The market and the state in Russia and other powers of our planet are two related phenomena, objects, concepts, carefully studied by science. How important is central authority for the market and the economy formed by its rules? Disputes on this topic were relevant decades ago, and they will also be discussed decades later. Consider some features of the issue.
Historical context
About the capital market and the state began to speak actively already in the period of industrial capitalism. At that era in the scientific community, in society, the ideas of liberalism dominated, it was believed that the state is an institution that does not have the right to participate in the economy. An invisible market hand is what will deal with any difficulties on its own. In the 19th century, another idea took on relevance, proposing to consider the state as a kind of night guard, obliged to guard the property so that no one could encroach on it. This approach reflects the idea of liberalism of the economy and power, a free market.
If we turn to that era, we can see that the understanding of the state as a night guard was always supplemented by the perception of this institution as an arbiter. The state controlled and continues to do so, so that all market participants adhere to the previously agreed rules enshrined in law. The first and main task of the state is to ensure that competitors honestly compete with each other. An equally important aspect is the implementation of bankruptcy proceedings. The state is obliged to coerce those who regularly violate debt circumstances to comply with them.
Money, market and country
In the XIX century, the rule of law and the market were regulated by various aspects of financial matters. In particular, the state was fully responsible for aspects of the issue of banknotes. At that moment, a distinctive feature of state policy was the desire to support a national producer of goods. At the same time, the power’s functionality was very limited, it was more of an auxiliary institution. In the XX century, the situation has changed a lot, which is noticeable both in practical measures of that era and in the theoretical works of famous authors. After 1917, in our country began to build socialism, the power became the owner of the production of basic resources. She organized the management, production. Gosplan came to the place of market regulation. For the period 1928-91. managed to fully implement only the plan adopted for 1966-70.
In the 20-30s of the last century, the market and the functions of the state in the economy changed slightly against the backdrop of the economic crisis. Until that moment, the powers of our planet simply did not know a problem of a similar scale. The element of the market, completely out of control, destroyed countless companies and factories. Millions of people went bankrupt. The elite of that era, observing the economy of the USSR, saw in this country a threat to the whole world, fearing that similar movements in other places would also cause a coup. All this led to a new format for assessing the state role in the national economy.
Development issue
In 1936, Keynes authored a work devoted to the state and the money market, the problems of interest and employment. The author compiled a theory that centered on the idea of capitalist conditions, thanks to which it is possible to combine social progress and economic efficiency, fairly distributing the available wealth among all members of the community. An analysis of the situation of overproduction and the crises that followed allowed Keynes to derive a formula by which the gap between production and consumer abilities can be eliminated. For this, according to the author, a power should become a participant in the economy, create additional demand for a product that is not popular among the population, thereby guaranteeing a sufficient level of consumption. Keynes considered that a state should nationalize a certain percentage of capital and form state-owned enterprises. Using taxation, the authorities can socially provide those who are below the poverty line in order to improve the standard of living of society as a whole. Summing up, he formulated the need for the state to have leverage thanks to which the authorities will be able to participate in the market.
It took some time for Keynes's theories to find their place in reality. The market and the state in a market economy began to interact precisely in the manner described by them after the Second World War. This is how social states were built in European lands, in the North American region. In the 40-60s there were several waves of nationalization, as a result of which the state became an important market participant. So, in France, the authorities owned 34.5% of enterprises, in the UK - every fifth, and the Italians half of the wealth was under the control of the power. Austria as a power owned electric, coal enterprises, mines.
Everything is interconnected
The market and state failures known in history, which provoked many large-scale crises, allowed to accumulate considerable experience. When the active construction of the socialist powers began, they simultaneously reformulated the key goals of market regulation by the power. Four key aspects were identified, which in the economy are conditionally designated as “magic quadrangle”. The first involves ensuring stable economic growth, the second angle is the absence of problems with employment, the third is the stable level of value, the stability of money. The fourth aspect of the market system is foreign economic stability. Some economists propose the inclusion of a fifth reference point in this system - the justice of the formation and division of income. This aspect includes ownership. Modern economists often include in this system another point that is extremely important for any country, society and each individual person. It is about the need to protect the nature that surrounds us.
About techniques
In order for the role of the state in the market to be fully realized, a state must have the resources, means, methods of their application in reality. Government intervention is important primarily for capital-intensive areas of the market, which are characterized by a long payback period. In order to develop transport and build nuclear energy enterprises, in order to initiate the progress of high technologies, it is necessary to invest money from the budget. In addition, such industries require long-term lending. The state can develop tax incentives for those who invest their capital in promising areas, key production areas, areas whose development is most significant.
Another important role of the state in market conditions is to create conditions in which lending is possible at the lowest interest rate. This is realized through lowering the discount rate and interest established by the credit institution to the client who wants to receive money for use. The central bank of the state is responsible for the formation of the minimum credit rate for the funds that it lends to a commercial structure. A private bank that has received such money sends it to interested entrepreneurs who want to develop some production on pre-agreed conditions. The percentage requested by the commercial structure cannot exceed the discount rate for this type of cooperation. This is beneficial for an entrepreneur, which means that a person will gladly direct finances to the development of production capacities. The number of jobs for the population will increase, production as a whole will become more active. All this leads to the growth of the power economy in general.
Yesterday Today Tomorrow
Among the functions of the state in the market, indicative planning looks especially significant. Plans, forecasts in different powers began to be compiled quite a long time ago. Initially, these were programs with specific goals, designed to solve the current problem specific to a particular country. For example, such was the privatization program. A similar example is nationalization. Among the early programs can be noted the American, dedicated to the development of the coast of Tennessee. Of the longest and largest, the Italian one devoted to the development of the southern lands deserves attention. Of the industry, implemented with the best results, it should be noted embodied by the French industry in the field of nuclear energy. Of the international projects, the largest such was the creation of a tunnel that united the two powers under the English Channel. All such programs receive funds for implementation from the state budget. It is allowed to attract private capital from persons interested in future to receive income through the results of the project.
Traditionally, the interaction of the market and the state is realized in the shorter term. Power market planning can be seen by analyzing Japanese economies, European practices, Indian development systems, or the economies of the Philippines. Each year, the state forms a concrete plan aimed at solving a certain problem. It may be aimed at developing agricultural sectors, eliminating the ruin of a particularly unstable social stratum, preventing urbanization or expanding the market for the sale of a certain product. Short-term programs are being developed regarding technological progress and the fuel market. They are tools for creating stable, reliable, large farms that can successfully survive in a difficult world.
Among any programs, the priority traditionally belongs to scientific research.
Medium terms and more
The medium-term interaction of the market and the state in planning aspects has been practiced everywhere since about the 60s of the last century. Such plans are characteristic of the modern French economy, they are resorted to in Germany and a number of other progressive powers. The French example is revered by many as the most striking, characteristic. The national plan was first adopted for the period 1947-52. It was composed so that America would help the European powers. The plan was named after Marshall. This document contained certain prerequisites that industrialists had to fulfill. The directive immediately included restrictions on industrial sectors. It extended to the energy sector, coal mining, ferrous metallurgy, the manufacture of aggregates for agriculture, domestic transport and cement. Until 1997, inclusive, formed 11 plans with an average prospect of execution. Most of them were calculated for a five-year term. The French authorities and leading economists abandoned the directive and command plans, instead of them adopting indicative, that is, forecasts.
The cooperation of the market and the state in the economy within the framework of the described example involved the preliminary determination of quantitative indicators that would speak about the stable development of the economy. Such parameters were chosen based on the nuances of the near future, as well as the current capabilities of the economic sector. According to the results of the next plan, the state assessed the discrepancy between the indicators and the achieved real. Indicators were used to formulate the norm. If the changes were weaker than normal, this indicated the need for health-improving measures. Such forecasts are used to this day. These plans are not dominant, they do not subjugate the market, they are only recommendations. This is formulated taking into account the likelihood of unforeseen situations. So, it is impossible to predict the development of finance, the market at the global level, which means that it is impossible to pre-determine the directive for the whole country without taking this aspect into account. Indicative planning has a limited effect on real market processes.
Features
The interaction of the market and the state in the economy is multifaceted. Perhaps the administrative influence on the economy by the authorities of some power. This is often practiced in order to legally oblige everyone to protect the environment. To do this, adopt regulations on its protection.
In developing countries, the practice of determining the maximum value of goods that are vital to the population is widespread. According to experienced economists, such a measure is relatively ineffective and does not lead to progress. In most cases, it does not justify itself.
Old gives way to new
It is rather curious to analyze the market and the state, taking into account historical vicissitudes. The political economy of the past was centered around the production of material wealth. For the new political economy, intangible wealth has become the center. The old one devoted all its energy and time to economic processes; the new one specializes more in political ones. State policy in the past was significant for political economy, but only in recent decades has it become truly widespread, approaches to the topic have changed.
Political economy: what and what?
Political economy as a science was born in the era of the formation of capitalism. Today, a mixed economy, market, and state are studied by specialists in this field from various aspects of the phenomenon. Initially, the situation was somewhat different. Political economy at the time of its inception was a science that concentrated on the field of circulation, rather than production at all. Trade gradually developed at the global level, with the involvement of various powers, and the importance of the merchant layer became more significant. Political economy, which appeared at first, was a reflection of the interests of this particular segment of the population. The first direction of political economy is considered mercantilism. As early as 1615, a treatise on political economy saw the light of day - it was then that science gained its name. The concepts of the gradually developing political economy became a reflection of the desires and aspirations of the third estate, which fought against the absolutist system.
In the 19th century, the liberal doctrine that has developed over the centuries was divided into two rivers: one devoted itself to entrepreneurial freedom and the absence of state interference, the second became a reformist. She retained the basic values of the liberals, but proposed to consider the state as an active participant in the market. The leading economists in this direction are Mill, Bentham. Gradually, scientists turned to market and state issues in a command economy.
Neoinstitutionalism
Economic scientific thought moved in this direction, rethinking the market and the state as interrelated phenomena. Neoinstitutionalism critically perceives the role of power in the market system, reckoning this mechanism as a weakening market. In 1960, Coase’s theorem was published, which proves the impossibility of government interference in the development of the economic sector. The state includes various institutions, and some of them, according to economists, are not sufficiently effective. This leads to the appropriation of public income, the formation of categories of citizens with specific interests. Such persons want to change the game for themselves, are looking for political rents.
A change in the strictly institutional system, the emergence of new blocks that accompany the relations of the market and the state, force us to make large investments. The problem with this issue is that institutions formed long ago require very large investments and are hardly changing. People involved in the process spend too much resources, depreciate the current capital of institutional development. This has been called developmental dependence, which has occurred in relation to a specific country earlier.
Change or not change?
For the economists of our country, the relations of the market and the state within Russia certainly look the most important. This problem has certain specific features. For a full-fledged market economy to appear in the country, first you need to create conditions that would correspond to the social economy of the market - for example, such as in Germany. The foundations for this work were laid by experts in order theory. It is its practical application that is considered by many modern scientists as opportunities for our state to take a step forward.
Social market management involves individual freedom, the justice of society and the viability of the economy. The militarization of the economy is an already passed stage of development of Germany, and the economists of this country can reasonably speak about its negative impact, especially when accompanied by the oppression of citizens' freedoms. At one time, the economists of this power struggled with difficult situations of interference by the authorities in all areas, while at the same time it was impossible to establish a comprehensive order. This led to the formation of ordoliberalism as an economic direction. The founder of this trend is revered by Euken, who published a work on the national economy in 1940. It indicates the interdependence of the political, economic order, compliance with laws and social life. In 1952, already after the death of the author, another light saw the light, in which the power’s ability to organize the market through a policy of order was indicated, the main tool being free competition.