By Volodymyr ZOLOTARIOV, The Day
of dry land
Andriy KNYSHEV
The seven years of endless reforms have become a kind of
an intellectual nightmare for people who ask themselves: what is actually
going on in this country? Indeed, on the one hand, the authorities seem
to be doing something, but, on the other hand, life is becoming worse and
worse. There are a host of explanations for this condition: from a Jewish-
mason conspiracy (optionally: Russian) to reasoning about the innate qualities
of our people and rulers. Despite the diversity, all versions suffer from
complete hopelessness and only “lay another brick in the wall” of our eternal
desperation before the “huge, hundred-headed monster.” We all know the
sensation as if we try to make our way through a cotton wool wall — it
emerges when we deal with our state or try to do anything that goes beyond
the norms of life. Every step here is so hard that this creates the impression
that the gravitational force in Ukraine is several times stronger than
the rest of the planet.
Meanwhile, there may be other explanations for our situation,
more plausible than “all are bastards,” and, accordingly, recipes for overcoming
it, the more so that today's intellectual preparedness is higher than it
was before. The West has come up with the fruitful concepts of virtual
economics, which stands much closer to reality than other “explanatory”
ideas. (As far as I remember, only a few years ago attempts to explain
to foreigners at various seminars that, for example, Ukraine's state budget
is mere fiction — from the macroeconomic angle, not just in terms of “isolated
figures” — were accepted with distrust, to put it mildly). A few years
ago, Serhiy Datsiuk's Renewal came out, and the author also published
the article “The Pins and Needles of Ukrainian Reforms” in Roman
Zvarych's journal Demos at approximately the same time, so now,
after “virtual economics,” I can assert that there are certain points of
departure for a new, more productive, view of Ukrainian reality.
A FEW PRELIMINARY NOTES
1. The illusion of economics.
During and after perestroika , economic science
assumed in the public consciousness a hitherto unknown, literally sacred,
image. To working people and politicians, economists seem to be like magicians
who possess the secret knowledge of “how to take the country out of the
crisis” (suffice it to recall Natalia Vitrenko's steady affirmation: “I
am an economist!”). Economic debates, from the angle of public consciousness,
look like disputes about how to correctly pronounce the salutary mumbo-jumbo
incantations. No one doubts, however, that the main thing is to find and
pronounce the saving formula. Meanwhile, economics is rather far from both
the magic and the exact sciences (the only similarity is perhaps observable
between money circulation and thermodynamics). It is Nobel Prize winner
Friedrich von Hayek who gave the most accurate definition to the problem
of illusions connected with economics: “...economics is only a science
about humans.” Indeed, we practically always participate in economic relations,
not only when buying and selling things or working at a factory; what influences
our economic behavior is not only the so-called purely economic factors,
but also the commonly accepted social practices, morals, and traditions.
It is not accidental, by the way, that the aforementioned Hayek suggested
a new term “catallaxy,” for he was aware that a scientific- looking context
grossly distorts the vision of reality. We are going to use further on
mostly this “catallaxy” approach; in other words, we always mean that economics
is a science about humans.
2. It is hard to speak about snow in Africa.
Much of what follows below could not have been noticed
inside or outside the defunct USSR. Inside, there were almost no people
possessing “outer” knowledge (let alone experience), for all states look
more or less the same “from the outside” (this is why Sovietologists mainly
specialized in foreign policy of the USSR and Kremlin intrigues). It is
our present-day “in-between” situation that makes it possible to comprehend
and outline the vectors of the on-going processes.
3. The point is in proportions.
The phenomena in question perhaps exist in all countries.
However, they exist in different countries on different scales, leading
to different consequences. No doubt, the Ukrainian situation can also be
discussed in terms of macroeconomics, which is true, but this will only
be a part, not the greatest at that, of the truth. On the other hand, in
America, a senator's son must have more chances than an ordinary mortal
to become a senator, but this is not critical for them. To avoid a great
number of digressions, this author asks the reader always to bear in mind
these remarks.
KARL MARX WAS RIGHT, OR THE LAST HELLO FROM THE GRAVE
Mykola FOMENKO
For me, the most unintelligible thesis of Marxism was the
postulate about the state dying out as a result of total etatization. Indeed,
it is impossible for those born under socialism to grasp this postulate,
for the excellent condition of “dying out” was in fact achieved at the
very first stages of Soviet history. However, this failed to lead to the
brilliant consequences Marx foretold, so we all learned in college about
“the further necessity of the state's increasing role under the conditions
of socialism.” But there was nothing to increase because all things possible,
including individuals, had been nationalized. True, there was no state
in the USSR in the strict sense of the word, as we can only speak about
the state when there exist subjects independent of it, for whom the state
might be the lawmaker and the arbiter. Since there were no such subjects,
there was no state (see the previous remark 3). Mature people, who determine
our policies, never saw or came across the state; they do not know its
design and purpose. What existed in the USSR still requires term- assigning
and research. For brevity, let us call this structure a pseudostate (at
least because it had the outer signs of a state).
EACH MARKET HAS ITS OWN “INVISIBLE HAND”
who
were slowly closing the circle...“
Andrey KNYSHEV
Whether or not the state exists, there is always economic
exchange in society. In a “normal” case, the exchange is carried out on
the basis of private property, with the main criterion of its efficacy
being the ability to meet the needs of other people. Growth of property
is the motivating force of human economic behavior (it would be more correct
to speak about satisfaction, but this would unnecessarily complicate things
in this case. Usually, the growth of property and satisfaction are interconnected
things, even if man prefers the latter to the former). A most primitive
non-monetary exchange (I need the pencil, you the eraser, let us swap)
features the growth of public good because the two sides satisfy their
needs. The growth of our property in a “normal” market depends on the satisfaction
of other peoples' needs (it in fact depends on the growth of national wealth).
An “abnormal” socialist situation, when there is no private
property as an economic phenomenon, also displays exchange. Here the role
of property is played by the status: in the simplest case it is a post
in the state hierarchy (we all remember “not-so-simple” cases, when an
“empty-bottle-bank” dealer or a “well-connected” man “who knew how to make
his way up” had a higher status than the manager of a small factory — this
is why I speak about the status, not the post). This method of economic
activity became especially evident in the years of “developed socialism,”
when the share of direct coercion fell drastically. We all remember shortages
and the proverbial “pull.” Pull is the most vivid example of a status-based
exchange. So if you, for example, can “get hold of” wooden boards for your
country house, and you need a ticket for a vogue theater show, the number
of boards you will swap for the ticket will depend on the status you wield.
Obviously, if you manage to turn to the ticket-holder introducing yourself
as a representative of the city Communist Party Committee secretary, this
will require fewer boards than if you represented an ordinary factory manager.
But if the ticket-holder is a good friend of yours, you will get the tickets
for free, i.e., for money.
Let us add to this another important thing: the market
(or, in Hayek's words, “the extended order of human cooperation”) is based
on the principle of the supply of goods and services to all those who need
them. Pull existed for the “insiders” (although all were involved in it).
In other words, the costs of exchange in the former and the latter cases
cannot be compared. In the former case, you go to a shop and buy the thing
you need; in the latter, you spend your time and effort to search for the
“people you need” and produce some additional services to become an “insider,”
in addition to paying for the commodity itself. This situation embraced
not only private persons but also enterprises. Let us recall “procurers,”
the people who majored in “wresting” supplies from the related enterprises,
the supplies being, as a rule, prescribed by the state plan and supposed
to be effected “automatically.” All the above-said may boil down to two
formulas: 1) The scope of status- based property under socialism does not
depend at all on the ability to meet the needs of other people. 2) Most
transactions in this system do not increase the national wealth. The Soviet
Union was done away with not by imperialism or oil price cuts, but by the
daily billions- worth of loss-making economic exchanges.
Now we can take the next extremely important step. Since
there is a multitude of exchange, the socialist system can also have the
market as an information medium and a method of coordinating the efforts
of people, who do not know each other, to achieve individual goals (so
to speak, coordination without a “prior arrangement”).
Frankly speaking, I know rather few people in Ukraine who
understand the decisive function of the market which in fact allowed Adam
Smith to speak about an “invisible hand” that moves the required resources
where they are mostly needed without any government interference and finally
leads to an increase of national wealth.
Spreading rumors can also be an example of an effective
self- organizing system similar to a market function (only much more primitive).
Let us note that although the decision on whether or not to pass the information
further on is being made by each “spreader” individually, the information
(irrespective of its trustworthiness) becomes known to you almost immediately.
What is more, for you to become the “recipient” your wish is not required
— your potential interest is quite enough. Let us also note the effectiveness
of the spontaneous “natural selection” of information importance, which
exists in spite of the differing human ideas of reality: “backstage” rumors
will never leave the bounds of “back stage,” while generally important
information will be known to all (suffice it to recall that in Soviet times
rumors warned us about price rises with almost 100% precision).
Returning to nos moutons , we conclude bitterly
that a self-organizing system of coordination, which emerges naturally
in a system with status-based property, enhances many times over the negative
consequences of loss-making exchanges. Since the growth of property (status)
does not depend on the satisfaction of the needs of other people, “the
invisible hand of the status-based market” kills all living creatures in
the economy, reducing, not increasing, the national wealth. For more convenience,
we shall call the status- based market “antimarket.”
WHAT HAPPENED DURING PERESTROIKA?
Mikhail GORBACHEV
(Robert ASPRIN, Myth Inc. in Action
)
The degradation of socialism caused the monolithic pseudostate
to gradually disintegrate (I do not mean the political collapse of the
USSR, which is only one of the consequences of the overall process). Speaking
more figuratively, the socialist iceberg began to melt, forming around
itself such “water” that people and structures, as a result of economic
degradation, found themselves outside the system of absolute governmental
patronage. An environment emerged outside the pseudostate, which began
to exist by the laws of normal money-based economics (it is very important
to point out here that the perestroik a-time liberalization, which
allowed a transition to money relations, was only a reaction to the degradation
of socialism, which allowed the “ice” to melt slowly rather than burst
into pieces from overload; our current situation is the result of a still-continuing
destruction of socialism, and not the result of “perestroika” or
“liberal reforms”). This resulted in a quaint system in the post-Soviet
countries, which at the same time combines a money-based economy and an
antimarket that is parasitic on the latter.
Another important moment: as soon as the pseudostate formed
an environment outside itself, the former began to deal with the latter
as a normal state — the source of standards and the arbiter — without being
adapted to this and, what is more, without any feedback from the outer
environment. But inside, this “iceberg” of a pseudostate has not changed
at all and is still a system based on status. The motives our pseudostate
is guided by with respect to the money-based economy are being dictated
by the destructive logic of the anti-market. It would be a grave mistake
to think that the anti-market is only confined to the state limits: in
fact, we are all actors on both the normal market and the anti-market at
the same time. The simplest example is a kiosk selling contraband cigarettes
(because the “required people” can import cigarettes without an excise
duty owing to connections). Bribing traffic policemen, plumbers, etc.,
is nothing but status-based anti-market relations pervading our society
and being deeply inherent in it (Yegor Gaidar showed in his book The
State and the Evolution that the territory of the former Russian Empire,
throughout its history, never knew “normal” private property, which makes
parochial status-based relations much more deep-seated than we think).
THE ECOLOGY OF ECONOMICS
the Statute!
A commander's threat to his subordinates
We all know the simplest way the anti-market feeds on the
mo- ney-based economy, which quite fits our hypothesis. Let us remember
that various state agents (tax authorities, fire brigades, etc. ),
in dealing with their victims, first try to go from the formal plane of
a juridical norm to that of personal relationship based on status: “We
can find any kind of violations in your place, so let's strike a friendly
deal.” What is more, victims themselves never strive for a law- bound relationship.
A good example of this system can be found in the army. Formally, the Statute,
equally compulsory for a soldier and a general, guarantees a private soldier
decent conditions of service: an 8-hour sleep, weekend liberties, etc
.
However, it also contains some clearly unfulfillable requirements, for
example, that all servicemen salute each other (i.e., soldier to soldier).
So if you want to stand up for your rights, go round and saluting and making
your mates laugh .
The main loss inflicted on society by the anti-market is
not a simple arithmetic sum of the inadequate profit derived from the time
consumed for dealing with the state and the amounts spent on bribes. Much
more horrible is the overall “pollution” of the market (in general, it
might be an interesting topic for the “ecology of economics”). As is the
case of ordinary ecological pollution, the “pollution of the market” is
nothing but a standing factor, but it is impossible to say what kind of
effect it will have in each concrete instance. In other words, decisions
in the money-related part of our economy are made not only under the influence
of its own signals but also under that of anti-market signals, which makes
these decisions ineffective. Coming back to our example, a smuggler who
does not pay an excise duty can sell his cigarettes cheaper than the one
who does. On the normal market, a lower price is a signal to other sellers
to lower prices, which requires some economic measures (to search for new
suppliers, etc. ). However, in our case, a low price is not the
result of know-how (which other market actors could also have discovered)
but the result of a status exchange, so the normal response of other sellers
(price reduction) to the “polluted” signal will bring about their ruin.
Such a situation radically diminishes trust to any market signals in our
economy: you never know whether the signal is from the market or anti-market.
It is next to impossible to assess the damage from this state of affairs.
We can so far point out only three obvious results: 1) Our entrepreneur,
with prior knowledge that “nothing will come out,” usually does nothing
in situations where the “normal” one would kick-start bustling activity;
2) Under the conditions of doubtful signals, it is impossible to plan on
the level of an enterprise, and any long-term activity and efforts by market
actors are mainly aimed at seeking out the “fast money,” which leads to
criminalization and, hence, to a greater dependence on the state; 3) Competition
turns under these conditions into a rather dubious instrument which by
no means secures the victory of the best; in essence, there is competition
for more convenient and cheaper access to the required status.
AN INSOLENT CANCEROUS TUMOR
has never tried to rob a child of his sweets
Robin HOOD
(Robert ASPRIN, Another Magnificent Myth
)
All entrepreneurs ask the same rhetorical question: “Don't
they understand?” This boils down to reproaching the state: you can't kill
the hen that lays golden eggs, and something of the kind. An NDP member
once said to The Day : “When you talk to officials, each of them
seems quite sound-minded person, but, all together, they act like a swarm
of locusts.” An absolutely correct definition, if you bear in mind that
both standard-setting by-laws and the existing practices are, in many respects,
anti-market products. In this lies the “specifics” and the hopeless horror
of our situation: for the money-related part of our economy, the products
of the state are juridical norms, while for the pseudostate itself, they
are “economic” decisions, methods of parasitizing, converting the status
into money and “normal” property. What is more, the application of norms,
which is the competence of the “executive power,” fully depends on the
latter's “goodwill” (it cannot be otherwise in a status- based system),
so even “correct” and “reformatory” laws and other norms are fulfilled
in such a way that it would be possible to support, above all, the conditions
that enable the anti-market to exist. To look at it from the outside, this
activity looks so masterly and its consequences so evident that this allows
none too clever people to speak about the “conspiracy” of either “imperialists”
with the IMF to boot or the wrecker officials. In reality, the activity
of the pseudostate is so effective just because it is not directed from
one center and, in most cases, is not the product of political decisions
and compromises but is the result of the same market-type coordination
of the unknown-to-each-other people to achieve their individual goals,
which we mentioned at the beginning of this article. Let me remind you
that not only the officials but also the rest of the population take part
in this coordination, without both sides suspecting this.
To illustrate the effectiveness of the anti-market, I will
give a list of the main “victories” of the pseudostate, with which all
those who have been following our recent history will surely agree.
1) An absolute victory over private property. All talk
about privatization can only deceive perhaps the IMF. When there is no
procedure for bankruptcy, when an enterprise can be “reprivatized” any
time by the State Property Fund or parliament because of “incorrect” privatization,
when the notion of property does not exist for “law- enforcement” or other
bodies, when no one even dares to speak about the private ownership of
land, it is senseless to speak about property. If there is no property,
the economy is ruled by status.
2) Fierce resistance to attempts to convert the pseudostate
into a normal state. Glaring evidence of the power of anti-market mechanisms
is the tear-jerking unity with which most post-Soviet countries have introduced
the notorious “mixed” system of an electable president and an appointed
premier who heads the government. Not a single developed state has a structure
like this, perhaps due to its excessive intricacy (the author is prepared
to prove that even the “French model,” as cumbersome as it is, is very
far from our national options). In reality, there is nothing new in this
system: this is a renamed version of the Party Central Committee-Council
of Ministers relationship, in which the leading role is assigned to the
Central Committee (president), with the Council of Ministers made responsible
for putting it into practice. If the will of voters in no way influences
the government's behavior, status rules the roost.
3) A complete flouting of the law plus rejection of judicial
reforms (it is self-explanatory). If there is no arbiter, whose decisions
are binding on all, status-based relations take the upper hand.
I could be accused here of downgrading the role of corruption
and the lobbyism of “pressure groups,” and of actually defending the powers-that-be,
as if it were the “invisible hand” and not they who are guilty. I will
only say that there is no corruption in Ukraine, for it is the rule, not
the exception. Even when you apply to a state body and manage to resolve
your problem without a bribe, you in any case pay the pseudostate a “tax”
in the shape of the time you lost, which is always longer than is necessary
to resolve a problem (I will stress again this is a too simple and linear
example relating to a narrow sphere, while reality is far more complex).
What is most important for the anti-market is your “running about” per
se, which indicates sufficient non- transparency, one of the indispensable
conditions for its existence. An individual official who needs a bribe
may not in fact get one, but all officials, without prior arrangement,
will in any case make you “run about” to make it possible for some of them
to receive the bribe. The power of a self-organizing system manifests itself
in the fact that, while an individual bribe-taker can be fired, no one
will be able to force the officials to act otherwise as long as man depends
on the state to the extent that he does in Ukraine.
All must have noticed that if, for some reason, visitors
to administrative bodies cease to “run about” (due to simplified rules
or tightened control), the anti-market reacts immediately, and after some
time everything is restored. Who does so? Nobody in particular, but all
together. At the state level, this is revealed in a picture all observers
know: as soon as some reformatory decisions have been made, the anti- market
at once “makes up” for them either by making decisions in a different field,
which bring the former to naught, or by overt sabotage.
As to the defense of the powers-that-be, nobody defends
them. On the contrary, as in any sector of the market, there is competition
and, hence, natural selection, here. It is the “fittest” that survive,
i.e., those who do not ask unwarranted questions and agree to the unwritten
and non-debatable rules (knowing well many officials, I have never seen
any of them discussing in restrooms how to “double-cross” the visitors).
People who regard our state bodies as really representing the state, i.e.,
above all, as those where there is strict order and the formal hierarchy
corresponds to the actual one, are doomed to failure in this competition.
As a market economy is stronger than a planned one (“we do not know any
means other than competition to inform the individual about where his contribution
to the making of public good will be the greatest,” writes Hayek in his
last study Baneful Self-Confidence ), so the anti-market is “stronger”
than any conscientious policy or “conspiracy.” The difference is that it
in fact “informs the individual” about where his activity will inflict
the greatest losses on society.
WHAT IS TO BE DONE?
too many mishaps?
Job
(Robert ASPRIN,
Sweet Myth or the Mythery of Life )
Our situation is being exacerbated by the fact that the
existing political stereotypes take no account of not only the decisive
role of the anti-market, but also the very fact of its existence. I think
the current President also sincerely believes that he promotes entrepreneurship
by issuing various decrees, whereas decrees cannot deliver the goods: the
anti- market “develops” in a natural way and the limit of its development
is its complete degradation. We owe, to a large extent, the emergence of
false illusions to the activities of “national democratic” politicians
(in cahoots with officials who cheerfully support them), who, taking advantage
of their ideological monopoly in the media in the most critical period
of 1991-1993, produced the indecent fits of hysterics, accusing each and
every “encroachment on statehood” every time one tried to criticize our
institutions. They created the illusion of us having a state which only
needs some reforming, whereas we were in fact left with a fragment of socialist
“ice,” with “reforming” so far boiling down to painting the facets of this
iceberg in various colors.
Little wonder that, looking at the current chaos that came
about allegedly as a result of liberalization, the overwhelming majority
of politicians rattle on about “a strengthened role of the state,” while
just the opposite is required for combating the anti-market. In general,
the best economic reforms lie in the separation of the state from the economy
and the organization of the state as such. This, however, raises a crucial
problem: how to reorganize the pseudostate, for there are no other tools
but the pseudostate itself to do so. We have already seen that the anti-market
is capable of effectively withstanding any attempts to undermine it from
inside, so the departure point for transforming a pseudostate must be outside
it (as Archimedes said: “...give me a firm spot on which to stand, and
I will move the Earth,” — it is too difficult to move the latter, standing
on the Earth itself). One such mechanism could be a Constituent Assembly,
effectively tried out by the Americans after they had tormented themselves
over their unviable system for ten years (after secession from Britain),
and repeatedly reproduced in Europe (the only failure occurred in Russia).
There might be other mechanisms, too, but, in any case, this is a different
serious subject.






