor in order for monopoly to make sense, the monetary expression of monopoly’s output has to be larger than it would be without monopolization. Unavoidable decrease in monopoly’s output has to be over-weighted by increase in prices. Only in this case monopoly’s proprietors will receive monopolistic profit or monopolistic income. This also represents a fundamental consequence of social monopoly from purely economic point of view or from the point of view of supply-demand correlation. Lower output attributable to a higher level of monopolistic prices forms a nature of comparative with non-monopolized economy economic inefficiency of any social monopoly or its general macroeconomic inefficiency. Economic inefficiency means that less real value is produced comparatively with the non-monopolized economy and that financial resources cannot be directed towards the most efficient macroeconomic outcome based on free flows of production factors and economic resources. Besides bringing along economic inefficiency, monopoly will oblige outsiders - particular individuals and social groups, which do not possess exclusive property rights - to spend an additional part of their income in order to pay a special price to monopoly’s proprietors for their exclusive rights. Such situation forms a nature of economic injustice, since extra income is coming neither from intensive utilization of any production factor nor from additional work of any kind, but from exclusive property rights based on power and coercion. Social monopolization immanently incorporates two fundamental and inseparable consequences - comparatively (with non-monopolized economy) lower output, which is a nature of economic inefficiency, and comparatively higher monopolistic price, which is a nature of economic injustice. In socially monopolized economy certain individuals and social groups always have to pay in terms of money and in terms of macroeconomic efficiency to monopolistic proprietors for their exclusive social rights. Economic inefficiency and economic injustice are one hundred percent correlated; they are absolutely inseparable. One of them never exists without another and even more than that - they represent two parts of one single social phenomenon – appropriation of exclusive income, which is a fundamental cause for any social monopolization. Generally speaking, what is inefficient is always unfair and vice a versa – what is unfair is all the time inefficient.

Social monopolization and price influence situation as well as created by them economic inefficiency and economic injustice represent a single cause for all social and economic depressions, both of the short-term (well-known under this term in economics) and of the long-term character (more familiar as a social and economic collapse of society). Both production factor and structural monopolies naturally are always eager to increase a price of their property or of their output and are always eager to decrease a price of their input. Being able to do so owing to specific social circumstances (including violations of social rights) and in combination with limited property substitution possibilities, every time social monopolies bring along discrepancies in supply and demand, while in case of production factor monopolies also discrepancies in societal systems. Supply and demand are in equilibrium only under the non-monopolized economy, otherwise equilibrium, if at all, is short-term, artificial, volatile and unstable.

Practical manifestations of economic inefficiency and economic injustice under production factor monopolies are slightly different. Even though under production factor monopoly societal grounds or societal preconditions for economic inefficiency and economic injustice are the same as under structural monopoly, their economic realization is different. Economic inefficiency and economic injustice under production factor monopoly are usually much more hidden inside the network of economic and property relations by social, political, legal and cultural infrastructure. Nevertheless, their nature remains the same. There is one particular aspect related to economic inefficiency under production factor monopoly, which is coming from price influence situation on the input side of business process. Even though, under production factor monopolies monopolistic prices of input is lower than under monopoly free environment, we have to understand that in reality these prices are lower exactly because monopoly-dependent social groups have to pay exclusive monopolistic price as a result of social limitations related to substitution possibilities for application of their property. Nature of monopolistic prices stands in exclusive social (based on power and coercion) appropriation by monopolistic social groups of the part of income or usually of the part of labor value created by monopoly dependent social groups. On the contrary to structural monopolies, under the production factor monopoly, monopolistic proprietors are passing economic inefficiency (lower level of aggregate output comparatively with non-monopolized economy and related opportunity costs) on monopoly dependent social groups and individuals rather than on the entire society. This is yet another reason why structural monopolies are not that lasting – it is easier to oppress certain socially weak and underpaid individuals and social groups than the entire society. Overall, from the point of view of monopolistic proprietors, production factor monopoly makes sense only if comparatively (with non-monopolized economy) lower prices on the input side of production process (or lower prices of labor) are over-weighting lower (comparatively with non-monopolized economy) output of monopoly. Output of the production factor monopoly is always lower on account of a comparatively (with non-monopolized economy) lower productivity of both monopolistic and monopoly dependent social groups. Economic rationale for lower comparatively with non-monopolized economy, aggregate output is based upon limited substitution possibilities for application of labor as of the property of last resort and upon limitations for personal freedom. Limited substitution possibilities cannot exist without negative macroeconomic influence upon the level of aggregate output or upon economy generally. Monopoly dependent social groups, which are selling labor as their property of the last resort or as their single productive property, are simply less interested in final product or in final result of their production activity, first of all, owing to social and economic limitations for their freedom. Monopolistic social groups relying on the mechanisms of power and coercion are anyway appropriating one or another part of income of the monopoly dependent social groups. The higher is a level of such appropriation, the lower are economic incentives for monopoly-dependent social groups to work hard and the lower is their output. On the other hand, if social and economic freedom is limited for monopoly dependent social groups, monopolistic economic agents or monopolistic social groups are also limited in their ability to substitute employed labor with more efficient one without damaging their entire exclusive social and economic situation.

The system of economic and property relations under production factor monopoly is characterized by comprehensive ties and interconnections between various types of social monopolies. Very important role in coordination and preservation of different types of social monopolies is playing the State. Under social formations based upon production factor monopoly, such as for example slavery or feudalism, always exist the key most powerful monopoly, which is essentially defining all economic and social relations as well as the entire social infrastructure. Strength of this particular production factor monopoly varies not only on geopolitical scale, but also on a time scale - usually being less expressed at earlier stages of social formation when economic and social relations are in the process of their configuration, strengthening towards a flourishing or maturity stage and starting to dissolve and collapse at the breakup or disintegration stage. At the final disintegration stage, the production factor monopoly is rather weakened. In order to preserve and to maintain itself it is starting to interconnect and to share its power with other social monopolies (for example structural and financial monopolies in 18th century in France or the same sort of monopolies in England a century earlier) as well as with the new more progressive for the time being forms of property relations (such as, for example, emerging capitalist relations in 18th century in France). Disintegration or dissolution stage of monopoly is also noticeably characterized by a rising dependency of production factor monopoly upon the power of State (ex. Roman Empire towards its collapse, 18th century France) for support and maintenance of its monopolistic privileges. At the disintegration stage, production factor monopoly as a result of mounting contradictions and inefficiency is simply unable to maintain itself internally relying only on its own power and on underlying this particular monopoly social and property relations.

For simple illustration of economic inefficiency and economic injustice associated with production factor monopoly, let us consider the land monopoly under feudalism. Property relations under feudalism are characterized by exclusive social opportunities to own land property or to own land as an economic resource and as a production factor on behalf of basically only one social group – the landlords or land barons. All other social groups and first of all peasantry, which is directly applying its labor to the land as a production resource, are basically lacking economic and social opportunities to possess land at least at the full maturity of feudalism. Natural monopolistic outcome of these exclusive property rights would be a lower comparative output caused by economic inefficiency and by monopolistic price influence situation. Since price influence situation under production factor monopoly is related to the price of input, all basic imperfections in property and income relations are, first of all, affecting social group, which is applying its property of the last resort for cultivation of land as a production factor. Landlord is able to appropriate exclusive monopolistic income owing to a lack of social opportunities for peasant to possess land property of his own and also as owing to certain coercive social constraints in substitution of his employer. Thus, landlord is able to cut peasant’s income or to cut price of his labor to a minimum level possible under concrete social and economic circumstances, appropriating part of peasant’s income, which the latter would receive otherwise under free market competition or in monopoly free economy. Then again, on account of coercive social opportunity to appropriate monopolistic income and on account of limited possibilities for capital flows based on inadequate amount of land available for sale and on underdeveloped land and labor markets, there are not too many incentives for the landlord to invest and to reinvest. He can probably gain more income in an extensive way participating in military actions or granting his services to a king, rather than in intensive way routinely managing his own property or developing new technology. On the other hand, peasant – a direct producer - always loosing part of his income as a result of monopolistic income appropriation by the landlord is also not so keen or might not be even socially able to invest. Lack of investment incentives, however, is only a part of the whole story. Feudal landlords were normally withdrawn from any production or economic activity, very often even from administration and management of their own property, being merely consumers of goods produced by the other people. At the same time, peasants are not willing to produce too much when they see that some part of their efforts is always being taken away by the landlord – moreover if this part turns out to be dependent upon a total volume produced. This is, so to speak, a pure case of feudalism. Situation becomes much more complex closer to dissolution of feudalism as of the production factor monopoly, when landlords as a social group have to unite their efforts in preservation of existing property relations with the power of State. Income appropriation in this case is becoming much more hidden and much more diverse with direct and indirect participation of the State, which sometimes is playing a major role within the system of property relations over-weighting social power of landlords as of the social group. Even though methods and mechanisms of monopolistic income appropriation evolve, the nature of income distribution and the nature of inefficiency associated with production factor monopoly remains to the same throughout the entire history of mankind. Today we may admire an exquisite architecture and beauty of medieval and ancient castles, palaces and fortresses, but it was merely coercive social monopolization as well as associated with it appropriation of exclusive monopolistic income, economic inefficiency and injustice, what made possible to build such luxurious constructions in such a low-income society.

Under perfect competition or in economy without any kind of social monopolization, investment and consumption generally do not differ from one another, neither in their influence on aggregate demand nor in terms of the nature of underlying them economic actions. Any consumption can be considered as an investment and vice a versa. Consumption and investment under perfect competition are indistinguishable and inseparable. Difference between the two is close to the difference between national income and national output – economic indicators and methods of calculation are different, but underlying actions and economic outcomes are at the end of the day the same. Every spending can be considered as some kind of investment and vice a versa, especially from the point of view of production factors’ participation in economic activity. Let us take a very simple example. Buying groceries by a sales manager of some company can be considered as an investment in reproduction of his labor force, since food represents an indispensable element for maintenance of his basic production factor (labor). Even if our man is buying a luxury item such as a giant three-floor manor it is still investment in his major economic resource – labor, as normally civilized living conditions are contributing to any person’s productivity of labor. Besides, this house as an economic or financial asset is increasing his confidence in future and allows him to pour all his energy and intellectual abilities into his line of occupation, consolidating also his level of specialization and devotion to his type of activity. On the other hand, house is a private long-term investment in common economic sense of the word. And what about procurement of necessary office equipment for a company where our sales manager is being employed? Does this kind of investment on national or societal scale really differ that much from procurement of the same items by a private individual? And which of the two is influencing company’s performance or aggregate national output more – buying food and house by company’s employee or procurement of office equipment by a company – it is really hard to tell. Ultimately both actions are directed towards the same objective - reproduction of particular production factors (capital and labor) and both of them are basically investments in themselves or in their nature, even though private acquisitions traditionally fall under consumption category. One of them represents investment in the labor reproduction, while the other – investment in the capital reproduction. And where shall we account new ideas and technologies invented by people privately outside of a concrete production activity per se or outside of investment process in its conventional understanding (for one’s own pleasure or for the sake of potential profits)? Since aggregate national output embraces both consumption and investment – from the point of view of general societal and economic efficiency it is not imperative which types of actions is taking place as long as they are happening in correspondence with the market or with macroeconomic efficiency indicators. Both consumption and investment are equally contributing to the process of property accumulation and are leading to an equal growth in aggregate output. Under the perfect competition any consumption represents an investment in labor as a production factor, moreover that in the modern world consumption is being significantly associated with the accumulation of knowledge and information.

Problems with consumption and investment occur only in monopolized economy. In socially monopolized economy not any consumption can be considered as an investment. Monopolistic effect at the macroeconomic or at societal level is driving economic resources or production factors development away from maximum economic efficiency requirements. This is happening because monopolistic income is being spent in a way, which is quite different from investment of any kind or which is quite different from reproduction of any economic resources. Most efficient balance between equitable development of production factors is being debased and certain economic resources are developing on account of the others. For example, if we refer to feudalism of 10-14th centuries, we can observe that monopolistic income of land aristocracy was significantly motivating a predominant expansion of military and arms industry, while later on in 17-18th centuries consumption tastes were much more stimulating a leading progress of luxuries industries. In both cases certain economic activities have prospered on account of balanced and proportioned development of all economic resources. This might be a major reason why all ancient civilizations no matter how advanced and sophisticated they used to be, never managed to invent even a simple steam engine. The wealthier ancient oligarchs were becoming the more income (owing to a considerable level of property rights imperfections in society) they were wasting on non-proportional and imbalanced development of certain industries on account of the free flows of economic resources. For the artificial development of any particular kind of activities without their complete dependence on natural economic tendencies and market mechanisms, it is absolutely necessary to coercively take away economic resources from certain other activities; otherwise resources are not emerging from nowhere. Here stands the trouble with all the aggregate demand boosting policies, which are emerging long before Mr. Keynes. Whenever and wherever exists additional social non-market motivation for the development of certain economic activities there is an equal disincentive for the development of other economic activities. Any coercive reallocation or redistribution of resources is having underneath strong private interests and always indicates a presence of property rights imperfections. Monopolistic proprietors generally have fewer reasons for investment. Owing to a lack of competition, they have much less interest and much less reason for renovation and capital modernization. They always have an alternative way of income appropriation and besides they have to spend quite a lot of financial resources on preservation and maintenance of their exclusive social and economic situation. Such statement of things generates given away opportunities in terms of property accumulation or the opportunity costs of social monopoly.

Difference between consumption and investment under social monopolization is based on immanent property rights imperfections. Spending of monopolistic income cannot be considered as investment in skills and qualifications or generally speaking exclusive income is not being associated with the reproduction of any production factor including labor. This kind of spending is non-socialized because of the underlying it exclusive social rights. Whenever monopolistic interest, which lies underneath of such spending, is unrecognized, it generates a feeling or even an impulse to hide a nature of one’s own income not only from other people, but sometimes even from one’s own apprehension, rather than it brings satisfaction from accomplished productive or entrepreneurial activity. Let us illustrate this spending of monopolistic income on a simplified example of the medieval landlord. Some fraction of his revenue our baron is spending on fortification of city walls, construction of fortresses and on additional military force in order to protect his territory from external invasions. This type of spending from societal point of view, other things equal, looks like a fairly decent expense. Spending income in this way gives our landlord a feeling of his own importance as well as of the importance of his undertakings, validating his general social and economic contribution in his own eyes and in the eyes of the other people. However, another part of his income he is spending on luxury items, such as new residence, hunting lodge, horses, fancy clothe, jewelry, etc. Speaking otherwise, this part of his income goes on luxury items connected with purely personal consumption, which in no way is being associated with economic efficiency (rather on the contrary stimulating preferential growth of particular industries on account of the balanced proportional development of all production factors), with any kind of investments (either in his labor force or in any other production factor) or with any economic activity at all for that matter. Excessively high level of spending on these items is creating a sense of stealing, which has to be hidden, especially if this feeling is permanently confirmed by social upheavals and unrest. Such spending based on coercive gain of revenues not only generates a general suspicion of unfair coercive expropriations, but is also spreading this suspicion towards the other fraction of his income spent, so to speak, in a “more socialized” way. Feeling of unfair income rests on much less idealistic and on much more materialistic foundations. Normally our landlord takes part in any economic activity very relatively if at all, while a heavy spending of his monopolistic income on various luxuries cannot be considered as investment in any skills, qualifications or in reproduction of his labor force. On the other hand, income coercively appropriated by the landlord is taking resources away from other people (mostly from peasants) and makes their own investment in skills and qualifications or even in reproduction of their labor force practically impossible. Generally speaking, reallocation of resources as a result of social monopolization, not only causes current day economic inefficiency, but equally creates preconditions for the longer-term giving away property (including skills and qualifications) accumulation opportunities reducing an overall level of investments comparatively with non-monopolized economy and therefore also reducing growth of aggregate national output as well as conserving poverty together with the immanent societal problems. Under social monopolization a general cutback in the level of investments comparatively with non-monopolized economy is based upon two fundamental factors. On one hand, spending of monopolistic income cannot be considered as any kind of investments in skills and qualifications or in reproduction and development of any production factor. On the other hand, production investments under monopolistic income are generally rather limited owing to existence of alternative exclusive possibilities for income appropriation on behalf of monopolistic social groups and owing to disincentives and given away resources on behalf of monopoly dependent social groups.

Before going any further we have to touch upon a concept of injustice and, first of all, to clarify whether there is any unbiased technical definition of injustice or is it a pure moral category. In order to understand the nature of injustice, we have to draw a clear distinction line between economic and social injustice. From economic point of view, injustice can only be connected with unfair distribution of income in society. Unfair distribution of income is associated only with the exclusive (based on social mechanisms of power and coercion) possession and utilization of particular property or of particular production factor. Such definition represents the quintessence of social monopolization. Unfair distribution of income not only underlines the social nature of monopoly, but also justifies monopoly from the point of view of monopolistic proprietors. Speaking otherwise, unfair distribution of income is only possible as a result of appropriation of exclusive property rights by particular individuals. Unfair appropriation of income is based upon particular non-socialized interests and on the mechanisms of power and coercion. Income and property founded on coercion is an ultimate cause of any injustice in the world and first of all of the economic injustice. Concepts of “economic injustice” and “economic inefficiency” are being related to the imperfections in distribution of income and property in society. All other types of injustice related to particular individuals and social groups are embraced by the concept of social injustice. Just like the nature of economic injustice is derived from property rights imperfections, in the very same way the nature of social injustice stands in violations of social rights. Mechanisms of power and coercion, which are supporting exclusive property rights, at the same time, represent the main cause of social injustice. Similar to level of property rights imperfections, the level of social rights violations in any particular society represents a quantitative phenomenon. The more property rights imperfections dominate particular society, the less property substitution (application) possibilities exist for monopoly dependent social groups, the higher is a general level of coercion in society and therefore the higher is the level of social rights violations. Unlike social evolution and economic development, which are infinite categories, social rights and economic justice being dependent on mechanisms of coercion are variable quantitative categories. Under ideal societal system – the one without any property rights imperfections (if such system will ever exist) - economic injustice will cease to exist while social rights will gain their complete realization. Since property rights imperfections, as we already know by now, represent the single reason for any violations of social rights and since violations of social rights are always based on power and coercion, economic injustice and social injustice are not only closely interconnected, but in fact make an inseparable unity. Property rights imperfections of different kinds form the foundation of universal economic injustice and simultaneously a single fundamental cause for all concrete cases of social injustice.

“Whoever says monopoly, necessarily excludes justice.” (Proudhon. What is property an inquiry into the principle of right and of government)

Let us also draw a clear distinction line between economic efficiency at macroeconomic and at microeconomic levels. Macroeconomic efficiency, first of all, refers to macroeconomic or even predominantly to overall societal conditions. For its estimation we usually employ macroeconomic indicators such as GDP growth, GDP per capita, worldwide GDP and GDP per capita comparisons, etc. Efficiency at the microeconomic level, on the contrary, refers to economic performance of particular economic agents. Microeconomic inefficiency of particular economic agents generally occurs because actions of particular individuals are not based entirely on reason, rational and comprehensive information and besides are influenced by our passions and emotions, which are leading to mistakes and misapprehensions. At the macroeconomic level, economic and social actions are resulting from the interests of social groups rather than from those of particular individuals and because of that such actions are more rational, less biased and generally are more influenced by material and financial considerations. One separately taken member of particular social group can be motivated by his personal sentiments and ambitions and act against interests of this particular social group or sometimes even against his own interests. But social group as a whole is hardly ever motivated by anything else except material and financial considerations. However, exactly this kind of rational motivation, which generates a rather stable microeconomic efficiency for particular social group (efficiency from the point of view of this group), simultaneously creates macroeconomic or societal inefficiency based on exclusive property rights and property rights imperfections existing to the benefit of this social group. Microeconomic and macroeconomic inefficiencies, thanks to correspondingly economic competition and to social counteraction (latter basically represents social competition), normally do not last for too long and vanish sooner or later. Though, vanishing of microeconomic inefficiency usually happens much faster than vanishing of macroeconomic or societal problems. Microeconomic inefficiency, being far less persistent and far less continuous than the macroeconomic one, accordingly is far less important both from societal and from economic points of view. Microeconomic inefficiency is much easier to discover, much easier to get rid of through routine market mechanisms and almost impossible to justify, while macroeconomic inefficiency owing to associated imperfections in social and property relations and owing to support of this imperfections by the entire social infrastructure, by dominating social ideology and by strong non-socialized interests is far more difficult to recognize and to remove.

First social monopoly probably appears when certain individuals start to recognize their outstanding personal capacities or simply their physical strength and exceptional intellectual abilities. Personality, which is unique according to its very definition, already embraces certain exclusivity in itself. Production factor monopoly is determining not only the entire complex of social and property relations in any particular society, not only the entire social infrastructure, but most fundamentally it also determines a particular type of social formation. Slavery, for example, is characterized by production factor monopoly on slaves’ labor on behalf of the slave-owners. The latter relying on mechanisms of power and coercion are denying any possibility for the slaves to possess their own labor and even their own lives. Feudalism, on the other hand, is characterized by production factor monopoly on land on behalf of the land barons with significant limitations for peasants as monopoly dependent social group to own land property. Communism represents an absolute revelation of the State monopoly, which nature we will examine in second part of the book. Marx once assumed that it is exactly a particular type of dominating property relations (or more precisely private property on “means of production” or production factors) what is shaping and determining any social formation. This is a sufficiently evident observation. Since property and economy are playing essential role in human society and in human history, people naturally look for the economic motives in order to differentiate one type of social formation from another or one historical period from another. Since property is a corner stone of all economic and social relations in society as well as a general expression of overall human interests including economic interests, it must have something to do with the process of social evolution, moreover that all other social relations can be drawn from property relations. But, if we thoroughly examine every historical stage and every social formation, we can observe, that property owing to self-interest oriented human nature is immanent to the human society and therefore always exists. We can go even further and say that there is basically only one type of property. In the second part of the book we will see that, strictly speaking, there is no any other kind of property except for the private one – all property is basically private in its nature just like all interests are private at the end of the day. Any property finally belongs to concrete private individuals, who benefit from this property the most and benefit, first of all, in terms of income. At the societal level property is an immanent category and therefore cannot be divided into a number of independent components without damaging the entire concept. Since property as economic and social category is attributable to all historical periods being inalienable part of human society, we will have to find another grounds for identification, differentiation and description of social formations.   

Production factor monopolies are originating mostly in underdeveloped or even in primitive societies. Lack of advanced labor specialization is leading to the simplest monopoly possible – monopoly on particular economic resource or on particular production factor. Most scarce, most important for economic activity and therefore the most expensive resource is usually being monopolized. Because both division of labor and living standards in primitive civilizations are minimal, only monopolization of the entire production factor can earn satisfactory living conditions for privileged social groups. Afterwards together with economic development and as a result of political, economic, cultural and educational evolution it is becoming more and more difficult to maintain privileges of certain people and social groups on account of other people or even on account of the entire society. Privileges of monopolistic social groups and associated with them financial benefits are declining together with the diminishing level of social monopolization, which ideally suppose to ultimately disappear. Since social monopoly assures exclusive rights for particular individuals and social groups and since some people enjoy exclusive property rights for which others always have to pay, appears a great deal of social, moral and cultural problems, tensions and conflicts inherent to any society built on social monopolization. All these problems lead to unavoidable dissolution and self-destruction of particular social formation, to disintegration of particular production factor monopoly and to elimination of the specific forms of property rights imperfections. Even though, it may seem that such dissolution is having underneath immediate, straightforward and superficial political and social considerations, deep down inside all social formations are coming to an end because of the one and the only immanent reason – economic inefficiency and economic injustice based on property rights imperfections. All monopolies are finally being destroyed because of a sheer incompliance with the requirements of general economic efficiency. Inevitable self-destruction based on inefficiency and injustice is an immanent characteristic both of the production factor monopolies and of the underlined by them social formations.

Social formations and production factor monopolies are having their typical evolutionary cycle. Under every social formation, under every production factor monopoly and even under every political regime we can differentiate three major evolutionary phases. Initial phase marks emergence and establishment of a particular system of property relations and of associated with it social order. At this stage new system of property relations emerges from preceding social formation, either coercively or peacefully, and is being enforced by the social groups in power. Preceding system of property relations is undergoing process of its final dissolution and new social groups in power are establishing their control over the State, property and society. Wide-scale process of property redistribution in favor of the new social groups in power is characteristic for this phase. Normally this process is rather painful being associated with considerable number of human victims and with comprehensive violations of social rights. Property redistribution or property expropriations are being accompanied by annihilation of the previous type of social monopoly and of the previous power structure. Legislative design of emerging property relations is merely acquiring its forms from bits and pieces of the past laws adjusted to new social conditions and circumstances. State and society in their new quality are slowly materializing themselves during this phase. Respect of laws and of any social institutions is rather weak and unequally present amongst particular individuals and social groups. Quite common during this phase are property rights violations of both private and social nature. Finally, representatives of new ruling social groups come to realize that they have accomplished endurable property redistributions or otherwise that they have already expropriated enough. At this point in time, they are starting to look for some ways and means to confirm and to assure their newly acquired possessions and to fix them in legislative system and in social infrastructure. After all that comes a period of flourishing, maturity and prosperity of particular social formation. System of social and property relations is acquiring stable mature character. Exclusive property rights and social monopolization are already firmly established as well as fixed and embedded in different parts of social infrastructure. State is becoming more powerful, but not yet powerful enough in order to surmount dominating production factor monopoly. Laws are vigorously enforced and mostly respected. Social counteraction is typically modest, especially forcible or violent social counteraction. Social groups, which were in power under preceding social formation are defeated, while social conflict between new monopolistic and monopoly dependent social groups is not yet that sharp because property relations are not yet significantly obstructing development of production factors. Overall level of property rights violations is diminishing. Private property rights violations are thoroughly pursued and prosecuted by more powerful State, while social property rights violations and forcible expropriations are declining or even completely disappearing. Third phase of social formation development cycle is characterized by accelerating degradation and disintegration of the system of property relations. At this stage social counteraction is growing because production factors development is coming in sharp contradiction with an obsolete system of property relations and is becoming to be significantly hampered by the latter. Conflict between the requirements of production factors development and between outdated system of property relations is determining all societal problems and political controversies in society. State is becoming increasingly reactionary in its attempts to save both itself and an old system of property relations and, on top of that, very vulnerable to any criticism or to any opposition, underneath of which the State feels a serious threat to its very existence in the current form. Property rights violations are intensifying and multiplying because State’s principal social interest is starting to be associated with oppression of social counteraction and it fails to pay an adequate amount of attention to counteraction of private property rights violations. Sometimes property rights violations are escalating as a result of violent social counteraction on behalf of monopoly-dependent social groups, which is being accompanied by spontaneous destructions and illegal expropriations of property. At the end of the day appears a moment when contradictions between property relations and requirements of production factors development are reaching critical level leading to extermination of the state, society and social formation.

Question is whether production factor monopolies evolve over time or is it merely a coincidence that initially comes out slavery, then feudalism, afterwards different forms of monopolization under capitalism and socialism and finally an extreme level of social monopolization under communism. Marx thought that every social formation was challenged and finally exchanged with more progressive one or with more progressive form of property relations. However, Marx equalizing property rights imperfections with private property rather than with social monopolization finally came to conclusion that the most superior form of social relations is communism, which does not comprise any private property and which is the only type of property relations worthwhile. He was led to such conclusion by false assumption that private property is the main source and fundamental reason of economic and social injustice. Instead of the counteraction of property rights imperfections, he insisted on denunciation and elimination of private property or of property generally for that matter. If historical alterations of social formations represent an evolutionary sequence, then under the concept of property rights imperfections it can only mean that social formations form a row of the diminishing levels of social monopolization and therefore also of the diminishing levels of economic inefficiency and injustice. It seems to be true in case of slavery, feudalism and capitalism. Slavery is the most severe type of social monopolization and the most notable case of social injustice, being not only a cause of coercive property expropriations but above all being a cause of the legalized expropriations of human freedom and human lives (those of slaves). Production factor monopoly of slavery is remarkably strong with an exceptionally obvious distinction between social groups – monopolistic (slave-owners), which exclusively possesses particular type of property (slaves or their labor) and monopoly dependent (slaves), which represents the very type of property possessed by the first group (slave-owners). Feudalism in comparison with slavery seems as a somewhat more mild social monopoly at least in its classical form. However, throughout emergence and establishment of feudalism social relations close to slavery were quite common as well. Monopolistic component of capitalism is much weaker than the one of feudalism. Since capitalism in its pure form of absolute laissez-faire or of entirely free market society has never been reached, a historically materialized “incomplete” version of capitalism probably was incorporating certain trivial types of property rights imperfections of production factor and structural nature. At the same time being abundantly based on free market mechanisms and virtually unlimited private property, it was constantly evolving towards the least socially monopolized society in the history of mankind until it met an outstanding human lust for income and property redistributions. It would seem that communism represents a single exception in this row of production factor monopolies of the diminishing strength. Being characterized by a severe State monopoly on all types of property, communism as a complete hideous State monopoly and at the same time quite a fascinating social phenomenon had totally revealed a nature of the State, which is demonstrating its tremendous bloody possibilities throughout the entire human history. Communism is quite a lesson that needs to be learned by the entire humanity as well. Nature of communism we will consider in the next part of the book since for its understanding initially we have to examine a phenomenon of State, upon which communism is exclusively built.

Society without any property rights imperfections, if such kind of society will ever exist, will not represent the social formation per se. In such society there will be no social monopolization and therefore no social groups. Without social groups there will be no social counteraction. Speaking otherwise, nothing social (based upon mechanisms of power and coercion) will be left. If there will be nothing social in society or more precisely within the common territory of inhabitancy of private individuals, such kind of social phenomenon cannot be portrayed as social formation. Everything connected with society, sociality and with social formation is built upon mechanisms of power, coercion and forcible persuasion. Whenever and wherever there will be no such evils, there will be no sociality and no society in their current understanding. Social infrastructure, sociality or everything “social” for that matter predominantly maintains and protects non-socialized interests and privileges of individuals and social groups in power relying on mechanisms of power and coercion. So far Homo sapiens are the social specie, which cannot live without sociality, power, coercion and property rights imperfections. Significant share of our intellectual efforts is wasted on social counteraction, struggle for different types of social exclusivity and on other unproductive and inefficient activities.

At the same time, throughout the entire history of mankind we are witnessing a permanent evolution of human society towards the most efficient type of social organization based on the most efficient system of property relations. Together with economic development also advance the property relations. And, vice a versa, evolution of property relations is providing strong motivation for economic and social development. Overall level of human actions’ efficiency including their macroeconomic efficiency is rising within the course of social evolution and so does physical and quantitative amount of property leading to property accumulation. Political, ethical, cultural, educational and other parts of social infrastructure tend to preserve and to maintain existing system of property relations and simultaneously also existing in society property rights imperfections. Economic or production factors development assures intensification of economic efficiency, which sometimes is coming in contradiction with current system of property relations. Since human behavior is not directly oriented towards maximum economic efficiency, but rather is of the self-interest oriented nature, certain disturbances are inevitably emerging within the process of development and evolution of human society. Economic efficiency at the macroeconomic level hardly ever represents main objective for any particular individual or for any particular group of individuals. Human nature is not directly oriented towards maximum economic efficiency. Property accumulation, evolution of property relations and production factors development are materializing through perpetual social competition and counteraction between individuals and social groups. Economic development and social evolution of human society are more explicit or more visible comparatively with universal or biological evolutions owing to availability of reasonably comprehensive information. Because of that, we can draw our own ideas, conceptions and theoretical models relying on facts and experience, not only from our modern history, but from our past as well. Major problem with our understanding of society, however, is that on account of our current material interests and on account of persuasive social ideologies designed to overshadow any reasonable apprehension of reality, our societal ideas are significantly biased and partial on the contrary to our impartial examination of nature and of universe.

From historical experience, we can conclude that social evolution and economic development are certainly having place. But where this evolution leads us, what is its basic principle or its tendency, if any? Marx, considering social evolution from the point of view of historical phases or from the point of view of improving social formations assumed that in historical retrospective the answer would be in overcoming of particular inefficient types of property relations. Since he believed that private property is the root of evil and the main cause of inefficiency, his conclusion was rather simple – we have to eliminate private property and all problems will be solved. Macroeconomic efficiency exhibits how well all economic agents and all production factors are interconnected and interacting with each other in particular economy. In other words, macroeconomic efficiency portrays a level of unification of all vectors associated with private economic interests of all separate individuals and social groups towards achievement of maximum economic efficiency. Since economic interests, at the end of the day, are expressed in property and in property relations, macroeconomic efficiency exhibits how efficient are property relations in particular society. Overall, maximum economic efficiency requirements are socializing private interests of separate individuals and are uniting them under one common vector of economic development and social evolution. Needless to say that separate human interests being self-oriented egocentric are, otherwise, rather detrimental for property accumulation. Maximum economic efficiency embraces two major components – efficiency of production factors development and efficiency of property relations. Only permanent combined evolution of both components is leading to the maximum economic efficiency outcome. Production factors development being based on accumulation of production resources is a rather stable and continuous process, while evolution of property relations is materializing on much more unpredictable and irregular grounds. Regressive, reactionary or obsolete property relations are slowing down accumulation of economic resources, while progressive property relations are accelerating it. Whenever old property relations are starting to be an obstacle for further development of production factors, they are doomed to vanish.

Just like at the microeconomic level every business entity is normally being oriented towards maximum profitability, in the very same way at macroeconomic level maximum economic efficiency requirements through internal and external, social and economic competitions are directing society towards maximum possible outcome under given social and economic conditions and constraints. Speaking otherwise, maximum economic efficiency is leading mankind towards achievement of maximum possible economic and social outcome under available economic resources. Just like every business entity cannot just stay at the same level of costs, skills and technology due to economic competition, in the very same way at macroeconomic level every single social group, society and civilization is bound to permanently improve in order to compete and to survive. At the macroeconomic or societal level competition does exist just like at the microeconomic one. At societal level this is mostly a social competition between social groups, social systems, societies, civilizations, social formations and States. Social and economic competition also exists at international or global level, where it represents a competition in production factors development between different countries or between different societal systems based upon different types of property relations (for example between capitalism and communism or between dictatorships and democracies). In order to undertake any economic activity, self-interest oriented human beings have to enter in some kind of social and economic relations with each other. Even though sometimes it is possible to produce and to consume everything within one single household without any social and economic contacts – normally it is rather inefficient as well. If a person is entering in economic relations with other people, this is normally increasing macroeconomic efficiency, while if he is entering with other people in social (based upon power and coercion) relations this is normally decreasing macroeconomic efficiency.

Efficiency as well as inefficiency can be absolute and comparative. Absolute inefficiency, from the point of view of property relations, means that amount of property created within the production process or within particular economic activity is lower than it used to be before this production process had started or simply that production output is less than production input and therefore value creation process is negative. Comparative inefficiency implies that even though the property is creating certain positive value within particular economic activity, this value is generally lower than it would be created otherwise under some alternative way of utilization of scarce economic resources. Absolute inefficiency is quite obvious and usually it does not take a lot of arguments to recognize that it is a pure “evil”. Absolute inefficiency is rather difficult (even though generally possible) to hide under any social infrastructure. Besides, as we have seen, inefficiency always brings along injustice – economic inefficiency and social justice never come together, and only non-socialized human interests are trying to hide inefficiency under the slogans of “social justice”. Comparative inefficiency is not so obvious and it usually takes time before natural order of things is helping people to recognize its presence. Sometimes comparative inefficiency is evolving into an absolute inefficiency and only then people start to notice it. Inefficiency, in fact, is never stable – it is either diminishing or growing. Even if we have only minor social and economic inefficiency, left alone it will either develop into absolute inefficiency or otherwise it has to be diminished somehow. Talking about comparative inefficiency of property relations, we primarily mean that alternative system of property relations is or suppose to be more efficient and suppose to win economic and social competition with currently existing one. It is rather difficult to theoretically prove, without any practical illustrations and social experience, that certain type of property relations or certain societal system is less efficient than an alternative one. Quite often even with illustrations and experience it is being rather difficult to prove as well owing to concealing social infrastructure and to subjective human interests. Requirements of maximum economic efficiency presume that we always have to have an absolute efficiency. Not just any efficiency can endure under the maximum economic efficiency requirements, but only the absolute one or rather even the maximal. In terms of property relations this implies survival and existence only of their most efficient form. Maximum economic efficiency requirements of absolute efficiency represent a major factor responsible for disintegration of communism. We cannot be too sure about late Soviet statistics before collapse of the Soviet Union, it probably cannot be considered as particularly reliable and trustworthy, but in certain former communist countries such as Czechoslovakia, Hungary or Eastern Germany during later years of communism there was probably some economic growth and therefore also certain accumulation of property. Under these circumstances we cannot claim that property relations as well as economic and social systems of those countries right before their fall were absolutely inefficient. Nevertheless, their property relations and economy were comparatively inefficient or less efficient than those of Western Germany for example. Therefore the system of social and property relations in those countries was not complying with maximum economic efficiency requirements and was bound to loose economic and social competition as well as to vanish sooner or later.

Contradiction between macroeconomic efficiency and self-interest-oriented human nature causes two types of relativity in understanding and explanation of society, social evolution and economic development. Overall we can talk about space and time relativity in application to different aspects of human knowledge and understanding as well as to different methods of our influence upon surrounding us various types of environment. Relativity in social science can be referred to diversity of behavioral models, of the ways and methods of our influence upon societal processes as well as to our ability to describe different economic and social systems based on evolution of human knowledge. Relativity is not a law in itself – rather it is a direct consequence of human subjectivity and partiality. Social science and economics basically deal with two fundamental methods of approaching economic and social reality. First one is connected with differences in methodology of microeconomic and macroeconomic (societal) laws and tendencies. It is based fundamentally upon the distinction between social and economic (conventional) property rights, but mainly upon contradictions between human interests. For example, social monopolization of steel industry by particular company is absolutely efficient from microeconomic point of view of this company, while it is inefficient from the point of view of every single outsider of this monopoly as well as from the point of view of macroeconomic efficiency. Yet classical school of economics has recognized a difference in principles and methodological approaches to micro- and macroeconomic processes and has actually introduced foundations of the system of macroeconomic knowledge. Classical school was the first one to clearly differentiate between business (microeconomic) and between macroeconomic (societal) domains. This differentiation laid a principle of space or scale relativity. Economic concept of Adam Smith and particularly its practical application are still sufficiently controversial even among professionals and are rather difficult for recognition by general public. Even in the modern times people are having trouble understanding how purely egocentric business actions can generate benefits for economy and at the end of the day for the entire society or for all human beings. Even today we hear a lot of claims to limit and to restrain private interests by some regulatory entity, which suppose to act on behalf of the entire society. Second type of relativity can be referred to the differences between long-term and short-term economics and social science and may well be called time relativity. To exemplify it - in a short run governmental borrowing might be somewhat practical in order to boost economy, investments and aggregate demand during severe depressions for example, but it can be rather tricky in the long run owing to resulting expansion and addiction to governmental spending. Many economists have contributed to one degree or another to better understanding of time differences within the economic approaches. John Maynard Keynes was among the first who were trying to analyze and to explain short-term and long-term economic controversy. However, we have to admit that unfortunately economics as a science even if and when it is investigating longer-term perspective rarely goes into profound historical analysis of economic and particularly of societal conditions. Already five years for macroeconomics is a long run. Karl Marx was one of the few economists who linked together economic and sociological approaches and in his attempt to understand economic development, social evolution and phenomenon of society started right from the beginning of human history. Foundations for time relativity are in the differences in influence of economic relations upon societal processes. In the short-term social and particularly property relations are influencing and are even determining the pace of economic development, while in the long-term situation is quite opposite – production factors development is stimulating qualitative changes in property relations and thus generating social evolution. Two types of relativity represent a rather fascinating and complicated phenomenon, which cannot be ignored when we are talking about the nature of societal processes, about their evolution and about evolution of property relations. Nevertheless, both principles are hierarchical in a sense that short-term and microeconomic developments are inferior and are finally being subordinated to long-term and macroeconomic (societal) evolution, while the latter is always being guided by maximum economic efficiency requirements.

 


PART II. THE STATE

While there is the State, there is no freedom. When there will be freedom, there will be no State.  

Vladimir Lenin

 

Chapter 7. State as Production Factor Monopoly

State and property are two most intriguing and captivating phenomena not only in economics and in social sciences but in society as well. Economic role and social nature of the State have attracted and still attract a great deal of attention on behalf of economists, sociologists, philosophers, historians and political scientists. Nevertheless, we still have a lot of controversy and discussion on this issue without almost any agreement on what the State really is and what is its role in economy and society. Indeed, the State is a very complicated and difficult for understanding phenomenon. Not only its nature is extraordinary hidden from the eyes of any observer, but throughout the entire human history the ruling social groups associated with the State are doing everything possible in order to conceal its real true nature as thoroughly as possible. Already this very fact of concealing, quite visible, however, for any impartial observer, represents a certain cause of alarm. What is wrong with the State and why throughout centuries it was so necessary to hide its real nature?

State is emerging and exists beyond the will of society or moreover beyond the will of particular individuals and social groups. The State is an objective impartial category, which occurs owing to self-interest oriented human nature and to people’s lust for economic and social exclusivity, although it may seem that things are happening some other way. Economic and social exclusivity are guaranteed by power and coercion, of which the State is an ultimate source, in the most distinct way. Nobody can create the State, as well as nobody, including society as a whole, is able to cancel its existence. Egocentric orientation of human nature towards exclusive benefits and first of all towards exclusive social and property rights based on mechanisms of power and coercion is generating the State and is determining its nature further on. After extensive period of tribal equality and primitive cooperation and probably as a result of wars with neighboring tribes and with other enemies, a man is beginning to recognize that he wants, and moreover, that he can obtain exclusive rights, supremacy and exclusive unavailable for his fellow human beings sources of income and comfort. So he starts to gain and to use power in order to get all those. He enslaves a part of his compatriots and is paying to another part in order to serve him and to enslave the first part. He recognizes that it is much easier, less costly and more profitable to enslave his weaker compatriots than to fight with the neighbors, which might possess equal or even superior military capacity. In such a way and for these reasons appear States and certainly not because people recognize some mythical idea of joint cooperation.

“States are maintained in accordance with the same principles that called them into being. The primitive state is the creation of warlike robbery; and only by warlike robbery can it be preserved.” (Franz Oppenheimer. The State)

There is no doubt that the State is contributing to cooperation between people if we consider coercion as an intrinsic part of the term “cooperation”. Whether such cooperation is good or bad, beneficial or not, just or unjust is another story, but it has nothing to do with how and why the States emerge. 

There is a little difference between the right of primary occupation of particular private property or of particular economic resource and between the right of primary occupation of the State. Just like land in primitive societies or more recently in American colonies was often appropriated according to the principle of primary occupation, arising States were normally appropriated by the strongest and most fitted individuals who became the kings. Later, both land and state property became the subjects of inheritance, exchange and frequently even of forcible expropriations. Just like originally private property possessions were based on primary or even on forcible occupation, in the very same way a balance of power in society or inner political (rather indeed military) hierarchy had determined original State proprietors. Besides, as we shall see, it is still determining the real proprietors of the State or “public” property.

“The right of occupation, or of the first occupant, is that which results from the actual, physical, real possession of a thing. I occupy a piece of land; the presumption is, that I am the proprietor, until the contrary is proved. We know that originally such a right cannot be legitimate unless it is reciprocal; the jurists say as much.” (Proudhon. What is property? An inquiry into the principle of right and of government)

The same is absolutely accurate in relation to the State property, especially to State property under any form of dictatorship. Principle of reciprocity in application to the State property implies an exchange of the recognition of power and property between the king and between other most influential and fitted individuals in society. Economic or lawful legitimacy of property might be a matter of inheritance or of economic activity, but its social legitimacy is merely an expression of the balance of power in society and of the mutual recognition of rights obtained within the process of social counteraction.

Embryonic State entity probably exists right from that moment when people begin to fulfill some kind of productive or exchange activity. Even more than that - no productive activity can be realized without, at least, some kind of State alike institution. In the society of self-interest oriented human beings, realization of property rights including maintenance of property regime and income distribution is virtually impossible without some kind of regulatory for those interests entity based on power and coercion at the societal level. The very same self-interest orientation of human nature is simultaneously generating intentions to benefit from privileges of this regulatory power. Cooperation between private individuals imposed by the State is certainly taking place, but it is primarily compulsory and coercive cooperation of an authoritarian nature. Nobody is agreeing upon this regulatory entity, nobody is being asked – it is simply imposed by the strongest and most fitted individuals in society. According to their private interests, those people never care about any regulation; they only care about property expropriations and property redistributions. For these “regulatory” activities people and the entire society is paying to the State or rather the State is appropriating (expropriating) a certain amount of money in the form of taxes and other payments, which form state revenues and which are allowing the State to acquire goods and services. State being such an irreplaceable and may be also unavoidable part of the global economic and social activity can be considered as a production factor since under the definition of production factor we understand economic resources, without which any productive activity is impossible.

Other thing, which is attracting our attention, when we are thinking about the State, is its exclusive nature or overall impossibility of its replacement. The State is unique in itself, according to its definition and to its nature. We cannot have another State in the same place and at the same time. And if some phenomenon is so remarkably unique and exclusive, it must have all immanent characteristics and inbuilt potential of monopoly. Since the State is an important production factor, to one degree or another involved in economic activity, it must have all resulting effects upon economy and society. Those effects must be the production factor monopoly’s effects associated with exclusive social and property rights. On the other hand, since the State is a unique supplier of particular product or rather of particular service usually called “public” services; it must have all economic and social characteristics of the structural monopoly. However, the most important, most influential and most determinative type of monopoly associated with the State is represented by its exclusive utilization of the mechanisms of power and coercion. Similar to any other monopoly, State enjoys price influence situation, marking a price of its services and being a pure price maker. Besides taxation and other forms of price influence situation, sometimes the State is also able to increase its property by borrowing (usually with somewhat uncertain obligations to repay either in the short-term or in the long-term) when it needs to cover additional expenses, problems while sometimes even mistakes of the government. Being price maker and enjoying price influence opportunities, the State is creating property rights imperfections evaluating single-handedly and socially (based on power and coercion) its own value and its own economic contribution. Exclusive rights connected with the State are articulating that they must be predominantly exploited by particular social group, access of other people and social groups to State property being either limited or denied.

The entire so-called communist, socialist and interventionist theories are critically mistaken in one fundamental assumption related to an overall system of property relations associated with the State. Every logical inconsistency, every inexplicability, methodological difficulties and permanent failure in adequate apprehension of reality are finally coming from this wrong assumption. They all suppose that State property (or as it is sometimes called “public property”) belongs to the entire population or even equally to every member of society. This is essentially and fundamentally wrong. In the best case, State property belongs to all members of society legally or formally. And even that is not always the case - neither in historical retrospective nor in the modern world. Such assumption is originally unsustainable because it is not differentiating between the legal basis of society shaped by people with their biased and partial interests and between the real statement of things expressed in objective and uncontrollable by people system of social and property relations. It is considering modern system of law as absolute, autonomous and as establishing or, at least, completely reflecting underlying system of property relations. However, law is doing nothing more than merely describing and putting on paper an achieved at certain point in time balance of power in society or an existing level of social counteraction. While it is exactly the system of property relations what is shaping the entire legal foundation of society. If laws are not adequately reflecting particular system of property relations they simply doomed on failure and disregard as multiple examples of modern developing countries and even more multiple examples from past history of modern economically developed nations teach us. On the other hand, if property relations comprise certain imperfections or certain exclusive rights, no legal system will ever improve or eradicate those imperfections. Law can only reproduce on paper existing system of social and property relations together with all its imperfections – nothing more nothing less.

In social sciences and first of all in political economy hardly there are any real economic differences between public and private (including partnership and incorporated) property. There is only juridical or legal difference between the two. But if we are considering social and economic processes of long duration and moreover if we are considering social evolution, this kind of difference is of no use for us whatsoever. Vice a versa the legal differences being imposed by social infrastructure are overshadowing the real true nature of property relations as well as the very fact that legislative system is completely dependent upon the system of property relations. There is only one type of property, which is always associated with concrete tangible proprietors or beneficiaries. Because of that it is being called “private property”. Though, much more justified is to call it simply “property”. Understandings of private, partnership, corporate and state property are rather convenient for statistical purposes and probably also for certain types of macroeconomic analysis as long as they do not intervene with our perception of societal processes. However, if we are talking about societal phenomena, property relations and moreover about social evolution we do realize that for every property at the end of the day there are always real personified proprietors who are benefiting from this property the most and, first of all, benefiting financially - in terms of income. Partnership or incorporated property for the sake of business efficiency and according to legal definitions may appear as integrated and unified. However, for any property there are always concrete and personified proprietors with a strictly determined share of every person or of every economic agent in any particular property. We can always differentiate that Mr. A is having a share of 75% in particular partnership while Mr. B is having the rest 25%. Very similar situation is with the state property except that the share of real proprietors in property possessions and primarily in income distribution is always hidden and looks like unidentifiable. Normally it is rather difficult to recognize the real mechanisms of income appropriation, distribution and redistribution inside the State monopoly. They are rather concealed and because of that the very nature of the State seems rather obscure, while in reality it is exceptionally simple.

Furthermore, if we look at the state property from the point of property relations, leaving aside its concealing and disguising mechanisms (various ideologies), we will be able to see that there is no any particular difference between public property and between property rights on that shop around the corner. State just like any shop is the conventional commercial enterprise with a single purpose to extract money from the people for its real informal proprietors whoever they are (who they really are we will learn in the next chapter). Even worse, on the contrary to other commercial enterprises the State is getting any money only by force relying on the mechanisms of power and coercion. State property similar to any other property is having its real informal proprietors – people who control it to the utmost and who are able to use associated with the State benefits (first of all material benefits) to their utmost personal advantage. Because of the State’s monopolistic nature, real State proprietors at the same time are acquiring exclusive social (based on power and coercion) property rights. State, from the point of view of property relations, is the very same economic agent as any other company, corporation, partnership or private enterprise with its concrete tangible proprietors and the same social monopoly as any other of a kind with its own egocentric and non-socialized interests. Moreover, that on the contrary to any other social monopoly, the State so far is not subject to social property rights dispersion and therefore under the current social circumstances will be indefinitely non-socialized. If State property belongs to particular individuals and not to all members of society on equal basis, then all State actions and all State resources will primarily benefit those particular individuals with their corporate and non-socialized interests.   

Just as any type of social monopoly is generating exclusive property claims towards particular economic property, in the very same way the State monopoly is producing exclusive property claims upon the state property. Who are real informal proprietors of the State property and who is having exclusive property rights upon the State monopoly is being determined in the very same way as any property rights associated with social monopolization. Just as non-socialized human interests are generating exclusive property rights, the very same interests are equally generating exclusive property claims upon the State. It is the same question of power and coercive appropriation.

“That which belongs to each is not that which each may possess, but that which each has a right to possess.” (Proudhon. What is property? An inquiry into the principle of right and of government)

Since public property does not belong to all people or to all members of society on equal basis the State does not represent any kind of impartial and unbiased arbiter - neither for property relations nor for the social ones. Vice a versa it is an enormously co-interested player in any social and property game with its own exclusive and non-socialized interests. Therefore it cannot be a judge in questions of fairness or justice as well as it cannot identify and eliminate societal injustice and, first of all, economic injustice connected with unfair income distribution in society. The very existence of the State as of production factor monopoly is immediately generating economic and afterwards also social injustice. Because of that any societal system, which is relying on the State cannot provide an absolute solution to the injustice problems. State property just as originally any property normally belongs to the strongest or to the most powerful individuals in any particular society.

State property similar to any other monopolistic property to one degree or another can serve certain societal interests to one or another degree of efficiency (though always on less efficient scale than any non-monopolized property). At the same time, State monopoly similarly to any social monopoly is always against particular private interests, first of all, in terms of the appropriation of monopolistic income. Formal rights upon the State property may be dispersed among a large number of “stakeholders”, who individually never obtain property rights upon the state monopoly and upon the state revenues. Real informal property claims upon the State monopoly and, first of all, upon exclusive patterns of income distribution associated with the State represent a much more concentrated phenomenon, which always rests with the most fitted and powerful individuals. Main problem with the State is that in order to get any financial resources it has to expropriate them from the people applying mechanisms of power and coercion. Thus we are always being trapped by its single solution to all our problems – growing property redistributions to the people who really control the State monopoly. There is simply no other way no matter what noble objectives the ruling social groups and people in power are planning to achieve. While the non-socialized interests based on exclusive property rights associated with the State are never noble and never fair.

 

“In coercing them to realize the general will or to give effect to collective choice, the state is competing with its subjects for the use of the scarce resource that is the liberty and property of each” (Anthony de Jasay. The State)

There is one particular social consequence of the State being both production factor monopoly and the final instance of power and coercion, which is basically immanent to any social monopoly. Social monopolies throughout the entire history of mankind possess a rather strong inclination to cooperate with each other, uniting their forces and power in order to increase their potential for survival as well as in order to raise their social and economic strength. Cooperating monopolies are helping each other to cover up, to conceal and to preserve monopolistic social relations as well as are significantly consolidating their opportunities to fool, to trick and to coerce the people. State being an ultimate source of power and coercion traditionally represents an essential tool for maintenance and support of particular production factor monopolies, which cannot persevere eternally under a natural order of things because of their inefficiency and injustice. They all need some instrument of power in order to survive and in order to oppress any opposition to their exclusive privileges and first of all to their exclusive and non-socialized revenues. Such an instrument is there all the time – a power of State, which being merely another type of social monopoly is always afraid of loosing privileges and benefits generated through its monopolistic nature and therefore normally is ready to cooperate with any other social monopoly. Additionally to state coercion, to social infrastructure and to ideology, a power of any social monopoly is being supported by additional exclusive income coming from its monopolistic privileges. To oppose or to fight with such kind of power sometimes can be dangerous for the State as well as for any government. It is much more profitable to cooperate with this power unless the State is constrained by other interests or unless it feels strong enough in order to dictate its will to all the people including to other monopolistic social groups. To make things better for every member of particular monopolistic social group, they need some kind of common social agreement for exploitation of their monopolistic privileges. State is a very handy and a rather suitable institution in order to provide such services. Both State and proprietors of other social monopolies are benefiting from each other. All these factors taken together lead to a reality where the State together with its direct nature of production factor monopoly represents also a key instrument for coercive maintenance of other social monopolies. Resulting outcomes of such unification of interests normally are authoritarian and arbitrary governance, lack of democracy, totalitarian political regimes such as monarchies, dictatorships, empires, etc. as well as private property claims upon the State property. On the other hand, even democracy, relatively diminishing governmental monopoly, cannot do anything about the State monopoly. Though the State sometimes is being erroneously equalized with the government, for societal analysis and from the point of view of property rights imperfections these two definitions are categorically different. Major difference stands in the fact that under democracy the government is only a part of top-level State bureaucracy, other parts being representatives and judicial institutions. State is always a property and always a social monopoly, while the government is neither anybody’s property nor necessarily a monopoly. The State is embracing an underlying property, while the government is only managing property of the State for some particular reward and therefore represents a certain part of the social group, which interests are associated with the State monopoly.

We have seen already that production factor monopolies generally and the State in particular differ what concerns their social and economic strength. Under communism the State is realizing itself as social monopoly to the paramount degree and is establishing an overall domination in society of the state bureaucracy as of the social group associated with the State with a rather limited co-optation or access to monopolistic property of the State on behalf of the other people. Monopoly of the State is very strong since nobody except for the top-level state bureaucracy or sometimes indeed except for only one person – a communist party leader – is having an access to power and to management of the entire State and state revenues. Therefore nobody else is having economic and social property claims upon the State monopoly – property rights are extraordinarily concentrated. Communism is a pure case of the State monopoly. Within other types of social formations and first of all under dictatorships, power of the State bureaucracy may be limited by the power of other existing monopolistic groups. For example, in 18th century in France State bureaucracy was quite strong and dominant in society and yet its power to certain extent was limited by the power of land aristocracy as of the social group associated with the leftovers of feudalism or with the leftovers of production factor monopoly on land. On the other hand, a deteriorating power of land aristocracy during the time period of feudalism dissolution can be explained by a social dispersion of exclusive property rights of this social group upon the land monopoly. At this point in time, power of land aristocracy portrays a diminishing strength of the land monopoly and growing association with the land property of other social groups such as financial magnates, state bureaucracy, bourgeoisie and farmers. Similar kind of property and power dispersion process, we are witnessing when State governance system is changing from dictatorship to democracy. Evolution of State from feudalism to capitalism incorporates a transition from dictatorship of a king and land aristocracy to democracy with wider property claims upon the State on behalf of various other parts of population - initially wealthy bourgeoisie, financiers, oligarchs, middle classes and at the end hopefully every particular individual have to be associated with the property claims towards the State. Though this is a rather idealistic picture of course. Evolution of governance system from dictatorship to democracy through conventional property rights dispersion is expected to provide to more and more individuals and social groups property rights upon the State as well as formal social or political opportunities to determine value of the State services as well as some kind of price influence situation related to the State property. This is how things are generally understood today in connection with the value of whatever State is doing in this world. However, since State is social monopoly, its price or the price of its services is based solely on its monopolistic nature. Particular individuals or people generally cannot establish economic value of the State simply because there are no any price voting rights and opportunities whatsoever. Price, which can be determined in relation to the State services, is a social (based on mechanisms of power and coercion) price of particular monopolized property. And whoever is establishing monopolistic price of particular monopolized property is also appropriating affiliated with this property monopolistic income. Only people acquiring monopolistic property claims or exclusive rights upon the State property can establish price of overall State services (thinking about dictatorship for example). Their opportunities to determine State value correspond to the monopolistic nature of State, while their interests are connected with the maximum possible price for the State services, which allows maximization of the physical amount of appropriated monopolistic income.

Established through political voting or through other mechanisms of social influence, price of State services or level of taxation is not an economic value of the State as of production factor, but rather is its social value determined by social and political processes based on power and coercion. Main problem with social processes is that they are having their winners and their losers. Social and political processes, on the contrary to economic ones, are never a win-win kind of game simply because normally they do not create any value, but only redistribute value created within the economic processes. Within any social or political process we are taking away resources from certain people in order to give them to certain other people. Social processes are simply never impartial and objective, because of the subjectivity of human interests, unequal distribution of power in society as well as because of the persuasive ideological mechanisms of social infrastructure, which main raison d'être is to justify redistribution of resources from certain people to certain other people. Very important and very costly element, which people have to buy under the social price formation, is ideology. Ideology always serves certain monopolistic interests and does not cost anything or does not have any value under the free market price formation mechanism. Core objective of any ideology is to persuade people to pay an exclusive price for certain exclusive rights. Ideology is vitally important tool for preservation of any social monopoly and is complementing in this task mechanisms of power and coercion, particularly in modern economically developed society where wide-scale utilization of coercion might be problematic.

State historically represents the highest form of property rights imperfections both in terms of social and economic domination as well as in terms of association with power and coercion. Power, coercion and domination in combination with monopolistic income are those essential returns to which self-interest oriented human nature is always perceptibly or imperceptibly driven. The very state’s existence is rooted in self-interest oriented human nature. As long as exist sociality, anything social in society or more precisely social means to make a living based on power and coercion, the State will always be with us. On account of all that, anarchist claims of overall State cancellation, whatever attractive they might be, are not really feasible under the self-interest oriented human nature. It may be possible to rebuild societal structure, exchange one type of governance system with another or one ruling social group with the other. It is also quite possible to destroy previous type of the State and even previous type of socio-economic formation together with associated property relations, as was the case of October revolution in Russia in 1917. Even to destroy the entire nation, country or civilization is very practicable as comprehensive historical experience is teaching us. But it is very difficult at our present stage of social and economic development to get rid of the State. Not even violations of property rights are the main threat under anarchism, but rather self-interest oriented socially strong individuals who will always find their way through to power and social domination. Social evolution, economic efficiency, economic and social justice are not directly connected with any particular production factor or with one particular social group. It does not matter whether it is working class (Marxism), entrepreneurs and capital proprietors (classical and liberal tradition) or the State (Keynesian and Marxist traditions). Social evolution is based on permanent continuous and constant interaction between social groups and production factors as well as on infinite counteraction of any property rights imperfections, including primarily of those coming from the State.

State, similar to any other monopoly, is not doing anything practical without strong social pressure. Just like any other monopoly it is accomplishing any tasks or anything for that matter only under a constant pressure and counteraction on behalf of the people. It took humanity several thousands of years of constant battles and confrontations with the State and with the other social monopolies in order to achieve a present day system of social and property relations. If this counteraction will decline or even stop, our “welfare State” will easily transform into “welfare monster” with a lot of State and very limited welfare. In twentieth century we have witnessed an astonishing number of such transformations including communism, nazism, different types of dictatorships and persistent human rights violations. Besides, it is not the State what is counteracting other social monopolies - those are the people who are doing that. The State, ceteris paribus, according to its real true interests or to the real true interests of its proprietors simply does not care. Sometimes counteracting other monopolies it is establishing its own social hegemony or increasing its own social strength. Sometimes, vice a versa, it is cooperating with other monopolies in order to promote its own power. Sometimes the State bureaucracy might even loose State control to more influential social groups. However, the State is never doing anything, what is not in its direct material interests or rather what is not in direct material interests of its real informal proprietors without pressure and counteraction on behalf of the people. The same is relevant for any social monopoly. Under different social pressures even structural monopoly can serve customers more or less satisfactory, but just like the State it does not care too much about them economically since they do not have any product or property alternatives – they simply do not have any social property rights related to its monopolistic nature.

Additionally to ideology, exclusive income and to mechanisms of power and coercion State monopoly is having two other very strong allies. First one is patriotism, which represents a non-economic or ideological factor of the moral nature. The problem with patriotism is that normally it is heavily exploited by the State and by associated with the State social groups in their non-socialized interests either in order to persuade people to pay monopolistic prices for overall State services or in order to obtain some financially inexpensive support often at the cost of human lives. Patriotism is not particularly consistent logically simply because by and large people have no any financial obligations to foreign countries and therefore foreign countries are materially irrelevant to them, while their home State have no any other means to appropriate any financial resources except to coercively confiscate them from its own people. Based on this powerful material foundation are arising all kinds of social, ethical, cultural and other immaterial factors leading to individual disaccord with particular society or with particular social infrastructure. Major impasse stands in that a person is not just giving up a part of his income for procurement of “public goods”, but that his income is being forcibly expropriated based on mechanisms of power and coercion and on exclusive property rights of the State monopoly and is utilized in its non-socialized material interests or rather in non-socialized material interests of State’s real informal proprietors. Second social ally of the State monopoly is income redistribution or people’s innate desire and sometimes necessity to benefit on account of the other people. The problem with income redistribution is that no matter what noble purposes it might serve, it is based on coercive expropriation of people’s property – an act extraordinary similar in its nature to plain robbery. But even worse is that any income redistribution is escalating a level of coercion in society, strength of the State monopoly (first of all, financial and economic strength in terms of State revenues) and an amount of exclusive income appropriated by State’s real proprietors. These two allies are vital and powerful in terms of State monopoly’s support throughout the human history. They tend to make people to forget about social counteraction with non-socialized State interests.

Nature of the State is based absolutely and exclusively upon the conceptions of property and property rights imperfections. As a matter of fact, we have separated this part of the book from the first one mostly owing to differences in common understanding of the phenomena of State and of property rather than due to any legitimate logical assumptions. Such separation is a bit artificial also since in the second part of the book we are examining the very same property rights and property relations and are relying on the very same approaches and concept of property as in the first part. More than that, second part would hardly make any sense without reading the first part. State is a unique social phenomenon, first of all, because any property rights imperfections in society can emerge only with its direct (State as a production factor monopoly) or indirect (support of other social monopolies) participation and support. It is a single and ultimate instance, which supports and maintains property rights imperfections. It is a single source of coercion throughout the entire human history but particularly in the modern times. If it were not for the State, emergence and preservation of social monopolies would simply never happen. The State is also a single entity, which owing to associated mechanisms of power and coercion introduces a phenomenon of sociality into almost any purely economic process. Sociality, no matter whether it is good or bad, whether it is right or wrong, whether it is necessary or not, means only power, coercion and forcible persuasion, otherwise there is nothing social in any economic process and nothing social in society; the only thing would be left without sociality is economy. The more barbarian or uncivilized is society or humanity generally, the more sociality it embraces, whereas the more economically and socially developed it is becoming the less of anything social it contains or the less it is based on mechanisms of power and coercion. At the same time, the less society relies on mechanisms of power and coercion and the less of social monopolization it incorporates – the more socialized it is. While power and coercion is exactly what the State is all about. Rephrasing words of Marx and Engels (“The history of all hitherto existing society is the history of class struggles”. Karl Marx and Frederick Engels. Manifesto of the communist party) – the history of all previous societies and civilizations is the history of people’s struggle with the State as with an ultimate source of power, coercion, injustice, corruption, inefficiency, oppression and forcible persuasion.

 


Chapter 8. Dictatorship and Democracy

Understandings of dictatorship and democracy are so important in social sciences generally and for us in this book in particular not because of their nature as of the two types of governance regime, but because of the nature as of two different underlining them systems of property relations attached to the State property. Problem with the State property is not only that it is so colossal and influential, but that whoever controls State property and State revenues simultaneously acquires straightforward exclusive rights on utilization of the mechanisms of power and coercion. Furthermore, whoever controls State property, State revenues and mechanisms of power and coercion is the single true informal proprietor of the State, all other people being false, imaginary and unrealistic proprietors. Who owns or who controls State property and first of all who controls those mechanisms of power and coercion is a rather complicated matter thoroughly concealed by social infrastructure throughout the entire human history. Already this fact of concealment should raise a lot of suspicion. Another problem with the State property is that not only it is associated with the largest ever monopoly based on power and coercion, but much more important is that in itself it is the final instance of power and coercion in any society. Problems with the State proprietorship by and large are portraying deficiency of any society. While the whole truth about inadequacy of any society impairs not only all non-socialized interests in this particular society, but might harm a lot of socialized interests as well. Because of all that, too many people prefer not to think too much or too deep about such tricky subject as State proprietorship and its applications. However, since State is nearly the main, the most powerful and the most determinative part of any society, without understanding of the nature of State proprietorship we will be never able to understand the nature of any society. 

Dictatorship from the point of view of property relations represents an act of appropriation of rights upon the State property on behalf of only one person – a dictator - or at most on behalf of the narrowest part of his associates among top-level State bureaucracy. Under the definition of property rights we basically distinguish three immanent characteristics - right to manage and to control property to one’s own personal advantage; right to alienate property or simply right to sell and exchange property and to appropriate the proceeds from such selling; and the right to appropriate some important income from utilization of particular property. When we say “right” we rather mean a real social opportunity or informal right – not necessarily a legal or formal right. As we concluded previously, exclusive social and property rights based on mechanisms of power and coercion are purely informal, though, sometimes, being reflected in laws they are becoming formal as well. Indeed, for proprietor it hardly matters what kind of rights formally exist as long as he can benefit from all three components of proprietorship above without any reasonable fear of punishment. Under any form of dictatorship such kind of rights upon the state property or indeed upon the State generally, normally belongs to an extremely narrow group within the top-level State bureaucracy or quite often basically to only one person – a dictator. Property rights dispersion under dictatorship is very insignificant in a sense that nobody except for dictator and sometimes also for a narrow circle within the top-level State bureaucracy controls the State property. Dictatorship implies a pure transformation of property claims towards the State property from “public” to private ones and makes State property to be privately owned by a dictator, whoever he is. Let us consider a simple historical example. State property and State monopoly under communism in Soviet Union in 1924-1985 have completely and indivisibly belonged to people at the highest hierarchical level of the State bureaucracy. They were capable to do with the State property as well as with the entire State revenues whatever they wish and much more than any modern proprietor can do with his own private property. In the most severe case of Soviet State monopoly in 1917-1975, State property literally belonged to only one person – communist party leader. Such property rights also included a possibility to exchange State property just like any other type of property, which Lenin had exercised in 1919 under the Brest Peace Treaty. He had abandoned parts of Soviet territory in order to end a war, which was threatening to the communist regime in Russia. We are not concerned here whether this was right or wrong political decision in historical retrospective, but such an act is demonstrating a plain reality that one single person, may be together with five-six of his associates, were managing the State property up to unlimited degree and even up to possibilities of territorial alienations. Overall, from the point of view of property relations, a fundamental difference between democracy and dictatorship stands in the fact that under dictatorship – a dictator or a narrow group of his associates from within the top-level State bureaucracy are acquiring non-dispersed private (at most “partnership” if associates are strong enough) property rights upon the State and upon the mechanisms of power and coercion. State property and the entire State revenues socially (based on mechanisms power and coercion and in correspondence with the societal balance of power) belong to a dictator and the severer is dictatorship the more obvious is such statement of things. Legally or formally property rights still belong to whoever is mentioned in various constitutions (most of the time, however, State proprietorship is not even cited there - it is simply being assumed), but really or socially (according to the societal balance of power) the State property rights under dictatorship every time belong to the most fitted and most powerful individuals in society, who are able to manage and to utilize State property and first of all to utilize instruments of coercion to their utmost personal advantage. In the first part of the book we saw that the law (or legal rights) is quite a superficial characteristic of proprietorship generally and absolutely inadequate characteristic of the proprietorship of social monopolies based on power and coercion. Law, in the best case, is reproducing on paper existing societal realities as people see them or by and large is reproducing on paper a current balance of power in society. The law is an absolute nothing and is totally non-functional without its foundation on the balance of power.  Without its foundation on the balance of power it merely represents a declaration of principles or a wish list. Besides, being a part of social infrastructure, law is never impartial or unbiased, always protecting and maintaining existing social and property relations no matter how inefficient and unfair they might be (for ex. slavery in ancient Rome). Proprietorship not based on mechanisms of power and coercion or on ownership of socially non-monopolized property is more or less adequately reflected in laws exactly because the laws are reproducing the societal balance of power sufficiently well in order to establish the economic proprietors. Economic proprietorship is rather adequately reflected in laws because monopolistic social groups are getting their exclusive rights, privileges and income not from the economic property per se, but from informal social (based on power and coercion) rights or from the property rights imperfections. On the contrary to economic property rights, property rights imperfections or exclusive social rights being the most imperative and most determinative part of an overall balance of power in society are almost never reflected in any laws. Proprietorship of social monopolies based on mechanisms of power and coercion including proprietorship of the State is never ascertained by law, vice a versa law is always concealing the true real proprietors of socially monopolized property and their non-socialized interests, which have a great deal of real power in society owing to their exclusive privileges and which normally are creating and enforcing all those laws. Proprietorship of any monopoly based on power and coercion, including proprietorship of the State, on the contrary to economic proprietorship, is never explicit and can only be uncovered vigilantly examining a societal system of control over the mechanisms of power and coercion.

Under dictatorship economic injustice in income distribution to the State monopoly is simple, clear and remarkably meaningful. State revenues are being expropriated from the people through application of the mechanisms of coercion in the form of monopolistic socially determined level of taxation, which is yet another expression of the monopolistic price of State services. Then State revenues are being redistributed to a dictator or to a particular ruling elite with payoffs to certain people or to certain groups of people in order to keep them fed, in one way or another, and in order to hide a real true nature of the phenomenon of State generally and of the phenomenon of dictatorship in particular. Under any form of dictatorship (monarchy, empire, nazism, communism, etc.), there is simply no any real informal difference whatsoever between the State property and between the property of dictator (though sometimes there is a formal one). Under dictatorship the entire State property and all State revenues everywhere and every time belong to dictator and in real terms they are inseparable from his private property and from his private income (for as long as he holds his position). Dictator generally can spend the entire State revenues in whatever fashion he choose as long as he privately controls mechanisms of power and coercion. Such social relations naturally are always concealed by social infrastructure in order to cover up their real nature and to avoid an escalation of social counteraction to such statement of things. Under any form of dictatorship, things are generally made to look as though public property belongs to the entire society (whatever society is). Spreading its influence upon human perception of reality this creates an illusion that State revenues and State property belong to every particular individual in society on equal basis. However, if we would abstract from superficial appearances and imagination (supported by the entire social infrastructure in non-socialized interests of the top-level State bureaucracy), from legal and political declarations and consider any type of property, including the State one, as an informal right or real social (based on power and coercion) opportunity to utilize and to benefit from particular possessions to one’s utmost personal advantage, it is absolutely clear that only an exceptionally narrow circle inside the top-level State bureaucracy is having private or “partnership” claims upon State property and State revenues. Other people being completely alienated from the State property are only paying monopolistic price for the exclusive social property rights of dictators.

Throughout the entire history of mankind had existed and still exist until now various types of dictatorships, which were established by diverse individuals and social groups. Sometimes, dictatorships may even be established by other than State bureaucracy individuals and social groups. It happens when a social strength of those individuals and social groups is superior to the one of the State bureaucracy. Ideological and political objectives of various types of dictatorships may also be rather different - they may bear communist, monarchist, nationalist, imperial, nazi and other ideas. However, once being introduced and no matter what are their original intentions, all dictatorships are generating exclusive social rights upon the State property and upon instruments of coercion for particular ruling elite. In the long-term, dictatorship is transforming an initial alliance of the top-level State bureaucracy with other powerful interest groups into a close and tight association of the State bureaucracy with the State monopoly.

Therefore, under dictatorship real informal rights upon the State property belong either to only one person – a dictator (who can be a king, a tyrant, an emperor, a duke, communist party leader and so on) or maximum to a narrow group of his associates. In the first case, State property is privately owned by dictator who also acquires private property rights upon the State monopoly and upon the instruments of coercion. State property is merely being transformed into a direct private possession of the socially strongest individual in society. Under dictatorship it is very difficult to imagine real and informal claims of any other people upon the State property, which might at least create an illusion of public ownership. Vice a versa, State property is acquiring all the attributes of private property. First of all state property comprises a real social opportunity for dictator to manage and to control State property up to its “commercialization” as well as a real social opportunity to distribute and to redistribute the entire State revenues. Such opportunities are noticeably exist for only one single person. All the State with all its property and with all its revenues is becoming a private property of dictator. In words of Louis XIV of France “I am the State”. In the other case, when property claims upon the State are associated with the narrowest group inside the State bureaucracy, State property is transforming into a partnership. Partnership dictatorship is slightly shifting the balance of power in society comparatively with a single-person dictatorship representing merely a more dispersed form of dictatorship. Number of “partners” normally is being determined by the balance of power within the top-level State bureaucracy and in society generally. Examples of partnership dictatorship are numerous both in ancient and in modern history. If we think about Soviet Union of 1924-1975, we can see almost a perfect case of private property rights upon the State of the communist party chiefs or as they were called - General Secretaries – Lenin, Stalin, Khrushchev. However, in 1970th, State is gradually transforming into a partnership property of the narrowest group of top-level communist leaders - members of Soviet Political Bureau (“politburo”). Though not every member of politburo had an equal voice in administration of the State and of the State property – some of them were more influential while others less.
 

Democracy more or less eliminates government monopoly, even though it does not eliminate the State one. Thanks to an overall social counteraction to the State monopoly and thanks to conventional property rights dispersion, democracy is dispossessing dictator and his associates from absolute social domination, from private claims upon State property and State revenues, but, first of all, from private property rights upon the instruments of coercion. Representative democracy through the conventional property rights dispersion is diminishing social strength of the State monopoly. Diminishing social strength of the State monopoly simultaneously represents a nature of democracy from the point of view of property relations. On the other hand, even under democracy there is still a rather modest social access to the State proprietorship and there are still no any economic and social competitors to the State on particular territory. The State remains to be a monopoly; remains to be a pure price maker and remains to appropriate monopolistic revenues based on mechanisms of power and coercion. Since the State does not have any economic competitors and nobody can enter a market of the State services, there is no any sign of social property rights dispersion and therefore the State remains to be the same social monopoly with the same exclusive social rights. Therefore it must still have certain more or less exclusive proprietors. Exclusive property rights upon the State property belong to the same individuals and social groups, which managed to obtain a true real social control over the State. Individuals, groups of individuals or social groups, which carry out management, control and administration of the State property, of State revenues and of the mechanisms of power and coercion or otherwise which carry out conventional property rights upon the State, at the same time are acquiring exclusive property rights upon the State monopoly. Under democracy the State bureaucracy and particularly top-level State bureaucracy (including representatives) continue to manage, to administer and to control State property as well as continue to appropriate benefits, incomes and privileges associated with the State. One of the key reasons for that, besides other things, would be a dispersion of interests towards the State property or otherwise a varying strength and intensity of interests associated with State property, State revenues and with personal income received from the State on behalf of different groups of people. Overall, the less property or less income is enjoying particular individual, the more focused and more concentrated is his interest in the State and the more pronounced is his longing for different types of income redistribution. Since State cannot be sold or exchanged in any way, it does not have any exchange value, while under the representative democracy just like under dictatorship any particular individual from within the State bureaucracy is interested in his private benefits from the State monopoly. Under the representative democracy (except, may be, for its earlier periods) State bureaucracy does not have any strong competitors, i.e. strong monopolistic groups competing with the State bureaucracy for social power and control over the mechanisms of coercion. Vice a versa, a pressure of interests associated with income redistribution from rich minority to poorer majority thanks to “one man – one vote” normally is rather strong and is furthermore consolidating the State and therefore the State bureaucracy as well. Under these circumstances State monopoly tends to expropriate money from relatively wealthier parts of population, which are not so eager to employ violent social counteraction and to redistribute financial resources to relatively poorer, whose interests in State property and in State revenues are much stronger and much more focused. Poorer parts of population are having a much more pronounced disproportion between what they might gain and what they might loose under the process of social counteraction and therefore are more inclined to appeal to organized and sometimes even to violent forms of social counteraction.

Under the representative democracy top-level State bureaucracy still forms quite a narrow and rather closed social circle and to enter this circle might be as difficult as to get a nobility title under feudalism. Overall, top-level State bureaucracy or State aristocracy being in control of the State property and of the State revenues is a rather inflexible and significantly closed group of people. For ordinary people it is not only very difficult to get an association with this group, but this group in fact is also rather distant and considerably separated from other subgroups inside the State bureaucracy.

“But what was monarchy? The sovereignty of one man. What is democracy? The sovereignty of the nation, or, rather, of the national majority. But it is, in both cases, the sovereignty of man instead of the sovereignty of the law, the sovereignty of the will instead of the sovereignty of the reason; in one word, the passions instead of justice. Undoubtedly, when a nation passes from the monarchical to the democratic state, there is progress, because in multiplying the sovereigns we increase the opportunities of the reason to substitute itself for the will; but in reality there is no revolution in the government, since the principle remains the same. Now, we have the proof to-day that, with the most perfect democracy, we cannot be free.” (Proudhon. What is property? An inquiry into the principle of right and of government)

We will go even further and insist that democracy is neither a sovereignty of nation nor of national majority, it is a sovereignty of the top-level State bureaucracy, while dictatorship is sovereignty of dictator or in the best case – of the narrow gang of his associates. 

From the point of view of property relations, State property belongs either to one single individual (single-person dictatorship), to a group of individuals (partnership dictatorship with a ruling of the narrow group of people usually from within top-level State bureaucracy sometimes in cooperation with other monopolistic social groups) or at most to one social group with an overall formal dispersed claims upon State property and less dispersed claims upon State revenues (representative democracy with a rule of top-level State bureaucracy). Under representative democracy, State is having all the standard monopolistic effects upon economy and society – price influence situation, income distribution and redistribution, economic inefficiency, economic injustice; administration and control over State property being an exclusive monopolistic privilege of the top-level State bureaucracy. With an exception of certain influences upon the process of income redistribution, people are having a very relative connection and a rather insignificant affiliation with the State property. Income redistribution, besides other things, depends on the balance of power in society. Today practically each and every economically developed country is confronting a problem of heavy retirement benefits and of their critical influence upon the State budgets. But since elder people possess quite a strong voting power owing to rising life expectancy, significant savings (allowing active participation in various lobbying groups and advocacy campaigns) and also because they normally are the most responsible and organized voters, it is very difficult to counteract a tendency of growing retirement benefits and of their problematic influence upon public finance. It was certainly not the case, for example, fifty years ago when elder people were not so socially strong and united. Overall, conventional property rights dispersion is rather orienting small proprietors towards the claims on income or revenues of a particular economic agent, than towards the claims upon property management. The more dispersed are property rights the more income claims prevail over property management claims. The same is also correct for incorporated property and for mutual funds when small shareholders are predominantly buying stock for the sake of income and not in order to administer any property. Once again an important role is playing here the phenomenon of interests’ dispersion among different sources of income available to a particular individual.

Income associated with the State monopoly and appropriated by the top-level State bureaucracy incorporates quite a broad spectrum of social and economic benefits and privileges such as direct monetary income (salaries and bonuses); office related benefits (luxurious traveling, wining and dining, office premises, cars etc.); vast possibilities for promotion of affiliated political parties, organizations, companies and simply of any private interests, both one’s personal and those of one’s friends; career opportunities for friends and relatives; future career and income expectations coming from current position in the government (ex. books, lectures, jobs, etc.); various privileges, which can be passed on to descendants and relatives; contracting and bargaining power related to commercial undertakings; various non-monetary benefits appropriated through the State, sometimes virtually non-punishable out-of-law and half out-of-law benefits; possibilities to utilize insider information to the private benefit; etc. There are few probably less important incentives such as, for example, a possibility to spend leisure time, to communicate, to stay in touch, prestige, pride, self-esteem, respect, etc. Non-monetary and non-financial benefits often represent any value only if they are linked with the future expectations of monetary rewards; otherwise they are merely the elements of consumption. For example, respect and reputation might serve as preconditions for potential promotion inside governmental hierarchy and therefore also for higher income in the future.

Price influence situation and connected with it appropriation of monopolistic income, State enjoys not only under dictatorship, but under democracy as well. Since there are no any competitors whatsoever and no any alternatives to the State, the price of State services cannot be determined through within the market mechanisms. State services are generally having very low substitution possibilities – the State simply would not allow any substitution of itself utilizing to utmost different ideologies as well as mechanisms of power and coercion. From one side, State expropriating a part of national income from particular individuals in the form of taxes is redistributing it to certain other individuals in accordance with a conventional property rights dispersion towards the State monopoly or otherwise in accordance with a level of democratization of particular society and with dominating social welfare standards. These standards to certain extent are influenced by understanding of social justice within particular historical period and within particular society. But most importantly such standards fundamentally depend on the balance of power in society or on counteraction between State, all social groups and all private individuals. From the other side, State is appropriating a part of national income in the form of salaries, benefits and privileges of the top-level State bureaucracy, representatives and of the State bureaucracy generally. Income redistribution through the State or social (based on coercion) welfare cannot be examined separately from appropriation of monopolistic income by the State bureaucracy because both patterns of income distribution are coming from the same source – taxation and both are managed by the very same people. From the point of view of State monopoly, income redistribution represents the net cost, while the funds intended for distribution among top-level State bureaucracy - net profit or net income. Following this analogy with conventional commercial enterprise, taxes and other financial inflows form the State revenues. Income redistribution is merely a payoff of the State to certain groups of people and to certain members of society. It essentially serves in order to avoid or to diminish social counteraction to the State monopoly and to buy any social opposition to appropriation of monopolistic income by the top-level State bureaucracy. On the other hand, it helps to create an illusion of common public ownership of the State property or, so to speak, “State communism” illusion.

Examining State from the point of view of underlying it property relations, we can see all applications and influences of representative democracy from quite a different angle. Democracy undeniably being a very important achievement of social counteraction and also being positively superior to any kind of dictatorship, nevertheless, embraces certain immanent straightforward contradictions. Essential cause of those contradictions stands in the fact that conventional property rights dispersion related to the State property and demonstrated by representative democracy, is affiliated with economic and social institution, which is based entirely on social monopolization and represents a final source of power and coercion. Connection of the State with social monopolization is having a significant reflection upon almost any societal phenomenon. Even in its most developed form (or rather especially in its most developed form) representative democracy through universal suffrage and under equal universal voting rights implies that poorer (not just “poor”) people, who are always in majority, have the opportunity to permanently benefit on account of the rich and affluent people, who are always in minority. This outcome no matter what are the justifications is embracing a certain abnormality or more plainly – an essentially important contradiction of the representative democracy. What is much worse from societal point of view is that such statement of things inevitably implicates while together with an advancement of democracy permanently accelerates utilization of the mechanisms of power and coercion. If income redistribution is indispensable, most probably, the proprietors, whose property is being expropriated, must have at least an opportunity to oversee what levels of expropriations are necessary and where the expropriated money goes. Another reasonable assumption would be that coercive expropriation might be more justified if it takes an equal share from each and every member of society. However, those are too idealistic assumptions. They are rather difficult to implement because of the current balance of power in society, because of the strong monopolistic interests in unequal income redistribution, but mainly because reason and logic have nothing to do where exclusive rights, power and coercion are involved – i.e. in human society. On the other hand, even equal taxation cannot completely eliminate the State monopoly in any event. Expropriation and redistribution, which are being carried out through the State are always associated with appropriation of monopolistic income by the top-level State bureaucracy. From the point of view of top-level State bureaucracy, income redistribution serves merely as a social justification for appropriation of personal monopolistic income. Income redistribution is not only a coercive expropriation in favor of would be vulnerable parts of population, but much rather a coercive expropriation in favor of the most powerful social group in almost any kind of society – in favor of the top-level State bureaucracy. Here comes a fundamental immanent to the State contradiction between idealistically attributed to it (without taking into account State’s real nature and interests of its real true proprietors) societal role from one side and exclusive property rights associated with the State production factor monopoly from the other.

Democracy, no matter how idealistically it sounds, materializes only owing to a certain evolutionary level of the system of social and property relations. It is another step ahead in counteraction of property rights imperfections - a big and important step, which is eliminating governmental monopoly on the instruments of coercion. But it is only the developments in system of property relations and in social counteraction what brings along democracy. People always have to fight for their rights and first of all for their social property rights. Social counteraction aiming at better and more efficient system of social and property relations perceptibly or imperceptibly is always directed against the State as against the last instance of all property rights imperfections, against all economic inefficiency and economic injustice in society. At certain level of economic and social development, social counteraction is introducing a governance system free from governmental monopoly or, otherwise, it is making property claims upon the State to be more economically dispersed and is eliminating extremely exclusive private claims upon the State property and upon the mechanisms of power and coercion associated with dictatorship.

Democracy is an objective outcome of social counteraction and of an overall process of social evolution. To exchange democracy for something better will take much more than merely to recognize its inefficiency. But may be representative democracy overall is the most efficient form of governance and there is nothing else or nothing better? What about some kind of governance system, which includes certain property or income census - when those people, whose money are being expropriated in the form of taxes, can decide themselves how much of their property they are willing or have to give up and for what purposes. Otherwise unlimited and unconstrained desire to benefit on account of other people’s property will remain for as long as will be richer and poorer people and not just rich and poor. While such desire besides being very difficult to justify brings along an enormous State production factor monopoly with all its immanent inefficient and unfair outcomes. After all, the State, besides other things, is an ordinary economic agent – conventional commercial enterprise - managed by ordinary people with standard self-interest oriented human nature, which is always eager to boost its personal income on account of other people and without taking into consideration any idealistic factors. 

“But the illustrious orator ought at the same time to demand that each elector shall have as many votes as he has shares; as is the case in commercial associations. For to do otherwise is to pretend that the nation has a right to dispose of the property of individuals without consulting them; which is contrary to the right of property. In a country where property exists, equality of electoral rights is a violation of property” (Proudhon. What is property? An inquiry into the principle of right and of government)


Any dictatorship is probably the worst form of governance and of societal organization, which can be applied to the State as to the final source of power and coercion. Main problem with dictatorship is that it is attributing to dictator not only private rights upon the State property, but, what is much more important, it is attributing to dictator private property rights upon the mechanisms of power and coercion. All the resulting disasters of dictatorships are arising solely from this major detail. Once upon a time in certain countries there was an alternative both to dictatorship and to representative democracy - a system of governance based on property census. It used to be a product of the original embryonic capitalism when bourgeoisie was anxious to protect its newly obtained rights and privileges from masses of poor population as well as from former land aristocracy. Property census hardly represents an absolute or universal suffrage democracy since voting rights are limited by a certain minimal amount of property or income. On the other hand, it is quite difficult to associate it with dictatorship either, first of all, owing to rather dispersed social claims upon the State property. In all probability the property census suffrage is somewhere in-between dictatorship and democracy. From the point of view of property relations, it is very much distanced from dictatorship also because instead of private and partnership property claims upon the State on behalf of the top-level State bureaucracy, it advances clearly expressed exclusive economic and social claims upon the State property on behalf of all capital proprietors or for all affluent individuals. Property census denies any social barriers for voting rights introducing instead economic or property requirements. Since property census represents a quantitative non-social requirement for voting rights, ideally anybody can reach it without utilization of the mechanisms of power and coercion employing purely economic means and actions. In order to compare property census with representative democracy we have to analyze their effects related to generation, preservation and consolidation of all types of property rights imperfections including property rights violations of private and social nature, social monopolization and State as a production factor monopoly.

  

 

Representative democracy

Property census

Property rights violations of private nature

Equal

Equal

Property rights violations of social nature

More

Zero

Generation and consolidation of social monopolies

?

?

Consolidation of the State production factor monopoly

More

Zero

Table 1. Representative democracy versus property census

Probably ability to counteract private property rights violations is approximately the same under both governance systems. Indeed police, law enforcement agencies, judiciary systems and courts as public institutions, which mission is to fight property rights violations of private nature, are relatively indifferent to both types of governance, while performance and public supervision of these institutions are approximately identical under democracy and under property census. Property rights violations of the social nature under property census are close to zero, because normally people in charge of the State administration being at the same time important proprietors are hardly interested in any property expropriations. Generation and consolidation of the various types of social monopolies might be the trickiest part of our comparison. Last but not least important factor is consolidation of the State monopoly. Under property census consolidation of state monopoly is rather unimaginable and hardly ever takes place bearing in mind that at the times of property census at the dawn of capitalism, share of the State in overall nationwide property possessions was absolutely negligible and therefore the State monopoly was economically very weak. It is absolutely not in the interests of voting proprietors to allow any large-scale taxation. On the contrary, under representative democracy social and economic power of State is reaching unprecedented levels. There is no doubt that consolidation of the State monopoly is much more substantial under democracy than under property census. Such statement of things is also perfectly explainable from the point of view of property relations. Under the property census voting individuals and people in power are relatively wealthy proprietors, who normally would be against any property expropriations. While under the representative democracy we are having an entirely different situation - all State revenues and all income of the State bureaucracy are based solely on property expropriations and property (income) redistribution.

Necessary adjustments have to be made before carrying out any final judgment. First of all, property census emerged at a certain time period, when sentiments towards the State generally were not of such a venerating character as they are today and we cannot predict how the property census would look today. Another interesting topic for consideration what concerns historical parallels is connected with the fact that capitalism in its major part and in its traditional understanding is associated with one or another model of property census. While an extraordinary level of State expenditures, enormous income redistributions and everything we understand under the representative democracy are rather associated with the modern socialism of economically developed nations. Overall, there is no direct evidence that today property census will be more efficient than representative democracy even though previously it could have been. On the other hand, it looks as representative democracy enormously escalating property expropriations from one side and State domination in society from the other hardly represents an adequate solution for complete elimination of all property rights imperfections in society. Today based on societal balance of power as well as based on societal evolution scale, property census looks rather obsolete. May be the only governance alternative to representative democracy worth consideration could be a some sort of income census democracy based on voting power in correspondence with person’s contribution to national budget or with the taxes he pays. The more taxes one pays or the more he invests in the State, the more rights he has to decide on how his money will be spend afterwards. Income census democracy, which implies conventional property rights dispersion towards the State property, on the contrary to representative democracy, provides a strong case for social property rights dispersion related to the State monopoly. The more income one earns, the more taxes he pays the more votes he gets and the bigger State “proprietor” he becomes. Theoretically under the income census democracy everyone is able to acquire tangible, personified and numerically expressed property rights associated with the State property (almost similar to corporate shareholding). What is extremely important - those property rights in their pure form are not based upon social mechanisms of power and coercion. However, income received by any particular individual still might be based on coercion and this leaves a room for emergence of certain types of social monopolization. For example, say a person earns ten billions of dollars per year. He pays roughly four billions in taxes and is equally having four billions of votes. There is no any point for him to elevate a general level of taxation (he is rather inclined to diminish it). Speaking otherwise, it is against his interests to boost State revenues and to consolidate the State as a production factor monopoly. What he really might do is to use his influence (voting power) in order to obtain certain privileges and certain exclusive rights for himself coming from his private and business interests. Though he is not interested in consolidation of the State monopoly, instead he might be interested in generation of the other forms of social monopolization. However, it is very unlikely, almost incredible, that somebody with such a fortune will seek to increase it further relying on mechanisms of coercion. And people with smaller fortunes will have a rather insignificant influence upon “public” decision-making due to their moderate financial contribution and therefore also moderate voting power. The only real factor, which can prove what kind of governance system, is more efficient and therefore also more just, is future economic development and social evolution. Even though today there is strong evidence against representative democracy, we cannot provide equally strong practical evidence in favor of the income census democracy. On the other hand, immense social, economic and financial interests, which will always ignore any evidence and which will do everything possible in order to make people blind in front of any evidence, are associated with representative democracy. Those are the interests of top-level State bureaucracy in higher State revenues, interests of the people relying in their business on the State and interests of the people benefiting from social protection and income redistribution.

State similar to any other production factor is permanently evolving throughout the entire human history. Just like technology, capital and labor, it is becoming more and more sophisticated and develops capacities to perform its real economic and social functions. But together with such kind of evolution it is simultaneously developing its capacities as production factor monopoly and therefore a level of supervision and control over the State on behalf of the people also requires permanent consolidation, first of all, in terms of efforts and financial resources. Money solves everything in society – only rich people and rich organizations can counteract State effectively and efficiently. Poor nations are helpless in front of the State’s colossal financial resources, in front of its instruments of coercion and in front of its sophisticated and seductive social ideologies.

“…competition between the state (which successfully maintains the monopoly of force) and its subjects (whose one strong recourse is rebellion—usually risky, costly and hard to organize) is prima facie so lopsided, so grotesquely unequal, that if the state stops anywhere short of enslaving its subjects, cogent reasons are needed to explain why” (Anthony de Jasay. The State)

For the time being we cannot entirely eradicate social and economic strength of the State monopoly and therefore State as a production factor monopoly cannot be completely exterminated. In the best case people can only diminish an overall strength of the State monopoly. They can do this in three possible ways - withdrawing State’s economic strength diminishing physical and material volume of the State property; through conventional property rights dispersion towards the State monopoly or, otherwise, consolidating democracy (though not necessarily representative democracy) and social counteraction to the State and finally through social property rights dispersion, which in application to the State thus far mainly means strengthening and advancement of international competition between countries and societal systems. On the contrary to other social monopolies, elimination of the State monopoly through social property rights dispersion and through an overall unlimited access to economic property rights upon the State for each member of society for the time being is impossible or at least seems that way. In particular case of the State monopoly, social property rights dispersion is not that straightforward and therefore elimination of this particular monopoly is a much more complicated task. Nevertheless, social property rights dispersion, as we know by now, is a single necessary precondition for a complete elimination of any social monopoly and it also has to be a sufficient condition for the complete elimination of the State production factor monopoly. We still have to find in what way social property rights dispersion can be applicable to the State monopoly. In modern times certain hope in this respect is connected with the competition between social, economic and political systems including with the competition between countries and nations, and why not even between the regions. Modern regions are so huge and powerful economically that they can easily represent a plausible alternative to the states. In modern history the most remarkable example of the social property rights dispersion in application to State property is a collapse of communism.

State is not in any way an ideal societal phenomenon. It is simply performing certain social and economic functions. And for carrying out of these functions it is being paid just like any other economic agent or, speaking otherwise, are being paid people associated with administration of the State and of the State property. If State is not accomplishing those functions or if it is accomplishing them comparatively inefficient it should be punished just like any other economic agent. However, the problem is that since the State represents social monopoly based on power and coercion and is hardly involved in any market relations it cannot be economically punished by the market for its inefficiency; the only way to punish it - is social counteraction.

Conventional property rights dispersion related to the State property, or democracy for simplicity, is having two very strong restraining factors what concerns its overall influence upon society. First of all, majority of population is normally involved in economic activities not connected with the State property and with the State revenues and on account of the dispersion of interests simply cannot or does not want to participate in administration of the State property. Majority of population is having much stronger interest in management and income associated with their private property than in those of the State. Furthermore, other things equal, normally people are trying to manage their own property in such a way that it would be appropriated or expropriated by the State to a minimal degree possible. If one day a majority of population will associate their basic interests with State property and State revenues, may be then a new model of society or indeed a new model of communism will emerge. However, it takes to change human nature in order for that to materialize. One of the essential contradictions of communism was an association of people’s interests with various properties or with various types of property, while in reality only one type of property (State property) was permitted. Dispersion of interests is one of the main objective constraints for conventional property rights dispersion related to the State or otherwise is one of the main objective constraints for democracy. Second restraining factor for democracy is grounded on the plain fact, that any social monopoly (including State) or rather its real proprietors will not allow anybody to be associated with the control over monopolistic property and especially will not easily allow anybody to participate in appropriation of monopolistic income. No matter how we call property – State, public, incorporated, private or otherwise - only individuals and social groups, which managed to obtain real informal opportunities to control it and, first of all, to appropriate income connected with this property are having real tangible property rights upon this particular property. While other individuals and social groups, which ideally (or rather idealistically) pretend to be proprietors or co-proprietors of particular property, without effective permanent social counteraction will always be left behind as long as property is monopolized at the social level and as long as its control is based upon mechanisms of power and coercion. In order to appropriate the rights on exclusive socially monopolized property based on power and coercion one must have this power and must fight for this type of property rights. Social property rights on the contrary to economic ones cannot be appropriated automatically – they are absolutely informal rights and, most of the time, they are not fixed in any legal acts. They are almost invisible and almost illusory inside the social infrastructure. Because of considerable and insurmountable so far constraints for social property rights dispersion related to the State property, the above-mentioned constraints for conventional property rights dispersion are very much determining who the real proprietors of the State are.

State interventions in economy of direct and indirect nature as well as social and economic regulation on behalf of the State represent a vivid illustration of the property rights violations of social nature associated with State monopoly in modern times. Those phenomena also provide a perfect example of how property rights of particular private proprietors can be limited by the mechanisms of power and coercion at macroeconomic or societal level. Under the State regulation of economy and society, property rights violations of social nature are embracing not only direct income distribution and income redistribution, but also control over the property, which formally or legally does not belong to the State. 

“The main error that prevents many of our contemporaries from adequately comprehending the significance of various party programs and the trend of the welfare policies is their failure to recognize that there is, apart from outright nationalization of all plants and farms as effected in Russia and China, a second method for the full realization of socialism. Under this system, that is commonly called "planning" or, in war time, "war socialism," the various plants and farms remain outwardly and seemingly separate units, but they become entirely and unconditionally subject to the orders of the supreme planning authority. Every citizen, whatever his nominal position in the economic system may be, is bound to toil in strict compliance with the orders of the planning board, and his income, the amount he is permitted to spend for his consumption, is exclusively determined by these orders.” (Ludwig Von Mises. Economic freedom and interventionism)

State regulation of economy and society reveals that property rights can be limited by mechanisms of power and coercion not only in particular economic sector or only within particular production factor but in the entire economy and for every single piece of property as well. We are not interested here whether State regulation and State interventions are beneficial or harmful, necessary or useless, efficient or not - rather our objective is to discover the underlying motives and interests associated with every single State intervention in economic and social affairs. Identification of types and forms of “desirable” interventions and of their qualitative and quantitative characteristics will not lead us anywhere in understanding of the State interests connected with ever-increasing economic regulation and in understanding of the State genius to create economic inefficiency and economic injustice and is out of the scope of this book. What has to be clearly exposed, however, is that the entire State regulation, as we will see later in the book, is one hundred percent correlated with financial and material interests of the top-level State bureaucracy. First of all, State regulation and State interventions are essentially undermining not only any other form of social monopolization but equally any type or source of economic power competitive to the State and to the top-level State bureaucracy. Second, State interventions create positive for the State, though illusory impression of an overall control over the private “exploiters”, of the advocacy for social justice in society and of caring for “public interest”, whatever that is. Last but not least, State interventions generate immense additional sources of State revenues (since any additional tasks bring along additional organizational structures while additional structures require additional resources) and therefore additional sources of income, power and influence for the top-level State bureaucracy.

Economic strength of the State monopoly is based on the size of State property, which in modern times is permanently expanding in practically every single country. Even if somewhere, sometimes we witness at least some minor privatization and deregulation activities, within several years State expenditures, tax collections and State debts are exceeding all the previous levels. On the other hand, privatization carried out against monetary units is not diminishing amount of the State property directly, but merely changes its physical form. The larger is the size of State property expressed in monetary units, the larger amount of monopolistic income is being distributed to top-level State bureaucracy. Representative democracy removing immanent to dictatorship private property rights upon the State is generating instead the more dispersed property claims and therefore is more or less downgrading social strength of the State monopoly. Uniting compound power of private individuals into an organized force against any perceptible exclusive interests, democracy to certain extent is counteracting social strength of the State monopoly. On the other hand, embracing as its immanent outcome virtually unlimited income redistribution, representative democracy is consolidating economic strength of the State monopoly. At the same time accelerating interventions in society of the mechanisms of power and coercion for regulatory purposes, taxation and income redistribution, representative democracy is also elevating social strength of the State monopoly. State similar to any other social monopoly is always eager to enhance its exclusive rights (aiming primarily at additional monopolistic income) including through diminishing of the conventional property rights dispersion related to the State property i.e. through minimization and downgrading of democracy. Only permanent effective social pressure on behalf of the people is keeping State on a leash, otherwise, it is always eager to dominate society and every particular individual and to drive a balance of power in society towards the governance forms close to dictatorship. From the point of view of top-level State bureaucracy dictatorship is an all times preferable form of governance because it allows much stronger social monopolization, because it attributes to State bureaucracy much more concentrated property rights upon the State monopoly and therefore also upon the mechanisms of power and coercion, but most importantly because comparatively with democracy dictatorship is raising enormously an amount of monopolistic income appropriated by the top-level State bureaucracy. Saying less technically, dictatorship allows top-level State bureaucracy to absolutely uncontrollably administer State property (including mechanisms of power and coercion) and to appropriate bigger monopolistic income.

Under the angle of property relations hardly ever we can call State property a “public property”. This more sounds like a joke. In no way State property belongs to every particular member of society automatically and moreover on equal basis. We have seen already that Social property rights based upon power and coercion never belong to anybody automatically - they need to be appropriated. Rights upon the State property, just as any other social rights based on power and coercion also have to be appropriated. Only the most fitted, socially strongest and the most powerful individuals are acquiring social property rights. While if property rights are appropriated only by a certain group of individuals or by a certain social group, these rights become exclusive and inaccessible for other members of society. Democracy just as partnership dictatorship is changing a state of affairs related to the rights upon State property. However, representative democracy is generating very different levels of people’s association with the State property. Representative democracy as partnership dictatorship does not attribute equal rights on State property to all members of society and in this sense it rather represents a more dispersed form of dictatorship – dictatorship of “representatives”. Strictly speaking “representative democracy” hardly is a democracy per se.

Even though there are a lot of alarming trends generated by representative democracy, so far it is quite difficult to judge where they lead. In our predictions we cannot completely rely on ancient societies such as Rome and Greece because they were not truly democracies even at the times of their prosperity, but rather aristocracies (a form of dictatorship) where a huge number of population (slaves) had no any rights whatsoever. Even though they vanished because of all-embracing in-law and out-of-law corruption, comprehensive inefficiency and severe property rights imperfections, we cannot really say that they were destroyed by democracy. Our modern societies and their rather short democratic history are also providing us with a very little input for conclusions. There are two principal social threats, which we can observe within past and modern democracies which are based entirely on property rights imperfections. First one is social parasitism or massive inefficient and unfair income redistribution coming from the real social opportunity for poorer majority to coercively benefit on account of rich minority – opportunity based on universal suffrage or on voting mechanism of “one man one vote”. Someone less wealthy would welcome indefinitely a legally approved redistribution of funds and property of other people and organizations in his favor and so far there are no any effective means to counteract such tendency. Social parasitism besides its negative effects per se is seriously accelerating a second threat coming from representative democracy – State domination in society or extraordinary boost of financial, economic and social power of the State monopoly. Elevating power of State monopoly is not only strengthening non-socialized nature and non-socialized actions of the State, but is also making too many people, corporations and organizations dependent upon the State - dependent, first of all, financially in terms of money. Remarkable in size income redistribution, accelerating material dependency upon the State as well as romantic and idealistic vision of society imposed by State are contributing to diminishing people’s abilities of social counteraction, the latter being a single available to us tool for annihilation of any exclusive rights, of economic inefficiency and of social injustice. Persistent problems in State administration, accelerating in-law and out-of-law corruption, inefficiency, which is difficult to conceal and moreover to justify, ever growing state domination, declining international competitiveness of loaded with redistribution practices societies are inevitably generating a feeling that something is wrong with an overall governance system of representative democracy. Private individuals and corporations socially and economically weakened by heavy taxation, income and property redistributions and dependent on the State with the strongest type of dependency – material or financial one - are having serious difficulties in counteracting State and other forms of social monopolization. Without social counteraction people are at a substantial risk of loosing their property, liberties and freedom. Democracy is not an idol. It is merely a tool, which we are having on a quantitative scale – it is not either we have it or not, it is how much of democracy we have. Not a single country in the modern world simultaneously integrates a highly developed democracy and a low degree of State domination in society, which would mean that the State is significantly defeated and dispossessed of the majority of its functions. Even though State as an ultimate instance of power and coercion up until now is a final source of all societal problems and a primary cause of any societal injustice, we have to understand the phenomenon of State in all its complexity and evolution. We do not want to create a new paradigm and new eternal enemies similar to an aged Marxist story about bourgeoisie and working class. State creates societal problems because it immanently incorporates exclusive property rights based on power and coercion. For the sake of scientific impartiality we have to admit that the same kind of imperfections may be associated with any other social institution, social group or even with any particular individual. However, in order to establish and to maintain exclusive social and property rights any one of them has to rely upon the power of State as of the single instrument of coercion in society. Liberalization of markets and economic flows and created by this liberalization international order are working hard towards at least some kind of social property rights dispersion related to the State property. This new international order much more than any representative democracy creates preconditions for people’s liberation from the State monopoly. On the other hand, immense income redistribution immanent to representative democracy and accelerating power of the State bureaucracy accompanying permanent growth of the State monopoly are working in a rather opposite direction – towards people’s enslavement by the State. Representative democracy once upon a time brought us Hitler and Robespierre and they hardly were the last of a kind. For the time being, the main precondition for elimination of any social monopolization - social property rights dispersion - in application to the State monopoly is only connected with economic and social competition between States, countries and nations. This competition, among other things, finds its expression in emerging unregulated supranational economic space where people and capitals can escape from enormous State appetites for property expropriations and income redistribution and in accelerating possibilities for people and for production factors to exchange States and country of residence like a pair of gloves. But States are not just fooling around doing nothing and this unregulated space is becoming smaller and smaller every year.

Chapter 9. State Functions

Unfortunately identification of the State value or of the price of State services through intermediary of economic or market mechanisms is impossible. Under representative democracy identification of the price of State services is appearing as a political voting process, which together with all associated problems and imperfections, nevertheless remains to be a single method for estimation of the State value. However, value established in such a way is not a market or economic price and therefore it does not demonstrate a real economic contribution of the State. It is not even the value of the State, but much rather is the value of a government and only indirectly is the value of the State. But has the State generally any value? And if it has, what this value is based upon and how it is being established outside of the market mechanisms? Similarly to a value of any other social agent or of any other social monopoly the price of State services is being determined by a set of social factors, which are relying on the mechanisms of power and coercion, on the balance of power in society and on the social strength of State monopoly. Saying otherwise – socially strongest individuals in particular society associated with the mechanisms of coercion are establishing (in correspondence with the balance of power in society) a price of any socially monopolized property including the one of the State. Needless to say that price formed in such a way has nothing to do with real economic contribution of the property or with its real value, being purely social price and certainly not an economic one. In application to the State property the most we can do - is to investigate what are those State functions for which people are actually forced to pay or simply to understand what we are actually buying beyond our will.

State besides a number of particular widely familiar economic functions, being closely associated with the mechanisms of power and coercion is also acquiring certain social functions associated with social agents or otherwise with social monopolies. Since State is a social monopoly with its real distinctive proprietors and with their non-socialized interests, speaking about State functions we have to clearly differentiate between ideal state functions – the ones people would like the State to have - and between the real ones, which can be actually attributed to the State according to its nature and to underlying it system of social and property relations. Major controversy on fundamental social and economic principles between socialist ideology from one side and classical liberalism from the other arises exactly on account of this confusion between real and ideal State functions. Generally speaking, misunderstanding of the nature of social property rights based upon mechanisms of power and coercion and idealization of social realities is making socialist theories to rely on the strongest social monopoly ever - the State. We already know by now, that in direct perceptible or imperceptible interests of the social groups associated with the State and first of all in the interests of State bureaucracy is to elevate as much as possible an economic role of the State and its participation in economy and society in order to increase an amount of property under control and an amount of income appropriated by the State and through the State. Likewise, in social and economic interests of the State bureaucracy is to make State monopoly less dispersed in terms of a number of proprietors and therefore to make it socially stronger. Accordingly any single acquired or appropriated by the State function or even any single additional domain of the State activity – either economic or social - actually represents a direct gain (including first of all financial or material gain in terms of additional State revenues) of the State as of production factor monopoly in its counteraction with the rest of society.

Let us start our investigation of the State functions with their ideal set – the one, which is attributed to the State by tradition, by general public and by various statist ideologies. From the point of view of property relations and based upon our previous analysis of property rights imperfections we can separate two fundamental groups of ideal State functions. First one is elimination of the different types of property rights imperfections and creation of efficient property regime accompanied by fair societal system. This is an ideal social function of the State. Second function is connected with the supply of particular goods and services, with income redistribution, with economic regulation and with the stimulation of aggregate demand. This is an ideal economic function of the State.

 


 

 

 

 

 

 

 

Diagram 3. Ideal State functions

Immediately we can see that main outcome of the State economic function is consolidation of the State social monopoly closely connected with expansion of the State property, State competencies, State revenues and State economic interventions. Therefore, State economic functions or rather their consequence is in a straightforward correspondence with the direct interests of the State monopoly or of the top-level State bureaucracy as of the State’s single real informal proprietor. Social function of the State ideally incorporates two major components derived from an objective to eradicate different types of property rights imperfections – counteraction of social monopolization and counteraction of property rights violations. We equally know by now that counteraction of social monopolization and of property rights violations of the social nature by the State is very problematic since their very emergence is possible only through utilization of the mechanisms of power and coercion or through direct participation of the State. If it were not for the State social monopolies simply will never appear especially under the modern societal balance of power. Another story is counteraction of property rights violations of the private nature or enforcement of law and order. It seems like a decent and at the same time appropriate and suitable task for the State. The only problem is that it concerns security of private individuals and directly is neither in the interests of the State nor in the interests of the State bureaucracy. State as a proprietor, as commercial enterprise or as economic agent simply does not care about property rights violations of the private nature just like it does not care about any private interests except for those of its real proprietors. Indirectly, however, State bureaucracy does get revenues as well as its own important ideological justification associated with this function. State has to take this function on board partly in order to justify its own necessity and its own existence and partly as a result of people’s demands under the process of social counteraction. Extremely important is that this function is making State to enforce the law and even the entire social infrastructure, which serve to preserve existing property rights and property relations and therefore also to preserve exclusive property rights associated with the State. On the other hand, this function justifies and so far extremely successfully the very presence of the mechanisms of power and coercion in society and therefore the presence of the State generally. This function is extraordinarily imperative for the State because it might be a single function, which more or less justifies necessity and an overall existence of the State. Ideal social functions per se are the most artificial to the State’s nature and the most strange to the State’s interests and first of all to the interests of its true real proprietors (even though indirectly they serve those interests in one way or another) and because of that people have to effectively impose them under the process of social counteraction.

Ideal economic functions of the State can be divided into two subgroups - macroeconomic and microeconomic ones. Ideally the State as macroeconomic agent has to achieve three major objectives – stimulate aggregate demand and aggregate supply, redistribute income in social security and welfare purposes and eliminate economic monopolies. State as microeconomic agent is expected to supply certain goods and services either because they are traditionally being considered as public goods, or because they suppose to contribute to the State’s macroeconomic task of boosting aggregate demand or because State might have certain economic advantages in their delivery on the market (advantages, which are very difficult to substantiate). Generally speaking it is out of the purpose of this book to investigate directly how efficient State economic functions or different macroeconomic recipes are. One of our principal concerns in this book is to identify and to exhibit the nature of economic inefficiency and social injustice connected with certain social institutions, with the State or much rather with all of them. We have seen by now that economic injustice never comes without economic inefficiency, while economic inefficiency normally is always rather explicit owing to its association with the concrete patterns of economic and social injustice.

All State macroeconomic functions are quite old. They have emerged neither in twentieth century nor in modern economically developed countries, and they certainly were not been discovered by Mr. Keynes, by socialist ideology or by other advocates of the State interventions in economy and society. Building of Nile irrigation systems in ancient Egypt was nothing else as an attempt to boost an aggregate level of national output. Building of Hotel des Invalides by Louis XIV de France is an example of long time known social protection or income redistribution function of the State. Third ideal economic function of the State - elimination of economic monopolies – though is having its roots back in history, in its present form may be considered as fairly modern.

From the point of view of property relations, all State macroeconomic functions can be reduced to one single social function of property and income redistribution. This is most visible in the case of income redistribution per se related to social security, social protection or social assistance programs. Income redistribution is a purely social function because its materialization is only possible through utilization of the mechanisms of power and coercion as well as through amplification of the physical and financial volumes of socially monopolized property (of the State revenues) and therefore also through elevation of appropriated monopolistic income by the top-level State bureaucracy. Any income redistribution represents a perfect example of property rights violations of social nature. As a more or less validating argument for income redistribution can serve a neutralization of negative effects related to existing social monopolies (others than the State). However, this is not relevant to our modern realities when the State, especially in economically developed countries, represents the strongest and most of the time a single social monopoly in society.

Income or property redistribution is only possible owing to utilization of the mechanisms of power and coercion and therefore owing to some kind of social monopoly upon those mechanisms, otherwise nobody will give up his property voluntarily. Any redistribution is always associated with non-socialized interests of real social exclusive proprietors of this particular monopoly. Even if we suppose that income redistribution may eliminate certain economic disproportions, this can only happen in the short run and always on account of the long-term development, on account of economic and social justice and on account of economic efficiency (not even mentioning on account of certain people). In reality income redistribution itself creates huge disproportions, hardly eliminating any other disproportions in society. Income redistribution can only be realized through socially and economically unfair and inefficient property or income confiscations directly leading to strengthening of the State monopoly, to consolidation of social parasitism and to escalation of the State domination in society – processes, which once emerged are very difficult to reverse. Generally speaking, income redistribution in no way is designed to eradicate any kind of social monopoly, neither the State one nor any other kind. Vice a versa, through intensification of social and economic parasitism, through generation of additional interests associated with the State and through resulting deterioration of social counteraction, income redistribution rather represents a powerful tool for preservation and consolidation of the State monopoly and therefore also of the general level of property rights imperfections in society.

Under its income redistribution function, the State is not transforming property rights violations into social monopolization, because no any kind of underlying economic activity is involved. Income redistribution is a simple long-term coercion and is nothing else as property rights violations of the social nature. The other thing is income distribution inside the State monopoly or income appropriation by the top-level State bureaucracy. Here mechanisms are much more complex. They involve, at least as a cover up, certain types of production or economic activity (ex. different State works, State orders and acquisitions, administration of State enterprises, etc.) as well as various types of social actions (income redistribution, planning, direct economic regulation, elimination of property rights violations of private nature etc.). If all State deeds under its income redistribution function are merely the acts of property rights violations, appropriation of monopolistic income by top-level State bureaucracy represents a pure case of social monopolization.

Overall the State to one degree or another might be able to fight property rights violations of the private nature or simply to fight crimes, even though this task not necessarily has to be attributed exactly to the State. Private individuals, local and regional authorities, other organizations are also able to contribute to counteraction of private property rights violations and since this book is about general principles of society and economy, we cannot exclude such an alternative right away. That is even recognizing that realization of this task by private individuals generates a strong threat of supplementary forms of property rights violations and social monopolization taking into account that private security forces may easily transform into the force of an overall persuasion and coercion. Under significant pressure of social counteraction the State might be capable to fight property rights violations of the private nature more or less efficiently. But this task the State is accomplishing only in direct connection with income and property redistribution, with other types of property rights violations of the social nature as well as with social monopolization associated with the State. State, as we know by now, is a single procreator and promoter of property rights violations of social nature, particularly under its income redistribution function. Besides, any interventions in natural economic mechanism of income distribution are always violating property rights. What kind of State deeds are prevailing - generated by the State property rights violations of social nature or counteraction of property rights violations of private nature is not so easy to say. From the point of view of property the State is merely civilizing mechanisms of property rights violations and raising them on ideologically more advanced foundations.

Second macroeconomic function of the State - stimulation of economic growth - under closer consideration is nothing else but redistribution of investment resources from private proprietors to the State. This function is also based exclusively on power and coercion (otherwise nobody will give away those resources) and therefore is a purely social function. Clearly, in order to stimulate any economic activity we need to take away economic resources from certain other activities. Growth stimulation function of the State being based on property redistribution is not diminishing any monopolistic effects; vice a versa it is consolidating them all elevating economic strength of the State monopoly. On the other hand, redistribution of resources from private to “public” sector as well as State involvement in entrepreneurial activities is generally creating smaller value, than otherwise would be created by private economic agents, if one thinks that the State is eternally less efficient entrepreneur comparatively with the private ones. Private investments in this case represent an alternative way of property utilization, which is comparatively more efficient than the State’s entrepreneurial activity.

Major problem with State’s microeconomic function of the supply of goods and services is that the State is all times least efficient economic agent or the least efficient commercial enterprise. On the other hand, this is a single State function, which is fairly modestly or at least not directly based on mechanisms of power and coercion and therefore it is a single more or less truly economic function of the State. Overall, all State functions to one degree or another are relying on the social mechanisms of power and coercion and cannot be accomplished and appropriated by the State without these mechanisms. General reason why State cannot be more efficient proprietor or more efficient economic agent comparatively with private companies is very simple and exceptionally obvious if we base our judgment upon underlying the State property relations or even upon common sense not diminished by ideological brainwashing. State is a production factor monopoly and its involvement in economy brings along various forms of economic inefficiency and economic injustice. Real material interests of the people associated with the State and first of all of the top-level State bureaucracy not always correspond or much rather most of the time contradict to those ideal functions attributed to the State. State, as a production factor monopoly and as an agent on behalf of the top-level State bureaucracy, is seeing its major source of income not in the process of exchange and not in the economic efficiency, but in social, political, moral and cultural justification of its coercive acts related to the collection of State revenues. In fact all ideal functions of the State serve merely as a validating argument employed by statist ideologies in order to justify the very necessity of the State and the necessity of the coercive collection of State revenues. Lion share of revenues the State is receiving not from any kind of production activity but from coercive taxation. Similar to any social monopoly, the State is acquiring its income not in intensive way efficiently serving the market and private demand, but in the extensive way - elevating amounts of confiscated property (income). Just like any other economic agent the State does not have a macroeconomic efficiency as its immanent goal. To be more precise as its immanent goal the State is having exactly the economic inefficiency related to non-economic coercive collection of State revenues and to elevated state expenditures. State as social institution feels efficiency maximization rather indirectly, if at all - through the entire row of other interests and objectives. For example, when State is trying to boost aggregate demand, then State expenditures are already accomplishing this task no matter how efficient they are, while few people see those opportunity costs (unfortunately opportunity costs are invisible), which arise in consequence of the relocation of resources from efficient private proprietors to huge inefficient social monopoly. Equally among objectives of the State and of the State economic activity we cannot identify an economic survival. In order to maintain the opportunities of monopolistic income appropriation connected with the State monopoly, top-level State bureaucracy has to buy certain individuals and groups of individuals. Such a need is linking many State activities to maintenance of the system of social (coercive) protection. Certainly this is not contributing to an overall State efficiency - State always prefers social outcomes (employment, social security, superficial “social justice” etc.) to economic ones and, first of all, to overall economic efficiency.

Growth stimulation function similarly to income redistribution function has nothing to do with elimination of social monopolies (especially of the State one); rather vice a versa it is supporting State social monopoly by pumping it with demand and additional financial resources. Taken separately, this function is actually working towards consolidation of existing social monopolies including of the State one. Instead of eradication of whatever monopolies are there, the State under this function is trying to match their secondary economic effects – overproduction, unemployment, inflation and economic depressions. Generally speaking either we are fighting social monopolies and then we do not need elimination policies for their effects or we are fighting monopolistic effects and then monopoly elimination policies do not make any sense. State, however, always wants all the functions it can get - power and reason never come together unless power is counteracted by another power.

Third ideal macroeconomic function of the State – elimination of economic monopolies - by and large represents the same act of property redistribution but with different participants. Now, the “losers” are proprietors of economic monopolies, while the winner ideally is society as a whole. However, we already know by now, that monopolies of economic nature not being associated with the instruments of power and coercion in their pure case do not represent property rights imperfections. Since on the contrary to social monopolies, economic ones do not generate property rights imperfections, in their pure form they hardly need to be counteracted at all and their eradication is a matter of time and market competition. Elimination of social monopolies, on the other hand, cannot be based on any economic actions since economic actions never destroy social monopolies. Only political or social measures, which rely on utilization of some kind of power against the power of social monopoly, have to be applied in order to diminish its strength or moreover in order to eliminate social monopoly completely. In other words, eradication of social monopolies does not have anything to do with economic methods, with economy or with the State economic functions. Any intervention of the State aiming at elimination of economic monopolies represents a simple act of property redistribution confiscating certain property or certain rights from particular economic agents and generating additional State revenues for carrying out of this mostly futile function. Prevention of economic monopolies is a function of the market, while elimination of social monopolies is a matter of social counteraction and there is no any appropriate place for the State in this combination.

Elimination of social monopolies hardly can be related to the State functions at all, first of all, because the very emergence and existence of any social monopoly is only possible owing to direct participation of the State as of the final instance of power and coercion. Besides, the very concept of social monopoly is rather vague today and it is hardly being recognized either by the State, by political economy or moreover so by the general public. In modern economically developed countries social monopolies in their major part are not represented by conventional commercial enterprises or by economic agents, to whom all the antitrust efforts normally refer. Today social monopolies apart from the State predominantly are being represented by specific non-profit organizations, social associations, special interest groups, unions or otherwise by social agents, which managed to obtain certain exclusive rights and privileges or saying otherwise which somehow managed to connect their revenues (income) with the power of State.

Besides absolute and natural failure to accomplish its ideal artificial functions, State brings along all the production factor monopoly effects upon society as well as immense net costs to people and economy. These costs can be divided into three major categories – (1) taxes, fees and other monopolistic payments to the State, (2) opportunity costs arising from inefficiency of the ideal State functions and from inefficient reallocation of resources through the State and (3) social violations of property rights (property limitations, state interference and income redistribution) emerging in order to assure people’s support for the State and a tolerance for its production factor monopoly.

Our ideal State functions have vanished more or less, while the real State functions or State functions from the point of view of underlying State property relations and from the point of view of State’s most adequate proprietor – top-level State bureaucracy - emerged. We are already sufficiently familiar by now with the State’s real immanent social nature of a final source of power and coercion and of a production factor monopoly. Also in the end we are being left with a single real true economic function of the State - comparatively inefficient supply of certain goods and services either under State growth stimulation efforts or under State involvement in particular microeconomic or business activities (including State owned enterprises and public services). Apart from those based on our previous analysis in this chapter we can add four social functions artificially imposed by the people. First one is income redistribution, which from the point of view of top-level State bureaucracy as well as from the point of view of the State monopoly (Table 2) represents a net cost and mainly serves as a tremendous ideological pretext for growing State revenues and appropriated monopolistic income. Second artificial function – counteraction of the property rights violations of private nature and maintenance of social order as well as maintenance of a particular property regime – though is also external to the State’s nature seems to be about a single function, which is justifying the very existence and necessity of the State in all times. Third function - elimination of governmental monopoly basically marks a transition from dictatorship to democracy and also what we understand under the democratization of society. This function is certainly being absent under dictatorship. But most importantly the State has nothing to do with this function. Much rather like vice a versa following immanent associated interests of its real proprietors (top-level State bureaucracy and representatives), the State is always leaning towards dictatorship, which is allowing higher levels of appropriated monopolistic income under less important control on behalf of the people. Finally, rather recently has developed the fourth artificial function of the State – “economic” and social regulation and State interventions in economy. All these functions in their essence are external and strange to the nature of State. At certain point in time they were forced by the people and willingly or not were taken on board by the State. People were inclined to persuade the State to assimilate these functions partly because of the misunderstanding of State’s nature and partly because they simply did not have any choice or any visible alternative. Ideally these functions expected to diminish the power of State at least somehow and at one point it seemed perfectly rational to introduce them into the State’s agenda. The problem is that all those functions, which suppose to diminish State power, are performed by the State, within the State and with additional resources expropriated from the people.




 

 

 

 

 

 

 

 

 

Diagram 4. Real State functions

 

If the State is unable to fight property rights imperfections or moreover if it is their final or even single cause and if its ability to counteract property rights violations is also questionable, one might wonder - what is it generally good for? Such a question is not relevant from the point of view of property relations. “Bad” and “good” are subjective partial categories, which do not interfere with the balance of power in society. For a number of people the State is good, for others it is bad and for some people it is neither one or neutral. From the point of view of property relations, the State being a production factor monopoly is always inefficient and unfair. Another question is what we can have instead - whether an alternative option is more efficient and more just and whether it will not generate even more severe types of property rights imperfections. Table below might be somewhat helpful in such comparative insight summarizing economic and social models connected with various types of property rights imperfections.






 

Property rights violations of private nature  (ex. robbery)

Property rights violations of social nature (property expropriations)

Social Monopolization

The State

Financial motivation

Revenues

Stolen money

Expropriation of property and its transfer to other proprietor(s) (including income redistribution, nationalization) often as a follow-up of social revolts

Revenues from goods and services sold at prices above free market level, or from input factors procured at prices below free market level

State revenues (taxes and other payments)

Costs to profiteer

Cost of a gun, special clothe, may be a car, information, knowledge of habits and territory, cost of cashing in of the stolen property

Financial costs associated with expropriations and political image costs (the latter sometimes may turn into benefits)

Economic and political costs of the maintenance and preservation of exclusive rights

Income redistribution, State programs and general expenditures, ideology

Profit

Money to spend

New property in possession except costs, which normally are rather insignificant in monetary terms

Revenues left after paying economic and social (related to maintenance of social monopoly) costs Revenues are higher because monopolistic prices of output are higher, while prices of input are lower than would be under the free market conditions

Income and benefits of the top-level State

Characteristics

Costs to people

Personal insecurity

Insecurity of property, emigration of capitals and capital proprietors, economic instability, underground economy, strong authoritarian trends

Economic and social injustice, social unrest, elimination of monopolies or diminishing their strength often leads to consolidation of the State monopoly

Social parasitism, social mendacity, social idealism, social hypocrisy, huge income and property redistributions, State domination in society, overall inefficiency

Duration of a separate action

One time

One time (might be repeated on regular short- to medium-term basis)

Long-term

Long-term

Legality

Illegal

Mostly legal

Legal

Mostly Legal (except for out-of-law corruption)

Foundation of action

Force

Power and Coercion

Power and Coercion

Power and Coercion

Nature of action

Property rights violations of private nature

Property rights violations of social nature

Social monopolization

Social monopolization

Main beneficiaries

Robber(s)

Normally the State (top level State bureaucracy), sometimes secondary beneficiaries to whom property was redistributed

Monopoly proprietors

The State (top level State bureaucracy and representatives)

 

Table 2. Types of Property Rights Imperfections


State combining property rights violations of social nature (income redistribution, nationalization, regulations, interference in economy, etc.), social monopolization (production factor monopoly) and being a final source of coercion is the most dangerous phenomenon we can ever imagine in any human society. In order to be correct from the point of view of property relations, we have to exchange our previous question with another one – what can be done (if anything) in order to diminish or even to exterminate monopolistic nature of the State? There are two fundamental practical ways to that end – social counteraction and production factors or economic development. Though this is too general. Speaking more specifically – there are three straightforward dimensions, which people are pursuing accidentally or intentionally within the process of social evolution in order to diminish social and economic strength of the State monopoly. Those are – (i) consolidation of the conventional property rights dispersion towards the State monopoly or simply real true democratization; (ii) diminishing up to a minimum possible level of the physical volume of the State property and of the State revenues; and finally (iii) promotion and advancement of a wide-scale competition between different countries and between different social systems for attraction of economic resources including capital, labor, population, ideas (social and political ideas as well), technology, investments, innovations, etc. First dimension - consolidation of democracy - promoting conventional property rights dispersion is reducing the social strength of State monopoly. However, conventional property rights dispersion never leads to a complete elimination of any social monopoly, because it neither annihilates monopolistic interests associated with monopoly nor eradicates exclusive rights based on power and coercion, nor even it particularly awakens people’s interest in administration of the State property (on the contrary to people’s interest in income redistribution). Representative democracy probably is the least efficient way to fight State monopoly among acknowledged above, first of all, because through income redistribution immanent to democracy it creates the strongest preconditions for elevation of the State’s economic strength. Second dimension - reduction of physical and material volume of the State property and of the State functions is counteracting economic strength of the State monopoly. This dimension is utterly important since declining economic strength is diminishing financial resources essential for maintenance and preservation of the State monopoly including through withdrawing those resources from State propaganda and advocacy and from buying of the certain groups of population. Those being tremendously costly cannot work without significant financial inflows. Advocacy of inefficient rising State expenditures is very expensive, especially when people are becoming more educated and more intelligent as a result of the developments in science, technology, knowledge and information. Funds necessary for such an advocacy are considerably exhausting State monopoly, moreover so if State’s economic strength or State property and State revenues are declining. On the other hand, diminishing economic strength and disappearing financial resources might equally reduce an interest of the State bureaucracy in State monopoly as well as the interests of other State supporting groups on account of a general reduction in “profitability” of the State. Nevertheless, diminishing economic strength per se also do not eliminate the State monopoly completely, because it does not generate any social property rights dispersion while complete elimination of the entire State property in reality is very hard to achieve. Third dimension – consolidation of international social and economic competition – is probably the most effective one among the three especially in the short run. Annihilating certain particularly exclusive social and property rights associated with the State, it generates an economic competition between States and may be to an extent even the social property rights dispersion in relation to the State monopoly. As a result of economic and social competition between nations, social systems and States, people and capitals are becoming more and more capable to choose among the States and societal systems just like they are choosing a place of residence or investment opportunities within particular separate country.
 

Unfortunately, economic competition is not a panacea. There are at least three significant impediments for social and economic competition between countries and nations. First one is the national borders, which are getting more and more opened and quite often people prefer to immigrate rather than to make an order in their home countries. This leaves those countries depopulated and filled with wicked social regimes, which represent no match and no competition for economically developed countries. Second impediment is emergence of supra-state agency and organizations as well as unification of several countries into one single economic, social and sometimes even political union. This factor is significantly downgrading competition between States and societal systems and therefore is equally downgrading social property rights dispersion related to the State monopoly. It may be that economic and political unification is efficient from economic point of view, but even that is rather questionable. At the same time we have to be very careful about the emerging system of social and property relations in consequence of any unification. It is much easier to generate exclusive rights and property rights imperfections in a huge recently materialized State entity without any experience in joint State administration and even more important without any experience in joint social counteraction - than in one separate and relatively small country with hundreds of years of experience in social counteraction and with a number of alternative States within three-four hours drive. Third impediment for international competition and primarily for its efficiency is of a more personal nature. Under the common international environment people are having a lot of things to exchange and a lot of things to choose from. What they are selecting is based entirely on their interests, wants and desires. What they are selecting is certainly not dictated by considerations of an overall economic efficiency. Consequently, there is no guarantee whatsoever that people will prefer the most efficient economic and social policies, vice versa, there is quite a risk that they will be preferring income and property redistribution spilling over from modern international societal environment.

Chapter 10. State Bureaucracy

State property unlike any other type of property seems to have no any private proprietors. Speaking otherwise, property associated with the State, ideally must belong to society as a whole or to all people. Relying on common understanding of public property, the latter is being utilized only on behalf of the entire society and to the benefit of its every single member and therefore no any private and moreover no any exclusive benefits potentially attached to other types of property possessions can arise here. Beneficiary ideally is represented only by society as a whole or by all particular individuals on equal basis, without any private economic proprietors or moreover without any exclusive social proprietors. However, this is a very idealistic or much rather even utopian picture. It is considering State property from the point of view of myths and legends invented by social infrastructure rather than from the point of view of underlying any economic and moreover so any social phenomenon property relations. Social infrastructure, as we know by now, is bound to create various idealistic myths in order to support certain non-socialized interests. There are always a government and a State bureaucracy, which are acting on behalf of the State, while government and State bureaucracy are represented by particular individuals with their private interests. Those interests are very much based upon and enforced by the fact that State bureaucracy through its State activities tends to appropriate certain economic claims upon the State property, State revenues, privileges and benefits coming from the State. Thus State bureaucracy naturally acquires certain exclusive social property rights associated with the State.

Under the State bureaucracy we will understand not only bureaucracy in traditional meaning of this word, but rather all groups of people, which correspond to two fundamental criteria. First one is receiving an important part of personal income and of other personal benefits from the State and from activities directly connected with the State property. Second is management and control of the State, state property, state revenues and of the instruments of coercion as a primary occupation. These criteria besides bureaucracy in conventional understanding are also embracing a variety of other positions such as members of national legislatures (representatives), elected public officials including judges and public attorneys where relevant, superior members of the government, magistrates and finally national presidents and presidential administrations. Since State is more than just a government and since in this book we have almost no interest in the government and all interest in the State, we can unite three branches of power – legislative, executive and judicial - in one big group of the State bureaucracy, or even with a certain rational abstraction from particular less influential members of this group - of the top-level State bureaucracy. Justification for such an approach is coming directly from the very definition of property rights as of informal opportunity to control particular property and to appropriate income received from this property. For all those groups of people or for the State bureaucracy as a social group generally, concrete levels of income appropriation from the State monopoly are established internally with quite a small influence on behalf of the other people or of society as a whole. Even though, there are undeniably certain restrictions and limitations in this respect imposed by outsiders of the State monopoly and also emerged as a result of specific contradictions between particular private interests inside the State bureaucracy as a social group.   

In order to understand a nature of State bureaucracy as of the social group and in order to examine concrete mechanisms of State property administration combined with appropriation of monopolistic income by the State bureaucracy, first of all, we have to identify and classify diverse and often quite isolated in their type of occupation groups of people associated with the State property and with the State monopoly. State bureaucracy, particularly under democracy, cannot be simply a renter of the State; State bureaucracy must always manage State property at least somehow otherwise it cannot justify its own existence as of the social group as well as cannot justify the very necessity of the State. Under dictatorship and under democracy ideological justification of the State is one of the main tasks of social infrastructure. It is quite unreasonable for any dictator to be merely a consumer of his power without application of any efforts for maintenance of this power. Wherever this is the case the power does not last long. Necessity of a permanent application of efforts and of a struggle for “survival” accompanied by constant exposure in front of the people is making top-level State bureaucracy to be quite creative and active social group in pursuit of their own interests. We must not be misguided by internal conflicts and controversies within the State bureaucracy, which are happening from time to time both under dictatorship and under democracy. Even though the struggle for power sometimes is weakening to one degree or another particular political parties, lobbying and interest groups, particular politicians and even an overall system of governance, it is neither eliminating the State as a production factor monopoly nor downgrading an overall influence of the top-level State bureaucracy, which is administering this monopoly. Inner struggles within the State bureaucracy including between the political parties are hardly ever diminishing social or economic strengths of the State monopoly.

As a fundamental factor for classification of the State bureaucracy we will use a relation of particular groups inside the State bureaucracy to both generation and elimination of the different types of property rights imperfections. Accordingly our classification will rely on the real State functions examined in previous chapter. More generally, proposed classification will be based on property relations and on influence of the State as of social monopoly upon economic development and social evolution. Originally we will separate two major groups in terms of their relation to administration of the State property and to accomplishing State functions. First group embraces people, who are responsible for the state economic functions - stimulation of economic growth, income redistribution and supply of certain goods and services. These people are involved in administering State both as an economic and as a social agent. They are dealing with economic regulation, taxation, debt management, State property administration, central banking, public education, health care, social protection, welfare and social security. We will equally add to this group a top level of the executive power, represented by institution of presidency and by cabinet of ministers. Finally, we will also add to this group the entire management of State owned enterprises. Functional importance of this group is underlined by its closest association with the nature of State as of production factor monopoly. State’s second immanent social nature of the key instrument of power and coercion is finding its reflection in the second group of the state bureaucracy. Ideally this group is dealing with prevention and elimination of the different types of property rights imperfections. In reality it represents those very mechanisms of power and coercion upon which all property rights imperfections are being founded. This group covers, first of all, the entire national parliamentary and legislative system (in case of democracy, while in case of dictatorship their embryonic, ideological and artificial substitutes), which is bound to eliminate governmental monopoly. Another very important part of this group is represented by judicial and law-enforcement agencies, which task is to fight property rights violations. National defense institutions may also be attributed to this particular group since they suppose to eliminate external threats of property rights violations and of potential externally induced property rights imperfections. At the same time, association with this group of the antitrust and competition enforcement agencies is not that straightforward even though it might seem that naturally they also fit in this group. However, since their real function in modern economy and society is connected with elimination of economic rather than of the social monopolies, they are primarily counteracting economic monopolies, which, as we concluded before, do not make a part of property rights imperfections.

 


 

 

 

 

 

 

 

  

Diagram 5. State Bureaucracy

Inside these two fundamental groups of the State bureaucracy a variety of subgroups and sub-sub-groups can be identified in relation to the specific tasks and functions. However, for our analysis of the nature and of the social role of State bureaucracy exactly the division into these essential two groups above represents a major interest. Absolutely different classifications of the State bureaucracy, from different angles are valid and illustrative of specific occasions. We are not inclined to provide here some extra original and exclusively legitimate one. Our classification serves one specific objective – investigation of the nature and role of the State bureaucracy in society and within the State monopoly.

First group involved in realization of social and economic and macroeconomic functions in reality is dealing with the support, maintenance, and administration of State property or State monopoly as well as with direct management of distributed, redistributed and appropriated by the State bureaucracy monopolistic income. Social infrastructure makes it look as this group is working on social protection, promotion of economic growth, control over production, reduction of unemployment, maintenance of adequate property regime, etc. All these tasks are portrayed, especially by socialist tradition, as a struggle with selfish and egocentric interests of private proprietors. People’s attention is being diverted from the very same selfish, egocentric and always non-socialized interests (of the top-level State bureaucracy) associated with production factor monopoly of the State. Objectives and role of the first group within the State monopoly are quite clear and fairly obvious. Second group (involved in realization of social functions) in terms of its origin and of its objectives is even more interesting and more complex than the first one. One part of this group dealing with elimination of governmental monopoly actually represents a direct consequence of people’s social counteraction with the State and with the other forms of property rights imperfections relying upon the power of State. The very existence of this subgroup within the State bureaucracy is demonstrating an important victory of non-monopolistic social groups and of the people generally, for that matter, over a power of State monopoly. Even though this subgroup in its embryonic form might exist even under dictatorship, under democracy it symbolizes the end of governmental monopoly. However, once upon a time being established as a triumph of representative democracy, further on owing to its association with the State property directly or indirectly, in one way or another it is starting to serve the interests of the very same State monopoly. Financial or material interests of the people making part of this subgroup are being increasingly attached to the interests of the State. Misunderstanding must not arise here - activities carried out by people in the second group might be important and useful. As a matter of fact, tasks accomplished by this group (especially counteraction and prevention of the property rights violations of private nature), are much more justified and much less controversial than the tasks and moreover than the size of the first group. Deeds and responsibilities of the first group (involved in realization of economic functions) manifested in State interventions and State regulation of economy, society and property relations not only represent property rights violations of the social nature, but are equally consolidating State monopoly, general level of property rights imperfections in society, economic inefficiency, economic injustice and in-law corruption associated with the State property. Actions of the first group are consolidating economic strength of the State monopoly. On the contrary to the first group, the second one (involved in realization of social functions), symbolizes, among other things, the elimination of governmental monopoly (dictatorship) representing key impediment for economic and political freedom as well as for social and economic development. Maturity of this function testifies that we are dealing with representative democracy. Besides all that, second group is contributing to maintenance of social order or to counteraction of property rights violations of the private nature. Preservation of human life and property, which are making society different from wild nature, ideally is another fundamental goal of the second group. This group is called upon to counteract direct individual forcible threats to personal property and, first of all, threats to human life, which is the most important kind of property and which, otherwise, would probably be a matter of armed gambling. Disregard of this function or its attribution to other social and economic agents is not that straightforward and mainly because of that an abolition of State even in theory seems to be rather problematic. And yet, tasks and actions of the second group, whatever important and essential they might be, are enforcing and consolidating exclusive property rights and thus also economic inefficiency and injustice connected with the State monopoly. Main problem with this group as well as with associated State functions stands in the fact that not only this group is linked with mechanisms of power, coercion and social persuasion, but that it in itself actually represents those power, coercion and social persuasion. Second group is associated exactly with that kind of economic and political power, which is making the first group to permanently grow and simultaneously to be further and further consolidated by such growth. Furthermore, the second group is associated exactly with that kind of power, which is finding its final expression in the very existence and in the size of the first group.

Being a part of the State monopoly and, first of all, appropriating income from the very same source as the first group, the second group is certainly having significantly State correlated interests. Actually, the nature and connection with State property of the second group (involved in realization of social functions) are much more complicated than those of the first group, which interests and income appropriation patterns associated with the State monopoly are much more explicit. Based on counteraction of particular types of property rights imperfections the second group can be subdivided into two subgroups. First subgroup (already examined above) dealing with elimination of governmental monopoly marks a direct outcome of representative democracy or more precisely of the conventional property rights dispersion of the State monopoly. It includes people from national legislatures as well as people from a judicial branch of power in their capacity related to elimination of governmental monopoly such as supreme or constitutional courts for example. Second subgroup is dealing with elimination and prevention of property rights violations. Property rights violations, among other things, can be either of external or of internal nature. Threats of property rights violations of the external nature are a matter of concern for national security and national defense - for army, navy and intelligence. Property rights violations of internal nature are in the competence of law enforcement agencies – of the police and judiciary in their capacity related to counteraction of property rights violations. We deliberately divided judicial institutions into two parts – one involved in elimination of governmental monopoly and the other one involved in counteraction of property rights violations of the private nature. If the first part or the first subgroup eliminating governmental monopoly is introducing an element of personal freedom in society (at least ideally), the second subgroup (involved in counteraction of property rights violations) no matter what are the intentions - directly represents an instrument of coercion in the last instance. Even an ideal task of this subgroup is associated with limitations of the very same personal freedom. Ideally, of course, an objective of the second subgroup is to condemn “bad guys” for the sake of the “good guys”. Though, as we know by far idealistic schemes never work in human society based on power and coercion. The very understanding of who are those “bad guys” and who are those “good guys” represents a quite complicated and permanently evolving dilemma with constantly changing and challenging one another points of view. On the contrary forces of coercion exist, compel and oppress every day at any time in ancient Egypt, in Roman Empire, in times of inquisition, in nazi Germany, in former Soviet Union as well as in modern economically developed democracies. Forces of coercion are also permanently evolving, sometimes getting milder under the pressure of social counteraction, but this “evolution” does not change their nature and underlying them material interests.

Government, no doubt, is the most powerful part of the State bureaucracy, which is accomplishing a general control over State property and State monopoly. However, government is not yet all State bureaucracy. It is not necessarily the most conservative and inefficient part of the State bureaucracy. Government is always under scrutiny, permanently experiencing a constant pressure on behalf of different parliamentary, lobbying and special interest groups as well as on behalf of public opinion (whatever it is). Government, being appointed directly from within the State according to special political practices and to some extent being indirectly elected by the people (in the best case and only under democracy), is subject to a certain degree of control both on behalf of the parliament and on behalf of the voters or rather on behalf of the interested groups of voters and of the special interest groups (which pursue their own interests ahead of the interests of voters). General elections under representative democracy based on universal suffrage and upon a fundamental principle “one man – one vote” are simultaneously creating preconditions for virtually unlimited income redistributions. Both governments and parliaments have to satisfy voters to one degree or another. While any material or any real satisfaction, first of all, implies money and financial resources or speaking more generally - different types of property. Even non-material satisfaction of voters implies huge financial resources and quite often is more expensive than the material one. Governments and parliaments in our days are not elected or appointed for descent things such as maintenance of God established economic order, of property regime or moreover not elected for elimination of all property rights imperfections. Vice a versa, normally it is being assumed that governments must do exactly the opposite - violate property regime applying property expropriations and income redistribution practices, permanently reestablish rules of the game for economic agents in mythical attempts to assure employment and growth constantly hampering the former and slowing down the latter, consolidate an involvement in societal affairs of the mechanisms of power and coercion, and finally reinforce the strongest social monopoly ever - the State. What any government is actually doing – is coercively expropriating property from one group of the people and exchanging it with the other group of the people for a right to be a part of the process of appropriation of monopolistic income associated with the State monopoly. This is quite a “seductive” and corruptive procedure both what concerns overall social and economic motivation as well as what concerns general morality (whatever that is). 

If for the entire growth of income redistribution are directly responsible interests of parliamentarians, presidents and national governments (i.e. of politicians), who are always eager to buy short-term political support throwing people a bone of coercive social welfare, for the entire growth of State revenues and therefore of monopolistic income associated with the State are responsible compound interests of all groups inside the State bureaucracy. State bureaucracy is always eager to maintain and to increase its power, prestige, influence, privileges, incomes and benefits through elevation of State revenues and through diversification of State functions generally as well as through elevation of budgets and diversification of functions of every single governmental agency and of every single governmental department. Generally speaking, top-level State bureaucracy being triple a single shareholder, a chairman of the board and a chief executive officer of the State monopoly, similarly to top management of any business corporation, at the end of the day is always having growth of revenues and of appropriated income as its main goal.

It is worth mentioning that our classification of the State bureaucracy here is much more evident under democracy. Under dictatorship all the groups and sub-groups, even though exist at least in their rudimentary form, are being brought together and merged quite often with mixed and overlapping functions in one single class or caste of the State bureaucracy. When power structure is vertical and property rights both upon the State and upon mechanisms of power and coercion are private, only a differentiation from the point of view of the proximity to the peak of power makes sense.

Reading different reports and analytical materials on State activities and governmental performance throughout modern history one can find a regular rigid set of characteristics common for all of them. Among those are a sincere astonishment about enormous waste and inefficiency related to overall State activity, strong belief that all mistakes and inefficiencies will be corrected if not today then tomorrow the latest and a sincere wondering how come these waste, mistakes and inefficiencies never disappear.

 

“The Federal Government Consists of a Maze of Programs and Agencies, Many of Which Appear Ineffective

Over the years, Federal programs and agencies have evolved in an ad hoc and random manner with little consideration of how they relate to each other. Individual programs proliferated in response to the real or perceived needs of the moment. This committee's recent report, Creating A 21st Century Government, pointed out that there were 1,013 Federal programs in 1985, while today there are 1,390 Federal programs administered by 53 departments and agencies. To support these programs and the bureaucracies that run them, Federal income tax receipts today have grown 13 times higher than they were in 1960.

As the agency-by-agency survey findings indicate, numerous Federal activities are chronically ineffective and wasteful. It is unclear, at best, whether many of these activities serve currently valid Federal missions. Legitimate questions have been raised concerning the viability of entire departments, including Commerce, Energy, and Housing and Urban Development. Many other activities that clearly address valid Federal missions are so beset by chronic problems that it is questionable whether they can carry out these missions effectively without fundamental change… (Federal government management: Examining government performance as we near the next century. Eighteenth report by the Committee on government reform and oversight. House Report 104-861)

 

or else,

 

“The historians of the Soviet Union cannot fail to conclude that the policy of the ruling bureaucracy upon great questions has been a series of contradictory zigzags. The attempt to explain or justify them "by changing circumstances" obviously won't hold water. To guide means at least in some degree to exercise foresight. The Stalin faction have not in the slightest degree foreseen the inevitable results of the development; they have been caught napping every time. They have reacted with mere administrative reflexes. The theory of each successive turn has been created after the fact, and with small regard for what they were teaching yesterday. On the basis of the same irrefutable facts and documents, the historian will be compelled to conclude that the so-called "Left Opposition" offered an immeasurably more correct analysis of the processes taking place in the country, and far more truly foresaw their further development.” (Leon Trotsky. Revolution Betrayed What is the Soviet Union and where is it going)

Theory of property rights imperfections claims that those are not temporary mistakes and occasional inefficiencies, but absolutely immanent to the State outcomes originated in the very nature of the State as of production factor monopoly. Interests of every single social group are never directly and willingly oriented towards economic efficiency, social justice and well-being of other people and social groups. On the contrary, a single rationale of any social group is to establish and maintain exclusive, inaccessible for others, social and property rights making people worse off in terms of economic efficiency and social justice. Those mistakes and inefficiencies represent a direct outcome of income distribution associated with the State monopoly and of income appropriation by the State bureaucracy based on exclusive property rights and on the nature of State as of production factor monopoly. It is not in the interests of State bureaucracy to make State more efficient; vice a versa inside inefficient State (the one with a lot of uncontrollable revenues and expenditures) income appropriation is much easier, a way more concealed, while an amount of appropriated income is much more significant. Sometimes State actions either owing to their immanent inefficiency or due to the private interests of particular bureaucrats are creating new or strengthening existing monopolies. Quite often they provoke economic agents’ or market participants’ interest in the State for preservation of their particular privileges. On the other hand, it is in direct ideological interests of the State bureaucracy to maintain a certain level of property rights imperfections or at least their image, which might serve as a through justification for preservation and expansion of State interventions in economy, property and society and therefore for associated growth of State revenues and State expenditures. But, overall, the State is quite a self-sufficient and independent economic and social player with its own separate economic and political interests and ideals.

Nature of all State “mistakes” and inefficiencies is closely connected with two patterns of income distribution through the State and of its appropriation by the State bureaucracy. These two patterns are exhibiting, though to different extent, a lack of direct interest of every particular State bureaucrat in macroeconomic efficiency or much rather a direct interest of the State bureaucracy in overall inefficiency of the entire State apparatus. First pattern we may call outside-of-state income while the second one - inside-of-state income; the words are speaking for themselves. Let us imagine a director of autonomous though supervised by particular ministry governmental agency, which is responsible for construction works for particular State needs. Let us also suppose that the wife of our director is a member of the board and an important shareholder of some private construction company. In direct interests of an abstract director of this particular agency is to award governmental construction contracts to his wife’s commission even if her company is far from being the most efficient bidder. Interests of a concrete particular director can be rather different including, for example, to keep his wife away from any contracts in case he is under a rough divorce procedure for example. If we are considering an abstract or general social behavior based on self-interest oriented human nature, in the interests of our hypothetical director is to make everything possible in order to help his wife to win contracts and afterwards to jointly benefit from such kind of victory. From the point of view of property relations, by doing so, he is utilizing State monopoly or State property in order to appropriate income (his informal share in his wife’s contract) outside of State distribution and redistribution functions or at least not directly connected with them, even though contract proceeds are coming from the State revenues. Speaking otherwise, personal income of our director associated with this particular contract does not represent the income received from State directly within his particular position within the State hierarchy, but rather from personal or private (sometimes illegal) utilization of benefits and opportunities connected with his position. If we take even more simple case of plain bribery, then the difference between material utilization of one’s own position within the State and between an associated income not linked with the State revenues or with the State property is even more explicit. Even if such income is not distributed or redistributed through the State, its appropriation is only possible owing to utilization of the State power and owing to participation in administration of the State property. In this particular oversimplified model stands the entire nature of the permanent State inefficiency connected with utilization of “public” property in the group interests of State bureaucracy as a whole or in private interests of particular members of this group. This kind of deeds or actions (our director’s story and not a clear-cut bribing) can be perfectly legal not only within the past historical periods or only in modern developing countries, but with certain adjustments in modern economically developed countries as well. On the other hand, all out-of-law or illegal acts connected with utilization of the power of State monopoly in private interests are positioned exactly within this pattern of income distribution through the State, which we called outside-of-state income. Of course similar practices are being under pursuit, public ostracism and public disdain and are brought here only for a very simplistic and at the same time very explicit illustration of the outside-of-state income. Much more sophisticated and much less intolerable examples of outside-of-state income include retirement participation in boards of private corporations, after office writing of books and lecturing, employment in high level positions after retirement from public office, gifts, donations, fund raising, etc., etc., etc. - all thanks to a high position within the State hierarchy.
 

Second income appropriation pattern is more complicated and mainly concerns inside-of-state activity. Let us try to simplify picture by following our previous example. Straight economic interests of our director of this particular governmental agency are mainly linked with the people who are paying his salary and responsible for his other benefits and who are also in a position to influence his future income and carrier expectations. These people are certainly not the ordinary voters, who might never hear either about our director or about his agency. The lower is the position of particular State bureaucrat in the State hierarchy the less visible is his connection with the voters. Our director’s boss – probably a minister, is having a somewhat general understanding about methods of work, operations and practices, which are employed by this agency. A boss of his boss – the Prime Minister – in the best case only knows overall tasks and responsibilities of this particular agency. While Parliament mostly knows what the Prime Minister wants them to know unless some visible problems emerge. With every single level of State hierarchy the connection with voters is becoming more and more ambiguous, while the specificity of tasks – more and more sophisticated. Even Prime Minister appointed by Parliament as a private individual with his private interests (first of all with his private material interests) is having a somewhat relative connection with the voters. Being a leader of the majority under parliamentarian system normally he is much rather attached to the interests of his party than to those of ordinary voters. And whenever a private person is becoming a part of the State administration, his personal interests are starting to be connected with the government, with the State and with the State bureaucracy. Mistakes and inefficiencies of the entire State bureaucracy are now being considered as his own mistakes and he is starting to conceal these mistakes, certainly not being able to get rid of them. By doing so, suddenly he discovers his common interest with the entire State bureaucracy – common interest in concealing things. While it is exactly the common interest in concealing things, which we examined earlier, what is distinguishing monopolistic social group in the first place. His ties with the voters, on the contrary, are getting more and more indistinct mainly because Prime Minister is appointed by and is reporting to his own party and to parliament and in the best case only once in four years to the voters, while interests of parliament and those of political parties (first of all their material or financial interests) are not the interests of the voters. Not even to mention a phenomenon of interests’ dispersion (examined before) towards the State property when certain categories of voters hardly ever care at all about the State as such unless it starts to expropriate too much and too fast. Based on self-interest oriented human nature we might conclude that in the very best case our concrete director will try to please his boss – the Minister, may be also the Prime Minister – i.e. people directly associated with his personal income and wellbeing. Though, even such an outcome is not that imminent since particular State bureaucrats within the modern system of public administration are usually quite independent from their superiors.

“Generally speaking, neither the president nor Congress has much control over the career bureaucrats. Their only real power is to change a bureau's mission or its budget. And to do this, the two branches of government must cooperate.” (J. Patrick Gunning. Understanding Democracy An Introduction to Public Choice)

Hardly ever our director has to please voters, society or particular individuals, which are having rather indirect and weak claims upon the State property and upon connected with it patterns of income distribution. State or “public” employees and State institutions do not have to report any profits or do not have to be “micro-economically efficient” under their particular responsibilities. Vice a versa, universal interest of particular State bureaucrat and of the State bureaucracy as a whole is to increase budgets of particular State subdivisions, of particular ministries and of the State generally as much as possible in order to boost associated income appropriation opportunities. Growth of any State subdivision’s budget is providing its employees and, first of all, its management with certain additional material and non-material benefits including higher personal incomes and a large variety of other benefits connected with income distribution from the State and with appropriation of exclusive income from the State monopoly. On the other hand, growing budget and new responsibilities are leading to even higher degree of institutional autonomy and independence both from superiors and from the general public. Higher level of specialization of bureaucracy’s functions associated with bigger budget is making particular jobs more exclusive, overcomplicated with technicalities, less technically understandable for supervisors and superiors as well as normally less exposed triple to outsiders, to public scrutiny and to job cuts in the public administration. Therefore, general expansion of agency’s budget is making our director more influential and powerful, first of all, owing to an equal expansion of agency’s tasks and responsibilities. On the other hand, growing influence is consolidating and diversifying our director’s possibilities to utilize outside-of-state income appropriation opportunities starting from a simple wining and dining and up to certain impressive in-law and out-of-law income opportunities. Bigger budget and growing amount of subdivision’s responsibilities are signifying to politicians and even to the voters that some kind of activity is probably going on and the higher are subdivision’s expenditures the more important this activity looks to an ordinary voter. All income of our particular director in this case comes from within the State or from the State budget and therefore we will call it an inside-of-state income.

Of course, this is an oversimplified example of income appropriation patterns connected with the State bureaucracy and it certainly does not pretend to represent any scientific discovery; displayed cases and practices being widely familiar and well-known. We brought it here mainly in order to illustrate particular income appropriation models associated with the State and in order to stress connection between income appropriation by State bureaucracy and visible on a surface State waste, mistakes and inefficiencies. In reality every kind of inefficiency and every type of economic waste are normally connected with certain patterns of income appropriation. For any waste, mistakes and inefficiency somebody always has to pay in one way or another (including in terms of opportunity costs), while certain other people are always benefiting from them. Any waste and inefficiency in society and economy is always a pure win-lose kind of game.

Outside-of-state and inside-of-state income appropriation patterns, being parts of social monopolization associated with the State, are interconnected with another important social phenomenon - with corruption. Corruption is a much more profound and a much more comprehensive societal phenomenon than what people normally understand under this term. Fundamental and determinative part of corruption is corruption in the system of social and property relations and not a widely familiar out-of-law or illegal corruption. Corruption in system of property relations, on the contrary to out-of-law corruption, is not only perfectly legal, but vice a versa it is always being supported and well-preserved by law and by entire social infrastructure. Such corruption will call it in-law or legal corruption. General level of corruption in any particular society is based upon one single factor – upon consolidated power of existing social monopolies or upon their social and economic strength. The higher is the level of overall social monopolization in particular society or the higher is the social strength of all social monopolies in this particular society or else the higher is the share of monopolized property in overall national property possessions - the more corrupted is this particular society. Corruption in common understanding implies certain illegal or out-of-law and outside-of-state income appropriation usually connected with the power of State and with particular State functions. In this book we are primarily interested in legal corruption, which is a great deal socially stronger, much more socially influential and is much less explicit than ordinary illegal corruption. Fundamental reason for differentiating in-law and out-of-law corruption stands in a simple fact that it is not the legal system or any illegal actions what is finally causing all imperfections in any society or vice a versa what is underlying any societal accomplishments. Social problems coming from violations of laws being far from representing all societal deficiencies mark only tip of an iceberg of all the problems in society. An underwater part of the iceberg represented by system of social and property relations concealed by entire social infrastructure forms the nature of legal corruption.

Persistent economic inefficiency, economic and social injustice and property rights imperfections are direct consequences of in-law corruption. In modern world in-law corruption is finding its practical economic expression in a permanently growing dependency of the entire economy including producers, financial institutions, academics, media, non-governmental organizations and entrepreneurs upon the State, State financial resources and State regulation. Such situation is further consolidating already enormous State monopoly and is gradually redirecting economic agents from satisfaction of customers, of the people, towards satisfaction of the State monopoly, of the State bureaucracy as a whole and of particular State bureaucrats. In-law corruption is not only creating economic inefficiency, but is also leading to moral corruption and degradation. People and economic agents are starting to realize that they can better achieve their goals by serving interests of the State monopoly as a whole and those of particular State bureaucrats, than economically pursuing real hard work and satisfying consumers’ needs. At dawn of the State interventions in economy and society (or at the beginning of modern socialism of economically developed nations) their scale and extent were quite low and corruption effects were not so visible. After a while though people are getting used to in-law corruption and do not notice or do not want to notice it anymore. For the sake of their moral comfort they are being persuaded to believe that minor corruption is actually what social progress is all about; that only short-term social and economic results are worthwhile and that theoretical social philosophy and political economy do not lead human kind anywhere. This self-hypnosis is very much enforced by a constant growth of national and personal incomes, which are becoming especially impressive in comparison with the previous centuries and civilizations. Even though national income trends are becoming more and more alarming today when in vast majority of economically developed countries GDP growth most of the time is even slower than in former Soviet Union. Everything looks nice and optimistic and people are starting to believe that nothing can change this prosperity and start questioning many factors leading to this “guaranteed” prosperity. Nevertheless, neither one known to us civilization, no matter how advanced it became, was able to survive mounting inefficiency of the system of property relations, which usually starts with some insignificant cases (levels) of in-law and out-of-law corruption. Several vanished civilizations (for ex. ancient Rome) were the most advanced for their time and after their collapse, other nations were not able to recreate their level of economic and social development for years and years. Not a low level of economic and social development is destroying countries, nations and civilizations, but mounting absolute and comparative inefficiency of the system of social and property relations or the in-law corruption per se.

 

“Our pride resents the thought that the great highways of New England will one day lie deep under layers of encroaching vegetation, as the more substantial Roman roads of Old England have lain for generations; and that only a group of heavily overgrown hillocks will be left to attract the archaeologist's eye to the hidden débris of our collapsed skyscrapers...

…What we and our more nearly immediate descendants shall see is a steady progress in collectivism running off into a military despotism of a severe type. Closer centralization; a steadily growing bureaucracy; State power and faith in State power increasing, social power and faith in social power diminishing; the State absorbing a continually larger proportion of the national income; production languishing, the State in consequence taking over one "essential industry" after another, managing them with ever-increasing corruption, inefficiency and prodigality, and finally resorting to a system of forced labour. Then at some point in this progress, a collision of State interests, at least as general and as violent as that which occurred in 1914, will result in an industrial and financial dislocation too severe for the asthenic social structure to bear; and from this the State will be left to "the rusty death of machinery," and the casual anonymous forces of dissolution will be supreme.” (Albert J. Nock. Our Enemy, The State)

In-law corruption apart from other things is being manifested by an overall orientation of producers, business units and economic agents towards orders and demands of monopolistic social groups. Because of the significant economic strength of social monopolies and therefore of their huge financial resources, they are not merely generating high levels of demand, but much rather are reallocating this demand and resources from other types of economic activities and from other production factors in their favor. In one of our previous examples we examined reorientation of producers and financial resources towards the needs and tastes of land aristocracy during the dissolution of feudalism in 18th century in France. Enormous demand for luxuries on behalf of land aristocracy existed mainly as a consequence of the high level of monopolistic income appropriated by the land aristocracy. Moreover, such demand at that time had significantly influenced (and is still influencing in our days) international economic specialization of France in different kinds of luxuries such as carpets and tapestry, fancy clothing, exquisite wines and liquors, gourmet food, etc. Almost similar situation is typical for other absolute monarchies of that time and particularly for Austrian Empire. Demand of monopolistic social groups was keeping a lot of producers within an orbit of feudal property relations, thus opposing an equal and even development of all the production factors. On the contrary, in England of the same time, an aggregate demand and overall economic development were significantly more balanced with less sharp differences between wealthy aristocracy and other parts of population. This is essentially explained by a smaller presence of social monopolization owing to more advanced level of social counteraction (which came in France only with the revolution in 1789) and owing to conventional property rights dispersion towards the State property (democracy based on property census). Serving production factor monopoly and its proprietors is having a rather immediate effect upon the interests of economic agents as well as upon their political and social views. First of all, public expression of any criticism related to dominating in society social monopolies even if it did not threaten entrepreneurs physically, would certainly harm their business. Serving social monopoly is not only binding the interests of particular entrepreneur to the interests of this monopoly’s proprietors, but is also downgrading a free expression of alternative political viewpoints or is limiting political freedom. Any offence of dominating social and property relations would simultaneously offend their main customers - people who are directly benefiting from existing social order. Growing role of the State in society, economic strength of the State monopoly and considerable State interventions in economy are directing economic agents and their interests towards this huge monopolistic buyer - the State. With permanently expanding role and share of the State in economy and with orientation of economic agents towards serving the State demands, any political offence against State monopoly, against based on it societal system, against dominating social values, against State bureaucracy and sometimes even against particular State bureaucrats would harm offender’s business and income. Even social sciences may have problems with free expression of their opinions about the direct buyer of some or sometimes even of all of their “products” in the forms of different scientific and academic grants, subsidies to particular universities and research areas, scholarships, etc.

From the point of view of property relations, out-of-law or illegal corruption is mostly represented by property rights violations of the private nature. Illegal corruption with all its complications generally can be reduced to the different forms of bribing broadly defined as a favor in exchange for material or non-material benefits. By and large, illegal corruption means illegal utilization of the State power and State property in private non-socialized interests of particular State bureaucrats. In-law or legal corruption, on the contrary, is having a much more profound and complicated social nature. In-law corruption is associated with such forms of property rights imperfections as property rights violations of the social nature, perfectly legal forms of social monopolization and with the State as a production factor monopoly. In-law corruption just as social monopolization is based upon appropriation of socially exclusive income emerging as a result of imperfections in system of social and property relations. Let us illustrate the difference between out-of-law and in-law corruption on a simple historical example. Let us go back to France of the 18th century. This time we will consider the case of bribing of a clerk responsible for ammunition procurement in the ministry of defense by ammunition manufacturer. Such action without much of controversy represents an illegal corruption since ordinary bribing normally is being prosecuted by law. Alternatively, let us consider a gift of several hundreds acres of land by a King of France to one of his friends, to his mistress or to the very same clerk in ministry of defense. Such gift is perfectly legal, while resources under consideration (the land) make part of a socially monopolized property (State property of which the king is a sole proprietor) and are obtained by the King of France mostly on account of imperfections in the system of social and property relations or to be more precise owing to social monopolization. Thus we have an example of the in-law corruption. Social monopolization in this particular case probably embraces a complex combination of dual monopolization – social monopolization of land as of production factor from one side and social monopolization of the State as of production factor from the other. All imperfections in system of social and property relations taken together represent the corruption of societal system or social corruption, which embraces both legal and illegal corruption. Even if these imperfections are not violating any laws, they are corrupting particular societal systems and are approaching their complete disintegration, which most of the time is much worse than any violation of laws. The more property rights imperfections exist in particular societal system the more corrupted it is. Therefore, a diminishing level of property rights imperfections, which represents a nature of social evolution, is simultaneously reducing a level of social corruption in society.

Entire legal foundation of society including constitutions, laws, regulations, normative acts, decrees and other “collective agreements” are merely reflecting existing in society balance of power achieved within the permanent process of social counteraction between different human interests. Only production factors development and social counteraction are pressing laws to a higher degree of justice and morality. Until exist supported by laws and constitutions exclusive property rights and associated with them economic injustice and economic inefficiency, the legal system cannot be considered as one hundred percent fair. People do not gather, establish rules for procurement of public services, select and hire public officials and establish constitutions and other kinds of “collective agreements” until they have won these rights or appropriated them in permanent fight with monopolistic social groups and, first of all, in fight with the State. All laws and constitutions are always imposed by those who are in power or by monopolistic social groups with their exclusive non-socialized rights and privileges and only afterwards (and it might be a very long “afterwards”) under the pressure on behalf of the people, laws are acquiring more or less human characteristics. Every word of every constitution must be fought for, must be appropriated by the people, must be expropriated from monopolistic social groups and must be engraved with a permanent struggle and with continuous efforts. All societies and civilizations beginning from ancient Egypt and up until modern representative democracies embrace particular types of “collective agreements”. However, first always comes bloody forcible appropriation of exclusive social property rights, “long” afterwards their coercive reflection in laws when usually only a tiny minority agrees and a great majority is never asked, then again bloody “contestation” of such an agreement and then another kind of agreement, another round of counteraction and so on and on and on up until modern days. Quite often constitution can be almost perfect as a legal document as well as in terms of the guaranteed freedoms and liberty, but it never works in practice not being based on social counteraction and does not reflect the existing in society balance of power. Unfortunately words never cost a thing in this world, even the words of laws and constitutions unless they are not supported by social counteraction of any property rights imperfections. Those who studied economies in transition, former communist countries or who are dealing with underdeveloped countries know well how almost perfect words of freedom in constitutions do not work at all, being based on rather insignificant people’s counteraction of the different types of property rights imperfections.

What guarantees fair or less unfair societal system is certainly not the constitutions or any “social agreements”, but social counteraction to any property rights imperfections. It is not the laws; it is people’s permanent resistance to social monopolization and to any property rights imperfections for that matter what is working. While laws and constitutions are usually written by wealthy appointees and self-appointees, who quite often represent different kinds of non-socialized social monopolies and whose material interests are closely connected with an ultimate source of power and coercion – the State. However, even bad laws are having an important role since there is no guarantee whatsoever, that any social revolt will not bring along even more disgusting forms of societal order and even more injustice in society, not even mentioning inevitable violence accompanying any social rebellion.


Chapter 11. State and Communism

Up until today are quite popular the so-called pragmatic views on social and economic development. Their basic idea is that we must not argue too much about which social system or which social formation is better and which one is worse because economic development and social evolution will anyway put everything in its own place. The more efficient social systems will survive and prosper while the less efficient will degrade and vanish. Such outcome is quite in accord with the maximum economic efficiency requirements, which basically predict precisely the same outcome. This may well be absolutely correct and we certainly do not intend to criticize those ideas. However, there is no any single reason to believe and there are no any proofs whatsoever that economic efficiency and universal evolution is connected exactly with mankind or exactly with our planet. Our planet is of a rather minor importance on the Universe scale. It can be destroyed in one way or another while economic or energy efficiency requirements will still work and the Reason will still govern the world and the Universe.

“We have next to notice the rise of this idea — that Reason directs the World — in connection with a further application of it, well known to us, — in the form, viz. of the religious truth, that the world is not abandoned to chance and external contingent causes, but that a Providence controls it.” (Hegel. The philosophy of history)

If our planet will somehow disappear, the universal evolution will hardly ever notice it. Our planet generally is a rather inefficient one with a lot of waste and with lent social and economic development. We must rather be shocked with our modest so far achievements. On the Universe scale we scarcely know anything outside of our solar system and because of that we cannot even discuss Universe properly from the impartial truly scientific point of view, we can only build more or less adequate hypothesis about it. We do not even know much about ourselves, about our own society. Our social or societal knowledge and our social self-recognition and self-apprehension remain to be quite unsatisfactory and above all extremely partial. Without at least some basic understanding of society and of its evolution we are not only doomed to repeat our previous mistakes and to perpetuate inefficiency, but what is much more important we are at a serious risk to completely destroy our planet with poorly conceived human actions.

A very important thing about communism is that it has clearly demonstrated one particularly alarming and imperative tendency related to society and property relations. It has demonstrated a plain overall possibility of absolute regress in social and economic evolution – not merely a disintegration and collapse of particular societies (like ancient Rome and Greece did), but a long-term regress of the system of property relations. Furthermore, such regress can be brought in forcibly as a result of planned human goal-oriented actions. Russian revolution of 1917 was largely an outcome of the deeds undertaken by a very small group of people, who ingeniously adapted themselves and their egocentric interests to political realities and societal circumstances. Obviously there were a lot of other objective and subjective reasons and preconditions for Russian revolution, but it certainly did not represent any sort of evolutionary process, i.e. a substitution of less efficient property relations with the more efficient ones. There had been also certain other, though except for Nazism in Germany not so illustrative, cases of regress in the system of property and social relations and quite a majority of them happened in twentieth century, which suppose to be the century of a triumph of democracy. Furthermore, very often those cases of societal regress were emerging exactly from within the representative democracy (including nazi Germany). In their majority those cases were the products of planned human actions based on some kind of emotional motivation and on superficial theoretical ideology. In their majority they were connected with the State oriented ideologies including socialism, Marxism, Nazism, etc. Isn’t this a good reason to think a little bit more theoretically about societal processes and not to rely only on pragmatism and experience? Otherwise one day we may all together awake in one big concentration camp and yell - “Look! Experience shows us, that we really had some problems with our societal system” or even worse than that - we might not be having any planet anymore where to awake. The major problem with pragmatism is that if we all follow our interests as they are today, according to modern societal balance of power we are very much going straight to communism. We are already almost there taking into account a share of the State in our economy and a level of the State domination in our society. Such unpleasant and probably somewhat controversial conclusion is based on the simplest rational foundation. Under the universal suffrage there are none any limits whatsoever for ever growing income redistribution from richer people to the poorer (who are always in majority just like always in majority are the people who would love to make a living on account of the other people) and therefore there are no any limits for social and economic domination of the State in our society based on enormous and ever growing amount of State managed financial resources intended for different kinds of income redistributions. Enormous inflating State, overflowing from societal realities state regulation of economy and society and a constantly shrinking share of private property (and accordingly a constantly shrinking power of private individuals) is exactly what socialism is all about, while only State and no private property is only a marginal evolutionary outcome of this process.

There are three fundamental forms of conventional property rights dispersion related to the State property according to declining level of property rights imperfections - communism, governmental monopoly or dictatorship and State monopoly under representative democracy. Within each of these forms, conventional property rights dispersion varies significantly among different countries and among different historical periods. State monopoly, however, exists within every historical period and within every social formation, while governmental monopoly only under dictatorships including under communism. Severity or strength of social monopolization and of the other types of property rights imperfections under each of the three types of conventional property rights dispersion is not only quantitatively differentiating one type from another but is also having certain specific for every type qualitative characteristics. Governmental monopoly is well known under the term “dictatorship”. Conventional property rights dispersion or dispersion of economic claims upon the State property is a fundamental factor, which is differentiating State monopoly under representative democracy from governmental monopoly under dictatorship. Communism is a rather specific case not only because it embraces governmental monopoly, but also because it assimilates into the State property and into the State monopoly the entire economy and all the production factors. On the contrary to other social formations based upon social monopolization of one single production factor, communism, though being based on social monopolization of the State, in fact integrates social monopolization of all the other production factors as well. Such statement of things is bringing along absolute restrictions for productive property alternatives, absolute restrictions for competition and consequently huge limitations of personal freedom based upon unthinkable limitations of economic freedom. Share of the State property in overall national property possessions is getting close to one hundred percent and embraces the entire property under all the production factors. Furthermore, under such a strong and severe dictatorship as communism – even the entire personal or non-productive property of particular individuals is subject to significant State control and various limitations. Access to any economic property within any production factor is denied for each and every private individual with an exception of the communist party leaders. Communism represents a unique social formation in which there is only one type of economic property – State property, and only one microeconomic proprietor in the entire economy – communist party leader (at most with a few of his closest and most influential associates). There is no any social property rights dispersion in relation to any production factor, except may be for labor, though to a limited extent and only at the later stages of communism. Labor under communism is a separate case for inquiry. Labor relations on account of exceptionally low substitution possibilities as well as on account of direct coercion are very similar to slavery especially at the earlier stages of communism. Overall, under communism people are allowed to own only one production factor – their labor. And even such kind of possession was effectively allowed only at the later stages of communism – after disappearance of the communist concentration camps. At the earlier stage of communism, people were absolutely literally under the slavery type of labor relations with rather limited rights to choose or to change their line of occupation (especially for those in concentration camps) and with all the corresponding applications in terms of social rights violations as well as in terms of monopolistic income appropriation patterns of the top-level State bureaucracy. Under communism due to a severity of exclusive property rights or to a tremendous strength of the State monopoly, there was quite unique price influence situation related both to input (price of labor) and to output (price of goods and services) side of the State monopoly. However, all the implications for appropriation of monopolistic income by top-level State bureaucracy on each side were quite different.

Under communism the State is finding its complete self-realization and self-expression. From the point of view of property relations, communism is characterized by an immense share (close to one hundred percent) of the State property in overall combined property possessions of the entire nation and, first of all, in total economic or productive property. Share of State property in overall national property possessions is one of the main indicators imperative for evaluation of the role and influence of the State upon economy and society. Such evaluation is our main objective in this chapter and exactly from this point of view we examine the nature of communism. At the same time share of State property (income) in overall national property (income) is not a single indicator, which has to be taken into consideration in order to evaluate a level of State domination in society. Significantly important is also a level of social (based upon power and coercion) control over private property, economy, society and private individuals on behalf of the State. Overall, State control over economy and society can be expressed by three essential criteria – share of State property in overall national property possessions, share of State revenues (or of State expenditures) in GDP and State’s direct coercive regulatory control over private property, economy and society. The last criteria incorporates a large variety of policies and measures such as direct social control through intermediary of laws and regulations, indirect control through application of particular economic and social incentives, macroeconomic regulation, taxation, social security regulation, labor regulation, contracts enforcement, specific industrial and environment regulations, sanitary and veterinary regulations, etc., etc., etc.

Diagram 6 exhibits a correlation between State control over economy and society and between varieties of social theories and ideologies, which are trying to explain the nature of State from one side and to propose adequate social and economic policies based on this explanation from the other. Extreme outcomes are represented by pure anarchism with close to zero percent share of the State in society and pure communism with close to one hundred percent State control over economy and society. One thing we have to bear in mind - if we are talking about the share of State property in overall national property possessions then one hundred percent outcome is hardly possible even under communism. However, if we are thinking about the share of State property in overall national economic or productive property such outcome is much more realistic and was practically achieved under the communism in former Soviet Union. In any event, all the inside figures on our scale - between zero and one hundred percent - are certainly feasible and were materialized in one way or another in different times and in different countries. Outcomes close to zero percent represent what is generally known as a “free market” and what we defined in this book as a society with a virtual lack of property rights imperfections. On the other hand, outcomes close to one hundred percent are suggesting a pure case of communism. In-between are positioned all kinds of economies and all kinds of societies, which are reflecting social, economic and political ideals of the various schools of social science as well as of the affiliated with those political mainstreams – conservative, libertarian, liberal, socialist, national-socialist, communist, etc. Of course the diagram is rather general and schematic and being brought rather for illustrative purposes does not pretend to be exhaustive or extremely precise.



 

 

 

 

 

 

 

 

 

 Diagram 6. Social Theories Spectrum

Communism being evolutionary inferior to any other social construction is not naturally emerging from the preceding structure of society or from the preceding social formation. Each and every time it establishes itself relying exclusively on power and coercion including through revolutions or sometimes through foreign invasions. In every particular society normally there are very few people who are willing to give away all their property possessions (whatever insignificant those might be) in consequence of the introduction of communist economy. May be with only the exception of rather poor and uneducated parts of population with very limited or close to zero quantitative amounts of property, which are eager to gain from communism more than they currently possess. We are not talking now about revolutionary leaders, who are motivated either by personal ambitions or by potential perspectives of property redistributions and future income appropriations. Exactly on account of a relatively small number of supporters, ideally communism cannot be established through parliamentary system under representative democracy and so far can only materialize only through the acts of external or internal violence and coercion. On the contrary to various types of dictatorships, which normally are being introduced by concerned individuals and social groups, communism was never established by associated with the State monopoly social group – by State bureaucracy. Communism rather is an artificial social formation emerging exclusively owing to complete misapprehension of the nature of State as of production factor monopoly. All other dictatorships normally are being established with the direct participation of certain groups from inside the State bureaucracy. Communism is never instituted in the interests of ruling under preceding social formations social groups; rather vice a versa it is destroying the previous type of State, old social formation and associated with them State bureaucracy. Instead it creates new bureaucracy, new State and new type of social relations. Nevertheless, private property rights upon the State and associated model of income distribution under any form of dictatorship generally and under communism in particular are so simple and self-evident that they have to be thoroughly concealed under the most emotional, moralistic and sometimes (particularly in the case of communism) even under the highly theoretical social infrastructure in order to disallow any rational understanding of reality. For some time it works, but as experience of former communist countries shows - not for too long. If other social formations with inbuilt dictatorships, such as slavery or feudalism, lasted hundreds of years, communism managed to stay intact for merely seventy years. Even though, there are several communist countries left until our days, the end of communism is already in the past or so it seems. Other dictatorships in modern history being unable to rely on such sophisticated theoretical, emotional and moralistic infrastructure equally do not possess huge economic and social power of the communist State. Their timespan is much shorter.

Communism embraces quite a combination of both microeconomic and macroeconomic inefficiencies. Though when there is only one economic proprietor in society it is rather difficult to differentiate between microeconomic and macroeconomic inefficiency. In case of the State property both malfunctioning of the State as of economic agent (microeconomic inefficiency) and associated with the State exclusive property rights (macroeconomic inefficiency) are significantly interconnected and are very often indistinguishable from one another owing to the State’s single integral nature of production factor monopoly. Since under communism all productive or economic property belongs to one single person or at most to small group of his associates, State property transforms into a microeconomic commercial private property of the communist party leader. There is only one employer, only one producer and only one economic agent in the entire society. Every member of society at the end of the day is nothing else but an employee of the communist party leader or in certain epochs indeed his slave. Communist party leader cannot simply hire those workers, peasants or engineers in conventional market correlated way. They might very much object and wonder why they cannot organize their own business - alternative to the communist party leader’s business or alternative to the State. In order to suppress or to postpone such kind of objections people in power or real State proprietors have to follow two strategies. First and probably the most important one - they have to propose some “big idea” or to sell some plausible ideology and to persuade people to slave for one particular exclusive employer. Secondly – they have to create certain mechanisms for coercion of the dissatisfied and for oppression of any opposite ideas. Their ability and capacity to do both things will determine an overall duration of their private property claims upon the State. It is difficult to say which one among these strategies is more expensive, but we can easily imagine that both of them taken together are enormously costly for communist dictator and for communist State especially under absolutely inefficient and wasteful communist economy.

Communism represents a showcase or a showroom of social monopolization. Everywhere we look there are only monopolies. Entire spectrum of structural and production factor monopolies can be detected and identified within communist social formation including all kinds of small, medium-size and large-scale vertical and horizontal monopolies. These monopolies are organic parts of one genuine State monopoly on every production factor and on every economic resource. In the most severe case of former Soviet Union there is only one employer, one seller and one proprietor. Precisely the same outcome can be observed in political, social, cultural, educational and in all the other areas. All these factors attribute to the State an exclusive authority to absolutely uncontrollably distribute or redistribute the entire national income. Exactly owing to its very nature of a gigantic comprehensive and all-embracing social monopoly communism apparently is the most inefficient and the most unjustifiable societal construction.

Communism already (or may be rather only “so far”) is a history. For the time being it is profoundly defeated and will not be able to regain its ideological power or at least its universal attraction in the nearest future. Perhaps it might seem that communism had already vanished, however, the very social institution, which benefited from communism, nazism and from any other kind of dictatorship, is still alive and prospers not only in the least developed and in former communist countries, but in the most economically advanced countries as well and probably there even more and ever more. Neither communism, nazism nor any other totalitarian regime for that matter is a primary and original source of all the societal troubles of humanity. Those are merely particular social derivatives of the concrete underlying any State non-socialized interests. The State in itself in correspondence with its immanent nature of the ultimate source of power and coercion tends to bring dictatorships, various disgusting governance regimes and deficient societal formations. Tremendous inefficiency and unprecedented injustice of the communism are manifested by enormous consolidation and enrichment of the State monopoly, by extraordinary enlargement of the size and share of State property and by colossal enhancement of the non-socialized State power. Overall the State and underlying it material interests under communism are no any different from those under the most advanced modern democracies. The difference is merely in the level of social counteraction to the power of State, which had finally brought the modern system of social and property relations as well as modern democratic institutions, whatever imperfect they might be. All other types of dictatorships are less inefficient and less unfair than communism exactly because a role, a share and a size of the State and of the State property under those dictatorships is less critical. Owing exactly to this factor, there exists an economic opposition to monopolistic State property and to non-socialized State interests, which automatically and simultaneously generates social and political opposition to particular societal regime and to the State generally.

During recent era of the competition between two opposite societal systems or between two opposite systems of property relations, communism always supplied an awful and frightening example of the extreme State domination in society. In our days when apparently communism had vanished while traditional capitalism seduced by State domination in society has transformed into some kind of socialism. Without communism people who have a rather insignificant and indirect experience of social, economic and political dictatorships are no more frightened and probably no more believe that their nice homemade welfare friend can be like that terrible monster from grandfather’s fairy tales. However, its nature and the interests underlying our welfare friend are absolutely the same as those of the Stalin’s communism and those of the Nazi Germany. Only more sophisticated people’s counteraction (which is permanently diminishing under the pressure of socialist ideas), so far is not allowing the State to establish it’s absolute and devastating social, economic and political domination.

Chapter 12. Capitalism, Socialism and State Monopoly

Both definition and understanding of capitalism in modern social science, particularly what concerns its nature and its historical time frame, seem to be not entirely perfect. According to the concept of property rights imperfections, a social formation embracing the weakest in history of mankind State monopoly presumably contains a rather insignificant degree of social monopolization. Indeed, capitalism in its pure form or more precisely the social formation based on absolute domination of non-monopolized private property or else “free market” social system would be exactly a model of society with the lowest degree of property rights imperfections. Probably in its pure form such model of society had never existed. Such type of societal construction cannot even represent a proper social formation since it does not contain any property rights imperfections and therefore does not bear anything social in it. We noticed already that certain types of social monopolization may have existed within the different stages of capitalism. However, these types of social monopolization being less significant in terms of their strength and intensity were not having any substantial basis within the mechanisms of power and coercion and were not acquiring a persistent immanent to the capitalist system of property relations character. Therefore a free market societal construction in its pure form, which is associated with pure capitalism, is characterized not by particular specific type of exclusive property rights, but vice a versa by the lack of any property rights imperfections. In reality such ideal or even idealistic type of societal construction is very difficult to achieve. Modern economically developed countries after the World War II under the enduring influence of different socialist doctrines have significantly consolidated the State and State production factor monopoly. Consolidation of the State as of production factor monopoly has elevated the level of property rights imperfections in society and simultaneously made us to think about another term for societal system prevalent in majority of modern economically developed countries. Enforcement of the State monopoly, escalating income redistribution and high level of sociality in our modern society accompanied by enormous interests and incomes associated with social monopolization, with the State as well as with the mechanisms of power and coercion have procreated a new kind of social formation, which sometimes is called “socialism”. Though understanding of “socialism” in modern world and the one in Marxist tradition are rather different. From the point of view of property relations, entire justification of the term “socialism” for modern days societal construction of economically developed countries is based on a considerable boom of sociality in modern society, i.e. on accelerated involvement in society of the mechanisms of power and coercion. Such involvement is being manifested through social monopolization, through property (income) redistributions, through elevation of economic and social (based upon mechanisms of power and coercion) strength of the State monopoly as well as through mounting State interventions in economy, society and private life of particular individuals (or otherwise through property rights violations of the social nature).

What is conventionally understood in social science literature under the term “capitalism” is also not entirely straightforward. From the point of view of property relations, this terminology can only be applied to that period of capitalism in its traditional understanding, which used to be connected with social monopolization of capital as of production factor. If such a period had ever existed, it ended up completely with massive State interventions in economy and society of 1920-1930th. The time period of Grand Cartels of late nineteenth - early twentieth centuries probably reveals the last attempt to save the exclusive property rights associated with capital. When this attempt failed, a social domination of the State as of production factor monopoly characterizing the entire modern system of social and property relations starting from 1920th was bringing something new into the societal structure. Significantly weakened, the production factor monopoly of capital had dissolved completely by that time if it ever existed at all. Under the pure capitalism an overall economic and social strength of the State monopoly, probably for the first time in history was temporarily (up until 1920th) in decline, at least in the most advanced capitalist countries. However, after a while, a new type of production factor monopoly – the State one, and simultaneously a new type of social formation – socialism, have emerged rather peacefully especially in comparison with the other types of social formations. From the point of view of property relations, the new social formation did embrace a stronger and a more powerful social monopoly comparatively with the monopoly of capital. Right away the State monopoly started to expand its power, while the production factor monopoly of capital was permanently in decline. This new emerging modern type of societal construction must be identified and marked separately from “capitalism”. The very term “socialism”, besides indicating an advanced level of sociality in this new society, to certain extent is logically approximating the new formation to the socialism of Soviet style or simply put to communism. According to Lenin - socialism is an initial stage of communism. Such statement of things is also having a somewhat rational reflection from the point of view of property relations since socialism means “more State”, while communism means “only State”. On the other hand, communism can be considered as a certain modification or a sub-type of modern socialism since both of them are based upon the production factor monopoly of State and both of them strictly mean “more State” and more State domination in society. The term “socialism” seems rather suitable for the social formation currently dominating the world and particularly dominating modern economically developed countries; moreover that it has already acquired a certain degree of popularity. 

Idea of the State interference in economy and society in modern history gains its popularity and momentum predominantly starting from 1930th together with the introduction of universal suffrage. Though, there are certain indications, which demonstrate that this process started even earlier than that and can be attributed to 1920th (Randall J. Holcombe. The growth of the federal government in the 1920’s). In 1920th an overall situation with social and property relations in the most economically advanced nations was rather complex. From one side, have existed the leftovers of various structural capital monopolies with rather concentrated property rights or even with the private property rights upon those structural monopolies. From the other side, to some negligible extent, probably still existed some bits and pieces of the production factor monopoly of capital. Finally, as an implicit response to these two types of social monopolies or rather as an explicit response to the concerns connected with their illusion, also emerged the structural labor monopolies in the form of various labor unions. Consequently, there were at least three types of social monopolies at that time and accordingly there were few property rights imperfections in society. Opposite sides of the capital-labor conflict were eager to dominate one another and basically considered their interests to be one hundred percent contradictory to those of their adversary. Owners of capital monopolies, both structural and production factor ones, were eager to make the most in terms of exclusive benefits establishing monopolistic prices of output in case of structural monopolies and monopolistic prices for labor input in case of the capital production factor monopoly. On the other hand, the workers in order to contest an appropriation by capitalists of what they considered as a part of their labor were uniting in unions and thus creating certain forms of social monopolization of the labor supply. There were then basically two weak points what concerns a free flow of production resources. First of all, the specific impediments existed within certain structurally monopolized industries. Secondly, certain impediments for free production factors’ flows were arising as a result of somewhat limited possibilities for economic flows from labor to capital or of somewhat limited possibilities for workers to become entrepreneurs or capitalists and to acquire productive or economic property. However, both types of capital monopolies were significantly reduced by 1920th owing to accelerating social and economic access for masses of population to capital as a production factor.

We will not endeavor here to analyze causes and reasons of the Great Depression; there are a lot of exceptionally comprehensive studies on that. Rather we will look at what happened after the Great Depression and mostly at its direct consequences in terms of property relations. Typical explanation of a long-term influence of the Great Depression is that the price of labor in consequence of labor supply monopolization by labor unions and the prices of certain products of structural monopolies were quite rigid and failed to adjust to the deteriorated demand. Apart from two clashed with one another social groups - unionized workers and monopolistic proprietors – other groups of people such as farmers and non-unionized workers were suffering from both monopolies. Main consequence of the severe crisis was an extraordinary consolidation of the State as of economic agent and as of production factor, which in a little while became the gigantic production factor monopoly. Thus was created quite a controversial situation when one type of social monopoly (the State) is expected to counteract the other types of monopolies both social and economic ones (antitrust regulation never does differentiate between the two). In either case, a number of existing social monopolies had increased up to four.

All four monopolies were rather different both in their nature, in their strengths as well as in terms of the concentration of property rights. Capital structural monopolies were represented by economic agents with high concentration of property rights in hands of the few mostly private proprietors. Production factor monopoly of capital by that time already significantly socially dispersed was at the stage of its complete disintegration. After the World War I its strength is critically diminishing and by now apparently it can be considered as completely dissolved, at least in modern economically developed countries. Among the four types of social monopolies existed at that time, production factor monopoly of capital appears to be the weakest one. Labor supply monopoly was represented by a row of structural monopolies with quite concentrated property rights and with less dispersed social property claims. Property rights were considerably concentrated because informally labor unions were controlled by a limited number of top executives. Social property claims were significantly concentrated since non-unionized labor had a rather limited access to labor markets in selected unionized industries on account of the restrictions occurred as a result of labor unions’ policy and actions. Today the labor supply monopoly, though still exists to certain extent, is far from being as strong as it used to be, even though its strength varies among different countries and among different economic sectors. And finally, there was the production factor monopoly of the State with formally dispersed, but in reality with rather concentrated property rights and with significantly concentrated social property claims. Overall, by now the modern economically developed countries have outgrown to a substantial degree the sharp conflict between labor and capital described by Marx. Today anybody can get a bank loan, start his own business and become a “capitalist” in Marxist sense of the word. On the other hand, our days a significant part of population owns one or another kind of productive or economic property including real estate, stock and other financial assets. Those people are also capital proprietors in the Marxist sense of the word. There is no anymore such clear division between capital and labor as it used to be in the middle of 19th century when Marx advanced his major societal conclusions. Today in view of diversified capital markets, of available bank loans, of various grants and subsidies, of relatively accessible venture capital and of the other types of financing available to anybody, the production factor monopoly on capital hardly exists at all, at least not in economically developed countries. On the other hand, certain types of occupation being somewhere in between labor and capital (such as for example engineer, lawyer, doctor, actor, composer, etc.) even according to Marxian interpretation are much closer to understandings of business and self-employment than to the understanding of “employee”. Concentrating significant amounts of initially invested capital, knowledge and skills, these types of occupation are often bringing much higher incomes than those of the small and even of the medium-size entrepreneurs.

At the beginning of 20th century occurred a number of significant clashes between the State from one side and capital structural monopolies from the other. Little by little, structural monopolies were significantly weakened by three fundamental factors. First of all, structural monopolies were reduced in numbers and were significantly diminished by social property rights dispersion as well as by the general social access to monopolized property in these sectors. On the other hand, growth of demand for capital and overall process of incorporation were leading to conventional property rights dispersion and had significantly reduced economic concentration of property rights. And finally, were developed practices of the physical liquidation of structural monopolies including through application of the antitrust policies. Ultimate elimination of structural monopolies was a direct consequence of the process of social counteraction - initially between structural monopolies and the people while afterwards between structural monopolies and the State. Today we do not see any structural monopolies with profound social and economic influence. State, on the contrary, raised itself to a single giant monopolistic structure in the modern world. Since all the other monopolies are completely destroyed by now, today State is the strongest and the single social monopoly. Furthermore, in economically developed countries it is more affluent and more powerful than all other economic agents taken together.

 

If all monopolies are practically destroyed and markets are close to perfect competition, why do we need a giant State monopoly, which is permanently growing both in size and in power? One would think that if the State will stop to interfere in society and will be suppressed in its economic strength, it might loose its power and then other strong social monopolies can emerge. This is more or less rational perception from the point of view of property relations as well as from the point of view of the balance of power in society. Nonetheless, we must not forget that all social monopolies are materializing only through the support of the State as of the final and fundamental source of power and coercion. The stronger is the State, the higher is the level of social monopolization and of property rights imperfections in society. Economic monopolies, as we have seen before, hardly generally should be counteracted unless appear attempts of their preservation at the social level relying on mechanisms of power and coercion and, first of all, on the power of State. Since creation and maintenance of social monopolies can be realized only at the social or societal level and since the State is a final source of power and coercion, the very emergence of social monopolies is only possible either with direct or with indirect (of particular state bureaucrats) participation of the State. On the other hand, as we know by now, not the State is eliminating social monopolies but people’s counteraction to any exclusive rights and non-socialized privileges. Counteraction of social monopolies by the power of State looks rather ridiculous - originally social monopolies are being created with participation of the State and then the State is expected to fight them. State being an ordinary economic agent or being a conventional commercial enterprise with its immanent egocentric interests, which purpose is to extract financial resources from the people and to redistribute them to top-level State bureaucracy, is not against any social monopolization or against any property rights violations. Only the people through social counteraction are making the State to deal with those.

Ideological part of social infrastructure related to interventionist theories is ideally suitable for the State interests in its struggle for societal domination with other social monopolies. Monopolies elimination function or antitrust regulation is empowering the State to destroy any monopoly while often simply any inconvenient economic agent and private interest with non-economic methods based on pure coercion. Growth boosting function is providing the State with a possibility to suppress any business organization economically by tying it up to the State procurement, State orders, State expenditures and State regulation. Previously advocated by social infrastructure nationalization of strategically important industries and enterprises yet in a very recent past was supplying State with the power to destroy economic agents directly through nationalization of any strong, not subordinated to the State, economic interests or of any kind of economic opposition to the State. Income redistribution function is granting to the State an additional power to directly expropriate private financial resources and consequently to diminish a compound strength of all alternative private interests taken together as well as the strength of every one of them taken separately. Direct regulation of business and economic activity is endowing the State with even more elbow space for companies’ oppression or sometimes, vice a versa, for their support and artificial motivation in the interests of particular State bureaucrats or of particular regulation units. Philosophy and infrastructure of State interventions is a precious gift to the State bureaucracy from the advocates of social welfare. Philosophy of social welfare is exceptionally convenient for fighting any economic opposition to the State, for escalation of the State’s own non-socialized monopolistic power and for disallowing any other powerful groups to control the State property. Any kind of social monopoly and the State one in particular are very proficient in creation of specific social infrastructure designed to promote and to advocate their necessity, to justify their existence and to conceal the nature of underlying them material interests. We can be sure that if one day the State bureaucracy will recognize an absolute similarity of its interests with the communist ideology, people will be convinced to vote for a lawful introduction of communism - we are already voting for it step by step.

Twentieth century brought a number of remarkable paradoxes in economic development and social evolution. From one side, this is the century of a widespread establishment and affirmation of democracy especially in economically developed countries. From the other side, it is the century of people’s permanent loss to the State monopoly. Communism, Nazism, state socialism, various dictatorships as well as colossal escalation of the State’s social domination and economic power are the negative results of the people’s battle with the State in twentieth century. Capitalism of the 19th century was somehow in opposition to half-monarchical absolutist governments, while societal disaccord and inconsistency of interests between the people and the State associated with absolute constitutional monarchies and with the power of land aristocracy were quite obvious. Capitalism of the 20th century, on the contrary, was left alone with the masses of relatively poor people, who assumed that their major enemy is the wealthy individuals rather than the State. State did everything what was in its power in order to preserve and to cultivate this opinion and in order to antagonize rich and poor aiming at spreading its control over both. Today we can say that it has overwhelmingly succeeded in this task.

Current stage of economic, technological and social progress as well as corresponding evolutions in the division of labor inevitably create preconditions for a wider range of economic monopolies or of businesses and occupations more or less exclusive in their nature and in technical skills. Back in history, for example in times of Adam Smith, number of occupations and number of economic sectors were quite limited while capital and labor were allowed to easily flow from one sector to another. One could be a baker today and a construction worker tomorrow without any serious re-qualification or without additional sophisticated education required. However, social evolution generally and technological progress in particular are raising the division of labor on such a height, where practically every single qualification is becoming more and more unique, while fewer and fewer people possess necessary skills and knowledge in order to carry out any particular kind of job. The same is also relevant for the capital and for the State as well. Technology and technological investments have acquired the very same degree of sophistication as the labor did. And if we are thinking about the State, it became so complicated and diverse, that sometimes it is very difficult to track all elements of an overall governance mechanism even for professionals in the field. Today we are witnessing a much heavier accent on specialization, which is leading us to more and more exclusive qualifications, with fewer and fewer competitors in particular small “niche” markets and in particular lines of occupation. There is a strong tendency of economic exclusivity or of economic monopolization of skills and technology conveyed by specialization. On the other hand, exclusivity is what technological progress is all about – it would be no any inventions if their proprietors cannot think about their exclusive utilization. Exclusivity trend is emerging yet at the earliest stages of social history (for example, certain shaman’s skills or special curing qualifications in primitive tribes). Then, it is constantly evolving together with specialization of labor, accelerating during industrial revolution and gaining its peak in the twentieth century. Emerging qualifications are of more and more complicated nature and require either substantial amount of knowledge, significant capital or sophisticated technology, or even more often a combination of these three factors. In line with those developments fewer and fewer competitors are remaining on particular markets as well as within particular qualifications (especially in high-tech industries, which are more and more embracing every single economic sector). In future, along with scientific and technological progress this tendency might accelerate even further. This tendency is absolutely objective; complaining that it poses a threat to competition certainly will not reverse it. On the other hand, exclusivity emerging as a result of specialization does not represent a social type of exclusivity or a social type of monopolization and therefore cannot be considered as property rights imperfections, even though any economic monopoly might seek to support itself with the social tools of power and coercion. Trying to follow the State intervention doctrines, moreover does not seem to do any good, because the State is merely another social monopoly though outstandingly colossal and the strongest one in the modern world. Following interventionist doctrines we are actually strengthening the larger social monopoly on account of the smaller economic ones. After the World War II the State monopoly worldwide barely started its way towards the real conventional property rights dispersion or towards democracy per se after thousands of years of various dictatorships and cosmetic democracies. Even commonly renowned ancient Roman democracy was not really a democracy in its nature.  From the point of view of the slaves, it was rather a joint coercive force of the slave-owners directed towards their oppression. From the point of view of the slaves, it rather represented the most severe dictatorship in the form of ruling aristocracy (simply more dispersed type of dictatorship), which was embracing all citizens of Rome. We are not even mentioning different social and economic limitations for conventional property rights dispersion related to the state property, which existed throughout the entire human history. Perfect competition, free market or laissez faire today or any time before means neither a lot of buyers and a lot of sellers nor does it necessarily abolish any price influence situation, nor even it implies a total absence of any monopolies. All these factors are merely the over-simplifications suitable for particular historical time periods of one single fundamental criterion for laissez faire – the lack of any property rights imperfections in society.

In parallel with the specialization emerged and in our days is furthermore consolidating a relatively new type of competition - cross-industrial or cross-sector competition, which is complementing a competition within particular industries or within particular economic sectors. This new type of competition is the technological competition, which designs and invents new technological processes instead of the old ones and which aims at particular need and at satisfaction of particular demand rather than at manufacturing of specific products thus creating new solutions, new products and new processes. Simplified example would be an invention of the aircraft. Before such invention the railway industry used to be a major carrier. Then, as a new solution, came an airplane being a strong outside competitor for the railway industry, which is not, however, in the railway business but in the transportation business. This new type of competition is the competition of ideas on the contrary to the old competition in organization, price and quality. It is introducing new solutions, new products, new organization, new price and new quality simultaneously in one package and at such a level that old technology, old production methods and even old products are becoming obsolete and non-competitive right away. It creates a new level of efficiency, which is destroying traditional habits and understandings and which is redesigning the very human life. Technological innovations consolidating economic competition as well as untying and removing the very dependency of competition on a large number of producers in particular economic sector are simultaneously destroying the entire variety of arguments invented by social infrastructure in favor of the State interventions and of the State regulation of economy.  

In globalization the world is having the last chance in its struggle with different kinds of social monopolization. With globalization of markets and of economic processes, multinational corporations do not look as immense as they do on national markets, while a number of competitors is becoming significantly larger. On the other hand, States and governments are loosing their overall economic and political influence. If they are trying to apply exceptionally inefficient policies (simply inefficient are all their policies) or particularly tight economic regulation, this is working less today than it used to work before. With internationalization of labor, capital and technology, economic agents are having the big global unregulated hole, where they can move their operations fleeing to the countries, which offer more attractive comparative advantages. This is stimulating an economic competition between the States for attraction of production factors and economic resources. From the point of view of top-level State bureaucracy, such competition represents a competition for more State revenues associated with new residents and new businesses from one side, while from the other – a competition between the social ideas evaporating excessive social idealism or social illusions as a result of fleeing away businesses and industries and of the subsequent unemployment and decline in personal incomes. Globalization in all the probability is leading us to one single huge world economy without national states or at least without their current significance at macroeconomic and societal levels. At certain point in time, however, globalization might generate instead some kind of economic and social governance at this global macroeconomic level. When this will come, monopolization will critically escalate once again. If until then we will manage to escape the destruction of our civilization by modern socialism (which is most unlikely), if mankind will not find trade partners somewhere outside of our planet and if human beings will not evolve into some other biological specie, we will be stuck face to face with the gigantic global State monopoly. For such an order of global governance and global economy to come it will not take centuries as it took mankind to approach the gates of globalization. With technological developments skyrocketing, piling up, pushing and pulling each other as well as with the acceleration of global interdependence this will probably take a much shorter period of time.

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Guide to the Phenomenon of StatE

(Manifesto of the State's Nature)



SOCIAL PARASITISM


THEORY OF HUMAN SOCIETY

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