Previously, in the “Ethics” category, I published several posts on the negative effects of the law of self-interest in society—as the primary source of injustice and evil on earth—and in “Social Philosophy,” I discussed it as the main cause of corruption. At the time, I promised to provide examples of its positive effects in various spheres of public life at a later date. This article is the first (but not the last) attempt in this direction. This time, we’ll focus on the economy.
In the fields of economics and trade within market economies, the law of self-interest operates at 100 percent. Here, it can safely be called the law of personal gain. The goal of any economic entity—whether industrial, agricultural, commercial, transportation, construction, or any other sector—is to obtain economic and material gain, or profit. But it has long been clear to all entrepreneurs that their personal economic interest (benefit) directly depends on how successfully they meet the personal interests of the consumers of their goods and services. Here, the interests of both parties are effectively and mutually satisfied.
Only in the socialist economic system was the goal of the economy “the fuller satisfaction of the ever-growing needs of the working people.” But there was practically no personal—and above all, material—interest on the part of producers. What to produce and in what quantities was decided by the “State Planning Committee” (Derzhplan)—the main body that planned virtually the entire state economy.
And although economic efficiency of enterprise operations was also required there—and to this end, so-called “economic calculation” was even actively introduced—quite a few enterprises were actually unprofitable and relied on state subsidies. Their primary task was to produce a particular product, regardless of its profitability. Profitability and profit came second; first and foremost was what the country and the people needed. Such was the guiding principle of the socialist system.
The goal was noble, to say the least. The socialist economic system had its strengths: the ability to concentrate resources in specific areas, massive construction projects, rapid development in certain industries, stability, certain advantages of a planned economy, a focus on serving the interests of workers, and a few others. As for the shortcomings—low profitability, inefficiency, mismanagement, wastefulness, laxity, and so on—we would gradually overcome them. It seemed both sensible and appealing. But years and decades passed. And what was the result?
The “outdated” capitalist economic system (in developed capitalism) has repeatedly outperformed the “developed” socialist one—first and foremost in terms of efficiency, as well as in terms of technical and technological advancement.
But what’s interesting is that even in terms of “meeting the ever-growing needs of the working people” (although this, it would seem, should not have been the goal of capitalist production at all, since the goal is profit), capitalism also far surpassed socialism. And Soviet citizens, who were increasingly traveling abroad, were constantly reminded of this.
When a Soviet person found themselves abroad and walked into a supermarket, they were literally stunned by the sight of thousands of the most diverse manufactured goods, half of which they couldn’t even fathom what they were meant for! And in the grocery aisles, they’d see dozens of kinds of sausages, cheeses, meat products, vegetables, and fruits; fresh greens lying on refrigerated shelves, constantly covered in a layer of moisture! And all of this, no matter the season! And all at affordable prices for anyone who works, as well as retirees. And she’s bound to exclaim, “But this is communism!” ??? And then she’ll wonder: How could such communism have come about in anti-communist capitalism!!!
And why did this happen? The reason, once again, is that same universal and all-powerful law of personal gain! Business owners, as well as their managers at all levels, have a personal—and, above all, financial—interest in high production efficiency, which is driven by consumer demand. Moreover, it turned out that it is also in the owner’s interest for his employees to earn a living and live a normal, dignified life. After all, when they do, they work better and are less likely to leave the company. At the same time, they thereby maintain (on a national scale) high purchasing power, thus contributing to the development of economic sectors—including that of the specific owner’s enterprise.
At the same time, however, workers’ effective struggle for their personal interests has shown capitalists that it is in their own best interest to meet workers’ demands; otherwise, they risk losing everything (through strikes or even revolutions).
To be fair, we must not forget that in its early stages, capitalism was far more brutal: there were crises and unemployment. But we also remember the no less brutal times of famine and total shortages of consumer goods under Soviet socialism.
And I believe that the gradual realization that balancing the personal interests of different segments of the population—primarily business owners and workers in developed capitalist societies—is in their mutual self-interest has brought the situation to a fairly satisfactory level.
It must be said that the state also addressed the issue of curbing manifestations of aggressive selfishness harmful to society—including by regulating a normal wage level through the establishment of a mandatory minimum wage.
In the socialist system, the personal interest and personal stake (primarily material) of those involved in production—particularly enterprise managers—were weak and did not adequately contribute to production efficiency. This has been demonstrated and proven thousands of times, first and foremost by life itself.
And how could an economy, in which the primary task was not economic but social, possibly keep up with a (capitalist) economy, in which the goal of economic activity was an economic one?!
And what did we end up with? Look at the socialist states with their socially oriented economies. And the root cause remains the same! Capitalism (especially in the economy) did not fight against the law of personal gain (which is objective and cannot be overcome), but rather exploited it. Socialism, on the other hand, spent its entire existence fighting against it, seeking to place social interests above personal ones and to re-educate people.
Remember (for those who studied it) the third task of building communism—the creation of a new person who would think precisely in this way: with a focus on society rather than on the individual. But they failed to take into account that the law of self-interest is objective and cannot be overcome. It must be utilized. We should, first and foremost, utilize its positive aspects and, whenever possible, minimize the negative ones
The mystery of the disappearing money. Self-interest is when we show interest in ourselves. Economics simply incorporates that into any model they construct. Will the model work? Why wouldn’t it. After all we have the most important piece of the puzzle.