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If Georgia is to get on its feet, the first thing to do is to develop an economic policy taking into account the country’s peculiarities. But most important of all, this requires political will both within and outside the country.
C o n c l u s i o n
After the restoration of state independence, Georgia embarked on an extremely complicated transition to market relations. Today, 18 years later, the political and socioeconomic situation in Georgia remains difficult. This is due not only to adverse initial conditions, but also to internal conflicts, wars to preserve the country’s territorial integrity and, most importantly, to inappropriate economic policy. The main purpose of shock therapy was to liberalize the economy instead of developing the country’s production potential, while the orthodox macroeconomic stabilization model was expressed in so-called dear money policy, whose main purpose was to curb inflation by cutting the money supply and to stabilize the lari exchange rate.
Since 2004, despite positive changes mainly expressed in measures to simplify tax administration, Georgia continues to face challenging socioeconomic and political problems. Quasidemocracy impedes economic development in conditions of extremely low demand and social stratification. All of this, in my opinion, clearly shows that the transition period in Georgia is not yet over.
Hadjiaga RUSTAMBEKOV
Ph.D. (Econ.), associate professor, Department of International Economic Relations,
Baku State University (Baku, Azerbaijan).
STATE POLICY IN THE COORDINATES OF POST-SOVIET MARKET TRANSFORMATION
Abstract
Post-Soviet market transformation has focused attention on the applied aspects of concepts dealing with the role of the state in the economy. In many cases, the main theme of discussion is still the primacy of economics or politics. But it is the interests of the individual that
are the primary factor of social development, while economics and politics play an instrumental role in their realization. The author analyzes these problems with due regard for the impact of globalization processes on the economy and state policy.
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I n t r o d u c t i o n
Since ancient times, the state has been the central institution of the social order, that is why it has occupied the minds of practically all great thinkers in history. Despite the significance of various attributes identified by many analysts, priority is given to such a qualitative characteristic of the state as its integrity. This is because a deterministic interaction between all spheres of life is immanent in statehood as such, in different eras and in any form: essentially, it is a blend of politics, economics, culture, religion, traditions and customs. The primary element of this unity is represented in the individual, whose social relationships are always formed in a concrete natural and social environment, for which the state provides a frame of reference at a certain stage of evolution. The definition of the state as an exponent of common interests goes back to Aristotle, who wrote: . .As a sailor is one of those
who make up a community, so is a citizen, although the province of one sailor may be different from another’s (for one is a rower, another a steersman, a third a boatswain, and so on, each having their several appointments), ... yet there are some things in which the same description may be applied to the whole crew, as the safety of the ship is the common business of all of them, for this is the general centre of all their cares: so also with respect to citizens, although they may in a few particulars be very different, yet there is one care common to them all, the safety of the community, for the community of the citizens composes the state.”1 This simile contains a very important truth, because the mechanism of the state, like that of a ship, rests on the organization of motivated human actions. The state sets guidelines (coordinates) for these actions comparable to the course of a ship followed by the political forces at the helm of the state.
The state is a vehicle of power, and those who exercise this power usually appeal to the people, the individual, and the citizen. But they themselves do not always live up to their own slogans, which often turn into demagogic ones. This is largely associated with the degree of individual utility that man represents in different eras as an accidental part of certain social entities, be it clans, tribes, communes, castes, estates or classes. Their interests (and not those of the individual) provide the basis for social progress and wealth in conditions where the key factors of production are land and capital but not yet labor. It took many centuries of socioeconomic “selection” before civilization could implement in practice, on the tide of scientific, technological and information advances, the thesis that society, the nation and the state gain maximum vitality by promoting the creative labor efforts of the human individual (a thesis perceived as declarative for many centuries). In contrast to land or capital, the labor factor cannot be alienated from the human personality and, consequently, contemporary society can ensure progress only by promoting the economic, political and spiritual interests of the individual. This applies not to the individual in general but to the concrete individual, complete with environment, inherited culture, moral attitudes, behavior patterns and specific perception of the world. This development paradigm is essentially universal, but it has come into sharper focus in the process of post-Soviet transformational changes.
Determination of Policy and the Economy in the Transformation Period
Having gained independence relatively late, after the disintegration of all other colonial empires, the post-Soviet nations were faced with the need to address two important interrelated tasks:
1 Aristotle, Politika (Politics), Moscow, 1911, p. 317.
to restore state sovereignty and engage in systemic economic transformation. After all, the economies of the newly independent states were mere economic fragments of the former Union state (moreover, a state that had used centralized directive management methods). Considering that with such a legacy they also had to enter into existing—and sufficiently contradictory—international global relationships, it is easy to understand the initial economic and political tangle of problems that the newly recreated states had to unravel. This tangle could not be cut like the Gordian knot, while a theory of a post-Soviet return to the market society was simply nonexistent, since there was no historical precedent and such a return was not even expected. Some Western analysts spoke of possible convergence between the two world systems, but hardly anyone ventured to go beyond this and make conjectures about a rapid disintegration of the “socialist camp.” All of this led to a situation where the first practical steps in the economic sphere had to be taken by the post-Soviet states spontaneously, without prior preparation or scientific validation. The extremity of the rapidly developing processes left no room for debate over the primacy of economics or politics and, above all, for their determination, which was important for a systems approach to the inevitable socioeconomic transformations. But practice showed—post factum, often having passed through the sieve of romantic delusions—that market transformation could not take a socially effective form without a targeted state policy. It became increasingly clear that the ongoing transition was not to a laissez faire market like the one that existed in the days of Adam Smith, but to a modern market, which is an organized process and, as the only possible economic development option for the post-Soviet states, requires consistent reforms and the creation of a proper institutional framework, with maximum intensification of the state’s macro regulatory measures along with private initiative. Government policy should be coordinated, proactive and responsive to the economic changes taking place in society, to their nature and in part to the past. In other words, it should be taken into account that society cannot skip over natural development phases but can accelerate the transition and make it less painful socially. In this respect, one should emphasize the state’s efforts to generate new, market-based economic entities while establishing rules and regulations for their interaction so as to ensure optimal conditions for the simultaneous realization of local (individual, collective, sectoral, regional) and national interests. For this purpose, the emerging system should consist of compatible, interrelated and oriented elements with a common regulatory mechanism. The very concept of system implies the transfer of the goals of maintaining a general equilibrium in the functioning of the national economy to all other reproduction levels. During post-Soviet economic transformation, this mechanism is activated by the state, whose task, among others, is to set clearly formulated and realistic development goals and to determine the ways and means of their effective achievement. Finally, the state has the key function of establishing institutions to ensure the general and specific rules of interaction between entities. Reforms first and foremost ensure the performance of tasks associated with changes in property relations, because herein lies the reference point for fundamental changes in:
(1) specification of property and property rights;
(2) establishment of clear procedures for changes in these rights;
(3) establishment of rules for starting and closing a business by economic agents.
But all these measures are insufficient without constant coordination of the emergence and development of the market structure as an integrated national reproduction system. This means that the system is established in macroeconomic terms and is given impetus by means of regulatory measures and unregulated forms of interaction between economic agents that are breaking loose from total state control. What distinguishes the market system is that knowing virtually nothing about other people we help them (and they help us) to live in a common economic space. Friedrich Hayek believes that by obeying certain rules of conduct we fit ourselves into a great framework of
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institutions and traditions: economic, legal, moral.2 Hence the conclusion that integration of economic agents of different forms of ownership into the common institutional environment is an essential prerequisite for their successful self-realization. On the other hand, an institutional system has two essential attributes: organic interaction of its parts and a single evolutionary trend of their development. They embrace every individual, every micro or macro-level reproduction and management unit. In the Hegelian dialectic, this is formulated as “the actuality and action of each individual to keep and to take care of his own being, while it is on one hand conditioned by the presupposed total in whose complex alone he exists, is on the other a transition into a universal prod-uct.”3 Developing this idea, Hegel comes close to characterizing the “pre-supposed total” through the concepts of time, nation (“a mere nation”), culture and the state.4 This dialectic has a direct bearing on post-Soviet transformation processes, because they address the task of creating a political and economic plural whole (total) starting from a monocentric structure. But social monocen-trism is always indifferent to the individual, because its movement is always determined by the masses under the direction of the state as represented by parties and leaders. As for socioeconomic pluralism, it cannot exist without personalized decisions and contacts, whose effect is not only of individual but also of social importance, which is why it is highly important for them to acquire the properties of a protected and generally recognized institution. We can identify the following original coordinates of socioeconomic institutionalization to be followed by state policy during transformation:
1. ensuring coordinated reproduction interaction between all economic units in the country, including the public sector;
2. establishing regular and long-term economic practices that would combine the rules of market transactions with social and cultural rules of interpersonal relations;
3. fostering national economic thinking at all levels of political and economic activity.
The process of endowing the economy with these qualities is a long and difficult one, being exposed to conflicting internal and external influences. Contradictions are inherent in the very economic structure of the market, which represents the interests not of one or several but of all economic units and entities. Not all of these are identical to national economic interests but may be diametrically opposed to them. In view of this circumstance, especially in the transition period, it is important to take targeted measures to translate the interests of individual production entities into constructive efforts accompanied by growth of GDP in absolute terms and its equivalent distribution (per capita and among economic actors). But this is one of the tasks of national economic construction whose proper solution requires closer attention to the characteristics of national economic evolution and its current stage in line with the achievements of civilization. This is necessary to ensure the structural and functional unity of the new (in terms of the quality of its macroeconomic space) state, to achieve the effect of system properties of the economy from the perspective of developing a stable and characteristic response to changing internal and external development factors. This applies to the response of a state operating in the context of national economic interests and only because of this:
(a) representing concrete, national economic reality in the process of its movement from the past to the future, its emergence and development according to its own algorithm;
2 See: F. Hayek, Pagubnaya samonadeyannost. Oshibki sotsializma (The Fatal Conceit: The Errors of Socialism), Moscow, Novosti Publishers, 1992, p. 28.
3 G. Hegel, Entsiklopedia filosofskikh nauk (Encyclopedia of the Philosophical Sciences), Vol. 3, Mysl Publishers, Moscow, 1977, p. 340.
4 Ibid., p. 368.
(b) turning the national community and each of its members into an economic actor (agent) with production socialization parameters creating a cumulative effect of multi-agency but unidirectional economic actions.
In this process, the state does not monopolize but consolidates the resource, technical and spiritual prerequisites for development, creating equal opportunities for all in achieving economic growth and ensuring public welfare. By performing reform and optimization functions, state policy endows the transforming economy with model properties of genetic evolutionary identification, liberal market mobility, and social orientation encompassing various constituent entities and structural layers of the economic whole. Hence the conclusion that the state is a deterministic economic and political force whose reform potential should be realized in the context of national economic interests so as to create, in Walter Eucken’s words, an efficient and humane economic order that could exist for a sufficiently long time. Such an order, in the author’s opinion, is designed to overcome the scarcity of goods to the maximum extent and enable people to lead an independent responsible life.5 The results of the state’s activities are usually assessed from a socioeconomic standpoint. And this is natural because, for example, if we are dealing with state reforms in economic life, it is necessary to assess the degree of involvement of the bulk of the population in the reform process and the benefits they gain from it. All other lines of reasoning recede into the background, because they do not include the main subject coordinate of state activities: the individual and individual interests associated with national interests. But emphasis here should also be placed on human rights, i.e., the individual’s opportunities to direct state policy toward serving his own interests and to control this process. From this perspective, a significant view is that “the concept of state interests practically coincides with the concept of national interests. Nevertheless, this equality is only possible in a civil society, where human rights are respected.”6 This is a very important point, because only citizens endowed with real economic and political rights can provide engaged support to the state, which it so badly needs in the critical transformation period.
Market Transformation Coordinates in State Policy
In the economy of countries developing on market principles and countries moving toward the implementation of these principles, the functions of the state are far from identical. Under mature market relations, the state performs functions similar to those performed by a football referee, who does not take part in the game but is responsible for ensuring compliance with the rules. But an account has to be taken of the initial conditions for transformation in the post-Soviet countries, where, in football terms, there is still no playing field and no players, i.e., it is impossible to apply the rules of market relations that have long become standard practice in developed parts of the world economy. In these conditions, the state is the most active “player” in the economy or even a playing coach. Depending on the research context, the state is also compared to a “night watchman” or an “emergency firefighter,” but a more suitable comparison for the state in the conditions of post-Soviet transformation is with an engineer renovating his house after a long period of alien use. He has to rebuild (reform) everything, starting from the basement to interior design, so that the “house” acquires a new functional structure and a national face, where everything is arranged for the convenience of the
5 See: W. Eucken, Osnovy natsionalnoi ekonomiki (The Foundations of Economics), Ekonomika Publishers, Moscow, 1996, p. 302.
6 I. Aliev, Kaspiiskaia neft’ Azerbaidzhana, Izvestia Publishers, Moscow, 2003, p. 370.
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“owner.” One can fully agree with the view that “either you live in your own national home or your home turns into a public thoroughfare. Evidently, people can live in dormitory-type human communities only under compulsion.”7
But a national “home” can be created for economically and politically free citizens with their own interests, whose realization requires common communications, security and rules of behavior. These are provided by the state, which is why it is no wonder that some researchers believe that in the modern world the nation state is a much more fundamental factor than the economy. It is the state that lays down guidelines for economic development, even though it has to take economic factors into account.8 In transforming societies, the main tools used to provide such guidance are institutional and structural reforms, whose purpose is to generate, recreate and develop the major components of a market economy. In this respect, state patronage of emerging national market actors is a key aspect of post-Soviet economic transformation.
Another significant question facing state policy is connected with the need to resolve the economic contradictions that were inherited from the past and that can be briefly summarized as follows: spatial distortions in production specialization, a sectoral imbalance and, as a result, incomplete macro reproduction relations. But at the start of market transformation, reform scenarios usually left these key questions in the background, and this led to new contradictions associated, in all probability, with inadequate awareness of the specifics of the ongoing transformation. This includes such major contradictions as the preservation of sectoral monopoly structures coupled with rapid price liberalization; privatization through administrative channels and using anonymous vouchers beyond social control; and an increase in exports of raw or intermediate materials with disregard for matters of economic diversification. At the same time, judgments about how to develop the economy at the transformation stage do not fit into ready-made patterns, although it is possible to identify certain common trends. One of these (unquestionably objective) is the most active role of the state, which is explained by insufficiently developed sociopolitical and not only economic institutions.
But the problem is also that transition-period state institutions themselves bear the marks of the old system. This is reflected in a bureaucratization of the state apparatus, which significantly increases the already growing transaction costs. The bureaucrat has more incentives to produce that which he thinks society needs and fewer incentives to produce that which society actually demands. The bureaucrat’s opinion on what society should have is usually called public interests.9 But public interests are usually tailored to private interests, and this is a very common situation, especially in countries with a transforming economy. The benefits of such essentially opportunistic behavior are reaped by the bureaucrat, while its costs are distributed among all members of society. From this perspective, a burning problem is the minimization of access to administrative structures at local and sectoral levels as a condition for economic appropriation.
In the transformation period, a great deal depends on subjective circumstances, particularly on the forces or, more precisely, the people at the helm of state. This aspect of the transition period is analyzed quite scantily, although it is sometimes of key importance. The views of the well-known Peruvian economist Hernando de Soto are of interest in this respect. He says in one of his interviews that the starting point of the transformation and the personality of the leader who initiates it are a key factor in the reform process. These two circumstances, in his opinion, are beyond our control and are largely accidental: sometimes people faced with the need to make a historic choice rise to this challenge and lead their countries in the right direction. But sometimes these opportunities are not taken, and then one has to wait for another happy coincidence.10 But what
7 Natsionalnaya ekonomika, ed. by Prof. P.V. Savchenko, Ekonomist Publishers, Moscow, 2005, p. 112.
8 See: J. Ellul, Politicheskaia illiuzia (The Political Illusion), Moscow, 2003, p. 39.
9 See: S. Pejovich, Fundamentals of Economics: A Property Rights Approach, Dallas, 1981, p. 144.
10 [http://www.polit.ru/research/2005/10/20/soto.html].
means the right direction of development during transformation? What are its coordinates? In answering this question, we should once again return to the interests of the individual and the creation of favorable conditions for their achievement. In this sense, the socially oriented market type of economic organization is particularly effective. Incorporating such advantages as dynamism, scope for constant change, receptivity to innovation and flexible adaptation to customer needs, a market with embedded social goals ensures not only the fastest growth in human history, but also the highest degree of public welfare. But the main thing, however, is that in this process it proceeds from the human factor, human energy, inquisitiveness, ambition and risk. At the same time, use of this factor is only possible when the individual is economically and politically independent and, consequently, seeks to escape from ideological and bureaucratic pressure. In such a system of development coordinates, the state gradually evolves from the status of manager through that of a tutor to that of a partner in the national market mechanism. As a result, the state’s direct involvement in economic processes becomes relatively smaller while its general role in the economy increases. This regularity of the market economy is now in evidence throughout the world, both in transforming countries and at the level of the whole market world, which is going through one of its worst crises since the 1929-1933 Great Depression. At that time, a response to the crisis was the emergence of new trends of economic thought and their implementation in practice, which applies, in the first place, to J.M. Keynes’s theory with its various modifications already after World War II. A theory proclaiming the state and its dirigiste socioeconomic policy to be the driving force of the economy originated precisely in the postwar period. The theorists of dirigisme (the prominent French economist Francois Perroux is regarded as the founder of this school) saw the main line of government policy in its impact on investments, whose major instruments are the state budget, tax policy, interest rate adjustment and, of course, the solution of social problems. It appears that many propositions of this theory are once again of relevance today, when we are evidently entering an era of new dirigisme (neo-dirigisme) as expressed in monetary policy that has opened the floodgates for a massive outflow of public funds from official reserves (for example, private banks in the United States facing liquidity problems which they themselves cannot resolve have received about $1 trillion, while total EU spending on measures to boost the economy has reached 400 billion euros). Such amounts and forms of government intervention in the market economy are without precedent. Virtually all countries have seen a sharp reduction in discount rates and taxes in order to enhance business activity, but it is symptomatic that measures to revive the economy are not accompanied by a significant increase in the share of state (public) ownership. This suggests that the authorities in developed countries use eclectic methods to fight the crisis, with a paradoxical combination of different methods that can be united in the concept of neo-dirigisme. It may mean the start of a new era in the development of the market system, which is acquiring new state leaders. Whereas Keynesianism replaced not only the theory, but also the practice of liberalism in the market economy of the early 20th century by means of President Roosevelt’s New Deal, neo-dirigisme (true, it has yet to be provided with a proper theoretical justification) is coming to replace the neoliberalism of the 1980s and 1990s, being manifested in the policy of U.S. President Barack Obama. At the same time, in America and especially in Europe it is considered important to determine the right priorities for further socioeconomic development so as to ensure that government anti-crisis funding has a favorable effect on GDP dynamics while helping to increase employment and boost consumption. In other words, “social medicine” methods are applied to “old” markets suffering from chronic excessive liberalism.
But in new market economies these methods should be applied for prophylactic purposes. At the same time, we have to deal here with market economic organisms of different ages. Besides, it is not only a question of the “market” nature of current economic models, but also of their national specifics. That is why we can speak of coordinates for the movement of transforming countries to a nationally specific market economy with elements of state neo-dirigisme. Such an economic development model is observed in Azerbaijan, where the share of the public sector in the country’s economy is steadily
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declining: from 51.6% of total industrial output in 2000 to 48.8% in 2001, 45.2% in 2002, 43.2% in 2003, 41.8% in 2004, 29.3% in 2005, 26.0% in 2006, and 23.2% in 2007. But this trend does not weaken the state presence in the key industrial sectors: 99.8% in oil production and refining, 80.9% in the chemical industry, 90.7% in power generation, 62.9% in metallurgy, 57.4% in the manufacture of machinery and equipment, 51.6% in metalworking, and 49.7% in the textile industry.11 This state of affairs ensures sustainable development of the national economy at the present stage despite the results of the war imposed on Azerbaijan and the global financial crisis. Simultaneously, about 60% of all investments in the Azerbaijan economy are made with public funds, which are mostly used to resolve social problems and for infrastructure purposes. This means, in effect, the state’s function of dirigisme in the economy, mainly performed through the redistribution of revenues from fuel and energy exports.
As a result, the Azerbaijan economy shows signs of a progressive transition to faster development of the non-oil sector compared to the oil sector, and one can say that the country has on the whole overcome the barrier of natural resource dependence in its economic development. Without exaggeration, this is the result of state policy among whose coordinates the goals of diversifying and socializing the economy have a dominant position. This is also evident from statistical data on a sharp reduction in unemployment and poverty in recent years. Such large-scale economic and social shifts are only possible due to the strategy of turning the natural resource factor (the country’s oil resources) into the basis for developing the human factor. Azerbaijan President Ilham Aliev provides weighty arguments in criticizing “the forces that have a poor knowledge of the situation or try to cast doubt on our successes” and “mainly associate our economic development with the oil factor.” This factor, in his opinion, is a “support point” for the national economy today, but highly skilled, professional personnel who love their native country and are attached to it constitute the resource that leads into the future.12 Love of one’s country in the context of economic problems is an interesting aspect of national thinking. The economy, construed not only as a product of the material world of production relations, but also as a phenomenon of national history, culture, mentality and behavior, represents the most sophisticated concept of synergistic research. World experience, too, shows that countries that have achieved the greatest successes in national economic development have always relied on their own traditions. Together with technological achievements and traditions, economic life should organically include, as Werner Sombart noted at the beginning of the 20th century, “patriotism” as recognition of the national community of the state. Identification of oneself with the state as a condition of success,13 one of whose components is the right to influence the policy of this state, is a powerful incentive to optimistic expectations, assessed as a spiritual productive force. The coordinates of political action should be set in accordance with these expectations, and for this purpose it is necessary to act in keeping with the idea that “the state in its spiritual essence is nothing other than the Motherland ... or, in other words, a group of people bound together by their common spiritual destiny and integrated into a single whole based on spiritual culture and legal conscience.”14
The conclusion to be drawn from the above is that state policy in the transformation period should be implemented in a three-dimensional coordinate system: the establishment of market principles in the economy, democratic rules in politics and spiritual values in social life. These three axes ultimately converge in the human personality, providing an inexhaustible source not only of economic growth, but also of development free from any, including market fundamentalism, since without rights and national values the latter is nothing but profit seeking. But the constructive market mechanism is not confined to profit, although profit is important as well. In this mechanism, a growing role
11 Data from “Azerbaycan statistik gostericileri” for 2000-2008, available at [www. azstat. org].
12 See: Bakinski rabochi, 25 October, 2008.
13 See: W. Sombart, Pochemu v Soiedinionnykh Shtatakh net sotsializma? (Why Is There No Socialism in the United States?), St. Petersburg, 1907, p. 21.
14 I.A. Ilyin, Put’ dukhovnogo obnovlenia, Vol. 1, Moscow, 1993, p. 241.
is played by people who drive the economy.15 From this perspective, by developing the individual and creating favorable conditions for human life and activity, state policy acquires a kind of perpetual motion machine and immeasurably enhances society’s opportunities to ensure progress.
Macro and Mega Economic Coordinates of State Policy
Today’s marcoeconomy is an open and evolving system involved in intensive interaction with scientific, technological, financial, investment, information and political development factors in both the national and international format. The degree of openness of national economic systems has increased significantly under globalization, which has spanned across the entire world economy and has drawn all countries into its orbit, albeit with different consequences. This is because globalization creates a new, worldwide space for competition not so much between various groups of people or production entities as between entire national economies for the appropriation of the largest possible share of world GDP. The greater a country’s successes in this respect, the more advanced, productive and rational is its economic development model. In one and the same region with generally equal development conditions one can find both rapid economic progress and economic stagnation or even regress. The need to establish the causes of such differences in the results of development comes into focus in the post-Soviet transforming countries, generating a surge of scientific and practical interest in national economic models found in the world economy. Indicatively, the greatest achievements are recorded in countries with a large share of investment in human capital. Market economy models giving priority to human development can also be regarded as the main coordinate of state policy pursuing long-term rather than short-term national revival goals at the transformation stage. But it is clear that a macroeconomic model is not the product of a one-off act. It is formed by targeted efforts with prior resolution of such issues as “what is the general vector of state policy” and “what is the general philosophical and pragmatic basis of state activity.”16 On this basis, conditions are consistently created for the development and reproduction of a specific model of the economy as an integral part of the ethnic and global civilization process. A distinctive feature of such a model is that within it national economic interests can acquire an adapted object and identified subjects (agents) of their implementation. The entry of a national economy into global economic relations precisely with these characteristics is probably the key condition for successful participation in global processes. In view of this, the development of possible lines of economic reform in transition countries should be based on considering the economy as an aggregate of formal (in large part globally unified) and informal (nationally specific) institutions. An important thing to take into account is that it is only in conjunction with ethnocultural institutions that market reforms can provide the national economy with a strategy for ensuring the socioeconomic and creative intellectual self-expression of society. Although the differences between specific national and international/global aspects of development in the modern world tend to blur, these phenomena should not be confused. We are dealing here with two parallel coordinate axes which do not merge together. For example, the policy coordinates of industrial states are underpinned by anthropogenic factors and the advantages of their multinationals in global competition, whereas those of transforming states are mostly based on factors driving the self-organization of resource, production and cultural development components. Efforts to match these coordinates should start from the indisputable fact that “nations as communities of people bound together by lan-
15 See: L. Iacocca, Karyera menedzhera (An Autobiography), Moscow, 1990, p. 194.
16 V.P. Kolesov, “Gosudarstvennoie regulirovanie ekonomiki,” Ekonomist, No. 8, 1996, p. 35.
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guage, culture and mentality and using mutual economic ties, common territory and the nation state as means of survival and development continue to be actors in the international arena and will remain so for a long time to come.”17 Cohesion on national lines is precisely what leads to the emergence of national interests and values, goals and objectives geared toward self-assertion in today’s mega economic space. They should be primary in the policy of a state with a transforming economy, because otherwise this economy, with its inadequate capacity to adapt to the international competitive environment, is doomed to be a donor in the global mega economic space. But apart from cohesion, another condition for the maintenance and steady buildup of the country’s resource potential is the capacity for nationwide purposeful action.
When the national potential is used to integrate the country into the international economic environment, preference can be given either to the natural (natural resource) factor or to the human (intellectual) factor. The first choice significantly limits the opportunities for proper participation in the process of international competition, which primarily takes place in finished goods markets. Among other things, it narrows the field of application of the global anthropogenic factor in transition economies, because it is mostly applied in the mineral industry enclave. This poses not only economic threats. The American columnist and author Thomas L. Friedman believes, for example, that the level of democracy is inversely proportional to the level of oil prices. Such is the “first law of petropolitics,” and it is quite possible that this law determines the nature of the current era.18 But the connection of oil and other energy prices with economic and political freedoms can hardly be qualified as a “law.” More likely it is a trend observed in countries where politics comes under ideological (populist socialist, religious, chauvinistic) pressure. It is no accident that in support of his conclusion the author cites the examples of Venezuela, Iran and Russia. In countries where there is no hidden political agenda behind politics and economics (Mexico, Norway, Azerbaijan), the so-called “law of petropolitics” does not work: temporarily rising oil prices do not discriminate against civil society institutions, to say nothing of economic rights and freedoms. At the same time, in the inevitable interaction of transformational and global development coordinates preference should clearly be given not to primary commodities readily marketable throughout the world, but to the human factor and to fostering human abilities (including business skills) during market reform of the production structure. Initially, this may include the creation of separate technologically developed economic clusters with an assured multiplier effect. One should also realize that “natural resource” involvement in the global market, which is characteristic of many developing and transforming countries, means an extensive form of globalization of the national economy. In contrast to this, measures to enhance the human factor and the intellectual potential directly associated with it open fresh prospects for the rise of a transforming economy as a new but intensively developing unit of the world economy capable of enjoying the achievements of modern technology and management. An orientation toward creating conditions for intensive production growth in the process of market transformation and global relations is precisely what enables the national economy to gain absolute, relative and factor advantages and provides alternative opportunities to look for an advantageous niche in the international division of labor.
Priority given to the human potential brought into play by the market transformation coupled with access to advanced technology through involvement in global economic relations gives plenty of scope for building a modern but nationally specific economy, for materializing cultural values not in medieval but in industrially advanced production and social dynamics. The point is that human beings play the role of an economic development factor not as abstract individuals but as individuals embedded in the national economic environment and taking part in the global mechanism of international economic relations only through this residential status. Any developed national economy is based on a stable institutional matrix that gives certainty to human relationships achieved through existing rules and norms. According to Douglass C. North, institutions are rules of the game and norms of
? Yu. Olsevich, “O natsional’nom ekonomicheskom myshlenii,” Voprosy ekonomiki, No. 9, 1996.
17
18 T. Friedman, “The First Law of Petropolitics,” Foreign Policy, 4 May, 2006.
behavior “that structure repeated human interaction.”19 Formal political and legal institutions, including in the economy, are established by the state, while informal rules are elements of the evolutionary heritage and include moral and ethical norms, popular traditions and value systems governing human behavior. Institutions adapt, direct and stimulate human activity, channeling it into socially acceptable forms and making human behavior understandable and predictable. At the same time, a close connection between formal and informal institutions ensures economic development as national development and opens the way to the use of global scientific and technological achievements in national economic interests. These interests convert informal institutions into a continuation, development and modification of formal rules, thereby providing opportunities for practical utilization of national specifics. From this perspective, one can say that institutions act as an intermediate link, as the basic coordinates of state policy in national economic interests. A special role here is played by informal institutions, which cannot be effective if implanted into the economy from outside.
Today’s mega economy, albeit contradictory, is largely integrated and institutionalized. Consequently, entry into this economy in effective forms implies the need to take this circumstance into account, because these parameters embody the common attractors of international economic relations. At the same time, the country’s economic whole should develop and function in accordance with its own specific features and should operate in the international arena only as an agent of national economic interests. If one of the parties involved in global interaction has not yet integrated into a single institutionalized whole, this means that the agents representing this underintegrated economy will inevitably serve the interests of the other party. This can be called an effect of macroeconomic integrity, which enhances (or reduces) the country’s opportunities for a concentrated expression of its resource and intellectual potential.
In the course of international cooperation, a nation should gain impetus for development, because otherwise the mega economic trend makes no sense. But it is only an integrated economy (in reproduction and institutional terms) that can acquire a globally generated acceleration without losing its own development coordinates. In this context, let us note the following: when a country gains sovereignty, it is faced with the goals of ensuring economic growth and asserting its position in the international arena. The importance of agreeing these goals is particularly evident in the modern world with its increasing economization of politics and politicization of the economy.
C o n c l u s i o n
The modern market toward which the post-Soviet transforming economies are heading is on the whole a state-regulated system. It is only the forms and the degree of this regulation that may differ depending on the development level of the economy, its current and desired structure, the social situation in the country, its history and the people’s mentality. This is particularly noticeable in transforming societies, where the weakness of the institutional framework is usually compensated by the growing activity of the state. Questions about the goals pursued by the state in this process, about their validity and consistency with global reality, and about the direction in which they lead the nations sometimes become predominant. All of this adds urgency to the problems examined in this article, which is an attempt to specify the coordinates of state policy that serve the current and long-term interests of people living in the difficult period of post-Soviet transformation.
19 D. North, Instituty, institutsionnye izmenenia i funktsionirovanie ekonomiki (Institutions, Institutional Change and Economic Performance), Nachala Publishers, Moscow, 1997, p. 33.
