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4A UTILITY APPROACH TO ASSESSING THE COMPETITIVENESS OF SOCIO-ECONOMIC SYSTEMS
Valery F. Bainev
Belarusian State University, Belarus Е-mail: Baynev@bsu.by
Abstract. The paper considers the shortcomings of traditional approaches to the assessment of efficiency and competitiveness of socio-economic systems. It shows that the focus of these systems on cost-based, typically cost-effective performance indicators served as the main reason for the aggravation of global contradictions in the development of civilization, which threatens its further existence. The paper reveals the basic provisions of the utility (consumer-value) concept of economic theory, the use of which in assessing the effectiveness and competitiveness of socio-economic systems can bring humanity to a truly crisis-free, conflict-free development path.
Keywords: socio-economic system, competitiveness, efficiency, value, utility, consumer value, labor economy, labor theory of value, labor theory of consumer value, free time of society, fading competition.
For citation: Bainev, V. F. (2021). A utility approach to assessing the competitiveness of socio-economic systems. Journal of regional and international competitiveness, 4(3), 9-14. Retrieved from http://jraic.com/index.php/tor/article/view/54
DOI: 10.52957/27821927_2021_3_9
Introduction
In modern conditions of unprecedented aggravation of competition between socio-economic systems of different levels such as individual companies, economic activities, industries, regions, national economies, interstate associations, the problem of objective assessment of their performance and competitiveness requires special treatment. Unfortunately, the vast majority of both traditional and new approaches to this assessment are based on a number of, in general, typical conceptual, theoretical, and methodological provisions, not allowing, in our opinion, to fully solve the specified problem (Kara & Minina, 2016; Moseiko, Korobov & Tarasov, 2015).
First, in its most general way, competitiveness of the socio-economic system is viewed in terms of its participation in the struggle with other subjects of economic activity for the limited natural, labor, financial, etc. resources as the ability to take them away from competitors in the required quantity. Thus, the analyzed category appears as a non-immovable property of the system, which is qualitatively and quantitatively manifested only in comparison with other similar entities. At the same time, it is obvious that even if there suddenly appears a hypothetical situation where there is only one economic entity in the world economy, monopoly controlling all the planetary resources, even then it will require the ability to fight with the external environment (nature) for limited and moreover rapidly consumed by mankind resources. Competitiveness, as we understand it from this point of view, is an intrinsic ability of every socio-economic system to make and implement economic decisions which are more or less consistent with the principles of conflict-free (with the environment, nature) development. By the way, in the light of the worldwide trend of monopolization of the world economy by superlarge transnational corporations, fundamental transformation of competition and its «extinction» through the current aggravation (Gordeev, 2006; Gordeev, 2007; Gordeev, 2013) the above described hypothetical situation seems more and more realistic.
Secondly, competitiveness of a socio-economic system is usually evaluated by a certain integral (comprehensive) indicator built on a number of particular significant criteria and indicators. On the one hand,
JEL codes: B41
the presence or absence of any particular indicators is often conditioned by both objective and subjective prerequisites associated with individual researchers' perceptions of efficiency and competitiveness, specifics of their objectives, etc. As noted by the famous Russian researcher Shkiotov, S.V., who investigated in detail the relationship between indicators of national competitiveness and economic growth recorded by international institutions, «the use of composite indicators as a basis for comparison revealed the problem of practical incomparability of data for the countries under study and the selected time period, despite the diversity of institutions, and reports on cross-country comparativism. All the indicators used, as well as data from the WEF and World Bank reports, are subjected to reasonable criticism by the scientific community; it is not only a question of changing the methodology of calculation, the theoretical basis of such studies is questioned itself. That is why the results of studies using these sources should be approached in a very balanced way, taking into account the criticism and existing objective limitations in international statistics» (Shkiotov, 2013). On the other hand, some methodologies for assessing competitiveness contain an unreasonably large number of significant indicators and indicators, which not only overloads it, but also ultimately makes it difficult, and sometimes even impossible, to make managerial decisions to improve it.
Thirdly, within the neoclassical «mainstream» imposed to former USSR countries, including Russia and Belarus, efficiency and competitiveness of socio-economic systems ultimately boil down to their ability to generate and maximise profits more or less than competitors do. In other words, competitiveness is considered from the position of cost criteria of economic efficiency - profit and its derivatives. Unfortunately, the vectors of development of socio-economic systems, which are focused on the cost criteria of economic efficiency, often do not correspond to public interests, and sometimes even contradict them. Profit-maximizing industries, such as environmentally hazardous industries, do not meet such interests, although their high efficiency is based on the ruthless exploitation of natural forces. The same can be said of the drug and porn industry, loan sharks, human trafficking, selling human organs, weapons, etc.
Results and discussion
We have to admit that the focus of socio-economic systems on maximum profit is the main reason for the emergence and unprecedented aggravation of global contradictions in the development of Earth civilization - raw material, energy, environmental, food, demographic, and other problems. The target criteria for the functioning of modern business entities are the gross product, value added, profit and its derivatives. From the point of view of classical political economy and, in particular, the labor theory of value, all these are typically value indicators, the essence of which is the cost of living, past, necessary, surplus labor. Thus, the universal focus on maximizing value indicators indicates that the modern world is dominated by a cost-based model of the economy, the operation of which results in costs. Cost maximization as a goal and result of the functioning of socio-economic systems is the main obstacle to crisis-free, conflict-free development of civilization.
Humanity is entering a stage of its development when all of us should seriously concern ourselves with the search for new, fundamentally different criteria for assessing the economic efficiency and competitiveness of socio-economic systems at various levels, ensuring the harmonization of their interests with the aspirations and demands of the human community as a whole. We are convinced that this problem can be solved by taking the consumer-value (utility) concept of economic theory. Theoretical and methodological foundations of this concept were developed by the major Soviet and Russian political economist Elmeev V.Ya. (2007), and then developed by the students of the scientific school created by him in Russia and Belarus: Gubanov S.S. (2012), Daderkina E.A. (2008), Dolgov V.G. (2003), Tarando E.E. et al. (2003).
This concept is based on the fundamental provisions of the labor theory of consumer value, according to which the utility (use value) of economic goods is an objective and quantifiable value, the value of which is uniquely determined by savings of living labor (working time), provided by a particular good at its use. The labor theory of consumer value organically complements the labor theory of value by Karl Marx and makes classical political economy as a whole logically complete, because it makes it possible to measure and compare in unified labor units not only the value, but also the use value (utility) of economic goods.
The main provisions of the utility (consumer-value) approach to the assessment of socio-economic processes are reduced to the following basic assumptions.
1. Any product (economic good) has a dual nature, because, on the one hand, it has a well-defined value, and on the other hand, it acts as a carrier of utility, is a use value. As it is known, in political economy, the value of a product (good) in its most general form is usually understood as a quantitative proportion, based on which the owner (producer) of a product (good) voluntarily exchanges it for another product he needs. In this case, supporters of the labor theory of consumer value adhere to the labor approach to measuring the value of the product, evaluating it by the cost of labor (working time) required for the reproduction of the analyzed good. In other words, from the point of view of the consumer-value concept of economic theory, as well as from the point of view of the labor theory of K. Marx, value is a quite objective and quantifiable category.
2. As for the utility (use value) of a product, it is known to mean its ability to satisfy some human need. Unfortunately, the vast majority of economists consider utility (use value) as a purely subjective economic category that depends on individual preferences of the consumer, the conditions of use of the good, its rarity, etc. In doing so, quite convincing examples are usually cited as incontrovertible evidence of the subjective nature of utility. For example, cigarettes (alcohol, drugs, etc.) satisfy a very urgent need for one person, but they are completely useless (and even harmful) for another. Felt snow boots, which are extremely useful in freezing weather, become unnecessary in the summer heat, and sandals, on the contrary, are worn in summer and thrown in the closet in winter. From the point of view of the theory of marginal utility, which is the foundation of the current «economic mainstream,» the first loaf of bread brings a hungry person much more benefit than the second, third and even more so the hundredth. It turns out that the utility of this very loaf is a variable value, depending not only on the preferences of the consumer, but also on the rarity of this good. In other words, these and many other such examples lead most of us to believe that utility (use value) is a subjective, quantitatively unmeasurable category.
Despite this, the labor theory of consumer value argues that the utility (use value) of a good, as well as its value, is an objective and, therefore, quantifiable quantity. At the same time, supporters of this direction of economic theory, dividing goods into means (factors) of production and consumption items, have developed conceptual, theoretical-methodological, and even methodological foundations for quantitative measurement of utility so far only means (factors) of production. The problem of quantitative analysis and objective comparison of the utility of consumption items is still under scientific development and is conceptually solved only for some of them (for example, for food products, based on their caloric content, saturation of proteins, fats, carbohydrates, micronutrients, vitamins, etc.).
3. When assessing the utility of the means of production, the utility (consumer-value) concept of economic theory proceeds from the fundamental position that the political and economic mission of technical and technological progress in general and the purpose of its specific achievements are ultimately reduced to increasing productivity (economy) of labor (Bainev, 2020). Indeed, production equipment, vehicles, household appliances, etc. have the same general purpose - to facilitate working and living conditions, to save labor, muscular and mental energy and, ultimately, to save working time. Based on this, supporters of the labor theory of consumer value draw a fundamental conclusion that the utility (use value) of any factor of production is its ability to save human labor, saving his working time. It turns out that quantitatively the value of utility (use value) is determined by the amount of working time, which allows you to save a particular factor of production in its productive use.
For example, let us assume that the excavation of a foundation pit for a residential house using a shovel requires 10,000 man-hours (man-hours) of live (simple) labor. An excavator operator, on the other hand, does the job in just 10 man-hours with an excavator. This means that in this particular case, the usefulness of the excavator is determined by objective and quite measurable quantitative value - the amount of human labor in the amount to 9990 man-hours, which will replace (save) the excavator digging excavation. Saved working time (and the resulting cash savings) - this is the only reason to buy and use an expensive excavator instead of a cheap but inefficient shovel.
Obviously, the utility of an excavator (and any other machinery) is determined by the total amount of
live labor that this machine will save its owner over the entire period of its use. If one machine during the whole period of its operation is able to save its owner 1 million man-hours, and the second one - twice less, the usefulness of the second machine is half as much as the first one. It should be noted that, taking into account the well-defined cost of each man-hour of simple labor, the saved time translates into corresponding savings of financial resources for the entrepreneur using the technology.
4. When comparing the costs and savings of labor, supporters of the utility (consumer-value) concept of economic theory take into account its complexity and use the techniques of reducing complex labor to simple labor, and vice versa. Thus, when analyzing the above case of using an excavator instead of a shovel, consider that an excavator replaces 10,000 man-hours of simple digger labor but requires 10 man-hours of excavator operator's complex work because he is a more skilled worker than the digger. Therefore, to compare labor costs of an excavator operator and a digger, it is necessary to use the method of labor reduction - reduction of complex labor to simple labor. In the simplest case, the indicated reduction can be made by reducing the complex work of an excavator operator, say, of the sixth qualification category, to the simple work of a digger of the first qualification category using the corresponding tariff coefficient of the Unified Wage Scale, in this case equal to 1.9. Taking this into account, the usefulness of the excavator in the above case will be less than our calculated value and will be only (10,000-10x1.9) = 9,981 man-hours of simple labor. Today we have also developed more precise approaches to the reduction/multiplication of labor based on the ratio of human physical (muscular) energy expenditure and the amount of third-party natural energy involved in the production process by the power of his intellect. It is clear that when calculating the usefulness of the excavator over its entire service life, not only the savings of simple labor during this period must be taken into account, but also the associated labor costs of the excavator operator and other workers who operate the machine.
5. When calculating the beneficial (value-added) economic effect from the operation of an excavator, one should not ignore the fact that although this machine saves human labor, its creation and routine maintenance (e.g. repairs, fueling, etc.) requires much more labor inputs compared with the option associated with the use of a shovel. This means that when calculating the utility economic effect in the form of labor savings provided by the excavator from its utility (cf. above) must be subtracted from the cost of past labour incorporated in the excavator during its construction, i.e., the cost of the excavator. Likewise, we must account for the cost of past labor embodied in the fuel and other consumables used by the excavator.
The utility (consumer-value) economic effect from the exploitation of the technical factor of technology production is determined by the absolute saving of total (living and past) labour, which this technology provides to society for the whole period of its exploitation. Note that this effect simultaneously takes into account both useful characteristics of construction machinery (savings in live labor) and cost parameters (cost of past labor, embodied in machinery and consumed by it consumables). Consequently, the utility (consumer-value) analysis comprehensively takes into account all aspects of the technical factor of production, since the requirement of maximizing the utility (consumer-value) economic effect simultaneously aims at: (a) an increase in the utility (productivity) of the technique as a saving in live labor that will be provided by the technique to the consumer; b) saving consumables (e.g. fuel, spare parts, electricity, water, etc.) when the equipment is operated by the user; c) the reduction of its value, i.e. the cost of past labor embodied in the technology in the process of its manufacture.
It should be noted that at present the above theoretical and methodological provisions of the utility (consumer-value) approach to efficiency and competitiveness assessment have found their practical embodiment in a number of working methods. These techniques allow quantitative calculation of utility (use value), utility (use-value) effect, and utility (use-value) efficiency of energy and technical (industrial robots, agricultural, construction, other technology) factors of production. This is a very important achievement because, from the point of view of experts of the World Economic Forum and other international organizations, the level of development of technologies, as well as the energy-efficient equipment implementing these technologies is a key factor of competitiveness in the current conditions of formation of the technotronic type economy.
We are convinced that competitiveness of socio-economic systems is an intrinsic immanent property,
it acts as their objective, quantifiable characteristic. In our opinion, competitiveness is entirely determined by the ability of business entities to generate and maximize not at all profit, but a utility (consumer-value) effect, which implies a comprehensive saving of costs of live and past labour, energy, raw materials, and other material resources. In this case, perhaps, the most important political and economic result should be considered the saving of working time and, therefore, the maximization of free time of society, which it can and should use for further development, including the solution of global problems faced by mankind. For only when free from hard physical, routine, non-creative work in the name of simple survival, a person can establish himself as a scientist, artist, athlete, teacher, family person...
Conclusions
In conclusion, we should note that the foundations of utility (consumer-value) analysis outlined in this article are not merely speculative theoretical arguments relating to the remote prospects of utopian development of socio-economic systems. We are convinced that their «natural selection» in the process of competition was done in the past, is being carried out now and will be made in the future precisely on the basis of the criterion of maximizing the utility (consumer-value) economic effect.
To prove this, consider the example of global competition between capitalist and socialist systems in the last century. It is known that Soviet political economy with the labor theory of value in its theoretical basis, as well as the Western economic schools, perceived utility (consumer value) as a subjective and, therefore, quantitatively indefinable, immeasurable characteristic of economic goods. The fundamental inability of Soviet economic science to calculate the utility (use value) of produced economic goods objectively determined that the socialist economy was forced to focus on the planned maximization of available cost, typically capitalist, cost indicators - the notorious «gross» profit, profitability, etc. Although it is clear that it was necessary to increase not the total value of goods produced by the Soviet economy, but their total utility (consumer value). With the Gosplan-guaranteed sale of everything produced, socialist enterprises in pursuit of the planned increase of value indicators deliberately increased the price of their products, while their uncontrolled utility, alas, was more and more inferior to their Western analogues. Capitalist countries, on the other hand, had an empirical tool for determining utility in their arsenal - competitive markets, which reliably blocked the manufacturing of products with low utility characteristics, which provided a decisive competitive advantage for the global capitalism.
Thus, competitive markets in reality reward with dollar-euro-ruble mainly those who are able to make products that provide the greatest utility (consumer-value) effect to their consumers, and thus to society as a whole. We think that if Soviet political economists had been able to determine (measure, calculate) the utility of produced economic goods without the services of a competitive market and to target the functioning of economic systems to maximize it, then the outcome of the competitive confrontation between the world systems of capitalism and socialism could have been quite different. The desire of Soviet leaders to compensate for this fatal error in Soviet political economy forced them to turn first to the model of self-supporting socialism, and then forced them to begin «perestroika» as an attempt to «meld» competitive market capitalism with the advantages of socialism. As a result, the main target, profit, as a typically capitalist indicator of efficiency and competitiveness, led the Soviet economy to capitalism, conditioning the collapse of the entire world socialism system.
By the way, with the current monopolization of the world economy by super-big transnational corporations, as discussed above, competition is, alas, inexorably fading. Markets are getting worse and worse at fulfilling their main purpose - to reward mainly those who produce the most useful economic goods with dollar-euro-ruble. For this reason, the relevance of the utility (consumer-value) concept of economic theory will only increase day by day.
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© Valery F. Bainev, 2021
Received 20.07.2021
Accepted 10.09.2021
