Those problems had not been indicated or sorted out on time by the Academy of Science of the USSR. The contemporary Russian Academy of Science and the Institute of Transitional Economy Issues (headed by Y.T. Gaidar) are unable see these problems. Foreign researchers and politicians keep silence on that issue as well, whereas World Economic Forum in Davos and UNO are rather appropriate places to call a spade a spade; but there is nobody to do so, because ill-will has prevailed.
If we consider the economic life of a society in terms of the Quite General Management Theory, the demographically dependent demand spectrum represents a management target vector, and the degradation-parasite spectrum includes his own ‘noises’ of the production-and-consumption system, as well as external noise that prevents the management (or self-management) targets from being reached; as a result, the vector becomes a component of the vector of management error.
The vector of management error is a hierarchized list of targets to be reached by management. The targets are listed there in reverse order, in comparison with a traditional successive rejection of targets in case the complete target list cannot be put into practice. In other words, the most significant target is listed first, and the least significant one is listed last.
The vector of management error represents the ‘difference’ between the target vector and the vector of state, which gives a description of the factual circumstances. The vector of management error is an unbiased indicator. It is unresponsive to the attempts of the managers to make everything look better than it really is. The only way of getting rid of it is by enhancing the management quality, when the errors would be reduced to the tolerated values.
In financial terms, the vector of self-management error for a society looks like a price list for products and services consumed by people beyond their production activities and public administration sphere.
Therefore, in a society that, firstly, does not have any degradation-parasite needs owing to the dominance of good-will and, secondly, where the system of production and consumption self-management is performed in a practically flawless mode, the output supply spectrum is at such a level that the market prices diminish up to zero, so consumption becomes free (and keeping non-zero prices can cost the society more than giving the output away for free to those who need it, because it will imply some accounting costs).
The relationship between the supply level and the price, revealed by the common economic science ‘for clerks’ possesses the same features: prices fall as the supply grows, for the price level is the means of elimination of would-be consumers whose paying capacity is limited in case the demands exceed the possibilities of their satisfaction.
However, having disclosed that relationship, the science ‘for clerks’ seeks the ways of artificial stimulation of effectual demand in situations where there is a drop in prices, expecting demand to support the prices and the break-even performance, bolster manufacturing etc, along the cause-effect chains. That leads to product destruction when a crisis of ‘overproduction’ arises, to fashion cult, advertising campaigns and so on.
This kind of approach to the production and distribution matters is a consequence of the fact that the common economic science does not make a distinction between degradation-parasite and demographically defined needs spectrum; as a result, “flies’ are mixed with the ‘ointment’.
In a crowd-‘elite’ society, the ruling elite’s degradation-parasite needs spectrum has a top priority in the target vector, and the economic self-management system tunes to it (the economic self-management system is always tuned to a target vector, even if the targets have not been recognized or understood by the society). As a result, global natural resources are mindlessly destroyed in a race of RAPTIOUS consumption, whereas demographically defined needs of the majority have remained unsatisfied in numerous generations (we should remember that the consumer’s ‘paradise’ of the USA and ‘developed’ European countries is based on the system usury and price-based robbery of ‘underdeveloped’ countries, including the post-Stalinist USSR and Russia, and it was not created by the honest and good-will labour of the population of those countries).
Having agreed on the separation of the total set of needs into degradation-parasite and demography determined spectrum, and on the fact that the price list is identical to the self-management error vector of a production and consumption system, we can say that the task of the government concerning macroeconomic and microeconomic management is following:
the state has to manage the cost-effectiveness threshold level for all kinds of commercial activities, supporting in such a way the break-even performance of particular producers, as the latter better satisfy the needs of the demographically defined spectrum, which will lead to the drop in prices for its composition.
the state must prepare the labour force of the society to the guaranteed satisfaction of all the future demographically defined needs in advance; in could be done by direct state investments into education and bringing-up, into state-run industry and mixed ownership companies, or/and by creation of investment friendly environment for private investors in the corresponding branches and regions using tax and subvention policy means.
the state must oppress and root out the degradation-parasite needs spectrum and the activities, both profit-bringing and non-profit, caused by it, using both economic and non-economic means of management of 1st – 6th priorities.
In the course of such way of understanding of socio-economic reality, the price list for goods and final consumption services will undoubtedly turn into the value of management error vector, which solves the conflict of self-management quality estimation in a production-consumption system, between a manufacturer and a consumer of this product, which we have mentioned in ‘Introduction to the Topic’.
2.2 The purpose of finance-and-credit system and distortion of its functions
On parity with the production differentiation that defines which branch a business belongs to, the microlevel of the production-and consumption system of a society is featured by the fact that the company’s management of internal exchange of goods in the course of technological process is nothing but the address orders and the address reports saying how the orders were executed.
That kind of management has some immanent limits of structure growth, beyond which it stops being efficient, and the structures generated by it come to self-destruction due to unavoidable errors made by the administrators.
Human wants, both individual and social (the whole society) cannot be satisfied (as the historic record shows) on the basis of the directive and address management of product exchange in households or community household, which generates an economic macrolevel that includes e plethora of specialized industries (branches). The macrolevel brings to life commerce, that is an uncontrollable directive and address exchange of products.
The early commerce was barter trade: they directly exchanged the goods produced by them for the goods produced by other people using a single-stage scheme «G1ЮG2» for satisfaction of their own needs of for using them in further production process.
Some of the variety of goods were easy to exchange, the others were difficult to exchange in case of direct barter trade, which slackened the exchange of goods at the macrolevel and suppressed the public production growth. As a result, easy-to exchange goods came to the front and turned into the indirect barter commodity in the double-stage scheme «G1ЮMЮG2» when the direct barter «G1ЮG2» was either hampered or impossible. The goods that proved to be easiest to exchange constituted the ‘money group’ of commodities to be used for barter trade purposes.