When the nominal GDP in Russia dropped by 35.6% between 1989 and 2005, the share of state budget in the GDP also decreased, from 47.3% in 1985 to 16.8% by 2013. This means that budget revenue got almost 5 times smaller. In other words, the income of the property owners in this period increased not through improved economics, but through legalized robbery of the state and society.
Table 1. Correlation between the actual GDP amount and the privatization rates in Russia [11].
Summing up, it may be admitted that in most cases privatization in Russia has no social benefits. So, the secret of market economy, if any, is not pinned to private property but to development of competition. To demonstrate this idea, let us use the statistics data on the dynamics of the actual GDP in Russia and of the number of enterprises privatized in the first five years after the privatization reform. This data is presented in Table 1. It should be pointed out that privatization was at the core of the 1990s reforms, and in that decade, most of the privatization transactions were passed.
Let us calculate the correlation coefficient between the two factors mentioned in the table to assess their influence upon each other. The resulting figure is negative, and it equals 0.992. This value is so close to 1, that it can be asserted that the more enterprises in the 1990s Russia went private, the worse the economics functioned. And this conclusion is not at all surprising, as “as long as there is any property, and while money is the standard of all other things, I cannot think that a nation can be governed either justly or happily’42 (Thomas More).
This signifies that the privatization model adopted by Russia was the major reason of the large-scale economic collapse of the country. By consequence, unless the interests of authorities and property owners coincide with those of the people and the state, such occurrences will be frequent. Unless private property is made productive, its further use is destructive. In the industrial development conditions, “Private property is less and less wholly private. Free enterprise has become progressively less free’ (P. Samuelson and W. Nordhaus [35]).
Such “state policy’ has driven Russian government into bankruptcy. It has lost the capacity to govern the country in the market conditions. That is why all state programmes are poorly financed, and the economics has got out of control. The salaries of civil servants, that is, the salaries assured through the budget, often drop below the living wage, and the population is exploited beyond imaginable. Its purchasing capacity has decreased, but on the other hand, the number of millionaires keeps growing. What is the sense of such politics, and why during the entire reform its course has not once been adjusted, like it was done in China, for instance? Does this mean that despite the lack of social benefit, some people find this situation satisfactory?
In summary, it is exploitation, that is, the parasitism of the few through appropriation of the values created by others, that constitutes the key reason of the accelerating economic degradation in Russia and across the world. Only the most naïve or cynical persons can see any progress in the insatiable egotism of certain people, deprived of any talent, morality, or knowledge, but craving for wealth at any expense. This phenomenon that is behind the majority of human troubles, all the wars, violence and crime, has become a scourge of the humanity.
In addition, it is reasonable to limit the middle class to those who are not exploited by others, but neither exploit anybody themselves. That is, these are the people who earn their living honestly and are not robbed by anybody. The middle class cannot be defined through the concept of the average income, for it is too vague. Thus, if 30% of the richest people and an equal share of the poorest people are excluded, the remaining 40% will constitute the middle class. But if 20% of each of the extremes is not included in the category, then the middle class embraces 60% of the entire population. However, a criterion varies with the statistics trickery is not appropriate for the assessment. Furthermore, the policy of middle class expansion should be given a completely different approach.
One more factor that leads to SLP suppression is usury. Without generating anything useful, it depresses the real economics, forces the producers to support the money owners, and sucks the resources out of production. The source of usury lies in the money deficit, which is inevitable in economics. In the past, when money was guaranteed by gold reserves, the valuable metals available were not sufficient for serving all the trade flows in the country. But even after this guarantee was withdrawn, the said deficit has been artificially maintained. The only reason for this is letting money generate more money, whatever the cost for production and society may be.
Besides, the foreign economic activity influences social performance, SLT and the population’s quality of life, too. If the foreign trade balance is positive, it means that the country exports convertible goods paid for in uncovered paper money. For certain years Russian import exceeded its export by almost three times. Thus, our country was selling its goods at foreign markets for one third of their nominal value. This made certain private individuals richer, but on the other hand, limited the usefulness of such trade. All other people suffer from it, the state is ruined, and social labour productivity decreases. In the end, the country becomes a donor for other states, whose balance of foreign trade with Russia is negative. However, the government makes of the positive trade balance a feather in its cap and does its best to increase it ever more.
1.3.4. Productive economic factors
Social labour productivity depends from many factors; however, it is most significantly influenced by human beings and their interest in the results of the labour. To be precise, it is human intelligence, education, qualifications, knowledge, physical strength and agility, and health that really impact labour productivity, as well as human energy, decisiveness, honesty, discretion, decency, common sense, tact, and communication skills. The desire to work, and the individual and social labour culture also play an important role in the SLP.
That is why everything that helps people develop the above-mentioned qualities, contributes to the SLP increase. Among these: fair wage distribution, efficient education and upbringing methods, the health both of the parents and the child, psychological and moral family, workplace and social environment, physical education and sports, ecology, and the entire infrastructure for life and leisure.
The works of W. Petty, A. Smith, A. Marshall, T. Schultz, G. Becker, and many others reflect the idea that the reproduction of high-quality work force is productive. Thanks to the contributions of these authors, the work of progressive managers to improve people has ceased to be seen as unproductive expenses, but has become the main source of flourishing for companies and the society, not less important than capital investments in the main funds. That is why, in the twentieth century, advanced economies accrued human capital faster than material capital. For instance, the US economic recovery is at least 15—30% due to the increased level of education among the work force.
Thus, in advanced economies human investment exceeds generously the investment in the main production means. Table 2 presents the correlation between the US investment in the so-called “social expenses’ and production investment, taken for 100% [36].
Table 2. Correlation between “social’ expenses and production investment in the US, %
The data provided above allows to see that the US allocates as much for healthcare and social security as for education. It is also evident that if these expenses did not pay back, they would not be so significant. The expenses for reproduction of work-force in the US in 1947—1989 alone increase 5.5 times, while those for reproduction of fixed capital – by 3.7 times only. As the UK Prime Minister Tony Blair said, “Knowledge-based economy has people as its