How can competitiveness and sustainability be preserved? Multi-speed economics around the globe
László Kulin
Please cite the paper as:
László Kulin, (2024), How can competitiveness and sustainability be preserved? Multi-speed economics around the globe, World Economics Association (WEA) Conferences, No. 1 2024, Capitalism, Socialism and Democracy 80 years later, Looking at capitalism today in light of its past and possible future
Abstract
I. Principles and formation of capitalism.Economic implications.
The roots of capitalism (production-economic category) can be traced back to the English bourgeois revolution and the subsequent industrial revolution in Europe.
The natural treasures of the world of that time were discovered 500 years ago.At the same time, in addition to a technological explosion, consumption demand also increased.Europe’s population also grew as medieval epidemics receded.
The market and market demand became the driving forces of production. So the driving force is at the bottom of society. At the level of individuals. The economic scope for individuals is wide. “The market is above everything”. This phrase has dominated the minds of working people and companies for 400 years.
The stock market was also developed so that an average person could actively participate in the market with their invested money.
Capitalism meant the emergence of the capitalist elite. The established regulatory principles are not reminiscent of the world of the Grail Knights.
Keywords:
- profit maximization
- reduction of production costs
- increasing sales of specific products
The economic potential of an individual is determined by at what point and how actively he can participate in the production process. The economic potential of a country is also determined by how active it is in the common (now called global) production process.
Positive effect: an effective system organizing force that satisfies the benefits and provides money to the population in the form of paid wages
Negative impact: competition depersonalizes, individuals and families distance themselves from each other, community perception decreases
The division of labour between institutions results in welfare pluralism.
II. The principles and formation of socialism. Economic implications.
The theoretical foundations of socialism were laid by Marx and Engels. In its wake, it was implemented in the Soviet Union in 1917 as the successor of Russia. It became the Soviet model. Currency: rubles.
Its creation was facilitated by the famine at the beginning of the century, which required a central, definite and regulated distribution of wealth. The essence of the structure is a regulated market, a system of planning orders in production. The absorption power of the market is estimated. The system is moved by the guides, the motive force comes from above. The economic room for manoeuvre of individuals is narrow.
The established rural farmers’ cooperative-KOLHOS system became a peculiar structure:
- large-scale public land
- reduction of private property
- specific settlement structure: central settlements with many inhabitants, i.e. the farmer does not live on his land
It is quite obvious that, from an economic point of view, this agricultural model starts from a disadvantage: the time and cost of transport are start-up disadvantages. In addition, the worker does not feel ownership of the finished agricultural product, which worsens work ethic.
Over time, KOLHOS adopted a “grab it and take it home” approach by the end of the twentieth century.
Positive effect: the role of the community becomes more important (especially during major crises), community functions are active, and in the short term (since the driving force is people) the structure may be capable of outstanding or outstanding performances
Negative impact:
- often non-cost-effective decisions in production processes
- international competitiveness may slow down
- the individual money market is shrinking
- technology innovation processes may slow down over several decades
There is no capital and anti-profit, but there is considerable state intervention.
III. The emergence of democracy and its economic consequences
The modern democratic state was established in the USA in the late 1700s, but its traditions date back to ancient Greek and Roman democracies. This became the American model. Money: Dollar.
It is characterized by a renewable market: an increase in production and consumption with constantly renewing economic agents.
Democracy is not an economic category, but demos-the rule of the people. It highlights the processes according to which the self-regulating role of the market is a system organizing principle.
Positive impact: outstanding individual and company stories, economic success stories
Negative impact: alienating, competing communities
IV. War of the Worlds in the Economy. The consequences of globalization.
The capitalist path is based on the individual and individual achievement: the individual is the problem solver. Money is managed by the individual.
The socialist way is based on collective production and consumption: the community is the problem solver. Money is managed by the state.
The engine under capitalism is the market from below, in socialism the leading personalities from above. The question is in what perspectives they can be pruductive and ensure sustainable development.
The unification of planet Earth: all economic processes are interconnected. This is a consequence of the occupying processes of capitalism and socialism. They have fully filled their space by 2023.
Contentious issues in economics led to conflicts, trade wars.
V. Solutions
The key word here is optimism. A settlement principle is needed to manage conflicts, but already at the level of science and experts.
It is important to keep good practices, to carry them on, and to reject bad ones. Thus, homogenization is necessary so that, based on indicators of economics, economies everywhere are characterized by sustainable development. But heterogenization is also necessary, because it is often not immediately clear which will be “good economic practice”. Innovation needs space. And for a while.
- It is important to legalize the ownership of managers, political career programs are needed so that experts are not under pressure and professional and economic decisions can be made
- It is important to regulate production and consumption uniformly (customs rules, pro- duction quota system, etc.)
- It is important to help slower achievers. There are slower performing individuals, companies, countries, continents. We are all sitting in Noah’s Ark and our ship is common.
The problem is that social mobility and economic indicators move together. In my view, greater mobility is also boosting the market. It increases supply and demand in the longer term.In advanced democracies, social mobility in an election cycle is up to 60%, but as I said, although it boosts the economy (there is a lot of potential for change and innovation), it alienates people, families and communities. Single people, single-parent families consume more!
The goal is common: to maximize individual benefit. Individual achievement can be supported by career programmes, e.g. helping children of low-educated parents progress in universities. This, too, will result in an increase in economic indicators, albeit with a longer payback period.
Professional career = career in economics, in all subsystems of society.
However, it must be recognised that not everyone is capable of the same performance: outstanding economic indicators require good education, good healthcare, a good food industry, among others. The field in this race may be divergent and some may decide to perform with less speed for these reasons. Because their society can’t take any more. This is not good news. Therefore, experts should strive for economic homogenization. The aim is not to increase the number of those lagging behind, but to promote sustainable development everywhere.
The responsibility of experts is enormous.
In my view, they are a new and very important engine of this current economic world. They will never be the elite, but their work is important to go to the economic machine. They can frame the machine.
References
Keynes,J.M.(1936) The General Theory of Employment Interest and Money London Macmillan
Kopányi, M(1997) Microeconomics Budapest Hungarian edition Bihari, M; Pokol,B (1992): Politologie Budapest Hungarian edition
I appreciate your contribution. I would just add the following remarks and a light question: the market is not an abstract mechanism leading automatically to individual and social utility maximisation. But it is an institution that, in John R.Commons’s words, “Tells what the individual must or must not do (compulsion or duty), what they may do without interference from other individuals (permission or liberty), what they can do with the aid of collective power (capacity or right), and what they cannot expect the collective power to do in their behalf (incapacity or exposure).”, Commons, Legal Foundation of Capitalism, 1924: 6. On that basis, could it be possible, in your opinion, to devise policies bringing together the objectives of dynamism and solidarity?
Dear Arturo Hermann:
Optimism is important in action.
The question is: what can experts do for the future: create alternative solutions and present them?
Efforts should be made to promote dynamism as well as solidarity. Solidarity: it also expresses togetherness, it means mutual help without withdrawal.
The problem is that the economic gap is opening up between the winners of the economic competition and those lagging behind, which can pile up economic problems.
Solutions: implementing social, health, housing programs and promoting social mobility, which has a positive effect on public revenues in the long run: it increases GDP and other economic indicators (since it keeps society’s human capital at a higher level).
Solidarity is a longer-term investment. The return on investment must be monitored.
László Kulin
social expert
Hungary
Dear Author, thansk for your contributions.
I would like to elaborate more
1. on the driving forces of growth in capitalism and socialism and
2. on the role of power in both economies.
Maria Alejandra
Dear Maria Alejandra:
Growth Drivers:
Capitalism:
A. detailed Economic Legal System, state regulators and checks
B. the accumulated knowledge of managers and directors of multinational companies
C. a strong capitalized banking system that can finance efficient economic innovation
Socialism:
A. charisma of leadership groups
B. since citizens’ incomes are lower (China may be an exception): there is a high incentive to acquire material goods through work.
C. efficient use of natural resources
The role of power is a sensitive area:
The question is: what can the average worker or expert do to increase social welfare? In my view, they contribute their knowledge and work to economic growth.
The problem is that leaders focus only on short-term economic and social goals.
László Kulin
social expert
Hungary
Dear Author, thanks for your contributions.
I would like to elaborate more
1. on the driving forces of growth in capitalism and socialism and
2. on the role of power in both economies.
Maria Alejandra