Perspective Chapter: The Influence of the Cultural and Historical Factor on the Socioeconomic Model of a Single Country

Abstract

The entire twentieth century passed in a sharp competition between two socioeconomic systems—capitalism and socialism. The irreconcilability of the two systems was so high that it often led to armed conflicts—Korea, Vietnam, etc. However, already in the twentieth century, the convergence theory appeared, which foreshadowed the emergence of a certain averaged sociopolitical model that harmoniously combined the basic principles of capitalism and socialism. The theory had serious grounds for its appearance because the specific forms of both—capitalism and socialism—differed considerably from country to country. Moreover, the history of the rise of capitalism in the West bears little resemblance to that in the East. The basis of these, sometimes fundamental differences, are unique national characteristics, mentality, basic values inherent only in a given cultural-historical community. Therefore, today, in the twenty-first century, it is necessary to abandon the opposition between capitalism and socialism and build on the basis of broad people’s democracy such a mobile socioeconomic model that at any given moment most fully meets the natural, human, financial, organizational and cultural possibilities and needs of a particular people, a particular country.

1. Introduction

Throughout its history, humankind has been searching tirelessly for an image of an ideal society of the future. However, until the end of the eighteenth century, this image was an image of a dream, a hopeless utopia. Although the projects for the “bright future” of previous eras identified correctly the shortcomings and contradictions of the contemporary relations in the society, they were not able to reveal the nature of these relationships or the causes and consequences of the current order at all. For this reason, they fundamentally could not serve as a guide on how to build the desired ideal. A real breakthrough from the realm of dreams into a “social science,” a consistent linking of theory with practice, was achieved by Adam Smith. He put the economy at the forefront of the development of a society and created the classical political economy of the new capitalist society.

The next important stage in the development of scientific understanding of the processes taking place in a society was Marxism, which explained the development of a society by purely material relations between people. Karl Marx put the state and the level of development of a society in direct dependence on the state and level of development of the productive forces (material production) and the corresponding production relations. The whole complex, laborious and bloody history of humankind suddenly acquired logical harmony and clarity; a clear explanation was immediately found for its many zigzags, collisions and cataclysms, which used to be so dark and incomprehensible before. And though it was difficult to explain, for example, the “class nature” of the Crusades with the help of the Marxist social model, or the suddenly resurrected archaic slavery relations in the “progressive” capitalist society of the United States—nevertheless, this model became the most popular political theory in the twentieth century.

By the beginning of the twentieth century, the capitalist model of the economy has been developed and was operating in reality, but the model of socialism-communism existed only in theory. In 1917, the situation changed as the first republic of workers and peasants appeared in Russia. It was the world’s first socialist state.

However, the actual implementation of the economic models of both socialism and capitalism differed significantly from the theoretical provisions; the differences became especially noticeable after the Great Depression. Humankind never saw “pure” models of capitalism or socialism: In socialism, as before, there was a private, market sector; in capitalism, after The New Deal and Keynesian economics, the state began to intervene actively in the economy. The ever-increasing trend of “mixing” economic models has finally led to the fact that today it is very difficult to speak categorically about the sociopolitical system of a single country such as Sweden or China. What do we see there at the moment—capitalism–socialism, or socialism–capitalism? Who will take the liberty of defining this precisely and irrefutably proving it? Clearly, any such attempt is understandably doomed to failure.

This statement significantly simplifies the chain of our further reasoning. After all, a whole layer of traditional, irreconcilable dispute—between adherents of supposedly antagonistic formations, capitalism and socialism—falls apart, since these two formations do not exist in their pure form in nature. There are exactly as many intermediate, transitional forms available in the world as there are state formations we have today—capitalism in Sweden is not similar to capitalism in the interpretation of the United States. And both of these options bear little resemblance to capitalism of India, or Brazil, etc.

What is the matter here? After all, all these forms of capitalism had enough time to converge to some kind of a single, optimal standard that prescribes a uniform, successful, in other words, the “only true” organization of the life of a human society. And this standard, in turn, was supposed to automatically ensure the well-being and prosperity of all peoples who adopted the capitalist model. And the level of this prosperity, in theory, should correspond to the level of the United States, at least. But in a strange way, such unity is not observed either in the principles of construction or in the results of activity—in the capitalist world, as before, as in the good old days, there are winners—states and peoples with a high standard of living, and along with them states and peoples living in miserable, glum conditions. Why is this happening? Where does this depressing diversity come from? Is it just the climatic factor that is to blame? Below we will try to answer at least some of these questions.

2. Liberal market economy: capitalism

The socioeconomic model, known throughout the world as “capitalism,” was originally based on two fundamental doctrines. The main subject of both doctrines was the individual—a self-sufficient human being, who aims to achieve his own life goals, success, and well-being, while acting independently and autonomously of other society members.

The first doctrine was derived from the Protestant revolution and was clearly manifested in Calvinism, in its dogmas about “predestination” and “mystery of election.” In his work “The Protestant Ethic and the Spirit of Capitalism” [1], Max Weber revealed perfectly the spiritual basis of the newly appeared, previously unseen “thirst for profit” that engulfed the entire Protestant population of Europe. At the same time, the same prevailing dogma of the reformist churches and sects about predestination instantly scattered the traditional society into individuals independent of each other, human-atoms. Industrial Revolution, which began a little later, further strengthened and accelerated the process of atomization of Western society.

The second fundamental doctrine of capitalism is the idea of a person as an insatiable consumer: a consumer with constantly growing needs, who keeps developing new needs, all of them urgently requiring immediate satisfaction. The hypothesis of “homo economicus,” acting always and everywhere rationally for the sake of an exclusively personal gain, has become the most popular in the Protestant countries of the West. The idea of continuous and endless progress that was added to it, first presented to humankind by the Enlightenment, was largely based on this doctrine of unrestricted consumerism.

Adam Smith introduced the first systematic presentation of the foundations of capitalism. He considered the main driving force behind the development of the economy to be a free individual acting on a free market based solely on his own, purely selfish motives. In theory, the egoism of separate individuals along with their irreconcilable competitive struggle in a free market inevitably becomes a source of economic growth and, as a result, the wealth and well-being of the entire people. Any outside interference in the selfish activities and struggle of individuals among themselves, no matter who it comes from—from the state or monopolies—was considered by Smith unacceptable and destructive to the economy. In his opinion, the free market and competition are the only ideal regulatory mechanism for the economy, the “invisible hand” that ensures its continuous development and prosperity.

However, just a century later, qualitative changes taking place in capitalism shattered the ideal concepts set forth in the political economy of Adam Smith. Vladimir Lenin detailed those changes in his perhaps best work “Imperialism, the Highest Stage of Capitalism” [2]. The emergence of monopolies, huge industrial and financial groups, and the multinational company (MNC) destroyed the wonderful possibilities of the “invisible hand” together with it itself. The global expansion of capital has reached the most remote corners of the planet and stumbled into its limits. The world from the infinite became finite. The hands of the market—that are no longer operating on free, but on limited, divided into spheres of influence markets instead—have become visible to the naked eye. Additionally, capital changed from “national” to “supranational.” Thus, at first glance, Adam Smith’s statement about the “absence” of capital’s own homeland was confirmed. However, national capital continued to act in the interests of its own country, now in the vastness of all continents (the Monroe Doctrine).

The arrival of the so-called colonial period in the development of capitalism, with its powerful growth of the economies of the Protestant countries, coincided with exploitation of the colonies. For example, in 1750, India produced 25% of the world’s industrial output, more than all of Europe (England’s share was 1.9%). And by 1900, the share of India had decreased to 1.7%. The catastrophic change of the shares of the national product of these two countries in the global economy did not occur as a result of the explosive growth of production in England, but was the result of a sevenfold drop in production in India itself, drained of blood by the metropolis [3]. At the same time, this turn of events eliminated a dangerous competitor for the British economy from the world stage.

Of course, the new qualities of capitalism inevitably and irrevocably eliminated the main necessary condition for the self-regulation of the market—the presence of an infinite number of independent sellers and an infinite number of independent solvent buyers. As a result, pricing policy became subject to the arbitrariness of large market players. Financial speculative capital became the leader, leaving industrialists and merchants far behind. Under these conditions, the balance between supply and demand could no longer be set automatically according to Adam Smith and the Great Depression struck.

A little earlier, a socialist revolution took place in Russia, which radically finished with capitalism and the capitalists within the country. These two most important events forced the political elite of the West, under the threat of imminent destruction, to take further decisive steps to dismantle the previously unshakable principles of classical political economy. The United States took the lead in carrying out vital socioeconomic reforms in the capitalist countries. US President Franklin D. Roosevelt resolutely embarked on reforms called The New Deal from the first days of his presidency. The main content of the reforms was the rejection of the former taboo—a categorical ban on any state intervention in the economy during peacetime. From that moment on, such interventions became justified, legitimate, and even necessary to bring the country out of a deep crisis. The theoretical basis for justifying such an intervention was developed by John Keynes, who repeatedly visited the USSR and carefully studied the latest experience in building the economy of a vast country by the state.

Keynesian economics has radically changed the previous approaches for the organization of socioeconomic relations in each individual country. From now on, an outside entity intervened in the “objective reality” of market laws—the national state, acting on the basis of a specific sociopolitical situation. The previously unshakable principle of “laissez-faire” was forgotten by all developed countries for a long time. The main source of state influence on the economy was now the redistribution of the national product in order to maintain the socioeconomic stability and repair damaged or inoperative market mechanisms. This was done most of the time with the help of a flexible tax policy.

However, since the capabilities of each individual country, the sources of its well-being are always different and strictly individual from the beginning (minerals, labor resources, foreign exchange reserves, state of science and technology, level of infrastructure development, laws, culture, customs, mores, climate, crops, geographical location, international position, external relations, etc.), then the governments of these countries could carry out their activities only within the framework provided by nature and the unique cultural and historical features of each country. From now on, there could be no single, common recipe for the prosperity of the economy of any individual state. That is why in the further development of capitalism the diversity of various countries played a decisive role in its implementation and the ways of its existence on the ground.

For example, in Germany recovering after the war, Ludwig Erhard developed and implemented a socioeconomic model called the social market economy. This model established the leading role of the state in correcting negative trends in competition and trade. The model also took into account the idealistic concepts about social justice that had been formed in Germany over the centuries. Consequently, the social market economy provided active participation of the state in the redistribution of income of the population, to ensure its high social protection. Further, the active intervention of the state in the economy, for example, allowed France, once one of the leaders in the automotive industry, to maintain the national automobile industry. Similarly, only decisive actions by the governments of both countries—Germany and France—saved the world’s second giant of the aviation industry, Airbus, from inevitable bankruptcy.

Continuing the conversation about Europe, one cannot fail to notice a stable characteristic feature that has been observed there for a long time. The countries of the European Monetary Union can be quite definitely divided into “lucky”—this is the Protestant north, and into “losers”—these are the states of the Catholic and Orthodox south of Europe—Spain, Portugal, Italy and Greece, as well as the bastion of Catholicism that joins in the north—Ireland. The “losers” have accumulated huge foreign debts that paralyze the activity of national economies. Particularly interesting in this regard is the example of Italy, where the “energetic” north has long been dreaming of separating from the “idle” south. The chronic lag of the south from the north in the same country can only be explained by the different mentality of the people living in these regions. The mentality of the inhabitants of the north of Italy differs from its southern inhabitants precisely by the dominant doctrine of capitalism—the Protestant ethic, in which the north of the country lived and was brought up for a long time and which practically did not touch the south. The mentality of the inhabitants of the south of Europe continues to be based largely on traditional values; business and career success have not become for them the meaning and purpose of their whole lives. This is the main reason for the chronic lag in the economic development of these countries from their northern neighbors.

No less indicative in this regard is the example of post-war Japan, which theoretically did not have any prerequisites for the successful development of capitalism. The absence of own minerals and the destruction of the economy and infrastructure by the war were worsened by the loss of all colonies, with the help of which the economy could be restored. In addition, the people of Japan, who had sacredly preserved traditional communal relations for centuries, had no idea either about “homo economicus” or about Calvinism. However, in a record short time, Japan took an honorable place among the seven most developed capitalist countries, and its unprecedented breakthrough to the heights of economic power was called the Japanese economic miracle.

Paul Krugman, the winner of the 2008 Nobel Prize in economics, provides a comprehensive explanation for this phenomenon in his book “The Return of Depression Economics” [4]. He clearly shows that the most important element that ensured the outstanding success of the Japanese economic model was the leadership role of the authorities, namely the Ministry of International Trade and Industry. It is rather obvious that the leadership of Japan, which was in ruins, categorically refused to restore its economy according to the harsh rules of capitalism. The path to national prosperity through the “liberation of the spirit of freedom” in countless greedy individuals, focused on mortal combat among themselves, was categorically rejected by the Japanese authorities. They chose sound, centrally controlled economic policies over the chaos of the free market, and it was only through this choice that Japan achieved its outstanding result.

The example of Japan turned out to be contagious, and the rest of the Asian Tigers moved to the heights of economic prosperity in exactly the same way, relying more on the prudence of the leadership than on “the invisible hand.” This successful and conflict-free joint activity of the population, social groups, and the state was largely facilitated by the influence of traditional Asian values, which were largely different from the values of Western civilization. Individualism, subjectivism, the social mobility of the individual, and his readiness to immediately break away in search of a “better lot,” nurtured in Western countries by Protestant ethics, clearly did not match the ethical standards of Eastern civilizations that developed under the strong influence of Confucianism. In the East, the priority is not personal success, but the best performance of a certain range of duties to nature and society—hence, lifelong service to one firm, one community, and so on. Moreover, material remuneration was not a top priority by itself, unlike in the West, but was rather perceived as a reward for faithful service and, accordingly, grew gradually, taking into account the years in service.

However, the period of The Glorious Thirty, which took place under the banner of Keynesian economics and was characterized by active state intervention in the economy, was interrupted in the mid-70s. This was provoked by the military-political crisis that broke out in the Middle East and the stagnation that followed. Adherents of the classical model of capitalism perked up, and its ideologists—Friedrich von Hayek and Milton Friedman—were awarded the Nobel Prize in economics in 1974 and 1976, respectively. At the same time, followers of Keynesian economics were expelled from the economics departments of the world’s leading universities. An attempt to return to the previously rejected principle of “laissez-faire” was called “neoliberalism,” and its application further proved the incompatibility of classical Western ideas about the structure and operation of the economy in relation to non-Western countries.

The first victim of the new neoliberal course was Mexico. In August 1982, the country defaulted. In order to overcome the crisis, the IMF and The World Bank offered the Mexican leadership a loan in exchange for guarantees of neoliberal reforms—privatization, opening domestic markets for foreign capital, lowering tariffs, and a flexible labor market. As a result of the reforms, the crisis only intensified—an annual drop in per capita income of 5%, inflation over 100%, a sharp drop in spending on urban services, health care, etc. However, the completely failed first experience of “laissez-faire” enthusiasts did not teach anything, and the new economic policy was imposed on the whole world in the form of recommendations of the so-called Washington Consensus. The “recommendations” were developed by the same IMF, The World Bank, and US Department of the Treasury. The main provisions of the Washington Consensus, developed on the basis of Western ideas about the economic system, were the requirements of a minimum budget deficit, lower tax rates, free exchange of the national currency, deregulation of the economy, privatization, removal of restrictions on foreign trade, and foreign investment. From now on, all countries experiencing difficulties in the development of the national economy—and any state in the world can be seen as such, without any exaggeration—had to strictly follow the “universal” guidelines of the Washington Consensus. What came out of this “worthy undertaking”?

Summing up the march of the Washington Consensus around the world is reminiscent of reports from the front, where heavy fighting took place. In most countries of South America and Asia, where reforms were implemented in accordance with the recommendations of the Washington Consensus, the situation worsened. Conversely, the countries that refused such recommendations (Singapore, Taiwan, and China) hardly suffered from the crisis of the 1990s that swept all over the world. Joseph Stiglitz, winner of the 2001 Nobel Prize in economics, explicitly pointed out that the Washington Consensus was the main cause of the financial crisis in Asia and added that there is not and cannot be a single, universal policy for all reforming countries.

Summarizing the consequences of the devastating global crisis of 2008–2009, the former head of the IMF, Dominique Strauss-Kahn, issued a statement that the Washington Consensus collapsed during the crisis with all its primitive economic ideas about the economy. The president of France during that time Nicolas Sarkozy confirmed that “without the intervention of the state, everything would have collapsed.” These confessions delivered the final verdict on the “laissez-faire” principle, with its crazy idea of a spontaneous market order based on continuous competitive struggle of individuals. The neoliberal economic model imposed on the whole world by Western civilization has come to an end. The leadership of most countries of the world began to realize that each country should implement its own economic policy, taking into account the cultural, historical, natural, geopolitical, and other national characteristics of each specific country.

3. Planned economy: socialism

If capitalism came into the world naturally, as a result of three revolutions—the Reformation, Enlightenment, and Industrial Revolution, and only then its theory was created, then socialism was originally predicted and described in theory. The most complete idea of socialism, as an inevitable stage in the development of humankind, was given by Marxism. Karl Marx considered the mode of production of material life to be the decisive factor in the development of humankind. In his famous work “A Contribution to the Critique of Political Economy” [5], he wrote:

At a certain stage of development, the material productive forces of society come into conflict with the existing relations of production… From forms of development of the productive forces these relations turn into their fetters. Then begins an era of social revolution.

According to this formulation, which Marx stated with the power of an objective law, capitalism had to inevitably appear, and then, after having reached its highest development peak, also inevitably leave the world’s stage, giving a way to other, more progressive, socialist relations of production. And such a course of historical development had to be invariably repeated in all countries of the world. In his magnum opus “Capital” Marx wrote:

The country that is more developed industrially only shows, to the less developed, the image of its own future.

Thus, Marxism doomed all countries of the world to the inevitable repetition of the socioeconomic processes that had already taken place in the developed countries of the West. This statement completely ignored the obvious cultural and historical differences and national characteristics of countries that do not belong to Western civilization. The first objections to this unsubstantiated, unconvincing judgment by Marx came from Tsarist Russia, from the underground terrorist organization People’s Will. The leadership of the organization sent a letter to the chief theoretician of socialism with a request to comment on the possibility of building socialism in the “lagging behind” countries bypassing the stage of capitalism.

Marx prepared four versions of the answer, but none of them was sent to the destination. Obviously, a very serious reason forced Marx to deviate from the rules of politeness—he could not question his theory on the “universality” of the laws of historical development. But at the same time, he could not indiscriminately deny the position of the Russian Narodniks that was firmly based on the characteristics of the Russian peasant local community, which were known to Marx in general terms.

The peculiarity of the Russian peasant community, its fundamental difference from those in Europe was the fact that the land of the community was collective, communal property, and a Russian peasant could neither sell nor mortgage his allotment. In the West, on the contrary, the land allotment of a community member was his private property, and he could freely sell or lease it. The system of land use and allotment in Russian communities was caused by the tough climate and has been established since ancient times. During the centuries-old existence of the Russian peasant community, special, very close collectivist relations of brotherhood and mutual support have developed between the community members—leading the classics of Marxism to call it “primitive communism.” According to the Russian Narodniks, these close communal relations were supposed to play a decisive role in building socialism in Russia, helping to avoid the breakdown of the society and other cruelties of capitalism.

As a result of a heated discussion with the Russian Narodniks, Marx finally admitted the possibility of a transition directly to socialism, bypassing the capitalist stage of development. However, he made this assumption specifically for the Russian situation. In addition, it was restricted by an indispensable condition that the success of the socialist revolution in agrarian Russia is possible only if, simultaneously with it, a proletarian revolution occurs in the West and thus they complement each other.

The fact is that the world’s first socialist revolution happened in agrarian Russia, where 85% of the population were peasants. Industrial workers—“proletarians” who were supposed to be the driving force of the socialist revolution, according to theory—comprised barely 3% in Russia, and even those were mostly concentrated in the capital and in several large cities. Capitalism in Russia was at the earliest stage of its development at that moment, so the socialist revolution that had taken place contradicted Marxist theory directly. Calling on all workers, soldiers, and peasants to the revolution, its leaders were convinced of the imminent revolution in the West, which should have happened any day now, in their opinion. However, these hopes were not destined to come true, and Russia was forced to start building socialism alone.

From the first steps of building a new socialist society, the first country of workers and peasants encountered significant difficulties, primarily of a theoretical nature. The fact is that in the classic works of Marxist writers there were no specific suggestions for an exemplary organization of a socialist society. In fact, in their works, they spoke of socialism only as a short-term transitional stage of a society to communism, or as the “first phase of communism.” But what this stage should have been, by whom and how it should be managed, what organs and economic structures it should have—the classics of Marxism did not state a word about these fundamentally important things. And communism itself did not acquire real outlines in these works either, remaining forever just a “ghost.” The only starting point for the builders of socialism-communism could only be found in a few signs of communism indicated by Marx’s theory, namely

• destruction of private property;

• destruction of the hierarchy in society, introduction of equality;

• destruction of the family and religion;

• disappearance of money;

• disappearance of the state and law.

It is clear that these signs did not just fail to answer the questions posed by the revolution, but in turn, they themselves gave rise to the next avalanche of questions to which there were no intelligible answers at that moment.

Some indications of initial measures immediately after the victory of the socialist revolution were in the Communist Manifesto, but Marx and Engels themselves repeatedly emphasized that these recommendations are not necessary and sufficient for the success of any revolution. Moreover, in the preface to the Communist Manifesto in 1872, Marx and Engels directly wrote that “this program has in some details been antiquated.”

As a result, the builders of socialism had neither a detailed description of the new society nor the stages of its construction with clearly defined goals. Therefore, the new Soviet authorities of the working people had no other choice than to immediately begin the urgent construction of the most just society in the history of humankind by a very costly and harsh trial and error method that led to many losses for ordinary people. There were no blueprints for the new society, so the central and local authorities had to build it based on their own visions and ideas about what was fair and proper; the same ideas that had served as the basis for the life of the Russian peasant community for centuries—“archaic communism.”

Unfortunately, the outbreak of the civil war and the foreign intervention of 14 developed capitalist countries forced the builders of socialism to introduce extraordinary measures in the economy—universal labor service, food rations. Strict food apportionment, widespread confiscations, and repossessions were carried out throughout the territory.

Forced emergency measures taken by the authorities led to the formation of a special type of economy—“war communism.” Since some features of “war communism” fully corresponded to individual features of classical communism, some leaders of the Soviet state, without much hesitation, regarded this phenomenon as the first successful step on the path to a “bright future.” In this difficult time, less than 10% of the needs of the urban population were met through money, and the country’s leadership considered ideas about the complete elimination of money circulation. Practical steps were also taken in this direction—government decrees abolished payments for fuel, utilities and food. At that point it seemed that the direct product exchange predicted by the classics of Marxism would succeed in the country, replacing commodity-money relations.

However, the real life did not fit into the dogmas of Marxism, and what was permissible and justified in the critical circumstances of a fierce war became barbaric and inhuman during the transition to peacetime. The continued policy of “war communism” catastrophically worsened the economic situation of the country and most importantly aroused widespread discontent among the people, which grew into riots and armed uprisings.

One of the first to understand the danger of blindly following Marxist dogmas, divorced from the needs and aspirations of the peasants, was Vladimir Lenin. Wasting no time, he abruptly broke with the Marxist doctrine for the second time since 1917. In February 1921, Lenin developed the main provisions of the new economic policy for the first country of socialism—NEP. The main content of the NEP was the rejection of coercive measures to “shove” the Russian population into the narrow framework of Marxist theory. According to the NEP plan, the restoration of the Russian economy after two devastating wars was to be carried out in a natural way on the basis of traditional labor peasant farms, followed by a broad development of cooperation. The work of the Soviet government was carried out collegially, on democratic principles, so Lenin had to work hard to turn most of his associates from hardened Marxist dogmatists into involuntary supporters of the partial introduction of bourgeois economic relations in Russia.

After the adoption of the NEP, the government of the country continued to strengthen the monetary circulation and the financial system of the country by opening commodity exchanges and banks as well as introducing a freely convertible currency—the “golden chervonets.” The food apportionment was replaced by a food tax in the village, and private trading of surplus food in the market was allowed. There were enterprises with the participation of foreign capital. All this together fundamentally contradicted Marxist theory and was viewed by orthodox communists as a direct betrayal of the cause of the proletarian revolution. But, thanks to the timely introduction of the NEP, the country managed to quickly restore the economy, albeit with some bias toward agrarianization. At the same time, the first attempts were made to develop state development plans. For example, one of the first plans to be developed was a plan for the electrification of Russia.

Meanwhile, the first country of socialism, in which elements of the capitalist economy continued to be preserved, was in a deep international isolation. Under the conditions of sanctions and embargo, it was impossible to count on the assistance of foreign business partners for the development of Soviet own industrial production. In addition, the international situation around the USSR continued to heat up and worsen. Chamberlain’s note, the conflict on the Chinese Eastern Railway, and the world economic crisis threatened the USSR with a new foreign intervention.

To preserve the gains of the socialist revolution, the country had only one way out—the immediate development of economic independence and military power through forced industrialization at any cost, or as they say today—“quick and dirty.” The natural course of market development, where emerging demand gives rise to supply, would extend industrialization in the USSR into many decades. The leadership of the USSR could not afford such a luxury, so they purposefully introduced a leading model of industrial development, where supply creates demand. However, such a revolutionary breakthrough in the economy could only be carried out under the condition of maximum mobilization of all the resources of the country in the hands of one player—the state that has a single, balanced and comprehensive economic plan for the development of the country.

The basis for such industrialization could only be a modern, well-developed agriculture based on a large-scale cooperative production and responsive to state planning. It was not possible to integrate the element of small individual farms into the state plans. In addition, a small business owner was physically incapable of supplying what the city needed or satisfying the needs of development of the large-scale industry in the necessary raw materials, food, and labor. Moreover, the low marketability of his small business prevented him from obtaining sufficient foreign exchange funds from the sale of grain for the acquisition of the necessary imported equipment.

And so under the slogan of “towards the mechanization of agriculture based on complete collectivization,” mass collectivization of peasant farms began, sometimes accompanied by extreme measures. As a result of total collectivization, the state received grain in sufficient quantities—a traditional Russian export product. The proceeds from the sale of grain were used to actively purchase machine-building equipment on the international markets—in 1931 alone, the USSR accounted for one third of global imports of machinery and equipment. These mass purchases allowed construction of the industrial base of socialism on a very wide scale.

However, the main driving forces behind successful industrialization were people—the peasants of yesterday—who transferred the ethics, the spirit of the Russian peasant community into the rapidly growing new industrial labor collectives throughout the country. These were special cells of the new society, in which fraternal, almost family relations reigned between the members of the collective. They spontaneously created and tested completely new, previously unknown production relations with a lot of enthusiasm, the desire to “fulfill and exceed,” grassroots initiative and innovation. Financial rewards also played an important role. The winners and leaders of the socialist competition—both individual workers and entire teams—were awarded vouchers and cash prizes and earned respect and honor. In turn, the leaders generously shared their experience, and actively helped and instructed the youth. Close and comradely relations in labor collectives were strengthened by the creation of mutual assistance funds, the distribution of free apartments, vouchers to sanatoriums, and even by the holding of comradely trials of guilty members of the collective. Unlike the lynching, the verdicts of the comrades’ courts had only the moral condemnation of the stumbled comrades in their arsenal.

In a very short time, the masses—brought up in the traditional collectivist spirit of the Russian peasant community and inspired by the construction of a new society—converted backward tsarist Russia into a powerful, industrially developed country—the USSR. Transformed by collectivization and industrialization, the USSR was growing at a rate never seen in the world before—the average annual growth of the Soviet economy for the period from 1929 to 1955, with the exception of 4 years of war 1941–1945, amounted to 13.8%. For comparison, the Japanese economic miracle presented an average annual growth rate of 9.7% in the period of 1948–1970 [6]. The phenomenal economic growth rates of the USSR looked especially impressive against the backdrop of the Great Depression that engulfed half of the world.

The undeniable successes of socialist construction in the USSR have become beneficial for all humankind. The USSR, which became a great industrial power, made the main contribution to the Allied victory over the Axis countries in World War II. The popularity of the world’s first socialist state, the world’s second superpower, led to the emergence of the countries of the socialist camp, gave impetus to a powerful national liberation movement in the colonial system and contributed to the growth of the activity of socialist and communist parties in Western Europe. Even in the cradle of classical capitalism—Great Britain, the Labor government announced a program to build a welfare state.

However, the worldwide success of socialism that won in Russia was overshadowed by one, but very disturbing symptom—a scientifically based theory of building socialism was still absent. Moreover, none of the socialist features mentioned above were fully implemented in the USSR. The situation was further complicated by the fact that in the post-war world the number of countries that declared their intention to build their economy on the basis of socialist relations was steadily growing. However, the first country of socialism could only recommend its own experience as the basis for such construction, which was completely unsuitable for other applicants for building a new society. The USSR was built contrary to Marxist theory and achieved its outstanding results based on the age-old ideas of the Russian communal peasant about a justly arranged society. The practical socialist construction in the USSR was developed in full accordance with those traditional ideas.

The missing theory of the socialist economy was replaced in time by the applied work of economists, for example, Wassily Leontiev, who compiled the first balance of the national economy of the USSR and received the Nobel Prize in economics in 1973 for creating the theory of intersectoral balances. However, no general theory of socialism emerged. The lack of theory worried not only the grassroots, technical workers who organized the work of the national economy directly, but also the top leadership of the country. The last major work of the leader of the USSR, Joseph Stalin, was the book “Economic Problems of Socialism in the USSR,” in which he demanded from Soviet economists to create a theory of socialist economics as soon as possible. Due to the lack of theory, the leader of the USSR postponed until an indefinite time the implementation of the Marxist signs of communism, including the termination of the law of value and the replacement of commodity-money relations with direct product exchange. In the same way, the advent of the communist era itself was postponed to an indefinite future.

The uncertainty of the basic concepts and provisions of the political economy of socialism led to the fact that each country that declared its intention to build socialism had practically unlimited freedom of action. Thus, the bourgeois socialism of Yugoslavia was significantly different from the mobilizational Chinese socialism in its Maoist interpretation. Socialism in Poland, which proceeded without establishing the “dictatorship of the proletariat” and kept small farms, was not similar to socialism in the USSR with its gigantic collective farms. By studying carefully the features of the socialist economies of different countries, one could come to a simple conclusion: how many socialist countries—so many socialisms.

4. The convergence theory and mistakes in building socialism in the USSR

When comparing the economic models of the socialist countries with the economies of the developed capitalist countries that applied Keynesian economics, one could easily detect a noticeable similarity between the two systems. On the one hand, state planning has become common among the leading capitalist powers; since the middle of the twentieth century, no country could survive without the active participation of the state in large national infrastructure projects, in solving social problems of the population, in the implementation of environmental programs. On the other hand, only private business and a free self-organizing market could provide a flexible and prompt response of the economy to the demands of the consumer market—the state planning machine is too slow and clumsy to solve this problem. Both state and private sectors of the economy were easily found in both capitalist and socialist economic models. Moreover, the antagonistic modes of production—according to Marxist theory—in reality not only did not contradict and did not displace each other, but on the contrary, effectively complemented one another, thus forming a common, non-contradictory economic system.

Many world-renowned scientists have come to this conclusion. John Galbraith argued that as a result of the technological revolution and the growth of large-scale industry, there is an inevitable convergence of the principles of organization and methods of managing the huge technological complexes of both systems—capitalist and socialist. A harmoniously developed modern economy must combine both: Planned principles for the ways of how large industrial, energy, transport, and financial corporations are organized, as well as market principles for medium and small enterprises, retail trade, and the service sector. At the same time, both systems are not isolated from one another and can work in close interaction, for example, when fulfilling government orders.

These considerations formed the basis of the convergence theory that asserted the gradual erasure of differences and the inevitable convergence of the capitalist market and planned socialist socioeconomic systems in the future. At the same time, it was important to note that the qualitative and quantitative nature of the interaction between the public sector and the market is unique for each country, for each specific historical stage, and only their optimal combination ensures maximum efficiency of the economy. From this conclusion, it follows that the former categorical opposition between planning and the market had irrevocably gone into the past, and now the former antagonists do not just coexist, but also interact effectively.

Moreover, skillful and timely intervention on the part of the state in changing the proportion of the plan and the market in the economy speaks of the high qualification and maturity of the country’s leadership. For example, immediately after the end of World War II, the Labor government in the UK carried out large-scale nationalization: the Bank of England, civil aviation, coal mining, rail transport, electricity, gas industry, and ferrous metallurgy. And in the 1980s, no less large-scale privatization followed. Both events made it possible to solve successfully the contemporary problems of the national economy.

On the contrary, a formal, mechanistic approach to economic problems that does not take into account national characteristics, cultural and historical traditions, the degree of development of productive forces, education, and social achievements is fraught with serious consequences, up to the complete collapse of the economy and the extinction of the population. It is precisely such a tragic example of a thoughtless replacement of the economic model that Russia showed the world.

Before World War II, only a small part of the works of Marx and Engels was translated into Russian. Fragmentary, unsystematic information from Marxist theory in the minds of recent communal peasants easily acquired the visible features of the society that the Russian peasantry dreamed of for hundreds of years in their stories, traditions, and legends. Their ideal was a classless society of free workers, in which everyone, young and old, was well-fed, satisfied, and happy. Following this model and likeness, guided by the traditional concepts of justice and common sense, they built a new socialist society, paying little attention to theory.

After Stalin’s death, the situation changed. To begin with, the first textbook on the political economy of socialism finally appeared, and furthermore, the first relatively complete collection of classic works of Marxism had been published in Russian by that time. Marxism became the property of the broad masses; university departments began to study thoroughly all the subtleties of Marxist theory. For thoughtful researchers, it turned out unexpectedly that the practice of building socialism in the USSR diverged significantly from Marxist theory.

In the meantime, the construction of socialism in the USSR continued to be carried out at a gigantic pace, drawing into circulation unprecedented natural, material, and human resources. The country’s leadership, concerned about the efficiency of public investments, had set a new task for the economic bodies—“to produce more products with less labor and money.” Since commodity-money relations in the country continued to be the main method of commodity exchange, Soviet economists had to revive the categories of political economy of capitalism seen as “hostile” to socialism—such as cost accounting, profitability, and profit—and then successfully introduce them into the existing socialist production.

Such a decisive retreat from the Marxist positions did not please the orthodox adherents of Marxist theory at all. Sharp discussions broke out between them and the practitioners of socialist construction. Unfortunately, to the detriment of scientific thoroughness, orthodox Marxists in any principle dispute often skillfully resorted to quoting the classics of Marxism, and such a trick most often decided disputes in their favor. The Marxists categorically declared: “Either a commodity economy or a socialist one. There is no third way!” It was risky to argue further. It is clear that the orthodox Marxists from the beginning rejected the convergence theory that had appeared by that time.

The accusation of deviating from Marxist theory was considered a grave sin in the USSR, so the country’s economic policy was clearly skewed to the left. The private supplementary farms of the peasants, who freely sold their products in the markets, were significantly limited in their capabilities; keeping livestock in the personal property of citizens living in cities and workers’ settlements was prohibited completely. These leftist measures soon led to difficulties in the food supply of the population of the whole country. The policy of merger of collective farms, which reduced their controllability, gained momentum and their mass transfer to state farms was carried out. In fact, industrial cooperation was eliminated, together with its high entrepreneurial initiative and high speed of meeting the needs of the population in consumer goods. All those enterprises were transferred to the clumsy state administration.

Thus, due to the ill-conceived, erroneous measures of the government, carried out for the sake of the dead theory of social transformation from a century ago, a consumer market crisis arises in the USSR and grows every year to reach its peak by the middle of the 80s. During that period, a new generation of leaders headed by Mikhail Gorbachev and Nikolai Ryzhkov came to the leadership of the country. The new leaders announce “perestroika” all over the country. However, according to their later confessions, they did not have any plan for reforms.

In the absence of a detailed reform plan, the hasty and ill-considered approaches of the new leadership fell like rain, often directly contradicting each other. The call for acceleration was immediately replaced by a call for perestroika, while the slogan for acceleration remained in force. Almost simultaneously, mutually exclusive, but mandatory, resolutions appeared: The demand to restore order and strengthen executive discipline from top to bottom was immediately blocked by the demand for increasing the independence of enterprises and local authorities; the fight against unearned income was announced and immediately a law on individual labor activity appeared, which provided the widest field for extracting unearned income. Also carelessly and recklessly, the most important pillars of the former socioeconomic system were destroyed—the monopoly of foreign trade, the currency monopoly. The ill-conceived laws on enterprise and cooperation broke the two-circuit system of monetary circulation, which had previously maintained the enviable stability of the financial system of the USSR that did not know inflation. As a result, in a climate of monopoly and total shortages, an unlimited cash flow poured into cash circulation, finally destroying the consumer market.

Against that background, anti-Soviet, anti-socialist internal and external forces became more active, performing as a united front to demean all the achievements of socialism and to praise wildly the charms of capitalism. Moreover, it was the primitive capitalism according to Adam Smith that was promoted, with its “invisible hand,” spontaneous market order and other attributes that have long sunk into oblivion. Not a word was said about modern capitalism with its state planning, globalization, with its strong center and clearly defined periphery, or its MNC, which often exceeded Soviet ministries in size. The unrestrained propaganda of capitalism was primarily based on the glorification of the cult of the individual, who was supposedly capable of creating miracles. Among other things, he was credited with the mythical ability to instantly satisfy all the emerging needs of the population at the highest level. To achieve this miracle, only one thing was required from the population—to switch to the Western model of development with a simultaneous categorical rejection of the former way of life and the former communal, collectivist way of thinking. Massive propaganda convinced the majority of the people, and passionate propagandists of the capitalist model of the economy received a carte blanche from the population to carry out shock market reforms.

The reforms largely followed the recommendations of the Washington Consensus and indeed led to shocking results. In the first 3 years of reforms, the average annual decline in the economy was more than 12%. The systems of education, health care, transport, and the unified energy system that had previously worked properly were shattered. Entire advanced industries essentially disappeared—machine tool building, civil aircraft building, and the radio engineering industry. The fall of the economy continued until August 1998 and ended in default.

However, the worst thing happened to the population: After a severe change in their previous environment and lifestyle, job losses, rapid impoverishment, the destruction of the social system, and medicine—people began to die out at one million a year. Soon, an ominous Russian cross rose over Russia—the mortality curve soared sharply upward, at a sharp angle crossing the birth rate curve, which had hopelessly fallen down.

Speaking about the complete failure of the reforms, of course, one can refer to their mediocre implementation, to the wild attempt of the reformers to introduce economic models of 200 years ago into the modern developed economy, as Joseph Stiglitz rightly noted. However, the main reason for the failure of the reforms was their unnatural, violent rejection of the vital principle on which social and economic relations in Russia have been built for centuries. The modern Russian Federation exists in line with the principles of a capitalist paradigm alien to it—“the market is above all” and “every man for himself.” These principles are entirely opposed to the principles of both the Russian peasant community and socialism, based primarily on solidarity, mutual assistance, and close cooperation of all people, with the slogan of “everything for the good of humankind.” Precisely because the paradigm in which the Russian Federation is trying to exist turned out to be deeply hostile to the mentality and cultural attitudes of the majority of its people, the country still cannot get out of the systemic crisis that began more than 30 years ago.

According to the Accounts Chamber of the Russian Federation, 77% of Russia’s economy was privately owned by 2004. It would seem that the miraculous mechanism of “the invisible hand” was about to start working, providing the country and its people with well-being and prosperity. However, that did not happen. Yes, a rise of the economy was noticeable at that time, but it was not related to the growth of the innovative economy as one would expect; it was caused by raw material exports. And today, Russia’s economic growth rates are below the global average; the standard of living of the population has been steadily declining over the past 7 years, while the population itself has been shrinking.

In contrast to the failed market reforms in the Russian Federation, the reforms carried out around the same time in the second most historically significant country of socialism, the Chinese Communist Party, were not shock reforms, but had a deeply thought-out, orderly character instead. Most importantly, they were firmly connected with the national characteristics of this remarkable country and its people, who had been brought up in the spirit and traditions of Confucianism for thousands of years. This explains the fact that while continuing to be a socialist country in which the leading role in the economy is still assigned to the state, China today has become the second global superpower with a continuously growing standard of living of the population.

5. Conclusions

In summary, no state in a pure capitalist or pure socialist form ever existed in reality. The countries that exist now or existed before embody an intermediate state in a “gray zone” somewhere between these two rather abstract poles. This is especially noticeable today, in the twenty-first century, when all kinds of economies in the world are gradually drifting toward the center of the “gray” zone. Therefore, one can never say definitely, where capitalism ends and where socialism begins, and vice versa. The boundary between these two poles is very blurred or absent altogether. We can only talk about the degree of proximity of a state system to one or the other pole. Strictly speaking, not just the words “socialism” and “capitalism” should be used as the poles of such a scheme, but the most general categories of political and economic nature: “state property,” “private property,” “state property with the participation of private capital,” etc. With changing proportions of these or other indicators, the model of the economy as well as the corresponding political system obviously moves to one degree or another.

However, in order for each such change to become successful and achieve its goal, it must fulfill an additional condition, namely to coincide with the opinions and worldview ideas about the proper and fair that are shared by the majority of the people affected by the change. In other words, when carrying out reforms, introducing innovations into the socioeconomic system, the responsible government should take into account not only the state of productive forces, finances, international relations, but also the mentality of the population, its national characteristics, and cultural roots. In this sense, the example of the organization of health care systems in three capitalist countries—the USA, the UK, and Germany is very indicative. In the USA, the healthcare system is private and for-profit; in the UK, it is public and free. In Germany, medical care is guaranteed to every resident through compulsory health insurance. In the USA, tens of millions of people are left without health care simply because the cost of health insurance is beyond their reach. This obvious social injustice from the point of view of an average German citizen was an important issue that the administration of President Barack Obama attempted firmly to improve. Yet the much-advertised Obamacare has all but failed, largely due to the negative attitude of a significant portion of US citizens toward it.

It is quite clear that in this situation, as in many others, that what has been and is still decisive for the success of reforms and innovations is the human factor—people themselves, with their rich spiritual content, thoughts and feelings, consciousness, value systems and moral attitudes that drive people’s behavior, their preferences, motivation, aspirations, and hopes in real life. To replace all the enormous spiritual wealth of a person with the primitive satisfaction of his material needs, to forcibly turn homo sapiens into homo economicus is a big, fatal mistake that was made by the Russian reformers and which the Chinese reformers avoided.

This fact and the example of various health care systems demonstrate convincingly that consciousness, way of thinking, and the basic set of values that together form the worldview platform of different peoples are unique and inimitable. This statement, in turn, allows us to emphasize the existence of a vast variety of solutions for similar or even the same problems with respect to different peoples and civilizations. Therefore, the decisions taken by governments should be more in line with the ideal concepts of the majority of the people about the good life and not just formally fulfill the prescriptions of the rigid paragraphs of impersonal economic theories.

“The economy is one of the most important sections of the demos life order. It combines all the elements of culture—ideas about nature and humankind in it, about property and wealth, about the fair distribution of benefits, about organizing joint activities, technological knowledge and skills. There are a lot of options for combining all these elements, so the economy of each ethnic community has a unique originality. An ethnos is the creator of its own original system of economy. But the economy, embodying all aspects of culture, becomes an important part of the matrix according to which the ethnos is assembled and reproduced. That is, in turn, the economy is the creator of its ethnic group, demos” [3].

Consequently, the careful preservation of human nature in all its diversity is ensured, among other things, by the preservation of traditional forms of organizing economic activity.

Today, it is absolutely clear that the ideals of both communism and capitalism are unattainable in the foreseeable future. None of the people living today can imagine a human society outside the state, outside the law, and outside the established commodity-money relations. The peoples of the Far North, the nomadic Berbers in North Africa, the Australian aborigines, who for centuries have been faithful to pre-state tribal relations with a formally absent state, use the charity of the states on whose territory they live. Without this support and without the charity of international organizations, their existence could be interrupted at any moment by devastating natural disasters, deadly epidemics, or catastrophic climate change.

In the same way, adequate inhabitants of planet Earth are well aware that the doctrine of endless economic growth of production and insatiable consumption was an insane doctrine that could destroy all life on the planet. The finiteness of nature, the exhaustibility of its resources does not allow humanity to deal with its divine uniqueness in such a barbaric way.

And, of course, the image of the future of the planet and humanity living on it should not be limited only to a careful approach to wildlife, but must also include an equally careful approach to the nature of humankind—history, culture, traditions, language of each ethnic group, no matter how small it is. The uniqueness of the history and development of nations, their cultures, traditions, economic systems is one and only, which means that the path leading to happiness and prosperity of each individual people is also one and only.

It is precisely the variety and alternativeness of social development—due to the peculiarities of the cultural and historical development of individual nations and peoples as stated by the civilization theory—that might show the way out of today’s global crisis of changing economic order.

And that is why the idea of creating a unified world government, proclaimed, for example, by the Humanist Manifesto 2000 [7], which was signed by a number of prominent public and political figures, is a dangerous utopia, or, rather, a dystopia that can destroy all the variety of the world and reduce its unique diversity to gray, featureless homogeneous mass. The example of a united Europe clearly demonstrates this. Brexit, constant disagreements among the EU members, which block the work of the European Commission and which force the EU to replace its order of making decisions by consensus by a simple majority—all this clearly proves the foreseeable incapacity of the world government proclaimed by the Manifesto.

At one time, Francis Fukuyama declared the “end of history,” pronouncing the “only true” liberal-market model of the socioeconomic system for all countries. However, while announcing the global triumph of the capitalist system, he nevertheless stated that the free market is not able to build public infrastructure, transport, health care, and other vital social systems. In his opinion, all this should be transferred to state administration.

Today, after the global crisis of 2008, which each country tried to manage on its own, it became clear that the further path of human development is not limited to the secret, “only true” economic doctrine for all, but must be found in a skillful combination of all known theories and economic tools. The criteria for choosing these tools should be the cultural and historical characteristics of a particular people. Only a combination of the advantages of capitalism and socialism—well thought out by the people themselves, projected onto national cultural and historical features of development—is capable of building the most efficient economic system.

Blind faith in the miraculous power of “great” economic doctrines and “great” teachers, who could automatically lead all countries and peoples to prosperity, should be scrapped. Today, more than ever, we need to rely only on human reason, experience, tireless creative search, and inventiveness.

Instead of the failed “end of history,” its infinity both in time and in forms of existence should be proclaimed: “Mobilis in mobili.” In other words, happiness and prosperity of peoples today, in the twenty-first century, must be built individually, without readymade formulas and recipes, especially those received from outside. It should be the result of continuous, meticulous, collective creative work of the best, democratically elected representatives of the people, who have all the necessary knowledge, sufficient experience and high responsibility.