Alexander V.

Osadci










THE PROPERTY
General Theory of the State and Social Evolution








[Link]

statetheory@[Link]


All rights reserved, 2003




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To the memory of my father
Valentine
Professor, PhD in Economics





































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Table of Contents


PART I. PROPERTY RELATIONS AND SOCIAL EVOLUTION
Chapter 1. Exclusive Property Rights
Chapter 2. Property Rights Imperfections
Chapter 3. Self-interest Oriented Human Nature and Socialization
Chapter 4. Social Evolution
Chapter 5. Strength and Elimination of Monopoly
Chapter 6. Economic Inefficiency and Economic Injustice

PART II. THE STATE
Chapter 7. State as Production Factor Monopoly
Chapter 8. Dictatorship and Democracy
Chapter 9. State Functions
Chapter 10. State Bureaucracy
Chapter 11. State and Communism
Chapter 12. Capitalism, Socialism and State Monopoly

Notes



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PART I. PROPERTY RELATIONS AND SOCIAL EVOLUTION

Chapter 1. Exclusive Property Rights
Amongst economic categories and definitions, property perhaps is the most fascinating
and the most global in terms of the explanation of societal processes and economic
realities. Relying on property relations, we can draw an essence of any particular
economic and social phenomenon. Property at the same time is one of the most popular
categories in social science. Everybody possesses one or another type of property
beginning from beggars clothe and ending with a space shuttle. Any object, material or
immaterial, tangible or intangible can be considered as a certain type of property.
Intellectual property, patent, State or public property, income, salary, house, clothe,
exclusive rights upon utilization of certain production facilities, education those are
concrete examples of a general category of property. Even such idealistic intangible
substances as our ideas, feelings, emotions, sentiments and even our own life also
represent particular types of property. Just as any material property these types can also
be influenced or controlled by other people; majority of them can even be appropriated
by the other people. Ones own property upon his feelings, emotions, ideas and upon
ones own life is an essence of what we understand under definitions of "human rights",
"freedom" and "liberty".

People often think about property as about an economic category or as about something,
what can be sold, bought, exchanged, etc. All that makes sense, but this is only a part and
absolutely not a determinative part of the general phenomenon of property. Truth is that
the property is essentially a social category rather than economic one, because there is no
property without its foundation on power and coercion. Without at least minor degree of
power, we would be unable to acquire and to hold any property and even our very own
life would belong to other powerful people we would simply be slaves without any bit
of power. Any proprietorship, first of all, is based on power; power is a foundation of
proprietorship. There is no any proprietorship apart from its reliance on power. Law,
which allegedly guarantees us our property possessions, is nothing else as a mere
reflection of the balance of power in society. What kind of property and to what extent
particular private individual in any particular society can possess and use is being
determined by two factors his personal power or his personal relation to social
mechanisms of coercion and a balance of power in this particular society based on
counteraction between all private interests. Whatever system of property rights and
property relations we are having in modern times in economically developed countries, it
is based exclusively on the balance of power in our society, and only thanks to that
particular balance of power we are able to acquire property, to use and to hold it. People
are not struggling and fighting in society just on their own; quite often they are grouping
or formally and informally uniting for promotion of their special interests. Because of
that and also because of the general commonness and uniformity of basic human needs
and basic human interests a person does not have to fight for his rights and privileges
only on his own, he can do it in association with the other people with similar interests.



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Even more than that, as we all know, sometimes he can even be a free rider. Therefore,
besides a private component of our social power, there is also an inbuilt or embedded in
every person group component of power, which is uniting particular private individual
with a particular power group, with a particular interest promotion group or with a
particular social group.
Usually we think about property as about something, which belongs to concrete
individuals or to groups of people. This can be attributed to understanding of property in
economic or in legal sense and at economic level. At the economic level property rights
are realized by their direct proprietors who are simultaneously their main beneficiaries
beneficiaries, first of all, in terms of income. From economic point of view, any economic
proprietor is realizing his property rights through different types of economic activity.
Property rights include, as well, a right to freely manage ones property and to use
according to ones wish any benefits arising from utilization of the particular type of
property. Economic or legal property rights, their applications and appropriations are the
most explicit ones not only for professionals and practitioners, but for general public as
well. They are lying on a surface of everyday economic activity and of everyday social
life. On the other hand, owing to their interconnection with real tangible economic
interests, economic property rights are often stimulating significant controversy,
discussions and quite often even more severe types of social counteraction. They are also
directly connected with a distribution of income and property in any particular society.
At the social level things are relatively different and first of all what concerns a definition
of property. Economic property rights and connected with them distribution of income
are realized by their economic, private or lawful proprietors only up to a degree limited
by existing in society at particular point in time balance of power or balance of
counteraction between all private interests expressed in a system of societal or property
relations. Without understanding of social - based on mechanisms of power and coercion
- property rights we cannot describe different types of social formations such as slavery,
feudalism, capitalism, socialism and communism. On the other hand, without
understanding of property relations at social or societal level we cannot describe any
social phenomenon generally, because property relations are determining not only
particular fixed in time social processes, but also social processes in their evolution or
social evolution as well. We can go even further and say that economic or legal definition
of property is not enough for understanding of property and property relations and
therefore is not enough for general understanding of social relations in any society and as
a matter of fact without the notion of "social property rights we cannot describe
anything in society. A feeling of multidimensionality of societal relations related to
production of material wealth occurs far back in history being explicitly pronounced by
Franz Oppenheimer.

There are two fundamentally opposed means whereby man, requiring sustenance, is
impelled to obtain the necessary means for satisfying his desires. These are work and
robbery, one's own labor and the forcible appropriation of the labor of others



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I propose to call one's own labor and the equivalent exchange of one's own labor for the
labor of others, the economic means" for the satisfaction of needs, while the unrequited
appropriation of the labor of others will be called the "political means."
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Property is a very complex and exceptionally influential category what concerns social
and economic processes as well as what concerns social and economic behavior. Property
is having a double nature. First part of its nature is connected with personal consumption
and utilization of property for satisfaction of personal needs. In such quality property
serves as a reproduction factor for labor force or for entrepreneurial capacities. Its second
part is connected with industrial or economic consumption and in such quality property
serves as a reproduction factor for capital. Property as labor force reproduction factor is
utilized in personal or private consumption, which under normal circumstances never
troubles other people either socially or economically. In this sense few limitations can be
attributable to personal consumption or to this form of property utilization. On the
contrary, production utilization of particular property or more precisely its utilization in
value creation process is directly connected with interests of the other people and
because of that property is acquiring a coloring of social phenomenon. Uniting and
connecting various private interests, production utilization of property is bearing a seal
of social counteraction and potential of becoming a social phenomenon.
Entering into production or economic relations, property is loosing its personalized or
personified character and starting to be related, in addition to its direct proprietors also to
a certain number of other people. Any act of property exchange represents at least two-
dimensional deal. Simple exchange transaction can at least be considered from the point
of view of buyer and from the point of view of seller.

The buyer depends on the seller and the seller on the buyer
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Every one of them is having his egocentric interest in particular exchange transaction and
tends to extract from such transaction as much benefits as possible. Despite this fact,
main visible outcome of the economic utilization of private property is the decrease of a
general level of prices or an increase of the aggregate level of income in society. Such
outcome forms the nature of a process of property accumulation. If we have more
property today than we used to have yesterday we can speak about property or capital
accumulation. Single intensive (not directly connected with discovery of new resources)
method of capital accumulation leads either to decrease in prices or to growth of
aggregate income, which are the two different effects of the very same economic or value
creation process, as we shall see.
Property, especially in its application to economic activity is not something fixed,
constant or steady. Quite opposite, the very logic and reason for any economic activity is
to make property work and move. If from the legal point of view or from the point of
view of common understanding of property, it probably more corresponds to the former
characteristics, from economic point of view property rather represents a constant



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process of movement, flows and reallocation of resources. It influences and concerns not
only separate economic proprietor, but rather closely fits into the network of
macroeconomic and societal relations. Any social (based on mechanisms of power and
coercion) obstacle on the way of free property flows is allowing certain people and social
groups to obtain exclusive property rights and is bringing along both inefficiency and
appropriation of monopolistic income. Based on that, economic operations are under a
great deal of social pressure and quite often also represent a social phenomenon, which is
uniting, counteracting or cooperating more than one interest. Economic property
possessions as well as capital or property flows can be limited or restricted at the societal
level or by certain social (based on mechanisms of power and coercion) property claims.
Since property is not something fixed, but vice-a-versa is something, which must
constantly move and flow in order to bring any value - universal status of social property
rights presumes unrestricted property flows in correspondence with maximum economic
efficiency requirements. If somebody does not have an access to any particular property,
it means that somebody else is utilizing this property on exclusive basis and is benefiting
from such utilization in an exclusive way. Any non-exclusive economic property
possession and moreover economic utilization of such property also represents an act of
socialization. Any non-exclusive economic property possession is beneficial both for its
proprietor and for society as a whole or for every single member of society. Economic
non-exclusive utilization of property is not a private process (even though property is
called private) because it involves and concerns a certain number of people and
because it is being carried out without creating any exclusive property rights at social
level with implication of the mechanisms of power and coercion.

Private property of the material factors of production is a public mandate, as it were,
which is withdrawn as soon as the consumers think that other people would employ the
capital goods more efficiently for their, viz., the consumers', benefit
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Economic utilization of property is nobodys merit or nobodys accomplishment from the
point of view of moral or justice. Proprietor is benefiting in terms of income and therefore
already is receiving an award from people for his actions. On the other hand, people are
benefiting in terms of new products, in terms of lower prices or in terms of growth in
aggregate income or what is the same in terms of growth in aggregate property's value.
Consequently non-exclusive or non-monopolized property possession is not only
allowing property accumulation for the owner of this particular property, but also
through its economic utilization is increasing a value of property of the other members of
society. This is the highest economic expression of socialization of the private interest.
Under perfect competition or under monopoly-free environment, any member of society
is having an access to the same economic resources as all other people, and if somebody
does not succeed, it is merely because he is not so smart or lazy. Therefore, nobody can
say that a winner is getting an unfair or exclusive reward (income) on account of the
other people. On the other hand, under monopoly free environment any proprietor
always has to think about his customers or potentially about every particular individual
since only serving their preferences to their utmost satisfaction he can benefit from his



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property. Permanent dependence and interconnection with economic property rights and
of other people are keeping separate private interest within an aggregate framework of
interests of all other people thus socializing it.

The market does not directly prevent anybody from arbitrarily inflicting harm on
his fellow citizens; it only puts a penalty upon such conduct. The shopkeeper is free
to be rude to his customers provided he is ready to bear the consequences
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We have a completely different picture if somebody managed to obtain particular
exclusive property rights, exclusive social property claims or exclusive privileges based
upon social mechanisms of power and coercion. Such rights and privileges are freeing
particular proprietor from economic interconnection and interaction with the rest of
society. First of all, this proprietor simply has fewer incentives to satisfy demands of
every particular individual in this particular society, because people do not have a choice
in terms of procurement or utilization of this particular property. From the other side,
exclusive proprietor is becoming independent from the rest of society in evaluation of his
property in terms of the other peoples property and therefore is becoming to be able to
evaluate on his own both his property as well as other peoples property and economic
contribution in terms of his property. This is another big step away from socialization.
Both factors are bringing self-interest oriented human nature of exclusive proprietor in
contradiction with interests of other people and moreover with the requirements of
macroeconomic and social efficiency. Carrying a human self-interest all the way to
exclusive social property rights, such statement of things creates disturbances in the
entire system of social and property relations.
Social property rights are closely connected with and relying upon macroeconomic or
social evaluation of property or upon price influence situation. Marx, for example, had
demonstrated rather explicitly that the process of exchange represents a complex social
relation
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. It is not just a matter of particular seller and of particular buyer. It goes much
deeper in its social essence and influence. Every particular transaction is inseparable from
an overall societal process of exchange. Clearly, those are the compound claims of all
market operators upon any particular commodity what is driving and determining
exchange ratios and not just the narrow preferences of particular seller and buyer. On
these basis an exchange value of any particular commodity is being established. This
implies that all individuals in society have an influence or have a right to vote on any
particular exchange transaction according to their preferences, being at the same time
able to repeat it, if they wish, with their own financial resources in the very same way.
This also implies, that if somebody for one reason or another is unable to reproduce a
desirable kind of transaction owing to social (based on mechanisms of power and
coercion) factors, he is automatically excluded from particular process of economic
bargaining or from economic formation of a price of particular commodity. Speaking
otherwise, this person is becoming unequal or inferior in his economic voting rights
related to expression of his consumer preference. Not only he is unable to vote on price
of particular property (commodity) of certain other people, but he is equally unable to



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participate in a formation of price of his own property in terms of certain other peoples
property as well. Those other people acquiring exclusive property rights based on
power and coercion are violating his social property rights and are determining instead
of him the price or economic contribution of his property in terms of their property. This
is a major underlying reason of monopolistic injustice from the point of view of economic
exchanges.
Generally speaking, any commodity is not bound to be exclusively utilized since the
entire economic network by and large is directed towards maximization of revenues and
therefore towards maximization of sales. Only certain specific commodities can be subject
to exclusion from the market and to their exclusive utilization. These commodities are
called production factors. What is so special about them that make them so desirable in
terms of their exclusive utilization? First of all, it is their nature based on impossibility of
any economic, social and therefore of any life supporting activity without their
implication. And if this is the case, then their withdrawal from exchange will give their
proprietors exclusive rights on their utilization and first all will provide them with a
possibility to receive exclusive or monopolistic income. Accordingly, it will make other
people, who are left out of price voting influence upon economic contribution of
particular production factor, to pay certain exclusive prices, which exceed economic or
market value of these resources.
Let us consider a simple case of exclusive rights - monopoly on production and
distribution of matches in particular city, which has emerged, for example, as a result of
bribing of city council officer by matches production and distribution company. Such
circumstances are making people in this particular community to pay monopolistic price
for matches. However, consequential exclusive income is not distributed equally among
owners of each production factor, which has participated in manufacturing of matches.
Since production of matches is sufficiently simple and does not require sophisticated
skills and qualifications, workers who are employed to produce matches are easily
exchangeable for other people. Value of labor in this case is determined by the market or
by the price voting mechanism with participation of every single consumer of matches.
Particular employee cannot influence the price of his labor. Let us suppose, that land
affiliated to this factory is rented from a local landowner. There are hundreds of other
plots of land and hundreds of other landowners in town and in its vicinities. Price of
land, therefore, is also determined solely by the market. Consequently all production
factors employed in this particular economic activity are subject to formation of their
value through market exchange process, with an exception of capital. In other words, an
overall economic voting is involved in the process of price formation for all production
factors employed except for the capital. It is not only the voting of particular people
engaged in these particular transactions what counts. Every member of society is voting
on values in this particular economic activity. Price or value formation process involves
all people in equal manner even if due to certain reasons some of them do not want to or
simply cannot buy particular commodities. All land market participants or landowners
determine a price of land including the price of land for this particular project. All labor



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market participants are determining a price of particular labor input at our matches
factory. Speaking otherwise, every member of society is taking part in determining
economic value of this deal. Here lies a connection between economic and social nature
of the value (price) identification process. If every single member of society is able to
participate in price formation for any particular exchange transaction, we have a case of
economic and social justice and we do not have any exclusive property rights or property
rights violations. On the other hand, if only particular individuals or particular social
groups are able to determine economic and social value of particular property or of
particular economic transaction on their own, discriminating or excluding the rest of
society, then appear both exclusive property rights and associated economic injustice. In
our example of matches factory, concrete economic process of value identification is
violated. People are not able to effectively participate in the process of price formation for
matches or more precisely in identification of the economic value of capital as of
production resource for this particular commodity or for this particular economic agent.
Access to matches capital is closed for the rest of society. Nobody can use capital to
produce matches. Social property rights of every particular individual are violated and
simultaneously exclusive social property rights are appropriated by the proprietor of
matches factory. People are excluded from the market voting or from the process of
value identification for this particular commodity. They are also excluded from
identification of value of the participation of this particular structural capital in overall
economic activity - of its general economic contribution. Exclusive property rights
represent in this case a social phenomenon - imperfection in the system of property
relations, which arises as a result of self-realization of an egocentric interest through
utilization of the mechanisms of power and coercion (City Council) and not on account of
any economic factors. These particular exclusive property rights are not emerging from
economic competition, but vice a versa they are appearing owing to a direct violation of
such competition and therefore this kind of property rights is bearing purely social and
not an economic nature. Nature of social monopolization is essentially different from the
nature of economic monopolization - those are two absolutely different types of
monopolization.
Price of property or of commodity is not a private matter of buyer and seller or even of
both of them - it is rather an economic phenomenon, which depends on every member of
society. Every particular individual is evaluating his property in terms of other people
property. He does not fix price just in terms of monetary units, but rather marks it in
terms of a certain amount of other peoples property. If people accept his price, by selling
his property (commodities) he is acquiring economic claims upon their property. The
same is valid in terms of other individuals claims upon his property.
This is what is meant by those who call the market economy a democracy in which every
penny gives a right to vote
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Even if somebody does not want to buy or does not have enough money to buy
particular property he is also voting by saying this price is too high for me and I vote it



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should be reduced or even I generally do not need this commodity even for free. This
is his influence upon property of the other people or his social property right. Although
he is not participating in a particular transaction and may not even own any property
(which is very unlikely) nevertheless he has a social right to vote just like anybody else.
Through economic voting he is acquiring the right on evaluation of anybodys property
in terms of his own property. Ones own property, at the end of the day, is not expressed
in some mythical or mysterious monetary units, but only in terms of other peoples
property. If a large number of people will articulate their claims upon particular property
or commodity in the same negative way, then under the pressure of market competition
an owner of particular property or of particular commodity will have to reconsider his
price. By doing so, he will contribute to economic efficiency requirements, which claim
that the price of his commodity is too high and therefore the cost of his property to the
society is too high as well. Society or any actor on behalf of society within the process of
exchange neither have any ability nor any justification to coercively persuade the owner
to reconsider a price of his property. If the owner does not want to respond to social
property claims of the other people and to reconsider his price and therefore also to
reconsider the cost of his property to other people, then his competitor or proprietor of
similar commodity will reduce the price in order to increase sales and profits. By doing
so, he will be able to extend his property possessions, because buyers will now vote for
his price and therefore for his commodity. By responding to social property claims of the
other people this particular proprietor will be able to sell more or what is the same will be
able to increase an amount of his property.
But what if in the system of property relations appear some kind of imperfections and
owing to certain social factors, which we will consider later, there are no more any
substituting property possessions while the proprietor of certain commodity is becoming
to be a single supplier of this particular commodity on the market? Accordingly this
particular proprietor is acquiring exclusive social property claims accompanied by
violation of the price voting mechanism. Price voting mechanism and social property
rights cannot anymore influence the value of his property and its cost to every particular
individual in society, simply because there is no any other price and no any other similar
property (commodity) offered. There is no any alternative price option; there is only one
option established by exclusive proprietor. People, therefore, will loose their social rights
upon this particular property, even though they are still able to acquire this property
(commodity) within the process of exchange through a simple exchange transaction. On
the other hand, people will not be able anymore to participate in evaluation of their own
property in terms of this particular proprietors property. As a result their rights on
evaluation of their own property or their own social property rights are violated. In other
words, if somebody is acquiring social possibility to determine a price of his property
only on his own independent from other people, it means that this individual is not only
denying for other people a possibility to participate in value formation process related to
his property or to determine his economic contribution, but simultaneously he makes it
impossible for them to evaluate their own property in terms of his particular property.
This phenomenon, which we call price influence situation, is essentially important for



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understanding of the nature of problems and imperfections arising in the system of
property relations very important first of all on account of associated patterns of income
distribution.
Normally, any proprietor is eager to obtain exclusive rights for utilization of his property
and for associated appropriation of exclusive income or, otherwise, is eager to limit an
influence of the other members of society upon evaluation of his particular property and
upon the consequential pattern of income appropriation. Since it is quite difficult to
accomplish this task on ones own, sometimes it is more profitable for a group of
exclusive proprietors to unite their efforts and to form a social group in order to acquire
and to maintain exclusive property rights on utilization of particular property. Such
incentive moreover exists in case of monopolization of the entire production factor.
Exclusivity of social property rights is a rather quantitative phenomenon. Whenever
certain social group manages to obtain exclusive property rights, we are having a case of
social property rights violation or a case of appropriation of exclusive social property
rights. Such situation generally means restricted social (based on mechanisms of power
and coercion) access for individuals and social groups to certain type of property.
Violation of social property rights simultaneously implies that particular individuals or
particular social groups owing to certain social circumstances together with ordinary
economic property rights are simultaneously acquiring certain exclusive social property
rights. In order to realize their exclusive social property rights, proprietors need some
kind of macroeconomic or social entity a source of coercion - for protection of their
exclusive privileges as well as for facilitation of the distribution of associated exclusive
income. Accordingly, exclusive social property rights for one particular social group and
property rights violations for other members of society are normally coming together at
the social or societal level and with direct participation of the State main or even single
social entity empowered with coercion and social persuasion.
Unlike economic property rights, exclusive property rights can be realized only on
account or in detriment of the other individuals and social groups and objectively against
their interests. It is exactly at the social or societal level exclusive property rights are
being generated and the main reason for their emergence is power, while the main tool
for their maintenance is coercion, both existing only at the societal or mostly at the State
level. Perfect competition simply means that nobody in society is having exclusive social
property rights based on power and coercion or otherwise that everyone is having full-
fledged unlimited social property rights based on universal price voting mechanism.
Unrestricted non-exclusive social property rights presume equal opportunities for
realization of socialized interests through various types of economic activities. Under
economic property rights we will understand rights, which are not having any
determinative influence upon societal processes, which are not based upon mechanisms
of power and coercion and which do not lead to emergence of any exclusive privileges
and benefits. Under social property rights we will understand general social accessibility of



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any particular type of property for every particular individual in given society. Social
property rights have to be appropriated by all people and by every single individual
separately. Unfortunately, they are not fallen from sky and never belong to people
automatically. Initially, only the most fitted, the strongest and the most powerful
individuals directly associated with the mechanisms of coercion are acquiring social
property rights. While if property rights are appropriated only by a certain group of
individuals or by a certain social group, they are right away becoming to be exclusive
and inaccessible for other members of society. Originally exclusive property rights are
very strong and therefore social property rights violations are very strong as well. And
only with the time passing by, those other people counteracting established exclusive
rights are gaining little by little their own social property rights, for which they have to
fight permanently and continuously. Any social property rights including exclusive
social property rights imply underlying them power and coercion - that is why we call
them social. Violation of social property rights generates exclusivesocial property rights
and simultaneously creates a social opposition or social counteraction to any exclusive
rights.
If at the economic level we have one particular beneficiary of any private property a
proprietor, at societal level the situation is rather different and normally we can identify
other social beneficiaries of the same property, which owing to certain social
circumstances are able to profit, in one way or another, from property possessions of the
other people. Exclusive social property rights therefore represent another way of
benefiting from economic property possessions. However, on the contrary to non-
exclusive private property rights and to non-exclusive social property rights, particular
individuals and social groups can benefit from exclusive social property rights only on
account of the other individuals and social groups. Particular individuals and social
groups are becoming social beneficiaries of property possessions of the other people
owing to existence of exclusive property rights, which are established and maintained
with utilization of the mechanisms of power and coercion. Only the socially strongest
and the most fitted individuals, usually united in social groups, are acquiring exclusive
property rights based on mechanisms of power and coercion and are becoming property
and income beneficiaries on account of the other members of society as well as on
account of general economic efficiency.

Besides direct social beneficiaries sometimes we can also identify indirect social
beneficiaries, who are benefiting from income redistribution, rather than from income
distribution. They are nevertheless social beneficiaries, because any redistribution of once
earned income is only possible through application of the mechanisms of power and
coercion. Difference between income distribution and income redistribution is very
simple and straightforward. Income expropriated from its direct proprietors and received
in a non-market way through application of the mechanisms of power and coercion
represents income redistribution or unearned income. Indirect social beneficiaries can be
of a very different nature, origin and social characteristics, beginning from kings
mistress and up to the elder people, disabled, unemployed and different other groups of



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population varying throughout particular countries and particular historical periods.
With emergence of globalization and with growth of international aid appears a process
of income redistribution at international level where beneficiaries are not only
represented by particular individuals and social organizations, but much rather by
particular governments and States. Any income redistribution similar to distribution of
exclusive or monopolistic income can only be realized relying on force, power and
coercion. In order to redistribute resources, it is necessary to possess certain power and to
be able to persuade and to punish those who are not willing to give up their property.
Income redistribution being possible only through application of power and coercion is
always coming along with associated exclusive rights on utilization of the instruments of
coercion, with appropriation of exclusive or monopolistic income and therefore with
imperfections in an overall system of property relations.
Social groups normally should be defined according to a relation of particular
individuals to certain types of property possessions and to certain income appropriation
patterns. Since income appropriation is the most significant and the most influential part
of property rights, the definition of social groups, first of all, has to rely on property
relations and on exclusivity of property rights. Exclusive property rights and especially
exclusive property rights upon particular production factor are a single reason for any
social groups to exist. Exclusive property rights of particular social group upon particular
production factor are determining and differentiating social formations slavery,
feudalism, capitalism, socialism and communism. Within each social formation we can
identify two fundamental types of social groups monopolistic social group, which
possesses exclusive property rights on particular production factor and monopoly
dependent social group, which has to pay for these exclusive property rights of the first
group at least in terms of property and income. Besides financial or monetary payments
per se, normally monopoly dependent individuals and social groups also have to pay in
terms of their social or human rights, in terms of their freedom and liberty. It is very
difficult to maintain exclusive property rights without at least some limitation of social
rights for monopoly dependent individuals and social groups. One needs to rely heavily
on mechanisms of power, coercion and forcible persuasion in order to make people pay
for his exclusive rights. Otherwise, nobody would voluntarily agree to pay exclusive or
monopolistic price. In order to acquire exclusive property rights from one side and in
order to persuade monopoly dependent social groups to pay some extra price from the
other, one would need extraordinary power as well as immense material and financial
resources.
Income received from economic utilization of non-monopolized property is not making
people to unite in social groups - at most in special interest groups (which typically form
in order to fight for certain exclusive rights and privileges - not in order to maintain
already gained rights). What creates social groups is either a necessity to support and to
preserve existing patterns of income appropriation or, vice a versa, a need to counteract
exclusive income appropriation rights of the others. In the first case social groups are
monopolistic (ex. slave-owners), in the second - monopoly dependent (ex. slaves).



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Normally nobody in a society can escape direct or indirect payments for existence of
exclusive property rights. At the same time, besides monopolistic and monopoly
dependent social groups by and large in any society there are certain other groups of
people, which are neither really paying monopolistic price from one side nor having any
exclusive rights from the other. These people (for ex. doctors, artists, etc.) in fact do not
represent any social group, because their property and income appropriation patterns are
not associated with any exclusive rights while their social rights not always and not
directly are being limited by the mechanisms of power and coercion.
Only income appropriation and income distribution connected with exclusive property
rights is a key for identification of the social groups. We cannot define social groups
according to their line of occupation or to their relation to particular non-monopolized
property. Writers, lawyers, doctors, farmers, entrepreneurs cannot be considered as social
groups. At most they might form professional interest groups, which usually (though not
always) are not organizationally designed in order to manage exclusive economic or
exclusive income interests and in order to organizationally influence or even manage
instruments of coercion. Taken separately people of particular profession within their
professional mode of income appropriation do not even have any reasonable common
interest to fight for - in their non-monopolistic nature they are simply selling their
services as anybody else. More than that, normally they are competitors among
themselves. However, if only those people are somehow uniting in order to impose a
certain pressure towards specific patterns of income distribution and redistribution and if
they are succeeding in that, then they are automatically acquiring exclusive property
rights. Any exclusive income or any exclusive property rights are simultaneously
generating social opposition or social counteraction. Social counteraction is what social
groups are all about. Any social structure based upon exclusive property rights, power
and coercion is leading to social counteraction and simultaneously creates social groups.

Political power, properly so called, is merely the organized power of one class for
oppressing another
7

Definition of social group does not imply any caste alike stubborn system of social
relations. Generally speaking, what makes peoples transition from one social group to
another difficult is the level or degree of exclusivity of particular property rights. Pursuit
of exclusive rights is making monopolistic proprietors eager to limit an overall number of
owners of the monopolistic property and therefore to increase their personal share in
total monopolistic income. Monopolistic social groups simply do not like to share their
exclusive income with the other people. Such statement of things is explaining rigidity
and inflexibility of social groups. However, certain opportunities for transition from one
social group to another or rather from non-monopolistic and monopoly dependent social
groups to monopolistic ones exist even under the most severe types of exclusive property
rights. The less exclusive are property rights - the larger are the possibilities for such
transition.



15
In order to assure long-term social privileges, permanent wealth or even means of
subsistence at the earliest stages of the formation of human society, socially stronger
individuals, which afterwards had formed a foundation of ruling social groups, were not
only eager to possess some kind of property on exclusive basis, but also to assure for this
possession to be of a long-term hereditary character. It is exactly the exclusive property
rights, what creates social groups and not people's relation to private property as Marx
once assumed. The closer is an aggregate national market to perfect competition or the
lower is domination of exclusive property rights in a particular society, the less
significant are economic, social and even cultural differences between social groups.
Social groups are distinguished based on their relation to certain types of exclusive
property rights and not based on their relation to different types of property or even to
different types of production factors. Particular individuals are beginning to recognize
their common interests of a social group whenever they have something in common to
hide, to protect and to maintain (for example exclusive property rights and privileges) on
the one hand or whenever they have something in common to fight for, on the other
hand. Whenever people are under monopoly free environment or under perfect
competition, every single individual is having his own, quite independent from other
people, interests. Under these circumstances, there is no need or what is more important
there is no sense to unite such interests in one common social interest. Generally
speaking, any political and social interests are, first of all, uniting on the basis of common
ideas about income distribution and redistribution, i.e. owing to purely economic reasons
even though they are uniting socially i.e. relying on mechanisms of power and coercion.
General declaration of universal non-exclusive social property rights can be referred to
something like - to assure for every member of society a social opportunity to benefit
from every single property possession through unrestricted non-exclusive social access to
any type of production factor and to any kind of property. Under the non-exclusive
property regime, every member of society is benefiting from every single property
possession of all other people through their economic and production activity
simultaneously participating in an overall property evaluation process. In order for this
statement to hold, every person or every business organization must have a possibility to
realize their social property rights through the free flows of economic resources in any
economic sector or in any type of business activity according to maximum economic
efficiency requirements and in correspondence with market indicators. If for certain
people an access to particular type of property or moreover to particular production
factor, for one reason or another, is restricted or denied, or otherwise, if capital flows are
limited, then their social property rights are being violated. While certain other people in
this case are automatically acquiring exclusive property rights.
The principal cause of the evil lay in the accumulation and immobility of capital of all
sorts, -- an immobility which prevented labor, enslaved and subalternized by haughty
idleness, from ever acquiring it
8




16
Chapter 2. Property Rights Imperfections
All people are born equal in their natural rights, one of the principal fundamental rights
being a right to possess any kind of property. Right to possess property without any
restrictions, at the same time represents a right on realization and development of ones
natural capacities. But, since natural capacities are not equal and since human nature so
far is having mainly self-interest oriented character, people with the strongest and more
suitable for particular stage of social development abilities are naturally inclined to
benefit on account of their weaker in the social sense compatriots. The only way possible
for that are exclusive property rights, property rights limitations and social restrictions to
possess and to use certain types of property. Otherwise everyone is in the same
conditions. These limitations may well have a variety of forms starting from a simple
forcible expropriation and up to exclusive property rights upon particular production
factor, upon other peoples labor and even upon other peoples life. Such outcomes,
which are somewhat familiar to general public under a concept of "monopolization", we
will call property rights imperfections. At certain stage of social evolution people came to
realize that simple compulsory expropriation is a too rough and therefore a too short-
term pleasure. It is also too bad for an overall economic performance. More appropriate
as well as more long-term means have to be discovered in order to get an exclusive
monopolistic income.

it begins to dawn on the consciousness of the wild herdsman that a murdered peasant
can no longer plow, and that a fruit tree hacked down will no longer bear. In his own
interest, then, wherever it is possible, he lets the peasant live and the tree stand.
principally in accordance with a developing customary right - the first germ of the
development of all public law - the herdsman now appropriates only the surplus of the
peasant.
9

Self-interest oriented human nature is having a general tendency to direct any activity
towards maximum possible level of exclusivity. This tendency is not based merely on
idealistic assumptions of pride, self-esteem or others of a kind. Exclusivity is having a
very specific and very tangible economic expression, allowing realization of particular
economic activity on certain exclusive or monopolistic basis. The higher level of
exclusivity is assuring a higher level of income of a longer-term character as well as all
consequential social benefits and privileges. Generally speaking, property rights
imperfections are a direct consequence of the self-interest oriented and exclusive in its
self-interest human nature. However, not any type of human exclusivity is yet creating
property rights imperfections, but only the one, which is establishing and maintaining
itself through utilization of the instruments of power and coercion
Property acquisition or property exchange represents an essence of economic activity and
not necessarily creates property rights imperfections. It is natural that people want to
acquire any kind of property in order to satisfy their needs or in order to realize certain
economic activity. There is equally no sign of exclusive social property rights in a desire



17
to acquire higher level of education, which sometimes is also allowing for a certain
degree of exclusivity. All these aspirations can be accomplished within purely economic
process of exchange. It is not the property itself, what creates problems and inefficiencies
in economic and social systems, but vice a versa the imperfections in system of property
relations. Property rights imperfections can occur only at the societal level, because in
order to gain and to maintain exclusive property rights, their proprietors need social
mechanisms of power and coercion, which exist only at this particular level. In other
words, they need an instrument of force and coercive persuasion, which will allow for
their interests to remain exclusive or non-socialized and to be in a direct contradiction
with the interests of other members of society. This is an essential difference between
property rights imperfections and ordinary non-monopolistic or non-exclusive property
possessions. The latter are generally subject to microeconomic or business transactions,
rather than to social ones based on power and coercion.
Disturbances or imperfections in system of property relations are widely familiar under
the term monopoly. However, as we shall see, not every kind of monopoly is leading to
exclusive property rights. Term monopoly in its common understanding unites a
variety of phenomena both of economic and social nature. Exclusivity starts from forcible
property expropriations of a personal one-time character such as robbery for instance if
we consider robbery as an exclusive possibility for burglar to expropriate certain kind of
property based on force (which is giving him a shotgun, for example) and as a violation
of economic property rights. Difference between general robbery and other types of
property rights imperfections stands in the fact, that under those other types a process of
property (income) expropriation is always legal, of a long-term nature, more dispersed in
terms of robbed or monopoly-dependent individuals and a way more hidden by social
infrastructure.
If, then, the State takes more from me, let it give me more in return, or cease to talk of
equality of rights; for otherwise, society is established, not to defend property, but to
destroy it. The State, through the proportional tax, becomes the chief of robbers; the State
sets the example of systematic pillage: the State should be brought to the bar of justice at
the head of those hideous brigands, that execrable mob which it now kills from motives of
professional jealousy
10

or else

A robber who justified his theft by saying that he really helped his victims, by his
spending giving a boost to retail trade, would find few converts; but when this theory is
clothed in Keynesian equations and impressive references to the "multiplier effect," it
unfortunately carries more conviction
11

Indeed, short-term or single time forcible expropriation of property also represents
property rights imperfections, moreover that it directly violates legal property rights.
Forcible or coercive expropriation of property implies exclusive utilization of force or



18
power, which an opposite side due to certain social circumstances either does not possess
or possesses to a much smaller extent than the side expropriating property. Let us
consider a simple case of robbery when criminal is threatening his victim with a shotgun.
Let us suppose that due to a variety of reasons the victim does not carry a gun. In that
case the burglar is acquiring exclusive opportunity to use particular property (such as
would be a force or a shotgun) and therefore to appropriate some property based on
certain degree of force. It does not really matter whether this is an in-law or an out-of-law
action, since we are not talking here about any legal rights, but rather about real social
opportunities arising owing to use of force, power and coercion. We may employ a word
opportunity or possibility instead of right. In order to differentiate this kind of
actions from property rights imperfections connected with economic activity, we will call
them property rights violations. This particular type of property rights imperfections is
different from exclusive property rights mainly on account of its short-term character.
Indeed, it is not so easy to find any other differences between property rights violations
and long-term property rights imperfections. Robbery represents private violation of
property rights or property rights violation of privatenature. Another type of property rights
violations property rights violations of social nature. Already the word social tells us that
this type of property rights violations is relying upon mechanisms of power and coercion
rather than upon force of one particular individual as in the case of robbery. In order to
better understand property rights violations of the social nature, let us examine a simple
historical example - coercive expropriations of wheat during the so-called war
communism in Russia in 1918-1920th. Farmer, whose grain is being confiscated, may
possess a shotgun, but it is quite unreasonable for him to use it, if in front of him he sees
five State appointed expropriators with five shotguns. Therefore in this case
expropriators are having an exclusive authority over this particular farmer and over his
property sealed by the stamp or by the power of State. This authority stands for exclusive
social rights based on instruments of coercion and is realized through a forcible
expropriation of property carried out by one social group on account of another or on
account of separately taken private individuals.
Normally property rights violations of the social nature, which for simplicity we might
call social expropriations, are being carried out by social groups, which come to power
as a result of social revolutions or of some significant qualitative social changes.
However, sometimes yet in our recent history, such uncivilized acts had been employed
by governments of fairly civilized nations under the so-called nationalization policies.
Fortunately at least in economically developed countries all such nonsense has ended by
now. Expropriations being in their nature obnoxious and barbarian acts, in order to be
accepted and tolerated by society normally have to be based on certain underlying
ideologies - none of them, of course, deserves any attention from the point of view of
property relations or from the point of view of common sense. From the point of view of
property relations only an expropriation of exclusive property rights and elimination of
different types of social monopolies based on power and coercion can be justified and
moreover are absolutely necessary. Expropriation of any kind of property, even of the
property associated with exclusive property rights, not only unable to create any value,



19
efficiency or justice, but vice a versa always brings along inefficiency, injustice and moral
degradation and represents a direct violation of property rights. Not only property
expropriations are deteriorating property regime, social rights and economic freedom,
but quite often they are also taking peoples lives.
Property rights imperfections are not the only kind of imperfections, which is appearing
as a result of a contradiction between self-interest oriented human nature and general
social and economic progress requirements. Together with imperfections in system of
property relations, another social process, which in our days we call violation of social or
human rights, is simultaneously taking place with a different intensity at various
historical stages of social evolution. Since economic freedom is a determinative element
and a necessary precondition for social freedom, any violation of economic property
rights and therefore also of economic freedom is indispensably accompanied by violation
of social freedom. Even more than that, violations of social rights do not represent merely
unscrupulous brutality, but are normally being carried out rationally in order to achieve
certain social and economic results. Under social rights violations we will understand
property rights violations of a long-term, persistent and usually mass character
associated with restrictions and limitations of personal freedom. Nature and reasons for
violations of social (human) rights are based solely on exclusive property rights. No
matter what are objectives and motives of particular individuals and social institutions
committing social rights violations, the fundamental cause, which lies underneath such
actions, is an appropriation of exclusive property rights and of exclusive income.
In his critics of capitalism, Marx referred to property relations at the economic level,
where they represent a source of simple exchange transactions.
12
He had a feeling that
something is not right, he even had a feeling that it is exactly an exclusive character of
certain property possessions what is not right, but he connected this exclusivity with
private property. During Marxs epoch, certain degree of monopolization or certain
degree of social exclusivity in property relations might have existed. Capital flows were
very much constrained by a lack of financial resources for procurement of industrial
property on behalf of working class and of certain other groups of population.
Property rights were concentrated with a relatively narrow group of wealthy people.
Capitalists, as Marx called them, as a social group probably did obtain in certain cities,
towns or regions certain exclusive rights, which were out of reach for other groups of
population. Term reach or access is actually connected with another very important
social concept directly related to property rights imperfections, which is having a rather
wide application and significant influence upon the entire spectrum of social and
economic relations. This conception is very important for our further consideration and,
first of all, for understanding of the phenomena of State, society and social evolution. In
order to better capture a nature of this conception let us turn to economic conditions and
property relations of Marxs historical time frame. It is exactly exclusive property rights
monopolized at societal level and absolutely not a private property, are responsible for
possible appropriations of monopolistic income, which might have existed at that time
and which are described by Marx. Of course, overall level of income and economic



20
development was rather low comparatively with the modern ones and that well could be
a main reason (which is more of economic nature rather than of the social one) why quite
a narrow group of population had an exclusive access to certain type of property
(capital), while, on the other hand, for a lot of people such an access was denied. No
matter what political and social circumstances were shaping this situation, it gave to
quite a narrow group of people more or less exclusive possibility to utilize particular type
of property. At the same time, large part of population simply did not have sufficient
financial resources in order to acquire necessary productive capital. Such kind of
monopolization, which is emerging owing to purely economic or economic development
factors, we will call economic monopolization. On the other hand, now and then a social
access to a circle of bourgeoisie or to some particular capital in particular town,
province or even at the national level might have been relatively restricted for
newcomers and outsiders. Local and national bourgeoisie was certainly eager to
oppose any attempts of new business entries employing social ties and personal
connections, overcoming of which might prove to be fairly difficult. Now and then even
social attributes of individual social origin, religion, nationality, origin of wealth, family
status and family members, education, morality, etc - were exploited in order to
jeopardize new capital entry. If there ever were any problems for potential entry into
bourgeoisie as a social group it much rather would be represented by an occasional
application of some direct power, authority and coercion in order to limit a freedom of
capital flows either at national or at local level through different social pressures. This
type of property rights imperfections, which is appearing and being maintained relying
on utilization of the social mechanisms of power and coercion we will call social
monopolization. Social monopolization is a keystone and the most fundamental social
concept for understanding of the nature of society, State and social evolution.
Property rights violations and social monopolization together are embracing all types of
property rights imperfections, which might exist in any particular society. Property rights
violations (especially those of the social nature), being the roughest form of property
rights imperfections, historically are appearing when social counteraction is rather weak.
Property rights violations usually can be of one time or at most of the short-term
character. Length and intensity of property rights violations depend exclusively upon the
level of social counteraction to these violations and upon the social power of
counteracting individuals and social groups. On the contrary, social monopolization
because of its reliance on particular social and ideological infrastructure, which is
designed to preserve particular social formation and particular type of property relations,
is normally having a much longer-term character. Connection of social monopolization
with economic or production activity is a major factor differentiating it from property
rights violations. Such connection is not changing the social nature of property relations
too radically, but it is creating more obstacles for understanding of social monopolization
and concealing the real essence of this phenomenon in a more profound way. Under the
property rights violations there is only coercive or forcible expropriation, which is not
connected with any type of economic or production activity. In this sense property rights
violations represent a purely social type of property rights imperfections, which is



21
emerging only as a result of weak social counteraction or as a result of profound social
weakness of particular individuals and social groups. Social monopolization, on the
contrary, is uniting in itself both economic and social nature. It cannot occur without at
least some kind of economic activity, even though similarly to the property rights
violations, it is based primarily on social mechanisms of power and coercion.
Social monopolization usually represents a much more wide scale and longer-term
phenomenon comparatively with property rights violations, including in terms of its
disturbing influence upon the general system of property relations. Even though
property rights violations may be more intolerable from the point of view of justice or
morality, while their effect on economic development and economic efficiency is more
disastrous, their authority and influence is usually of a rather short-term character
comparatively with those of social monopolization because normally people do not
tolerate any bare violations for too long. Interconnection between property rights
violations, social monopolization and violations of social rights is a significantly complex
and a very important social phenomenon. Property rights violations of the social nature
similar to any other property rights imperfections are unavoidably infringing on social or
human rights. Property, generally speaking, represents a fixed and concentrated
realization of particular feelings, emotions and ideas and simultaneously an
accomplishment of lifetime hopes and objectives of the people. While realization of
human feelings, emotions, sentiments, ideas and objectives (including such objectives as
freedom, liberty and life) is exactly what we understand under the social rights. If
property rights are violated while property is being expropriated such situation
automatically represents an act of expropriation of particular social rights.
Property is a real right, jus in re, -- a right inherent in the thing, and whose principle lies
in the external manifestation of man's will. Man leaves his imprint, stamps his character,
upon the objects of his handiwork. This plastic force of man, as the modern jurists say, is
the seal which, set upon matter, makes it holy. Whoever lays hands upon it, against the
proprietor's will, does violence to the latter's personality.
13

If certain property rights are socially monopolized and people have to pay specific
monopolistic price, it automatically means that they have to give up more of their
emotions, sufferings, feelings and intellectual efforts for the same amount of property of
those who possess exclusive property rights.
Fundamental difference between social and purely economic monopolizations stands in
the fact that economic monopolization in its pure form is not based on exclusive social
property rights. In its pure form economic monopolization is being generated within the
market competition and does not bring along exclusive rights based on mechanisms of
power and coercion as well as a long-term appropriation of monopolistic income
associated with social monopolization. This type of monopolization rather represents a
microeconomic monopolization, which is arising from natural economic competition and
which is not connected with exclusive property rights, power and coercion. If there are



22
no power and coercion involved then there is nothing social in any phenomenon. Under
economic monopolization coming from purely economic competition, anybody can enter
particular market as well as participate in economic price formation of any particular
property or as economists would say - there is always a possibility of potential market
entry, although the latter conception we are applying here in a purely social sense
meaning potential social entry. Potential possibility of social entry implies that there are
no any social barriers based on application of the mechanisms of power and coercion for
free capital flows or simply that there are no any exclusive property rights. Just as in
economy we have an economic competition, in the very same way in society we are
always having a social competition between all individuals and between all private
interests for social property rights as well as for exclusive property rights. And even
more than that - as long as exist mechanisms of power and coercion economic
competition does not represent a key determinative part of an overall competition for
production resources and for particular social privileges.
Wherever opportunity offers, and man possesses the power, he prefers political to
economic means for the preservation of his life.
14

Social competition always brings along exclusive social and property rights. Monopolies
of economic nature equally embrace property rights upon certain sophisticated
knowledge or information. In this sense, all intellectual property rights and industrial
patents can be attributed to this category. Actually a phenomenon of knowledge or
information as well as its role both in value creation process and in property relations
deserves special attention, which is out of the purpose of this book. Since knowledge,
information and technology sooner or later are becoming obsolete economic monopolies
usually do not last long. Besides, being short-term in their nature, they do not contain
price influence situation of the social character. Special short-term price can be
considered as an award for accumulated knowledge and information and for their
productive utilization. However, particular individuals and organizations are always
eager to maintain their economic advantages relying on mechanisms of power and
coercion, even if those advantages are emerging under purely economic competition.
Accordingly all economic monopolies incorporate a certain potential to acquire exclusive
property rights and may lead to social monopolization.
Preservation of social monopolies is not an easy task, because other things equal people
are not very much eager to pay for somebodys exclusive rights. We have mentioned
already that one the most fundamental tools for maintenance of exclusive property rights
is mechanisms of power and coercion. However, it is quite difficult to maintain exclusive
rights relying only on such a primitive tool, first of all because people are always inclined
to counteract and to destroy those mechanisms. Rather fortunately for monopolistic
social groups there is another influential instrument in order to persuade people to
support or at least to tolerate a presence of exclusive rights. This instrument is ideology.
The single purpose of any ideology is to persuade people to buy certain social
monopolies and to pay certain monopolistic prices. Any ideology is benefiting either



23
ruling social groups or social groups eager to get in power. Ideology is a very dangerous
phenomenon, which represents an appeal to human feelings and emotions aiming, first
of all, at downgrading of the rational apprehension of reality. At the same time, ideology
may include a standard logical appeal as well. However, grounds for argumentation or
social assumptions are always being based on emotional apprehension of reality. If
particular ideology is capable to change or to shift certain social assumptions it can draw
whatever conclusions one wants. Any ideology is rationally and logically inconsistent
because there is no such thing in the whole world, which can justify exclusive property
rights. From the point of view of monopolistic social groups employment of any ideology
besides logical inconsistency incorporates another essential negative feature - any
ideology is rather costly and inefficient social phenomenon, which is usually connected
with significant income redistribution for its direct and indirect support. Inefficiency and
costs associated with promotion of particular ideology quite often are leading to
economic bankruptcy of social regimes, which is very much linked with their political
bankruptcy.
Together with dissolution of primitive societies, an assurance of relatively comfortable
standard of living as an objective of social monopolization from the point of view of
monopolistic social groups, is substituting in superiority an assurance of means of
survival and becoming to be a predominant reason of property rights collisions and
imperfections. At the same time, with further social and wealth differentiation and with
emergence of social groups, maintenance of social status and social privileges arising
from social monopolization is becoming equally important for monopolistic social
groups. Underneath various types of artificially induced limitations for capital flows
there are always clearly defined material or financial interests of particular individuals
and social groups. Quite often such interests are not even recognized by advocates and
promoters of particular property rights restrictions or of particular capital flows
limitations.
Similar to Marx, Lenin also had a feeling of problems inherent to his particular society
and to his particular time period.
15
Deriving his vision from Marxism, he naturally
considered that these problems are connected with the private property and represent an
immanent characteristics of capitalism. However, property rights imperfections
described by Marx and monopolization portrayed by Lenin in his Imperialism, the
highest stage of capitalism are two different types of property rights imperfections.
Although both belong to the social formation, which we usually call capitalism, their
nature and origin are utterly different. Property rights imperfections described by Marx,
at least ideally, are based upon exclusive property rights of certain social group
(capitalists) on particular production factor capital, and upon limited access to this
factor for certain other social groups (workers). This particular type of property rights
imperfections connected with exclusive property rights upon the entire production factor
we will call production factor monopoly, though such monopoly have hardly ever existed
under capitalism. Alternatively, monopolization described by Lenin is related to
exclusive property rights upon all capital within particular economic sector sector



24
monopolization. Such type of monopolization is characterized by a limited access to
industrial capital in particular economic sector on behalf of all other social groups, but
also on behalf of all other capitalists (outsiders for this particular economic sector).
Exclusive property rights in this case are violating social rights of the rest of society to
participate in evaluation of an overall economic contribution of particular economic
sector. Property rights imperfections connected with exclusive rights upon all property in
particular economic sector or in particular geographic region we will call structural
monopoly. Under the production factor monopoly of capital an access to various economic
sectors for all capital proprietors is relatively free, while under the structural monopoly it
is either limited or restricted. In case of structural monopoly, flows of economic resources
between labor and capital as well as access of social group represented by labor to capital
and to social group represented by capital might be significantly less restricted (or even
not exist at all) than in the case of capital production factor monopoly. Within Lenins
historical time frame it becomes less difficult for other social groups to become capital
proprietors, but not in structurally monopolized industrial sectors. Origin of structural
monopolies may have purely economic reasons (such as economies of scale, for example),
nevertheless afterwards they might easily transform into social monopolies with
potential market entries being opposed by monopolists through utilization of the social
mechanisms of power and coercion.







Diagram 1. Property Rights Imperfections
In application to production factor monopolies the phenomenon of price influence
situation is having a much more complex nature and must be understood in a much
broader sense, than merely an influence upon the price of particular commodity under
ordinary microeconomic transaction. Price influence generally is a very complicated and
diversely significant phenomenon and not only from economic point of view, but what is
far more important - from the point of view of its social influence and underlying this
influence types of economic relations. Price influence is determining not only peoples
economic contribution, but also the entire social structure and social relations as well.
Property Rights Imperfections
Social Monopolization Property Rights Violations
Structural
monopoly
Production
factor monopoly
Of social
nature
Of private
nature



25
Price influence situation at macroeconomic or at the social level embraces a variety of
property and exchange relations, which only on a surface are expressed by
interconnection and fluctuations of price indicators. Very simple price influence situation
is determining price levels at monopolized potato market in a small town. Much more
complex social and property relations are determining the mechanism and the level of
monopolistic income appropriation by land aristocracy under feudalism including
redistribution of national income through the State, where aristocracy is benefiting from a
social alliance with the state bureaucracy. These types of property relations are much
more hidden and much more difficult to trace; especially taking into consideration a huge
social infrastructure designed to conceal any appropriation of monopolistic income.
Nature of price mechanisms related to both production factor and structural monopolies
we will examine in more details in chapter 6. At the end of the day both social
monopolization and social rights violations are built upon price influence situation.
Price of any commodity simultaneously represents a measurement of this particular
commoditys value in relation to all other commodities, services and production factors.
Being subject to economic evaluation process, price is an objective category, which cannot
be influenced by direct human interference. At the same time, we have seen already, that
under certain social circumstances appears price influence situation connected with some
kind of exclusive property rights. In this case particular commodity is acquiring a non-
economic or social value, which is reflecting an appropriation of exclusive or
monopolistic income and which is based on social mechanisms of power and coercion.
Price of a particular commodity incorporates payments for all production factors
employed in manufacturing of this commodity including for monopolized ones. Every
producer and every proprietor is generally trying to make his commodity, service or
technology exclusive in satisfaction of certain human needs in terms of quality, price,
design and numerous other characteristics or in terms of combination of these
characteristics. Such statement of things represents a fundamental motivation for
potential exclusivity of practically any type of property. But only when this exclusivity is
starting to be based on social mechanisms of power and coercion and when it begins to
interfere with production factors flows, it does generate social monopolization.
While structural monopolies can have either economic, arising from competitive
environment, or non-economic social nature, production factor monopolies are always of
the non-economic nature. They are the social monopolies of artificial origin in a sense that
their emergence is only possible at the social level owing to the general orientation of
human self-interest towards power and associated with it possibilities of exclusive
benefits and privileges. On the other hand, elimination of production factor monopolies
is a natural or evolutionary process, which is happening through peoples counteraction
to any exclusive rights outside of the domain of economy. Eradication of social
monopolies is mainly connected with inefficiency of property relations, which is
accompanying any exclusive property rights and which essence we will examine later in
chapter 5. Sometimes some serious man-planned efforts directed towards elimination of
production factor monopolies do not succeed because property relations have not yet



26
came in sharp contradiction with economic or production factors development (such as,
for example, numerous slaves rebellions in ancient Rome including Spartacus). On the
other hand, sometimes very few efforts might be enough in order to overthrow a
degraded system of property relations (for example, peaceful revolutions in communist
Hungary and Czechoslovakia). Even though, at the end of the day they serve the interests
of certain social groups, production factor monopolies do not appear as a result of a will
of particular individuals, but rather as a result of significant differences in social strength
and social power of particular individuals and social groups. It might be the case that
everyone wants to be a king, but originally only the strongest or the best socially fitted
individual is becoming one. On the other hand, if his social strength or power fails
somewhere or sometime or if the king fails to remain the most fitted person, there are
plenty of others, who are ready to replace him, at least what concerns governance of the
country if not what concerns an actual title. It is exactly the system, rather than concrete
beneficiaries what matters when we are dealing with exclusive property rights. It is
exactly the system of property relations what creates inefficient and unfair outcomes and
not concrete individuals who are benefiting from exclusive property rights - they are just
children of fortune or better to say children of natural selection the most fitted to
particular societal systems individuals - and it does not really matter who they are
personally. People can destroy one particular social construction, but it will always
appear another one in its place, because self-interest oriented human nature will always
fight its way through to the highest degree of power, coercion and exclusive property
rights. Because of that it is quite difficult to imagine anarchism in its pure version or
general State cancellation under the self-interest oriented human nature. Normally
property rights imperfections always appear when the interests of certain number of
people are strong enough in their unification under one common social vector, while
interests of all the rest of society or of other social groups are too weak to counteract
trend expressed by such vector. Similar to their emergence, social maintenance of
production factor monopolies is also relying on power and coercion. Particular
production factor monopoly is dominating social and economic relations in any given
society up to a degree defined by the power of associated with it social groups
comparatively with a compound social power of monopoly dependent individuals and
social groups.
Once being established, production factor monopolies are not only determining the entire
social infrastructure, but are also starting to influence personal character and social
behavior of particular individuals and social groups. Social nature of production factor
monopolies is equally portrayed by the fact that exclusive property rights do not belong
to particular individuals or groups of individuals, but much rather to the social groups.
Monopolistic social groups represent groups of people united in their social, economic
and political interests by exclusive, forbidden for any other individuals and social
groups, types of property possessions and social privileges and, first of all, by the benefits
of exclusive income, which are emerging from this kind of possessions. Social
monopolization, making part of property rights imperfections is having its roots in social
and property relations and cannot be described relying merely on conventional economic



27
property rights. In fact, quite possible is a situation when there are no particular
superficial disturbances in economic property rights associated with existence of social
monopoly. If we address our previous example of matches factory - an owner of this
company can sell it to another proprietor just as any other property. Actually, social
monopoly as a property is separated from economic possessions of any type of capital or
of any economic resource. Generally speaking, from the point of view of its proprietor,
monopoly itself is already a capital or a property. Ideally, in its pure version it is able to
bring income without any associated property or without any associated capital.
Monopoly is having its own value - separate from the value of associated property.
Owing to that, sometimes, it can be bought and sold without the associated property as,
for example, structural monopolies in England in 17th and in France in 18th century. If
social monopoly not necessarily has to be associated with a particular property, equally
not necessarily it has to be associated with only one proprietor or with only one economic
agent. If social monopoly does not suppose any underlying property, it can be realized
by a group of individuals with rather different property possessions if only this group
will somehow manage to obtain certain exclusive rights. This is opening a wide horizon
and comprehensive possibilities for materialization of production factor monopolies,
which are socially uniting several or multiple proprietors of separate economic property
possessions. Members of particular social group are gaining exclusive income not from
their land, from their capital or from any other economic resource (if these resources are
not socially monopolized they do not bring any exclusive value) but only from exclusive
property rights or from the very fact of social monopolization of a particular production
factor, such as, for example, slaves labor under slavery or land under feudalism.
In our example, a selling price of the matches' factory besides other factors will be also
influenced by a higher return on capital as a result of embedded possibilities for
appropriation of monopolistic income. But, nevertheless, it will still be determined
according to a market rate-of-return on capital as any other investment transaction. There
is no any violation of economic rights of various proprietors. Those are only the social
property relations, which are violated and which violation is explaining an exclusive
condition of this particular company. Monopolized property economically,
technologically and financially may perform just like non-monopolized property. Oil
refinery equipment, which forms fixed costs or fixed capital, is having the same
microeconomic nature with or without monopolization. If one single manufacturer
manages to monopolize the entire oil industry, appears a situation when nobody else can
sell oil products or, what is the same, as a result of the presence of exclusive property
rights, nobody else can invest capital in oil production and in industrial utilization of oil
refining equipment. Price influence situation and changes in income appropriation
patterns connected with this monopolization are associated with the social nature of
exclusive rights and are certainly not connected with microeconomic or technological
nature of particular property or of particular equipment. Exclusive property rights on
account of certain social factors are attributing specific social nature to ordinary
microeconomic property possessions.



28
Throughout the entire human history have existed and still exist a lot of different and
sometimes not even clearly identifiable property rights imperfections, or different kinds
of restrictions, regulations and limitations related to possession of particular types of
property or, what is the same, various restrictions on realization of particular economic
activities. All these imperfections according to their scale, economic nature as well as to
their economic and social influence can be divided into two basic categories production
factor monopolies, which are defining the very essence of social and economic formations
and structural monopolies, which are extensively investigated by economic science and
are abundantly described in economic literature. Such division not only is connected with
the differences between particular types of property under associated exclusive rights,
but also with the degree of influence of a particular social monopoly upon social, political
and economic environment in any society and within any social formation. Production
factor monopoly, which we are trying to understand, is a very complicated and
simultaneously fascinating social and economic phenomenon as well as a fundamental
reason or rather even an essence of social and economic disturbances and disarrays.
Production factor monopoly is also a much more persistent throughout the entire human
history as well as much more socially influential phenomenon than any structural
monopoly.
Different types of monopolies of different sizes are surrounding us beginning from that
shop around the corner and up to a national gas and electricity supply monopoly. Not all
of them, however, embrace property rights imperfections. Although in our days almost
everywhere in the world exist antitrust laws, which suppose to fight structural
monopolies, those laws are mainly aiming at economic structural monopolies, which do
not comprise any property rights imperfections and therefore in their pure version hardly
ought to be counteracted at all. To fight social structural monopolies is rather difficult
because their very emergence and maintenance is always backed up by the same social
institution, which delivers antitrust regulation by the State. Structural social
monopolies are emerging only relying on the power of State the final if not the single
source of coercion, both in modern world and in any historical retrospective.

In practice, monopoly frequently, if not generally, arises from government support or
from collusive agreements among individuals.
16

To fight social monopolies is also very difficult because of the advantages, which
monopoly offers to its proprietors in terms of additional or monopolistic income,
considerable part of the latter being normally spent on consolidation of the power of
monopoly and on its ideological support. On the contrary to structural economic
monopolies, production factor monopolies, are never hunted or counteracted by law.
Vice a versa, they are the law and they are establishing all laws in the world as well as
shaping all other elements of society or the entire social infrastructure. If explanation and
analysis of structural monopolies sometimes (whenever they are of economic nature)
represents a task of microeconomics, discovering of the nature of production factor
monopolies, owing to their reliance on power and coercion and consequential



29
overwhelming influence upon economy, politics and society, is positioned inside
sociological and political theory. Similar to structural social monopolies, production
factor monopolies cannot be realized without significant social support based on power
and coercion at the societal level. General understanding and analysis of structural social
monopolies and moreover of the production factor monopolies is impossible without
implication of the conception of social property rights. Only structural economic
monopolies, which are not based on mechanisms of power and coercion, represent
purely economic appearance and do not violate social property rights.
Social monopolies are rarely being identifiable within legislative systems or inside social
infrastructure. Throughout entire history social monopolies rarely represent explicit and
clearly designed social entities; vice a versa they are always hidden in order to conceal
their non-socialized nature. Legal or legislative systems are almost never establishing
rights and privileges of social monopolies explicitly and comprehensively. Structural
monopolies, especially structural monopolies in modern history, are frequently hidden
by social infrastructure. According to a spirit of antitrust laws structural monopolies
generally suppose to be fought or counteracted by the government. Production factor
monopolies, among other things, appear owing to an inadequate overall societal
knowledge and particularly owing to a lack of understanding of their very nature. This
normally happens when level of social and economic development is comparatively low
and people are having more emotional rather than logical apprehension of life, society
and economy. Monopolistic social groups are certainly not inclined to explain to the
people where the problem exactly is by mentioning exclusive rights in laws explicitly and
thus helping people to understand the nature of society they are living in. Together with
evolution of human society, it becomes much more difficult to maintain particular
production factor monopolies, not in the last instance thanks to an expanding
comprehension of their true real nature and to rising human intelligence. With escalating
level of social development is also intensifying social counteraction to any exclusive
rights. Social counteraction is trying to annihilate existing social infrastructure, which
serves to maintain particular production factor monopoly relying on legal, moral,
educational, political, social and cultural setting. It is becoming more and more difficult
to conceal and to justify social monopoly, owing exactly to more advanced stage of
human, social and economic development as well as owing to more advanced stage of
human (including social) knowledge. At this juncture, maintenance of existing social
monopoly becomes quite problematic. With further social evolution and economic
development a persuasion to buy this particular social monopoly is becoming more and
more difficult. Social infrastructure associated with particular monopoly under the
pressure of social counteraction is permanently dissolving up to a point of its complete
elimination. Unfortunately, after all that comes another social monopoly with its own
justification machinery and with its very own social infrastructure. Even more
unfortunately is that people do buy this new one as well, until sociality or anything social
in society - based on power and coercion - will disappear completely (if it ever will).



30
Chapter 3. Self-interest Oriented Human Nature and Socialization
Property is having its deep down roots in human nature. Property in fact is the most
advanced expression of human interests and of these interests realization. Particular
human beings may have different kinds and groups of interests. Those interests can be,
for example, of cultural, educational, social, political and of any other nature, which can
only come to mind. However, when we are talking about social and economic processes
and moreover about social evolution we are rather concerned with the social and
economic interests of human beings. Also we are primarily concerned with those types of
interests because not only they are determining a system of property relations and its
evolution, but are also shaping social behavior of particular individuals and at the same
time to significant degree are defining all other types of human interests. Self-interest
oriented nature of human beings originally is directed towards economic goals and, first
of all, towards assurance of the means of survival, while the strongest expression of
economic interests is the property. Since vast majority of people to one degree or another
are moved by material considerations and besides since material considerations represent
the basic type of human needs and interests (ex. Maslow's pyramid or any other pyramid
of human needs) then in order to understand anything in society we must take them into
the most serious consideration. Besides, almost all our non-material interests are based
on rough material foundation. If we like reading books are quite expensive these days;
if we like music CDs, opera, concert halls unfortunately are rather expensive as well; if
we like to travel and to experience different cultures that is even more expensive; and if
we like to command people that is very expensive as well we need somehow to
persuade them that we know more than they do and have better managerial skills (for
example based on some very expensive training or education). As a matter of fact, our
non-material interests by and large cost even more than our material interests.
Fortunately or unfortunately, everything costs money and everything in this world
depends, first of all, on money (if not for particular individuals, then definitely for
societies and nations) culture, education, health care, literature, arts, etc. Poor countries
have absolutely negligible culture, education, health care, literature and arts. Because of
almost indivisible interconnection between economic and social (based on mechanisms of
power and coercion) aspects of any human activity, the property simultaneously
represents an intense concentrated expression of the social interests of particular
individuals.
Property and property accumulation are those substances in which such fragile and even
somewhat idealistic categories as human nature and human interests are materializing
under social and economic activity. Generally speaking, everything what we want, wish
or desire forms human interests. Those interests or rather their practical materialization
can be either of socialized or, vice-a-versa, of non-socialized nature. Interests of particular
human being, which do not contradict or do not harm interests of at least one other
person, are already acquiring certain degree of socialization. Simplest example of
interests' socialization is family, where husband and wife are normally having quite a lot



31
of common or joint interests of financial as well as of non-financial nature. Family
represents the most natural but at the same time the lowest level of socialization initially
uniting only two separate self-interests. The larger is a number of people with common
interests common to particular interests of a particular individual - the more socialized
are actions of this particular self-interest oriented human being. Any kind of corporation
or association of people represents the next stage of socialization quantitatively (in terms
of a number of people with common interests) superior to family, but qualitatively
inferior because a level of correlation between the interests of particular individual and
particular corporation normally is not as high as the one in the family. After the
corporation or association of people, the next and the highest level of interests
socialization is society. Society presumably assimilates interests of particular individual
with the interests of all other people. Though again, a degree of interests coincidence
between individual and society generally is even lower than between individual and
particular corporation, bearing in mind that corporation normally represents a main
source of income or of living subsistence for a person. Although society as a whole may
occasionally or permanently redistribute in his favor one or another type of benefits,
generally speaking, these benefits do not represent individuals basic source of income
unless he is unemployed or retired. He may also have some expectations of future
potential benefits both from society and from particular corporation. From society people
normally expect some social benefits and guarantees including insurance in case of
retirement, unemployment, disability, etc. Major potential benefits, which one can expect
from corporation or from their own business, are higher salaries or higher revenues in the
future. Potential benefits from corporation may also include future carrier expectations.
Generally speaking, the quantitatively more superior (in terms of a number of people
with common interests) or, for simplicity, the higher is a social stage or the larger is a
number of individuals united under certain kind of social or economic structure, the
lower is a correlation of interests between every particular individual and the other
people within this stage. Lower degree of interests correlation associated with a higher
social stage is also a fundamental cause or rather even the nature of a very important
social phenomenon interests dispersion, which we will employ in the second part of
this book. Self-interest oriented human beings are normally pursuing their own interests,
however, we cannot exclude that some of those interests may coincide or at least not
contradict to the interests of other individuals. If actions of particular individual coincide
with the interests of a number of other people and social groups or at least do not
contradict them, then this individual is acquiring certain degree of socialization. If all
actions or all interests of particular individual are benefiting or at least do not harm all
other members of society, this individuals overall social behavior can be considered as
socialized.
When we are talking about self-interest of particular human being from the social or
societal point of view, we must not be confused by moral considerations or rely on
moralistic approaches. Moral is only a part of social infrastructure, the latter being always
determined by a system of social and property relations. Although moral is certainly



32
influencing human behavior, it is never determining people's social and economic
interests - at most only their superficial expression, especially taking into account that
people do not always understand and recognize their best interests. Self-interests, vice a
versa, are defining a single determinative substance of morality the system of social and
property relations. Moral is merely a product of the system of social and property
relations. The more perfect is the system of property relations the higher is a general level
of morality in society, or simply the more moral or rather the more just and fair particular
society is. There is no direct relation between financial prosperity or national income and
morality. However, exactly because the system of property relations is shaping a level of
morality while imperfections in this system and particularly exclusive property rights
based on power and coercion are the one and the only barrier for economic efficiency and
societal justice, we can say that the richer is particular society the more moral it is. First
of all, it contains less property rights imperfections and therefore less of economic and
societal injustice, which is a single scientific expression and simultaneously a foundation
of any morality. We can equally say that poor society is generally less moral or even
immoral. All poor nations are poor exactly because of a huge level of either historically
dominated or currently existing property rights imperfections accompanied by
significant violations of social rights, economic and social injustice. All people and all
nations are originally endowed with equal development opportunities, all of them
independent on race or nationality being representatives of one single natural specie.
Therefore any society is subject to the same development and evolutionary trends and
tendencies, all of them initially being in the same start-up conditions and originally
equally endowed. Some nations are richer than the others because due to a variety of
objective and subjective reasons they managed to fight property rights imperfections and
violations better than the others. Historically, mechanisms of the survival and
development of mankind have been and still are based exactly on self-interest oriented
human nature, whatever imperfect those mechanisms might be, and it does not matter
whether those self-interests are moral or immoral. If self-interest is economically and
socially fair or if it is not based on property rights imperfections or on exclusive social
and property rights then it is moral, alternatively it is immoral. However, from the point
of view of political economy, self-interests generally taken are egocentric in terms of their
first incentive because first of all they satisfy particular individual, then may be his
family, afterwards probably some social or economic structure and in the last instance
society as a whole. Particular individuals might have rather different interests even
absolutely altruistic or self-denying. However if we are talking about human sociality,
society as a whole and about social evolution all separate vectors of particular human
interests are directing us towards consideration of human behavior in terms of
coincidence of egocentric interests inside the societal structure. Otherwise, we cannot
understand either the current stage of social development or even social evolution as
such and we are not considering mankind specie as it is, but rather as we want it to be.
Since this book is about general principles we will not exclude, however, an overall
universal possibility of some qualitative evolution of human nature, but even if
something like that will happen one day, this will not spread its influence upon the past
and will not affect earlier including contemporary development tendencies.



33
Under materialistic approach to social evolution and human history as well as under
classical economic tradition, it is generally assumed that historically human beings are
following their particular private interests in a priority mode comparatively with the
interests of any other people. This, in fact, is a basic common assumption both of
materialistic and of classical conceptions of society and economy as well as a common
hypothesis both of Marxian and of Adam Smiths political economy. Rather notable is the
fact that fairly extreme schools of economic and political thought share this view.
Sufficiently original and notable view of human nature was brought up by communist
tradition, which believes or used to believe in a possibility of creation of the self-
socialized human beings of a new type. At the beginning, however, it is considering
social evolution from the point of view of originally self-egocentric human nature (as
classical economic tradition does), which as a result of a communist organization of
society finally will become self-socialized and evolve to some new type of human specie -
to something called in former Soviet Union - a Soviet man. But even in non-communist
societies, egocentricity of human nature was attributed by Marxism only to exploiting
social groups or classes, while exploited mass of population presumably is of a much
more socialized nature. In reality more socialized nature of exploited or of monopoly
dependent social groups is connected rather with their social, physical or intellectual
inability to obtain any exclusive social rights and to establish or to enter in any
monopolistic social group. Monopoly dependent individuals and social groups or any
non-monopolistic individuals for that matter are simply socially weaker than the
monopolistic ones; otherwise they will not hesitate to become exploiters and to loose
their socialization. Lack of exclusive rights with particular individuals and social
groups can only be explained by their general social weakness. Lack of social
monopolization normally is not grounded on respect of laws, social order or of any other
elements of social infrastructure. People may be frightened to break a law and in fear of
punishment do not commit crimes or acts of property rights violations of private
character. But we are not talking now about illegal property rights violations, which
represent only a part of property rights imperfections. We are talking about social
monopolization, which on the contrary to property rights violations has nothing to do
with legal responsibility. Social monopolization is always beyond and above the law,
moreover it is the law and it is protected by the law exactly because it is emerging and
exists at the highest level of social structure. Social monopolization dictates and creates
the law, the entire legal system and the entire social infrastructure. Legislative barriers
can serve as limitations for personal behavior. But there are usually no any legal barriers
for social monopolization, vice-a-versa the latter is normally protected and praised by
social infrastructure, and therefore people are much less limited by any principles, laws
or moral considerations in realization of their self-interests related to an absolute power
and to exclusive property rights. The only thing, which is limiting their appetites, is their
own social, physical or intellectual inability. In this sense, Marxism and several other
ideological currents are mistaking equalizing socialization and morality with exploited
social groups. Some people are poorer, while the others are richer not because the former
are more moral while the latter are less moral, but only because the former are socially
weaker and cannot fight for economic and social benefits in the way others can.



34
Self-socialization generally implies a voluntary self-limitation of particular self-interest
and subordination of particular individuals actions to the interests of social corporation
or even to the interests of society as a whole (whatever society is). Actions of particular
individual can acquire a self-socialized nature, among other things, on account of
misunderstanding of the nature of social and property relations and of dominating in
society mechanisms of income appropriation or as a result of a believe in the lack of any
exclusive non-socialized rights within particular society. One simple example will
illustrate how exclusive property rights always fit in the law and not outside of it. Let us
consider a proprietor of some company, which is manufacturing steel and which his
father or may be even his grandfather used to own. Our proprietor is quite a common
character without exaggerated ambitions and even without any real choice in his line of
occupation inherited yet from his father. In no way he is self-socialized. He is pursuing
his own quite pragmatic interest in the first place. And in no way he is non-socialized; he
has no any exclusive rights and every day he is struggling with his competitors, which
are quite numerous. He is socialized owing to a socially non-monopolized free market of
steel and steel products. His activity besides bringing benefits to himself as a proprietor is
also directly benefiting certain other people through taxes and salaries, and every
member of society indirectly through lower prices or higher incomes as a result of this
particular industrial activity under competitive environment and also owing to
technological innovations and economic growth. Even people who are not buying his
steel are also benefiting because those who are buying steel, thanks to market
competition, technological improvements and economic growth every year have a
possibility to pay lower relative prices for his products and therefore they have more
money left to buy other peoples products. Even more important is that with the time
passing by the final products made from his steel will also become comparatively less
expensive on account of the factors above. All this is spreading all over economy raising
aggregate demand, output or elevating everybodys real income. But let us suppose that
one day our steel manufacturer is proposed to join a steel cartel, which is trying to
monopolize steel distribution in this particular country. Our man understands that if he
will not join the cartel he probably will be forced out of business. He has two options
now. First one is to join cartel a monopoly of the social (based on mechanisms of power
and coercion for ruling out potential market entries) nature - and in this case on account
of associated exclusive property rights, price influence situation and appropriation of
monopolistic income he will impair, to one degree or another, all the people left outside
of the steel cartel. His financial or material interests will be in direct contradiction to
interests of the other people. Therefore his interests will become non-socialized. On the
other hand, he can refuse to join a cartel, stay out of social monopolization and damage
his own business or rather ruin it completely. Instead, in this case his actions will bear a
self-socialized nature. He cannot maintain or continue his previous status quo or his
previous position of market-socialized individual. There is no any third option when
people are staying in front of the social monopolization. Generally speaking, people are
not doing anything non-socialized either because they are frightened by the
consequential responsibility (mostly under the property rights violations of private
nature), or they are socially weak or because they are self-socialized.



35
If we are considering human nature to be of the self-socialized and not of egocentric and
self-interest oriented nature, we have to assume that people (not some of them and not
several of them, but human specie as a whole) generally are pursuing interests of a
higher social stage in priority mode to the interests of lower social stage. We can
distinguish two types of socialization. First one is self-socialization, which implies that
particular individual voluntarily, according to his personal conviction or according to his
own personal apprehension of reality, is pursuing interests of the higher social stage in a
mode of priority superior to his own interests. Second type of socialization implies that
interests of particular individual are getting so close to the interests of highest social
stages, or what is the same to the interests of all other people, that egocentrically
pursuing his own interests, at the same time he is acting in the interests of more universal
social structures or even of society as a whole. This type we may call simply
socialization or market socialization or even social socialization. Socialization also
implies that there are no any real social (based on power and coercion) opportunities for
a particular individual to generate exclusive social and property rights or otherwise that
there are no any real social opportunities to implicate mechanisms of power and coercion
in value creation process.
Definitions of higher and lower levels of social structure are certainly fragile because any
property at any social stage always belongs to concrete individuals or to groups of
individuals. In reality every social level or every social stage is having its own
proprietors, income appropriators and sometimes even appropriators of exclusive or
monopolistic income. Every level of social structure or every association of individuals is
having its own direct or indirect, explicit or hidden proprietors. Since underneath every
peoples association lie concrete private and first of all material interests, understanding
of socialization as well as of self-socialization can be applied not only to particular
individuals, but to all stages of social hierarchy as well. In the very same way as interests
of particular individuals, the interests of family, of corporation, of the State and even
those of society can be non-socialized. Actions of the State, which also represents a
particular type of social association and of associated with the State social groups, as we
shall see in the second part of this book, can be and in fact to one degree or another
always are non-socialized.
Socialization in a broader sense implies that the interests and actions of particular
individuals, social groups, corporations and those of the State are at least non-
contradictory to the interests of outsiders of these social structures. Thanks to a God
given golden opportunity of market socialization, economic actions of any particular
individual can benefit all other members of society and even the entire mankind. Social
and economic competition between self-interest oriented human beings is generating
social and economic conditions for socialization as well as for perfect competition or for
elimination of the property rights imperfections. Market, unlike institutions of power and
coercion, is a single instance, which is generating truly economic cooperation - on the
contrary to all forms of social cooperation, which deep down inside are based on
coercion.



36
Market, being an objective category always exists, whether we want it or not it exists
even when we try to suppress or to completely destroy it. Market is a direct expression of
natural (independent from mankinds overall will) economic laws and tendencies and,
first of all, of the maximum economic efficiency requirements, which are being
materialized exactly through the market mechanisms. Nobody can abolish, destroy or
even restrain the market. It is absolutely superior and independent from human
subjectivity, human desires, from egocentric non-socialized interests and even from
humanity as a whole. People cannot destroy or even slightly suppress the market, but
market violations and artificial regulations can and always do destroy us, our society.
Market or market laws are absolute and immanent to human society and always exist as
long as exists society. Market is not buying any cheap ideologies, which are designed
exclusively in order to conceal somebodys egocentric, non-socialized, unfair and
inefficient patterns of income appropriation. Market will always show how much worth
any commodity, service, monopoly, State, ideology or even any society. Even in the
former Soviet Union, where monopolization achieved its highest peak throughout the
entire human history and price influence situation was extreme, market forces worked in
the very same way as they did in the United States and in the other market economies.
Social monopolization and exclusive property rights have created enormous
inefficiencies of different kind as well as huge social injustice and have finally ruined
communism as well as useless, repulsive and inefficient society.
Laissez-fair explanation of social and economic development is embedded in the very
fundamentals of human nature. To change it - takes to change the human nature.
Communism once tried but did not succeed. Marxism and communist ideologies
generally suppose that overall human nature (not just separate particular individuals)
can be converted into the self-socialized one and that people in their vast majority will
prefer interests of the higher social stages to their own interests. However, the very same
communist ideology was utilizing this thesis in purely egocentric interests based on
particular patterns of monopolistic income appropriation attached to the communist
society, which we will discuss later in details. Whether it is possible to change human
nature under natural social and economic development the time will show. But,
generally speaking, evolution of human nature and changes in human psychology are
happening throughout the entire history of mankind. Profound and complicated social
and economic metamorphoses are influencing human psychology and human nature as
well. Fundamental reason for evolution of human nature is economic and social
development, and specifically essential changes in the system of economic, property and
social relations brought up by this development. As a result of changes in social and
economic conditions are appearing all the transformations in self-apprehension or self-
recognition of human society, as well as all new social ideas and societal conceptions.
Metamorphoses of human nature cannot materialize without certain effects upon society
and societal processes. If human nature will ever evolve to some kind of new self-
socialized specie, then people might loose ability of individual self-recognition and
moreover of social counteraction as well as understanding of their real true interests. It is



37
hard to say whether mankind will finally win or loose from these developments.
Particular individuals experiencing self-socialization for a certain long period of time
and, furthermore, generations of people subject to the very same process might gradually
become completely self-socialized besides their will. Today we are already witnessing
some notable manifestations of the self-socialization of particular individuals in
particular societies, which is having a strictly materialistic foundation - financial
prosperity and relatively low degree of visible property rights imperfections in systems
of social and property relations. With comprehensive and all-embracing globalization
people are starting to think globally, to understand that there are national and even
worldwide problems, which nobody can solve just on his own no matter how wealthy, or
how fortunate he is. May be self-socialization tendency is not quite that evident, because
all these developments are not happening at once but rather represent a permanent
evolutionary process. Nevertheless, it is fairly obvious for an objective outside observer.
Modern organization of economy and society based on reason and logic especially in
economically developed countries is accordingly influencing human nature. Accelerating
degree of comfort without much of visible social problems or much of disclosed social
controversies, economic and social welfare as well as a long-term confidence in future
together with an industrial organization of business processes are creating preconditions
for more and more logically and reason oriented human beings on account of emotional
motivation of our actions. Mankind is moving further and further away from animal
instincts, passions and emotions, which basically form our self-interest oriented nature
and is approaching to predominantly logical or analytical apprehension of reality, which
is generating certain degree of self-socialization on its own. In some distant or not so
distant future this process might even influence in some radical way a human brain and
human genes. Such transformations may well bring some qualitative changes in human
nature and mankind will be in a position to rely upon this new human spirit in social and
economic affairs. However, the disparities in pace of scientific and technological progress
as well as the disparities in social and economic development between various countries
and nations are influencing different individuals, social groups and even different
countries to a rather different extent. Here lies another dangerous potential for emerging
of a rather crude social monopolization - a possibility to profit from the different levels of
individual self-socialization. Some people may have more self-socialized nature, while
the others less self-socialized one the level of self-socialization generally is never the
same for all people. Those of the less self-socialized nature will certainly try to benefit on
account of their more self-socialized compatriots (they actually always do and always
are). Nevertheless, coming down to earth - so far, human nature is definitely remaining
to be of a predominantly self-interest oriented and egocentric kind and in order to
describe any economic and social relations we have to build our consideration exactly
upon this type of human nature. The better are the social and property relations or the
less imperfections exist within particular system of social and property relations, the
more socialized are all self-oriented interests in particular society.



38
Under the self-socialization not only we have to assume that human beings are rejecting
their own interests in favor of the interests of some higher social stage, but also that the
higher is a social stage the higher priority people are attributing to it in terms of their
interests. Speaking otherwise we have to assume that, for example, interests of society are
of higher priority to particular individual than those of his family or of his own self. If
they are not - then he is not self-socialized, though he might be socialized owing to
particular social conditions. A person can be, for example, a good father and husband but
a bad person for the rest of society if he possesses particular exclusive rights and
appropriates exclusive income. On the other hand, if he rejects his chance to acquire
exclusive rights and exclusive income he might be bad for his family (at least from
material or financial point of view) and good for the other people. There is nothing in-
between. One can be a perfect husband and farther, but also a gangster and a crook; one
can be an excellent self-denying employee, but a company he is working for might steal
and squander public money; one can be an excellent professional in public finance but
what if the State he serves does slaughter its citizens. Only particular individuals can be
self-socialized, but not the entire society, nation, state and moreover not the entire
mankind; otherwise self-socialization would mean that there are no any property rights
imperfections, no anything social and no any mechanisms of power and coercion in
society. Not even mentioning that self-socialization might be rather controversial in terms
of its real social value. Historically and until now people are quite in counteraction with
each other and first of all in terms of interests related to property. Human nature has no
limits for its desires and appropriation interests. Abstract particular individual from the
social viewpoint would envy almost everything what other people have and only a
counteraction on behalf of those other people is not allowing him to acquire a total
control over the entire property in this particular society. Since self-socialization emerges
mainly when person is considering social reality to be free from property rights
imperfections, exclusive property rights and social injustice, it is quite difficult to imagine
a wide-scale self-socialization under the violent social counteraction. For a wide-scale
self-socialization to take place on a societal level the social and economic conditions must
rise on such a height that violent social counteraction would be significantly diminished
or even completely eliminated. This is only possible when imperfections in the system of
property relations and consequential social and economic injustice (which is a major
visible cause for social counteraction) are considerably diminished. From psychological
point of view there are two fundamental reasons why mankind, as a specie, cannot
escape social counteraction. First one is connected with a combined logical and emotional
apprehension of reality on behalf of human beings or with the unique two-dimensional
rational and emotional type of human nature. Even though together with the social
evolution people are departing from emotional image-based apprehension of reality and
are more and more leaning towards dominance over their behavior of reason and logic,
nevertheless emotional element is still significantly present in human nature. It
represents a major cause of human egocentric self-interest and self-recognition, which
basically are leading a person towards non-socialized types of behavior. If one-day the
emotional apprehension of reality will disappear completely - this might create a strong
case for evolution of mankind to some new specie. The second reason for social



39
counteraction from psychological point of view is connected with non-simultaneous
socialization and self-socialization of human beings. It takes only one non-socialized
individual to spoil the entire social harmony and to establish personal or group
domination with implication of the mechanisms of power and coercion. And such an
outcome is much easier to achieve under conditions of the wide-scale self-socialization of
a large number of people.
In reality, any economic activity of every single particular individual either benefits the
other people or harms them. It is never neutral. It is benefiting society if this activity is
socialized by the market and by social competition and if it is not based on exclusive
social rights. In fact only those types of economic activity, which are benefiting all
members of society may be considered as socialized. If actions of particular individual
coincide only with the interests of certain number of people united in some prearranged
social corporation or social group we cannot say either they are socialized or not without
further investigation of the entire societal structure and of the interests associated with its
every stage. Interests and actions of particular corporation or of the association of
individuals at any given social stage can be non-socialized as well and can embrace social
monopolization or exclusive social and property rights. In this case they are in the direct
contradiction with interests of society as a whole and of every individual outside of this
association in particular. Let us take an example of a particular individual who is a hard-
worker, highly qualified professional and a very nice human being. He is being
employed by some corporation in a legal department and his contribution is highly
appreciated by his superiors and therefore by the company as a whole. There is one
problem this company owing to certain social circumstances is having exclusive
property rights it is a social monopoly. Because of complex social and economic
relations, the company enjoys price influence situation on particular market and therefore
every single individual has to pay exclusive or monopolistic price for companys
products. Social property rights of the people are violated. Economic activity of this
particular corporation is neither socialized by social and economic competition nor it is
self-socialized. Let us also suppose that job responsibilities of our character under
consideration are connected with legal support and public maintenance of companys
exclusive social and economic position. Under these circumstances, when companys
operations are directly contradicting to the interests of other people, real professional
contribution of our individual is promoting non-socialized social corporation and
therefore cannot be considered as socialized, especially if he is participating in
appropriation of monopolistic income from this particular commercial undertaking.
Just like social monopolization or exclusive property rights are having nothing to do with
a matter of legality (or of illegality), socialization as a conception is also absolutely
independent from legal infrastructure. One might most solemnly respect the law during
his entire life and still to be non-socialized. A person can possess absolutely legal
exclusive social rights absolutely legally based on mechanisms of power and coercion
and be a perfectly non-socialized or anti-social individual. In this respect, we might think
of a slave-owner in ancient Rome, who is a highly respected citizen. However, having



40
exclusive social rights not only upon other peoples property, but also even upon other
peoples lives (slaves) he is nothing else as an absolutely non-socialized individual. On
the other hand, we can think of the overthrowing of communists regimes in
Czechoslovakia or Romania as about absolutely illegal yet mostly socialized actions as
they were directed against exclusive social rights of communist dictators. Therefore,
human actions can be illegal yet socialized and vice a versa legal but not socialized. All
that is rather straightforward coming from the very nature of social monopolization and
of exclusive social and property rights. At the end of the day it is exactly the property
rights imperfections what makes individuals, corporations, state and society to be non-
socialized.
Sometimes happens that people associate their interests with the higher levels of social
structure and for that reason self-socialize themselves to one degree or another, at least in
their intentions if not in their behavior. For example, a volunteer, who is sacrificing his
life for his own country during some war, pursues interests of a higher level of social
structure to his own interests and even to his instinct of survival. But this does not mean
at all that people who are associated with this higher social stage or people who are true
real proprietors of some social association at this higher social stage will act in the same
manner, sacrificing their own interests for the sake of his. In reality it may easily happen
(and most of the time it does happen), that what this soldier is sacrificing his life for, are
egocentric and non-socialized interests of the people connected with particular exclusive
types of income appropriation. It is just that those interests are remarkably hidden from
an outside observer.
The first glance at History convinces us that the actions of men proceed from their
needs, their passions, their characters and talents; and impresses us with the belief
that such needs, passions and interests are the sole springs of action the efficient
agents in this scene of activity. Among these may, perhaps, be found aims of a liberal
or universal kind benevolence it may be, or noble patriotism; but such virtues and
general views are but insignificant as compared with the World and its doings. We
may perhaps see the Ideal of Reason actualised in those who adopt such aims, and
within the sphere of their influence; but they bear only a trifling proportion to the
mass of the human race; and the extent of that influence is limited accordingly.
Passions, private aims, and the satisfaction of selfish desires, are on the other hand,
most effective springs of action. Their power lies in the fact that they respect none of
the limitations which justice and morality would impose on them; and that these
natural impulses have a more direct influence over man than the artificial and tedious
discipline that tends to order and self-restraint, law and morality.
17

Particular individuals may well self-socialize themselves without a strict dependence on
concrete social infrastructure, without taking into account exclusive social rights and
sometimes even without taking into consideration social and property rights violations
existing in particular society. However, the general tendency of social evolution is
generating self-socialized individuals in bulk only in strictest correspondence with the
level of property rights imperfections persisting in society. By and large, the less of



41
property rights imperfections exist in particular society, or to be more precise the less
property rights imperfections people think exist in society, the higher is an absolute
number and a share of self-socialized individuals in total population. Unfounded on
social realities self-socialization may actually be harmful not only for self-socialized
individuals themselves, but for the other members of society as well. Self-socialization
implying an ignorance or disregard of property rights imperfections normally tolerates or
even motivates egocentric non-socialized actions of monopolistic individuals and social
groups making society as a whole worse off in terms of social justice, economic efficiency,
while quite often also in terms of tyranny and violent social coercion.
People do not always recognize and behave in their best interests, even if they are not
deliberately self-socialized. This is happening because of the two fundamental reasons.
First is insufficiency of knowledge and information available to particular individual.
Rather often, especially in historical retrospective, people are having problems with an
adequate apprehension of what is really the most efficient and in the best of their
interests method of behavior. Second reason stands in the fact that certain individuals
and social groups in their own egocentric (mostly material) interests are always eager to
hinder an adequate apprehension of reality and a truth about what is in the best interests
for the other people. For such purpose exist different kinds of ideologies, which are
generally trying to convince people that their interests are in following egocentric social
recipes of particular monopolistic individuals and social groups. Both outcomes are
seriously influenced by economic development and social evolution. With higher level of
social and economic development people are becoming more educated and more
intelligent and able to better realize what is in their interests and what is contrary to
those. Unfortunately, changes in self-interest apprehension do not necessarily lead to the
most efficient macroeconomic or societal outcome. Quite often they are leading to a
regress in social and property relations. It is enough to mention communist ideology and
associated with it models and patterns of social behavior and of self-interests
apprehension. Though, communists initially usurp the power or change the system of
property relations and only afterwards are trying to influence apprehension of peoples
interests. It can only be a forcible or coercive attempt to change self-interest apprehension
and because of that it is always so painful. Historically, self-interests apprehension is
evolving together with advancement of knowledge and availability of information. There
are different ways to improve particular societal system, nevertheless only the closest to
existing realities or the least destructive method brings the best or the least painful and
the most efficient results. The most cardinal way to change societal realities is social
revolution or violent forcible transformation of the existing system of social and property
relations into some new one. This is a very painful technique, among other things also
because it does not change the underlying fundamentals of any system of property
relations an overall apprehension of the self-interests. It is rather taking peoples lives,
than changing apprehension of their interests. Even the long-term exercise undertaken by
communists in Russia in order to modify self-interests apprehension were able to alter a
real statement of things very relatively. This exercise neither shifted nor even it was
designed to shift self-interest apprehension of individuals and social groups in power, of



42
those who were benefiting from the entire communist system of property relations. It
generally takes a significant amount of time to change human psychology and peoples
apprehension of their interests - this is an extremely long-term process. Nevertheless,
such changes are happening all the time. For example, after the Russian revolution of
1917 a significant number of people, not only in communist countries, but also in
economically developed ones were associating their aspirations with the different models
of the communist organization of society. Fortunately, such an extravagant perception of
interests afterwards was in permanent decline. Modifications in peoples perception of
their interests are connected with economic development, with evolutions in the system
of social and property relations as well as with an expansion of knowledge and with
accelerating accessibility of information. Knowledge and information are making people
to better understand their interests and to see them under a rather new angle exactly
thanks to the removal of different ideological dogmas, which are hindering a clear
recognition of their interests.
Understanding of self-interests has significantly varied historically and is still varying
today among different cultures, countries and nations. Within almost each historical
period a perception of self-interests by West and by East, for example, were quite
different. West traditionally is more relying on individualism, freedom and self-
sufficiency, while East is more favorable towards collectivism, subordination and
cooperation. More generally, the West historically much less believes in any big ideas
or in any ideologies associated with society. It used to place a man or a private individual
and private interest higher than any kind of social structure. East, on the other hand, was
more eager to subordinate personality to interests of the higher stages of social hierarchy
- of a clan, of some social and economic corporations and of the State. In our days
everything has changed or evolved, the East employed a lot of western social ideals,
while the West acquired a lot of eastern values, and today we have a more or less
standardized global eclectic mix of social principles and values. Generally speaking it is
exactly the higher level of property rights imperfections in society and associated with
them poverty what rather intensively creates preconditions for collectivism, for reliance
on other people, on cooperation, on social corporations, social groups and finally on the
State. The richer people and nations are, the more individualism is gaining over
collectivism. Money, wealth and economic development are destroying collectivism. On
the other hand, the more advanced is the level of knowledge, of informational and
technological development - the higher is the level of peoples recognition of their real
interests and the lower is a possibility to enslave them in favor of some big idea.
Speaking more trivially, the higher is persons income the less he needs any kind of
assistance from the other people and from some outer social structures. Most importantly
- the higher is his income the less he needs those outside coercive social structures.




43
Chapter 4. Social Evolution
Property is an objective single source of self-realization of the human nature. Particular
human being can express himself in different ways and accumulate proceeds of his self-
realization in a variety of different forms such as for example intellectual property,
masterpieces of arts, scientific discoveries, college graduation, construction,
manufacturing, etc. - all of them in the last instance being united under one definition of
property. Social and economic relations between private individuals arising in the
process of creation, exchange and appropriation of property we call property relations.
Property relations manifest a course of interaction between different proprietors in
creation and accumulation of material wealth. Property relations are also a single
definition, which is exhibiting the level of socialization of particular individuals, groups
of individuals, corporations and of social associations. It is exactly the system of property
relations what is determining an aggregate level of socialization of all private interests in
any particular society.
Marxist vision of society and social evolution traditionally includes three fundamental
conceptions interconnection and contradiction between production factors
development and system of property relations, a theory of basis and superstructure (or of
property relations and social infrastructure) and a theory of class struggle. Marx
revealed in the most explicit way an evolutionary materialistic approach to history and
the fact that social evolution is rooted in economic motives, economic interests and first
of all in property relations. Main problem of his hypothesis is fascination with certain
political conclusions to which he adjusted not only his entire analysis, but also several
basic assumptions of his theory. Unfortunately, Marx failed to understand the very
essence of property relations, which represent a key factor of the materialistic approach
to history and upon which his entire theoretical construction is built. Without such an
understanding his practical conclusions were doomed to be inconsistent with reality and
with human nature. Nevertheless, he clearly pointed out two very important ideas first,
that there is such thing as social evolution and second that social evolution is having a
rather materialistic nature being rooted in socio-economic and property factors.
The materialist conception of history starts from the proposition that the production of
the means to support human life and, next to production, the exchange of things
produced, is the basis of all social structure; that in every society that has appeared in
history, the manner in which wealth is distributed and society divided into classes or
orders is dependent upon what is produced, how it is produced, and how the products
are exchanged. From this point of view, the final causes of all social changes and political
revolutions are to be sought, not in men's brains, not in men's better insights into eternal
truth and justice, but in changes in the modes of production and exchange. They are to be
sought, not in the philosophy, but in the economics of each particular epoch. The growing
perception that existing social institutions are unreasonable and unjust, that reason has
become unreason, and right wrong, is only proof that in the modes of production and



44
exchange changes have silently taken place with which the social order, adapted to earlier
economic conditions, is no longer in keeping.
18

Even though, Marxs perception of social groups in their relation to private property is
inconsistent with reality, nevertheless he was very close to understanding that it is
exactly peoples affiliation with certain exclusive types of property rights what procreates
social groups or as he called them classes. Marx believed that the basic immanent
societal contradiction stands in counteraction between monopolistic and monopoly
dependent social groups as we have defined them previously, or between exploiting
and exploited classes according to his definition. Just like Darwin taught about
competition for survival between biological species being an engine of natural evolution,
Marx thought that in application to human society we can talk about counteraction
between particular individuals and social groups as about an engine of social evolution.
Particular material interests are uniting in social groups either in order to obtain
exclusive property rights or in order to counteract them. From this point of view, social
opposition or social counteraction between social groups is extraordinarily important for
understanding of social evolution. Only through social counteraction property rights
imperfections can be removed or diminished, while a system of property relations
exchanged for more efficient one. In this book we are identifying Marxism as an entire
complex of communism-oriented economic and social thought. We will stand by this
definition because it is really very difficult to embrace all aspects of this theory within
one single authors writings. Moreover, that the entire communist ideology was
developed up to an unprecedented height in the former Soviet Union based on Marxist
conception. However, we will not include in this definition any writings associated with
socialist ideology and with social-democracy in their modern understanding.
Counteraction between social groups with exclusive property rights from one side and
between the rest of society from the other, but particularly between monopolistic and
monopoly-dependent social groups is the main tool, which makes property relations to
evolve. Apart from this process, but simultaneously in tight interconnection with it,
another progression is having place development of the production factors of Capital
(including technology), Land and Labor (including self-employment). Production factors
development based on accumulation of property is a trend, which is not only moving
ahead our civilization, but which is also influencing evolution of property relations. On
the other hand property relations or rather property rights imperfections inherent to any
property relations represent the one and the only barrier for perfection and development
of our society and civilization. Deep down inside this barrier is based on self-interest
oriented egocentric human nature. Human nature is not directly oriented or not directly
interested in pure economic development and in macroeconomic efficiency, but only in
satisfaction of personal desires, wishes, wants and necessities or in personal
microeconomic efficiency. Such satisfaction often happens on account of the other people
as well as on account of general macroeconomic efficiency. Individual and group
behavior based on universal human nature generating imperfections in system of
property relations is producing the above mentioned obstacles and barriers for



45
production factors development or for economic and social evolution of our civilization.
Obstacles on the way of production factors development are manifesting themselves in
economic inefficiency and in economic injustice (which natures we will consider in
chapter 6) slowing down both economic development and social evolution.
Attempts to benefit on account of the other people are simultaneously causing a
counteraction on behalf of those people. On the contrary to evolutionary engine for
property relations, which is basically having an entirely social (based upon mechanisms
of power and coercion) nature, the underlying reason for production factors
development - property or capital accumulation - is connected with less social or even
ideally non-social production and economic activity. Production factors development is
always being restrained by the existence in society of property rights imperfections,
which direct outcome is that certain people are getting exclusive or monopolistic income
on account of the other people and on account of an overall macroeconomic efficiency. If
the system of property relations would happen to be perfect or if there would be no any
property rights imperfections in particular society, then social evolution would be only
determined by a permanent development of production factors or basically by a process
of property accumulation. However, as a result of existing in any society property rights
imperfections a certain part of economic resources is simply being wasted on account of
economic inefficiency. Such waste, among other things, occurs because actions of
particular individuals and social groups are often driven by objectives, which are rather
distant from purely economic motivation and which are oriented towards generation and
maintenance of the social (based on power and coercion) methods of distribution and
redistribution of property and material wealth created by other people. Normally such
situation is not only diminishing or sometimes even completely annihilating real
economic activity of monopolistic proprietors, but is also reducing economic incentives
for monopoly-dependent social groups. The latter are being forced to give up certain
amount of their property or income as a payment for exclusive property rights.
Social counteraction between social groups with exclusive property rights and the rest of
society is not only continuously improving a system of property relations but, first of all,
it is providing an impulse for production factors development eliminating social
obstacles and barriers on its way. In this sense we can talk about counteraction between
monopolistic and monopoly dependent social groups (which Marx called a class
struggle) as about the engine of social evolution, which is also inseparable from
economic development.
Freeman and slave, patrician and plebian, lord and serf, guild-master and journeyman,
in a word, oppressor and oppressed, stood in constant opposition to one another, carried
on an uninterrupted, now hidden, now open fight, a fight that each time ended, either in a
revolutionary reconstitution of society at large, or in the common ruin of the contending
classes.
19




46
Although social counteraction is always there wherever exist property rights
imperfections, it is evolving together with accumulation of property and wealth, which
are bringing along accumulation of knowledge and higher levels of social education and
human self-recognition. Such evolutions are making people more and more sensible to
any kind of injustice usually directing them, however, against visible or perceptible
economic and social injustice rather than towards elimination of its causes, fundamentals
and deep down roots.
Production factors development is another fundamental cause contributing to
elimination of particular property rights imperfections. As a result of production factors
development the social counteraction is progressing and becoming more sophisticated.
On the other hand, social counteraction improving system of property relations and
removing social barriers for the free flows of economic resources is influencing economic
or production factors development. At certain point in time production factors
development resulting from peoples economic activity is coming in contradiction with
the existing system of property relations. From that very moment existing system of
property relations is doomed on disintegration and destruction. This destruction can be
either forcible or peaceful. If social controversy or social contradictions are strong enough
while economic inefficiency and injustice are persistent elimination of the current
system of property relations is taking aggressive and even violent forms such as
revolutions for instance, otherwise it happens peacefully. Production factors
development is always a progressive element; it is bringing along improvements in all
societal domains but, first of all, it brings prosperity and economic development. From
societal point of view, production factors development is stimulating progress in mans
and societys self-recognition and self-apprehension, in social justice, morality, law,
education, etc. From economic point of view, production factors development is leading
to an accumulation of capital and accumulation of knowledge, to more sophisticated
skills and qualifications, to improvements in technology and in entrepreneurial skills. On
the contrary to production factors development, property relations represent a rather
conservative element, which normally is in opposition to a natural process of social
evolution. Property relations tend to preserve and to protect an outdated social structure
and social relations. At some point in time property relations are coming in such a
contradiction with the requirements of social and economic development, that it can only
be removed either by a total elimination or at least by a fundamental modification of the
inefficient societal system and of obsolete property regime.







47

















Diagram 2. Social Evolution
Social counteraction is a very important and comprehensive social phenomenon, which
deserves a separate special analysis. Constantly generating economic development
production factors are simultaneously influencing a system of social and property
relations. Stimulating and intensifying social counteraction production factors
development is providing a permanent impulse for qualitative changes in social and
property relations. Consequentially, tearing apart dominating exclusive property rights
(or dominating social monopolies), these qualitative changes supply a new extraordinary
incentive for further development of production factors. This is an essence of never-
ending cyclical process of social evolution. Peaceful social counteraction is not necessarily
always free from particular acts of violence. Non-violent counteraction is rather an ideal
than a real outcome. In reality peaceful social counteraction implies non-forcible or non-
coercive improvement of existing system of property relations and of existing societal
structure through a permanent and gradual evolutionary process rather than through
any kind of social revolt. Particular acts of violence are not excluded even in the case of
environmental or anti-war demonstrations, which by no means represent forcible social
counteraction. We also have to differentiate between organized or planned and natural
social counteraction. Peaceful social counteraction to any imperfections in social and
property systems is not only tolerable, but vice a versa is absolutely essential for
economic development and social evolution. Organized forcible social counteraction or
planned violent overthrow of existing system of property relations and of existing
societal structure is a very dangerous occupation. It might happen that property
relations, which such kind of counteraction is planning to destroy, in reality have not yet
came into a sharp conflict with necessity and requirements for production factors
development. On the other hand, there is no guarantee whatsoever, that newly emerged
as a result of organized forcible counteraction property relations and newly emerged
societal structure will be any better than the previous ones. Another threat coming from
Economi c devel opment
Soci al evol uti on
Production
factors
(Capital, Land,
Labor, State)

Property
relations



48
violent eradication of the existing system of property relations is connected with human
nature and human interests. Particular systems of social and property relations as well as
their elimination are closely linked with a lot of interests, while each and every interest,
as we have seen by now, is eager to become exclusive with an intermediary of
mechanisms of power and coercion at societal level. There is no guarantee, that people
promoting this newly emerged system of property relations will not employ social
counteraction in their own non-socialized, ambitious and egocentric purposes. Actually
there is always a guarantee that somebody will definitely try to utilize social
counteraction and its outcomes in his own egocentric and non-socialized purposes. Even,
if it would not be exactly those people who are planning and organizing forcible social
counteraction and social insurrections, relevant individuals with such ambitions will
always come along. People, who are eager to benefit from new societal structure, from
new system of property relations and from new arising perspectives of property
redistribution will always try to make the most from social counteraction, from new
social conditions and from idealists, who are passionately and impartially promoting
those conditions.
Social counteraction is an extremely complex and equally important for understanding of
sociality and of human society phenomenon. In a wider sense counteraction embraces
any contradictions between private interests. Since so far property rights imperfections
represent an immanent part of human society, social counteraction also is a pertinent and
intrinsic to human society social phenomenon. Social counteraction is leading to and is
materializing in certain balance of power between all private interests or between all
individuals and social groups in society. From one side, the socially strongest individuals
are always eager to acquire and to maintain exclusive social rights. From the other side,
socially weaker individuals and social groups who are normally unable to obtain any
exclusive rights for themselves are always trying to annihilate exclusive rights and
privileges of the strongest and to get some exclusive rights for themselves should the
possibility arise. Definition of the social strength or of the social power of particular
individual or of particular social group covers all types of human capacities (physical,
intellectual, educational, material wealth, social status, inheritance, etc.). These capacities
are helping a person or a social group to fight with the other people and social groups for
ones own exclusive social and property rights or, vice a versa, against exclusive rights of
the others. The socially stronger are particular individuals and social groups the higher
are their abilities to counteract or to fight with other individuals and social groups. Social
strength, first of all, depends on two fundamental factors - on relation to the mechanisms
of power and coercion and on material wealth of particular individuals and social
groups. Since material wealth of particular individuals, groups of people, social groups
and of the entire nation is determined both by social and by economic factors, an
achieved level of economic development and social evolution are the main causes, which
are shaping intensity of social counteraction and an overall balance of power in society in
the long-term. The more advanced or more sophisticated is social counteraction to any
property rights imperfections, to exclusive social rights and to societal injustice the more
just and more civilized is particular society. Together with accumulation of material



49
wealth or together with economic development, monopoly dependent social groups are
becoming wealthier and therefore more educated, more knowledgeable and more
powerful. Simultaneously is rising their capacity to counteract monopolistic social
groups.
Social monopolies generally and production factor monopolies in particular cannot be
maintained and supported by purely economic tools. They cannot be maintained
naturally exactly because they are based on macroeconomic inefficiency and social
injustice, which are always calling for social counteraction. Both their formation and their
preservation can only be realized by non-economic means, such as power, coercion,
ideology, law, habit, cultural and educational prejudices, etc. All these elements we unite
under the term social infrastructure. Sometimes, it seems that social background or
social infrastructure is shaping economic behavior or that embedded social behavioral
patterns and motives prevail over economic ones. For example, sometimes people
imagine that laws, moral sentiments or existing societal structure is determining social
and even economic behavior or that some people may prefer social rewards or social
recognition (such as different honors, titles, positions, privileges, etc.) to economic ones.
Even though some people might prefer now and then these social rewards to economic
ones, in the long-term all those are either directly aiming at concrete economic benefits
and concrete patterns of income appropriation (in which case they are pure investments)
or they simply represent luxury goods when a person is having so much money that he
can buy social recognition just like he would buy some piece of art or some fancy car for
example. In this case we cannot say that he prefers social rewards to economic ones this
is being merely one way of spending his fortune.
In reality social infrastructure, though is having certain impact on personal behavior,
education and values, is far less strong motivation for any human actions especially at
the aggregate societal level than social (based on mechanisms of power and coercion) and
material interests. Sociality and social motivation are one hundred percent correlated
with exclusive property rights and with exclusive income; otherwise there is nothing
social about them and therefore there is nothing social in society. Something is social only
if it is based in one way or another on the mechanisms of power and coercion and that is
exactly what society or social infrastructure is all about. In the long-term, any social
infrastructure is deteriorating and cannot explain neither economic nor even social
behavior of particular individuals simply on account of permanent emergence and
dismantling of the entire row of social structures, which are qualitatively changing and
challenging one another. On the other hand, such categories as property, mechanisms of
power and coercion and human interests (first of all human economic or material
interests) are there with us all the time, they are immanent to human society and to
human beings and almost never change or even never evolve. It cannot be denied that
social infrastructure is having certain influence on economic and social behavior of
particular individuals and even on the entire system of property relations. In the short-
run particular individuals and social groups can benefit much more (including
economically or in terms of income) by complying with existing societal structure and



50
with accepted norms of social behavior, than by breaking any rules, norms and
regulations. Strategically it might be rather profitable for us to follow some
predetermined patterns of economic and social behavior, even if we do not like them or
do not believe in them. This is the case when societal structure is relatively complying
with our economic and social interests. However, if only people are getting a feeling that
social infrastructure is not satisfying them anymore, does not benefit them or that they
can have much more significant gains by obstructing or trying to obstruct social rules,
right away they will be inclined to forget about any social requirements. If such feeling is
strong enough amid a large number of individuals, they might be even able to destroy
existing societal structure or, what is the same, to destroy existing type of society.
Interconnection between property relations and social infrastructure is by and large
accurately described by Marx.

in every historical epoch, the prevailing mode of economic production and exchange,
and the social organization necessarily following from it, form the basis upon which it is
built up, and from that which alone can be explained the political and intellectual history
of that epoch
20

Balance of interests and primarily the balance of material interests of all members of
society is determining particular system of property relations. Property relations built on
the balance of peoples interests or more precisely on the balance of strength and
intensity of those interests are shaping all elements of social infrastructure, which is
usually called society, even though this word is mostly being understood in a
sentimental, moralistic, biased and unscientific way. Social infrastructure incorporates
law, politics, culture and education, ethics, moral, religion and anything else what comes
to mind in relation to society. Social infrastructure is playing a dual role in terms of its
influence upon economic development and social evolution. During emergence of a
particular social formation, social infrastructure normally helps to support and to
establish the new, more progressive system of property relations. Later closer to
disintegration of particular social formation, it is starting to play a conservative or even
reactionary role aiming at maintenance and preservation of inefficient and obsolete type
of social and property relations. It is rather difficult to determine when social
infrastructure is accomplishing its protective role and when it is becoming to be an
obstacle on the way of social progress, economic development and social evolution. It is
also difficult to say if this cyclical process ever ends and if one-day humanity will be able
to overcome all property rights imperfections or at least all forms of social
monopolization in society.
Production factor monopolies are rather difficult to surmount, not only because they are
convenient and profitable for certain individuals and social groups, but also because they
are providing those individuals and social groups with exclusive or monopolistic income,
which is a very powerful tool for maintenance and support of any social order.
Maintenance and very existence of social monopolies are always relying on the interests
of particular social groups, which are participating in distribution of monopolistic income



51
either directly from their economic property or sometimes indirectly through different
forms of income redistribution. Because exclusive income coming from production factor
monopoly is much more complicated phenomenon than the one from structural
monopoly, an essential role in maintenance and preservation of production factor
monopolies as well as in distribution and redistribution of monopolistic income from
those is playing the State.
Microeconomic efficiency is usually defined as a relation between output and input.
Following this principle, an understanding of macroeconomic efficiency can be derived
from a relation between achieved level of economic or production factors development
from one side and between the level of economic inefficiency represented by exclusive
property rights - from the other. In the abstract macroeconomic efficiency formula, we
can consider a level of production factors development as total or macroeconomic output,
while payments to the proprietors of various economic resources or of various
production factors as macroeconomic input or as national income. Under social
monopolization, additionally to general payments to all proprietors of economic
resources, people have to pay extra to monopolistic proprietors for their exclusive
property rights. Therefore, a level of social monopolization or of social exclusivity, being
additional cost to the people, simultaneously represents denominator for the level of
economic development. Equally we can conclude that in society free from any social
monopolization (if such kind of society will ever exist), permanent and even
development of production factors will actually be a single cause of social evolution.
In order to constantly generate social evolution mankind has to accomplish two tasks
simultaneously. First, we have to work in order to develop production factors, and,
second, we have to fight any property rights imperfections generated by self-interest
oriented and egocentric human nature. We do not have any choice and we are doomed to
do both things together, whether we want it or not. Particular person can be a free rider
under either of these tasks or even under both of them, but mankind generally cannot.




52
Chapter 5. Strength and Elimination of Monopoly
Monopolies generally and production factor monopolies in particular appear essentially
owing to a self-interest oriented character of human nature. This fact is determining a
social nature of monopolization. However, in real life economic and social
monopolizations are significantly interconnected. Foundation for this interconnection lies
in the very same self-interest oriented human nature. In the best interests of a particular
monopolistic proprietor is to maintain his privileged situation (which may have
appeared owing to purely economic reasons) as long as possible while preservation of
economic monopoly by social means based on power and coercion is providing the
possibility to receive an extra income and associated higher social status in the longer-
term perspective.
Comparatively to structural monopolies, production factor monopolies are usually more
dispersed in terms of their proprietors. Monopolization of a particular production factor
is normally realized by people united in specific social group and not by particular
separately taken individuals or by groups of individuals. Slave owners under slavery and
land barons under feudalism are the examples of real true proprietors of the production
factor monopolies under these particular social formations. This brings us to another
crucial point for understanding of property rights imperfections as well as of the ways
and means for their elimination. It is connected with a social and economic strength or
power of monopoly as well as with a general level of property rights imperfections in
society. Since property rights imperfections are characterized by exclusive social rights of
particular individuals upon certain types of property on the one hand, and by a limited
or restricted access to the same property for the rest of society on the other hand, we can
assume that the level of such exclusivity or of such limitation is determining the
strength of monopoly. We also have to understand a difference between the strength of
one particular separately taken monopoly and between the general level of property
rights imperfections in particular society or within particular social formation. In reality
in any particular society usually exist or are eager to appear more than one kind of
property rights imperfections or rather a multiple variety of them. General level of
property rights imperfections in the system of property relations is characterized by a
compound strength of all exclusive social and property rights in particular society.
Without social counteraction, social monopolies would appear permanently in different
kinds and in significant numbers, because practically almost every single individual is
keen to establish and to maintain his own monopoly or his own social and economic
exclusivity. Generally speaking, the level of property rights imperfections in society is
characterized by a composite effect of all existing social monopolies - both production
factor and structural ones.
The strength of monopoly, its social power, its price influence potential and its ability to
determine income distribution and redistribution patterns depend on two fundamental
factors. First one is the size of monopolized property. The larger is a size of monopoly



53
both in absolute and in comparative (to the entire economy) terms and the higher is an
appropriated monopolistic income, the stronger is monopoly. This definition relates to
dimensional, material and quantitative characteristics of property and we will call it
economic strength of monopoly. Second factor is of a much more social (based on
mechanisms of power and coercion) character and stands for an access to monopolized
property on behalf of particular individuals and social groups. The less individuals and
social groups are integrated into a course of social and economic claims upon
monopolized property the more socially exclusive it is and therefore the higher is its
power and its strength. This definition mostly relies on imperfections in system of
property relations as well as on social and power dimensions and we will call it social
strength of monopoly. The two characteristics of monopolys strength are not only
determining a level of property rights imperfections generated by particular monopoly,
but are also exhibiting a balance of power between this particular social monopoly and
between other monopolies existing in a given society from one side, and between this
particular monopolys proprietors and the rest of society from the other. Both factors or
both parts determining monopolys strength are represented by quantitative or by scale
relationship - in terms of a level of access of individuals and social groups to
monopolized property in case of the social strength of monopoly, and in terms of a
quantitative or material dimension of monopolized property and monopolistic income in
case of the economic strength of monopoly. Social and economic strength taken together
and in their combination or in their compound effect are determining an overall strength
of social monopoly. The higher is the social strength of monopoly the more possibilities
for exclusivity and first of all for exclusivity in income appropriation it creates,
simultaneously generating preconditions for expansion of this monopolys economic
strength.
Since social strength of monopoly is based on exclusive property rights and since
property relations are determining the entire legal, political and social infrastructure as
well as all the social rights in society, a concentration of exclusive rights with the
narrowest circle of individuals represents an essence of what we usually understand
under the term power. Generally speaking, understanding of power is rather
attributable to the State level (especially in the modern world), where all the instruments
of power and coercion are concentrated. Since any exclusive property rights or any social
monopolization is only possible through utilization of the mechanisms of power and
coercion, which exist almost entirely at the State level, one needs a certain degree of
power or a certain degree of association with those mechanisms in order to establish and
to maintain any social monopoly. The narrower is a circle of individuals who compose
particular monopolistic social group, the more social power and the higher monopolistic
incomes are getting people inside it. Definitions of monopolys strength and of the
general level of property rights imperfections in society are very important for
understanding of the nature of economic inefficiency and economic injustice. Actually, an
overall strength of monopoly simultaneously represents a quantitative expression both of
economic inefficiency and economic injustice. The stronger is the social monopoly, the
more economic inefficiency and economic injustice it creates. Owing to this correlation



54
monopolys strength allows to quantitatively determine or simply to measure the level of
property rights imperfections in any particular society. On the other hand, understanding
of monopolys strength is the key for identification of the balance of power in any given
society.
Conception of monopolys strength is not just an abstract logical definition, but rather
represents an essential tool for understanding of ways, methods and possibilities for
elimination of social monopolies. Since, as we concluded, an overall strength of
monopoly is determined by two types of factors social and economic ones - we can
equally assume that elimination of social monopoly might be feasible either through
eradication of its social strength or through dissolution of its economic strength. The less
property both in comparative and in absolute expressions is associated with social
monopoly as well as the more individuals and social groups are having social access to
monopolized property, the weaker is monopoly. Whenever, every single member of
society is gaining an unlimited social access to particular property (not an actual property
possession per se, but rather a social opportunity to acquire it) or to particular production
factor, or whenever no social barriers are left for every individual in order to acquire
particular type of property or particular type of production factor, then social strength of
monopoly is disappearing and monopoly is vanishing. Here lies a nature of social
elimination of monopoly or of social property rights dispersion. Reduction of the economic
strength of monopoly connected with a permanent decline in economic, material and
monetary expressions of exclusive property possession up to a zero level or simply
elimination of monopolistic property in terms of its quantitative physical characteristics
we will call economic elimination of monopoly. Although complete economic elimination of
monopoly is not entirely impossible, it is not so easily achievable as well and we can
hardly think about numerous historical examples of this kind of social phenomenon.
However, diminishing of monopolys strength in economic or financial terms might be
absolutely indispensable.
The more individuals and social groups are having macroeconomic or social access to
particular monopolized property or the more dispersed particular property is in terms of
a number of proprietors, the weaker is monopoly and vice a versa. On the other hand,
under the same conditions, the weaker is monopoly the less imperfections exist in
particular system of property relations. Let us bring an example. In France before the
revolution of 1789-1794 and during a period of dissolution of feudalism and of
emergence of capitalist property relations, social situation of land aristocracy exhibits a
dispersion of this social groups exclusive property rights upon land as a production
factor. This period is characterized by a weakening power of land aristocracy and by
incorporation into a network of production factor monopoly on land of the other groups
of population such as financial magnates, bourgeoisie and even peasants. Historical
period is exemplifying opening for these categories of population of previously rather
limited possibilities to own agricultural land. This process marks dissolution of feudalism
or of the land monopoly of landlords and aristocracy as well as emancipation of an access
to the private possession of land for other social groups through social property rights



55
dispersion. Under social property rights dispersion we will understand macroeconomic or
social access for a rising number of individuals to proprietorship of previously exclusive
property possessions accompanied by consolidating economic competition within
monopolized production factor or within monopolized economic sector. Social property
rights dispersion is consequentially diminishing a level of property rights exclusivity.
However, one or another degree of property rights exclusivity remains until complete
dissolution of production factor monopoly since certain groups of population and certain
social groups might remain to be handicapped in their social access to particular type of
property longer than others. Speaking otherwise, social access to monopolized
production factor still might not be entirely free for everyone in society; dissolution of the
production factor monopoly is a rather long-term process.
Considering social strength and social elimination of monopoly we have to draw a clear
division line between social (macroeconomic) and microeconomic or conventional
property rights dispersions. Social property rights dispersion, as we already know,
means rising social access to monopolized property on behalf of particular individuals
and social groups. Conventional property rights dispersion (we will call it so in order to
differentiate from social property rights dispersion) is quite a common socio-economic
phenomenon, which stands in expanding number of proprietors of particular economic
agent, corporation or association or sometimes in expanding appropriation of particular
property shares on behalf of individuals and social groups. Conventional property rights
dispersion can be realized either by economic means through a process of exchange, or
by social means based on mechanisms of power and coercion.
Natures of social and conventional property rights dispersions differ significantly and are
having rather unalike practical applications. First of all, this is connected with the fact
that social property rights dispersion is applicable to production factors and social
groups, while conventional property rights dispersion is applicable only to particular
microeconomic or business units. Let us illustrate the difference between social and
conventional property rights dispersions on a simple example. Let us suppose that there
is only one steel supplier in particular economy and therefore the steel industry is
monopolized. Let us also assume for simplicity, that only one person owns this particular
monopolistic company, which is producing and distributing steel. At some point in time
owing to social counteraction, it is becoming rather difficult for our proprietor to socially
maintain his exclusive privileges. He decides to unite his social and economic efforts with
some influential investors and politicians by offering them a certain stake in his company
and consequentially in his monopolistic property and in his monopolistic income. Such
an act would represent conventional property rights dispersion, i.e. an increase in
number of proprietors of this particular monopolistic enterprise. Conventional property
rights dispersion concerns only an economic side of property and is applicable both to
monopolized and to non-monopolized property, though in this book we are interested
mostly in its application to monopolistic proprietorship. No matter how much will
increase the number of proprietors, monopolistic nature of a company cannot be
influenced by conventional property rights dispersion. Even if every single member of



56
society will acquire certain stake in companys property, company will still remain to be
a monopoly and will appropriate monopolistic income under the lack of social property
rights dispersion as long as exist interests associated with other types of property. With
the time passing by, a situation of our original monopolistic proprietor changes to the
worse even together with his new influential co-proprietors he cannot anymore
maintain his exclusive property rights and has to allow access to the steel market for
other companies. Steel market is becoming duopoly or oligopoly and starting to embrace
an economic competition. Such statement of things exhibits entirely the social property
rights dispersion within monopolized property. Social property rights dispersion, being a
fundamental cause of monopolys dissolution can be achieved only through the
mechanisms of social counteraction to social monopolies and to other property rights
imperfections on behalf of monopoly dependent and non-monopolistic social groups.
Both social and conventional property rights dispersions are determining the social
strength of monopoly as well as the levels of economic inefficiency and economic
injustice associated with particular monopoly.
Counteraction between monopolistic and monopoly dependent social groups is derived
from the balance between social and economic strength of monopoly dependent social
groups from one side and between social and economic strength of monopolistic social
groups from the other. Similar to social monopolies, social groups owing to their nature
of social associations based on mechanisms of power and coercion can be described in
terms of their strength and power. The more wealth or the more property possesses
particular social group (either monopolistic or monopoly dependent), the more
economically strong it is. On the other hand, the more exclusive are property rights or the
more power is associated with monopolistic social group the more socially strong it is. In
reality economic and social strengths of monopoly are absolutely inseparable and are
contouring a single social phenomenon. Economic strength is significantly contributing
to the social strength, while social strength from the point of view of particular
monopolistic proprietor is worthwhile only for consolidation of monopolys economic
strength. Economic elimination of social monopoly is significantly contributing to the
social property rights dispersion related to this particular monopoly, because
diminishing physical or quantitative volume of monopolistic property is downsizing
material interests related to this type of property and downgrading its power. Only a
compound effect of social and economic strengths of monopoly or, otherwise, only
compound effect of economic elimination of monopoly and of property rights dispersions
defines an overall real strength of social monopoly and of the relevant social groups.
Strength of monopoly is essentially interconnected with the strength of human interests,
with achieved level of their exclusivity under particular monopoly and with an overall
level of power of particular individuals who express this type of interests under
particular system of property relations. Correlation between economic strength of
monopoly and between human interests stands in the fact, that the larger is a physical
amount of monopolized property the stronger is every particular interest associated with
this property. Correlation between social strength of monopoly and between human



57
interests stands in the fact, that the less individuals or social groups are having potential
social access to particular property, the larger are monopolistic incentives (and, first of
all, monopolistic income) and therefore the less socialized or the less counteracted and
the more powerful is every single interest associated with this property. On the other
hand, conventional property rights dispersion reveals that the more self-interests are
associated with particular social monopoly - the more dispersed are exclusive claims
upon the income from monopoly, the less is a share of every monopolys proprietor in
total monopolistic income and therefore the weaker is every particular interest towards
this particular social monopoly.
Social property rights dispersion generally is more leaning to the management,
administration and control over monopolized property. Conventional property rights
dispersion, on the other hand, is more directed towards income distribution and
redistribution claims, property management being a secondary priority. Such statement
of things, first of all, is based on the dispersion of interests. Private property possessions,
when property belongs to one single proprietor are associated with very strong and
concentrated interests. Incorporated property is exhibiting more dispersed individual
interests, taking into account that people usually disperse or diversify their investments
in different companies, corporations and social associations and therefore disperse their
interests as well. On the other hand, a lot of people who do invest their money in
incorporated property, in fact are not considering investment income as their basic
income they might have, for example, salary or entrepreneurial income as their
principal source of income. In vast majority of cases people invest their money in
incorporated property for the sake of income and not in order to acquire any
management or administrative rights. Quite often they even do not want any
management and administrative responsibilities either because they do not have time or
simply because they are not interested in management and control. On the other hand,
one always has to administer and control exclusive property rights and, first of all, he
needs to constantly influence and interact with the mechanisms of power and coercion
maintaining his social monopoly; otherwise not only his monopolistic income, but also
the entire monopoly might collapse. Any social property rights dispersion is associated
with certain degree of interests socialization, which is expanding together with the
diminishing level of property rights exclusivity or together with declining monopolys
strength. Conception of property rights dispersion is very important for analysis of the
state property and we will significantly rely on it in second part of the book.




58
Chapter 6. Economic Inefficiency and Economic Injustice
If somebody owns a product, which physically, intellectually, politically, socially,
culturally or in any other way cannot be supplied by other people, then he will have an
absolute advantage in provision of this particular product on the market. How should a
person use such an advantage? Economically coming from self-interest oriented human
nature in only one way he will try to benefit from this situation as much as possible,
knowing that there are no any alternative suppliers whatsoever. This will happen every
time through a price influence, which is a basic immanent outcome and at the same time
an essential material reason for social monopolization. Any extra income or any income
outside of the balanced development of production factors is only possible through the
price influence situation, otherwise every production factor is getting its own objective
market predetermined price in accordance with this factors contribution to an overall
economic process of production and exchange.
From the point of view of particular monopoly holder, price influence situation makes
sense only if monopolized property is having limited substitution possibilities. Otherwise
according to microeconomic price-demand correlation higher price will always lead to a
lower demand for particular commodity and lower demand will simply annihilate the
effect of higher price in terms of monopolistic income. From the point of view of
particular monopoly holder such statement of things means microeconomic inefficiency.
From the point of view of particular monopolistic proprietor, his monopoly makes sense
only if he can pass this inefficiency on other individuals, social groups or on society as a
whole. That would only be possible if he will find some way to persuade other people to
enter with him in exchange relations without strict dependence on a price of his product.
Such persuasion can only be based on restricted or limited alternatives for acquisition
and utilization of particular property (of particular commodities or of particular capital).
Social monopolization can only occur if for certain individuals and social groups
persevere limited property exchange or property substitution possibilities. Price
influence situation associated with limited substitution possibilities is a purely social
phenomenon; it can only be achieved by non-economic or by social means based on
mechanisms of power and coercion.
Price influence situation for structural monopolies to certain degree is limited by an
existence of the entire row of different substitutes for particular commodity or sometimes
even by a general possibility not to buy or not to use particular commodity at all. If we
return to our previous example of matches monopoly, the higher is price of matches
solicited by this particular monopolist, the more consumers will be willing to utilize gas
and electric lighters instead of matches. However, monopolization of a supply of more
strategic and global commodities, such as steel for example, which hardly can be
substituted as easily as matches, already is incorporating a much stronger price influence
situation. Steel monopoly is certainly more comprehensive, economically stronger and
socially more influential than the matches monopoly, but, on the other hand, it takes
much more social efforts and much more financial resources in order to establish and to



59
maintain it. At the same time, as a result of lower inherent substitution possibilities, the
steel monopoly will most probably bring higher monopolistic income to its proprietors.
On account of diverse and severe possibilities for social persuasion, on account of
dominating social infrastructure and social ideology as well as on account of certain other
factors, under production factor monopolies usually a substitution of employer is rather
limited. Slave, as a result of social persuasion and social coercion cannot freely choose a
mode of application of his labor. Medieval peasant is also quite limited in his choice of
occupation by a variety of factors of economic and social nature. The same is pertinent to
an aggregate labor force under communism and probably even under the earliest stages
of capitalism. Limitations of alternative types of property possessions and property
exchanges under the production factor monopolies are not only violating social property
rights, but also represent a single cause for limitations of personal freedom generating a
strong case of social injustice. The stronger is monopoly, the higher is its ability to create
and maintain limited substitution or limited application possibilities for certain types of
property (including for labor) and therefore the stronger is its influence upon particular
prices and the higher is a level of appropriated monopolistic income. Limitations for
property substitution and for property utilization represent purely social phenomenon
because they can only be established through implication of the mechanisms of power,
coercion and forcible persuasion.
Social limitations of ones own property exchange possibilities represent an essence of
slavery as of social phenomenon, which may actually exist not only under the social
formation of slavery but any time and anywhere. Slavery appears there and then where
and when social monopolization is creating social (based on power and coercion) barriers
for an alternative implication in the production process of ones property of the last resort
or of ones single productive, income generating property. Basic reason for violations of
personal freedom at the end of the day is dispossession from any property related
alternatives, because in order to make one human being a property of the other human
being, the former should be deprived from all means and possibilities to freely realize
any kind of production activity. This can only happen through utilization of the
mechanisms of power and coercion. Of course, slavery is only an opposite to complete
personal freedom particular social condition an extreme point on the liberty-slavery
scale. What is moving a pointer of this scale closer to the slavery extreme is the
diminishing level of alternative possibilities for property implication in the production
process. Labor usually represents a property of the last resort, because no matter how
poor a person is or how little property he possesses he still has his labor. Labor,
regardless of how unqualified it may be already represents the property, which can be
applied in value creation activity in combination with different other production factors.
If a person can apply his labor as property of the last resort only with one single
economic agent or with one single enterprise in the entire economy, this immanently
generates slavery-like social arrangements. From these arrangements there is only one
step to slavery in a common sense of the word deprivation of any social rights and
humble satisfaction of orders and desires of particular individual or of particular social



60
agent. Not the slavery is producing social monopolization, but vice a versa strong social
monopolization generates slavery. The stronger is social monopoly the higher is
limitation of economic and social choice, of alternatives, of the freedom at the end of the
day, and therefore the higher is the risk of the emergence of slavery. Structural
monopolies normally are socially weaker comparatively with production factor
monopolies because of a lower share of monopolized property in overall national
property possessions. Owing to that, structural monopolies rarely if at all produce
slavery. Under the production factor monopolies, on the contrary, various violations of
personal freedom including slavery are quite a natural phenomenon. Vivid example of
the violations of personal freedom under production factor monopoly is communism.
Under the communism we have only one economic agent, one producer and one capital
proprietor the State. This generates very severe conditions not only in terms of
limitations for personal freedom, but first of all in terms of potential emergence of the
slavery-like relations. When somebody is socially dictating to particular individuals and
social groups were to apply their property, including their labor we are already having
a case of violation of personal freedom. If people are not only unable to change their
employer, but are also limited in their choice of a line of occupation as it was mostly the
case at the earlier stages of Russian communism - it is exactly what slavery is all about.
Self-oriented, egocentric human nature in its desire to appropriate monopolistic income
engenders social monopolization. Strong monopolistic social groups and weak
monopoly-dependent social groups are making social monopolization rather powerful.
Strong powerful monopoly is always exploring new opportunities to raise monopolistic
income, simultaneously posing higher limitations for economic and personal freedom.
All these tendencies are working towards the emergence of slavery.
Under structural and production factor monopolies an influence of monopolistic income
appropriation upon overall social and economic conditions varies owing not only to a
difference in social characteristics of the two types of monopoly, but also owing to a
difference in the natures of generated by them price influence situations. Under the
structural monopoly exclusive property rights, price influence situation and monopolistic
income appropriation are connected with an output side of production process or of
particular economic agent. Structural monopolies are primarily output monopolies
they, first of all, monopolize a product or a service. Under the production factor
monopolies, owing to a specific type of limitations for property substitution and for
property utilization, price influence situation mostly applies to an input side of the
production process of multiple economic agents within one single production factor or of
multiple proprietors united in one monopolistic social group. This is a rather complicated
phenomenon, but it explains the entire nature of production factor monopoly and
therefore requires a special consideration. Because of this difference in the nature of price
influence situation in order to investigate the patterns of monopolistic income
appropriation appearing under social monopolization as well as in order to understand
associated economic inefficiency and economic injustice it seems logical to examine
production factor and structural monopolies separately. Obviously, violations of social or
human rights are much more severe under the monopolization of production factor since



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production factor monopolies are generally stronger and much more socially influential.
Therefore they are much more limiting economic freedom, substitution possibilities for
property utilization and choice of occupation. No one production factor can be employed
in production activity independently without an implication of the other production
factors. On the other hand, monopolization of one particular production factor is creating
significant economic inefficiencies and social problems for proprietors of all other
production factors. Some of them or even all of them have to pay certain monopolistic
price (expressed in different ways) to the proprietors or to an aggregate proprietor of
monopolized production factor. But this is not yet a whole story. People or social groups,
which have to employ monopolized production factor in their production activity or
production factor monopoly dependent social groups, have to suffer the most both from
appropriation of monopolistic income by monopolistic proprietors and from violation of
their social rights. Exclusive property rights, as we know, can only be realized within the
economic activity. If there is no economic activity, any property is idle and is not bringing
any income. However, since neither one production factor can participate in any
economic activity just by itself without implication of all other factors, in order to make
monopolized production factor to work or in order to receive monopolistic income,
monopoly-holders somehow have to integrate the monopolized production factor with
the other production factors into a unified production process. And, vice a versa, all
proprietors of the non-monopolized production factors have to connect them under
economic activity with monopolized production factor. From the point of view of
monopolistic individuals and social groups, such connection is necessary, first of all, in
order to charge monopolistic price for economic utilization of the monopolized
production factor by other people. In economics, monopolization (economic science does
not differentiate between economic and social monopolies) and price influence situation
are normally related to an output side of the production process. However, yet Marx
portrayed
21
that problems in the system of property relations might also arise on account
of social and economic processes connected with an input side of economic activity and
particularly on account of non-economic or social formation of the price of labor. Indeed,
if we consider a toil of slave on his masters mine, social relations underlying this kind of
work exhibit input side monopolization with appropriation of monopolistic income on
the input side of production process. Because of certain social circumstances, the slave
has to apply his labor exclusively with this particular master. Since under slavery, a
master or a slave-owner represents economic agent, while slaves labor represents a part
of economic input to particular production process of this particular economic agent, this
type of monopolization is attached exactly to the input side of economic activity. Even
though, for a slave, of course, it is an output side of his single productive property
labor, which is being discriminated or coercively expropriated by his master, while
expenditures connected with reproduction of the slaves labor, whatever insignificant
they might be, represent a cost for the master.
Price influence situation attached to the input side of production process is pressing
prices of monopolys input down, while price influence situation attached to the output
side of production process on the contrary is driving prices of monopolys output up.



62
Generally speaking, for understanding of universal social and economic mechanisms
related to appropriation of monopolistic income there is no particular difference on
which side of the production process - on input or on output such appropriation is
taking place. However, there is a significant difference in terms of the level of social
rights violations coming from particular social monopoly. The level of social rights
violations connected with price influence situation is significantly higher on the input
side of production process than on the output. It is higher under input side price
influence situation as a result of a superior social strength of production factor monopoly
comparatively with the structural one and also as a result of lower substitution
possibilities for monopoly dependent individuals and social groups in application of
their property of the last resort. On the input side of production activity or of economic
agent particular individuals are facing only one buyer of their labor and what is more -
not merely a buyer but actually also a single available supplier of their entire income and
of all vitally important life necessities. Such situation is granting to production factor
monopoly proprietors a rather elevated power over monopoly dependent individuals. In
the case of price influence situation on the output side of production process, this vital
economic dependency on monopoly holder is considerably diminishing. Monopolistic
price influence situation in this case is related in fact to the entire society and not just to
particular individuals and social groups. Entire society has to pay a price for limited
substitution possibilities, entire society is transforming into monopoly dependent social
group and the entire society normally is not tolerating such a situation for too long. What
concerns labor relations under price influence situation in structurally monopolized
economic sectors, people are usually having an option to change their employer,
profession or even line of occupation. Although in reality it might be not so easy to
accomplish, it is still much easier than to change occupation under the production factor
monopoly. Under production factor monopoly to change a line of occupation usually is
rather difficult owing to the persistent violations of social rights based on oppressing
social mechanisms of power and coercion. Without violations of social rights, production
factor monopoly is generally problematic because if people are absolutely free in their
choice of occupation and in application of their labor one has to try really hard in order to
collect from them any exclusive above-the-market income.
Price influence situation associated with social monopolization is having certain negative
economic and social impacts, which are based on appropriation of exclusive property
rights and particularly on appropriation of exclusive income. Those impacts are rather
perceptible and essentially important in terms of their overall social and economic
influence. First of all, under any social monopolization aggregate level of national output
and potential economic growth would generally be lower comparatively with non-
monopolized economy. Higher monopolistic prices despite of the limitations of
alternative exchange possibilities for particular property or for particular commodity, are
leading to a decline in monopolys output because of the substitution effects of economic
and social nature. In case of structural monopoly people might partly ignore monopolys
products and partly switch to the substitutes, while in case of production factor
monopoly - monopoly dependent individuals will simply work less or worse since



63
naturally they are not too motivated to produce more owing to social rights violations as
well as owing to particular modes and methods of exclusive income appropriation by
monopolistic proprietors. In order for monopoly to make sense from the point of view of
its proprietor, a monetary expression of monopolys output has to be higher than it
would be without monopolization. Inescapable reduction in monopolys output has to be
over-weighted by increase in prices. Only in this case monopoly proprietors will receive
monopolistic profit or monopolistic income. This also represents a fundamental
consequence of social monopoly from purely economic point of view or from the point of
view of supply-demand correlation. Lower output attributable to a higher level of
monopolistic prices forms a nature of comparative with non-monopolized economy
economic inefficiency of any social monopoly or its general macroeconomic inefficiency.
Economic inefficiency means that less real value is produced comparatively with the non-
monopolized economy and that financial resources cannot be directed towards the most
efficient macroeconomic outcome based on free flows of production factors and economic
resources. Besides bringing along economic inefficiency, monopoly will oblige outsiders -
particular individuals and social groups, which do not possess exclusive property rights,
to spend an additional part of their income in order to pay a special price to monopoly
proprietors for their exclusive rights. This situation forms a nature of economic injustice,
since extra income is coming neither from intensive utilization of any production factor
nor from additional work of any kind, but from exclusive property rights based on power
and coercion. Social monopolization immanently incorporates two fundamental and
inseparable consequences - comparatively (with non-monopolized economy) lower
output, which is an essence of economic inefficiency, and comparatively higher
monopolistic price, which is an essence of economic injustice. In socially monopolized
economy certain individuals and social groups always have to pay in terms of money
and in terms of macroeconomic efficiency to monopolistic proprietors for their exclusive
social rights. Economic inefficiency and economic injustice genuinely are one hundred
percent correlated; they are absolutely inseparable. One of them never exists without
another and even more than that - they are merely two parts of one single social
phenomenon appropriation of exclusive income, which in its turn is a fundamental
cause for any social monopolization. Generally speaking, what is inefficient is always
unfair and vice a versa what is unfair is all the time inefficient.
Social monopolization and price influence situation as well as created by them economic
inefficiency and economic injustice are a single general reason for all economic and social
depressions, both of short-term (well-known under this term in economics) and of the
long-term (more known as social and economic collapse of society) character. Both
production factor and structural monopolies are always eager to increase and are always
reluctant to decrease price of their property or of their output and, vice a versa, are
always eager to decrease and are always reluctant to increase price of their input. Being
able to do so thanks to specific social circumstances (including violations of social rights)
and in combination with limited property substitution possibilities, they every time bring
along the discrepancies in supply and demand, while in the case of production factor
monopolies also the discrepancies in societal systems. Supply and demand are in



64
equilibrium only under the non-monopolized economy, otherwise equilibrium, if any, is
short-term, artificial, unbalanced, volatile, staged and unstable.
Practical manifestations of economic inefficiency and economic injustice under the
production factor monopolies are slightly different. Even though under production factor
monopoly the societal grounds or societal preconditions for economic inefficiency and
economic injustice are the same as under structural monopoly, their economic realization
is different. Economic inefficiency and economic injustice under production factor
monopoly are usually much more hidden inside the network of economic and property
relations by social, political, legal and cultural infrastructure. Nevertheless, their nature
remains to be the same. There is one specific aspect related to economic inefficiency
under the production factor monopoly, which is coming from price influence situation on
the input side of business process. Although, under production factor monopolies
monopolistic prices of input are lower than under monopoly free environment, we have
to understand that in reality these prices are lower exactly because monopoly-dependent
social groups have to pay exclusive monopolistic price as a result of social limitations
related to the substitution possibilities for application of their property. Nature of
monopolistic prices stands in exclusive social (based on power and coercion)
appropriation by monopolistic social groups of the part of income or usually of the part
of labor value created by monopoly dependent social groups. On the contrary to
structural monopolies, under the production factor monopoly, monopolistic proprietors
are passing economic inefficiency (lower level of aggregate output comparatively with
non-monopolized economy and related opportunity costs) on monopoly dependent
social groups and individuals rather than on the entire society. This is another reason
why structural monopolies are not that lasting it is easier to oppress certain socially
weak and underpaid individuals and social groups than the entire society. Generally
speaking, from the point of view of monopolistic proprietors, production factor
monopoly makes sense only if comparatively (with non-monopolized economy) lower
prices on the input side of production process (or lower prices of labor) are over-
weighting lower (comparatively with non-monopolized economy) output of monopoly.
Output of the production factor monopoly is always lower owing to a comparatively
(with non-monopolized economy) lower productivity of both monopolistic and
monopoly dependent social groups. Economic rationale for lower, comparatively with
non-monopolized economy, aggregate output is based upon limited substitution
possibilities for application of labor as of property of the last resort and upon limitations
of personal freedom. Limited substitution possibilities cannot exist without negative
macroeconomic influence upon the level of aggregate output or upon economy generally.
Monopoly dependent social groups, which are selling labor as their property of the last
resort or as their single productive property, are simply less interested in a final product
or in a final result of their production activity, first of all, owing to social and economic
limitations of their freedom. Monopolistic social groups relying on the mechanisms of
power and coercion are anyway appropriating one or another part of their income. The
higher is a level of such appropriation, the lower are economic incentives for monopoly-
dependent social groups to work hard and the lower is their output. On the other hand, if



65
social and economic freedom is limited for monopoly dependent social groups,
monopolistic economic agents or monopolistic social groups are also limited in their
ability to substitute employed labor with a more efficient one without damaging their
entire exclusive social and economic situation.
System of economic and property relations under the production factor monopoly is
characterized by significant ties and interconnections between various types of social
monopolies. A very important role in coordination and preservation of different types of
social monopolies is playing the State. Under the social formations based upon
production factor monopoly, such as for example slavery or feudalism, always exists one
fundamental and the most powerful type of monopoly, which is essentially defining all
economic and social relations as well as the entire social infrastructure. Strength of this
particular production factor monopoly varies not only on geopolitical scale, but also on a
time scale - usually being less expressed at earlier stages of social formation when
economic and social relations are in the process of their affirmation, strengthening
towards a flourishing or maturity stage and starting to dissolve and collapse at the
breakup or disintegration stage. At the final disintegration stage, production factor
monopoly is already rather weakened. In order to preserve and to maintain itself it is
starting to interconnect and to share its power with other social monopolies (for example
structural and financial monopolies in 18th century in France or the same sort of
monopolies in England a century earlier) as well as with new more progressive for the
time being forms of property relations (such as, for example, emerging capitalist relations
in 18th century in France). Disintegration or dissolution stage is also noticeably
characterized by rising dependency of the production factor monopoly for support and
maintenance of its privileges upon the power of State (ex. Roman Empire towards its
collapse, 18th century France). At disintegration stage, production factor monopoly as a
result of mounting contradictions and inefficiency is simply unable to maintain itself
internally relying only on its own power and on underlying this particular monopoly
social and property relations.
For a simple illustration of economic inefficiency and economic injustice associated with
the production factor monopoly, let us consider a land monopoly under feudalism.
Property relations under feudalism are characterized by a situation when basically only
one social group the landlords or land barons - is having exclusive social possibilities to
own land property or to own land as an economic resource and as a production factor.
All other social groups and first of all peasantry, which is directly applying its labor to
the land as a production resource, are basically lacking economic and social possibilities
to possess land, at least at the maturity of feudalism. Natural monopolistic outcome of
these exclusive property rights would be lower comparative output, which is caused by
economic inefficiency and by monopolistic price influence situation. Since price influence
situation under production factor monopoly is related to the price of input, all basic
imperfections in property and income relations are, first of all, affecting social group,
which is supplying a major input for the land as a production factor. Landlord is able to
appropriate exclusive monopolistic income owing to lack of social opportunities for a



66
peasant to possess the land property of his own and also as a result of certain coercive
social constraints for the peasant in substitution of his employer. Thus, landlord is able to
cut peasants income or to cut a price of his labor to the minimum level possible under
concrete social and economic circumstances, appropriating part of peasants income,
which the latter would receive otherwise under the free market competition or in
monopoly free economy. Then again, as a result of coercive social opportunity to
appropriate monopolistic income and on account of limited possibilities for the capital
flows based on inadequate amount of land available for sale and on underdeveloped
land market, there are not too many incentives for a landlord to invest and to reinvest.
He can probably gain more income in an extensive way participating in military actions
or granting services to a king, rather than in intensive way routinely managing his
property or developing technology. On the other hand, peasant a direct producer, who
is always loosing part of his income owing to monopolistic income appropriation by the
landlord, is also not very eager or might not be even socially able to invest. Lack of
investment incentives, however, is only a part of the story. Landlords are normally
withdrawn from any production or economic activity, very often even from
administration and management of their own property, being merely consumers of
goods produced by the other people. At the same time, peasants might not be willing to
produce too much if they see that part of their efforts is always taken away by landlord
moreover if this part turns out to be dependent upon the total volume produced. This is,
so to speak, a pure case of feudalism. Situation becomes much more complex closer to a
dissolution of feudalism as of production factor monopoly, when landlords as a social
group have to much stronger unite their efforts in preservation of existing property
relations with the power of State. Income appropriation in this case is becoming much
more hidden and much more diverse with direct and indirect participation of the State,
which sometimes is playing a major role in the system of property relations over-
weighting social power of landlords as of the social group. Although methods and
mechanisms of monopolistic income appropriation evolve, a nature of income
distribution and a nature of inefficiency associated with production factor monopoly
remains to be the same throughout the entire history of mankind. Today we may admire
an exquisite architecture and beauty of medieval and ancient castles, palaces and
fortresses, but it was exactly coercive social monopolization as well as associated with it
appropriation of exclusive monopolistic income, economic inefficiency and injustice,
what made possible to build such luxurious constructions in such a low-income society.
Under the perfect competition or in economy without any kind of social monopolization,
investment and consumption generally do not differ from one another, neither in their
influence on aggregate demand nor in terms of the nature of underlying them economic
actions. Any consumption can be considered as an investment and vice a versa.
Consumption and investment under the perfect competition are indistinguishable
categories. Difference between them is close to the difference between national income
and national output economic indicators and methods of calculation are dissimilar, but
underlying actions and economic outcomes are equal at the end of the day. Every
spending can be considered as some kind of investment and vice a versa especially from



67
the point of view of production factors participation in economic activity. Let us take a
very simple example. Buying groceries by a sales manager of some company can be
considered as an investment in reproduction of his labor force, since food is an
indispensable element for maintenance of his basic production factor (labor). Even if our
man is buying a luxury item such as a giant three-floors manor it is still investment in his
major economic resource labor, because civilized living conditions are contributing to
any persons productivity of labor. This house, besides, is increasing his confidence in
future and allows him to pour all his energy and intellectual abilities into his line of
occupation, consolidating also his level of specialization and devotion to particular kind
of activity. On the other hand, house is a private long-term investment in common
economic sense of this word. And what about procurement of the necessary office
equipment for our sales managers company? Does this kind of investment on national or
societal scale really that different from procurement of the same items by a private
individual? And which of the two is influencing more companys performance or
aggregate national output generally buying food and house by companys employee or
procurement of office equipment by a company it is really hard to tell. Both actions
ultimately are directed towards the same objective - reproduction of particular
production factors (capital and labor) and both of them are basically investments in their
nature, even though private acquisitions traditionally fall under consumption. One of
them represents investment (reproduction) in labor, while the other investment
(reproduction) in capital. And how shall we relate the new ideas and technologies, which
are invented by people privately outside of concrete production activity per se or outside
of investment process in its common understanding (for ones own pleasure or for the
sake of potential profits)? Since aggregate national output embraces both components
consumption and investment from the point of view of general societal and economic
efficiency it is not imperative which types of actions will take place as long as they are
realized according to the market or to macroeconomic efficiency indicators. Both
consumption and investment are equally contributing to the process of property
accumulation and are leading to an equal growth of aggregate output. Under the perfect
competition any consumption is an investment in labor as a production factor, moreover
that the consumption in modern world is significantly associated with accumulation of
knowledge and information.
Problems with consumption and investment occur only in monopolized economy. In
socially monopolized economy not any consumption can be considered as an investment.
Monopolistic effect at the macroeconomic or at the social level is driving economic
resources or production factors development away from the maximum economic
efficiency requirements. This is happening because monopolistic income by and large is
spent in a way, which is quite far from investment or which is quite far from any kind of
reproduction of economic resources. The most efficient balance between various
production factors development is debased and certain economic resources are
developing on account of the others. For example, if we refer to the feudalism of 10-14th
centuries, we can see that monopolistic income of land aristocracy was significantly
motivating a predominant expansion of military and armaments industry, while later on



68
in 17-18th centuries consumption tastes were much more stimulating a leading progress
of luxuries producing industries. In both cases certain economic activities have prospered
on account of the balanced and proportioned development of all economic resources.
This might be a major reason why all ancient civilizations no matter how advanced and
sophisticated they used to be, never managed to invent even a simple steam engine. The
wealthier ancient oligarchs were becoming the more income owing to a considerable
level of property rights imperfections in society they were wasting on non-proportional
and imbalanced development of certain industries on account of the free flows of
economic resources. For artificial development of any particular kind of activities without
its complete dependency on natural economic tendencies and market mechanisms it is
absolutely necessary to coercively take away economic resources from certain other
activities; otherwise resources are not emerging from nowhere. Here stands the trouble
with all the aggregate demand boosting policies, which are appearing long before Mr.
Keynes. Whenever and wherever exists additional social, non-market motivation for
development of certain economic activities there is an equal disincentive for development
of the other economic activities. Any coercive reallocation or redistribution of resources,
either premeditated or erratic, is having underneath itself strong private interests and
always denotes a presence of property rights imperfections. Monopoly proprietors
generally have fewer reasons for investment. Owing to a lack of competition, they have
much less interest and much less reason for capital modernization and renovation. They
have an alternative way of income appropriation and besides they have to spend quite a
lot of financial resources on preservation and maintenance of their exclusive social and
economic condition. Such state of affairs besides a variety of other things generates given
away opportunities in terms of property accumulation or opportunity costs of social
monopoly.
Difference between consumption and investment under the social monopolization is
based on immanency of property rights imperfections. Spending of monopolistic income
cannot be considered as an investment in skills and qualification or generally speaking
exclusive income is not associated with reproduction of any production factor including
labor. This kind of spending is non-socialized because of the underlying it exclusive
social rights. Whenever a monopolistic interest, which lies underneath of such spending
is unrecognized it generates a feeling or even an impulse to hide the nature of ones
income not only from the other people, but sometimes even from monopolistic
proprietors own recognition, rather than it brings satisfaction from accomplished
productive or entrepreneurial activity. Let us illustrate this spending of monopolistic
income on a simple example of medieval landlord. Some part of his revenues our baron is
spending on fortification of city walls, construction of fortresses and on additional
military force in order to protect his territory from foreign invasions. This type of
spending from societal point of view, other things equal, looks like fairly decent expense.
Spending of income in this way gives our landlord a feeling of his own importance as
well as of the importance of his undertakings, validating his general social and economic
contribution in his own eyes and in the eyes of other people. However, another part of
his income he is spending on luxury items, such as a new residence, hunting lodge,



69
horses, fancy clothe, jewelry, etc. Speaking otherwise, this part of his income goes on
luxury items connected with a purely personal consumption, which are in no way
associated with economic efficiency (stimulating preferential development of particular
industries on account of the balanced development of all production factors), with any
kind of investments (either in his labor force or in any other production factor) or with
any economic activity at all for that matter. Excessively high level of spending on these
items is creating a sense of stealing, which have to be hidden, especially if this feeling is
permanently confirmed by social upheavals and unrest. Such spending based on coercive
extraction of revenues not only creates among people a general suspicion of unfair
coercive expropriations, but is also spreading this suspicion towards the other part of his
income spent in a more socialized way, so to speak. Feeling of unfair income in reality
rests on much less idealistic and on much more materialistic basis. Usually our landlord
is participating in any economic activity very relatively if at all, while spending of his
enormous (comparatively with monopoly dependent individuals) monopolistic income
on items traditionally connected with luxurious consumption cannot be considered as
investment in any skills, qualification or in labor force reproduction. On the other hand,
income coercively appropriated by the landlord is taking away resources from the other
people (mostly from peasants), which make their own investments in skills and
qualifications or even in reproduction of their labor force practically impossible.
Generally speaking, reallocation of resources as a result of social monopolization, not
only causes current economic inefficiency, but also creates preconditions for the long-
term giving away property (including skills and qualifications) accumulation
opportunities reducing general level of investments comparatively with non-
monopolized economy and therefore also reducing growth of aggregate national output
as well as conserving poverty and societal problems. Under social monopolization a
general cutback in level of investments comparatively with non-monopolized economy is
based upon two fundamental factors. On one hand, spending of monopolistic income
cannot be considered as any kind of investments in skills and qualifications or in
reproduction and development of any production factor. On the other hand, production
investments are rather limited generally owing to existence of alternative exclusive
possibilities for income appropriation on behalf of monopolistic social groups and owing
to disincentives and given away resources on behalf of monopoly dependent social
groups.
Before going any further let us examine the conception of injustice and, first of all, let us
try to clarify whether there is any scientific definition of injustice or is it a pure moral
category. In order to understand the nature of injustice per se, we have to draw a
distinction line between economic and social injustice. From economic point of view,
injustice can only be connected with unfair distribution of income in society. Unfair
distribution of income is associated only with exclusive, based on social mechanisms of
power and coercion, possession and utilization of particular property or of particular
production factor. This makes an essence and an immanent feature of social
monopolization. Unfair distribution of income not only underlines the social nature of
monopoly, but also justifies monopoly from the point of view of monopolistic



70
proprietors. Speaking otherwise, unjust distribution of income is only possible owing to
appropriation by particular individuals of exclusive property rights. Unfair
appropriation of income is based on particular non-socialized interests and on the
mechanisms of power and coercion. Income and property based on coercion is an
ultimate cause of any injustice in the world and first of all of the economic injustice.
Conceptions of economic injustice and economic inefficiency are pertinent mostly to
the imperfections in distribution of income and property in society. All other types of
injustice related to individuals and social groups are incorporated in the conception of
social injustice. Just like the nature of economic injustice stands in property rights
imperfections, in the very same way the nature of social injustice stands in violations of
social rights. Mechanisms of power and coercion, which are supporting exclusive
property rights, at the same time, represent the main cause of social injustice. Similar to
the level of property rights imperfections, a level of social rights violations in any
particular society represents a quantitative phenomenon and exists on a scale
relationship. The more property rights imperfections dominate particular society, the less
property substitution possibilities exist for monopoly dependent social groups, the
higher is a general level of coercion in society and therefore the higher is a level of social
rights violations. Unlike social evolution and economic development, which are infinite
categories, social rights and economic justice because of their foundation on mechanisms
of coercion are predetermined quantitative categories. Under ideal societal system the
one without any property rights imperfections (if such system will ever occur) - economic
injustice will cease to exist while social rights, vice a versa, will gain their complete and
overall realization. Since property rights imperfections, as we already know, represent a
single reason for any violations of social rights and since violations of social rights are
always based on power and coercion, economic injustice and social injustice are not only
closely interconnected and interrelated, but in fact represent an inseparable uniformity.
Property rights imperfections of different kinds form the foundation of general economic
injustice and simultaneously through application of the mechanisms of power and
coercion - a single fundamental cause for all concrete cases of social injustice.
Whoever says monopoly, necessarily excludes justice.
22

Let us also draw a clear distinction line between economic efficiency at macroeconomic
and at microeconomic levels. Macroeconomic efficiency, first of all, relates to
macroeconomic or even to overall societal conditions. For its estimation we usually
employ macroeconomic indicators such as GDP or GNP growth, GDP per capita,
worldwide GDP and GDP per capita comparisons, etc. Efficiency at the microeconomic
level, on the contrary, is more related to economic performance of particular economic
agents. Microeconomic inefficiency of particular economic agents generally arises
because actions of concrete individuals are not based entirely on reason, logic and
comprehensive information and besides are influenced by our passions and emotions,
which are leading to mistakes and misapprehensions. At the macroeconomic level,
economic and social actions are based on the interests of social groups rather than on
those of particular individuals and because of that these actions are more rational, less



71
partial and are generally more influenced by material and financial considerations. One
separately taken member of particular social group can be motivated by his personal
sentiments and ambitions and act against interests of this particular social group or
sometimes even against his own interests. But social group as a whole, is never motivated
by anything else except for its material and financial interests. However, exactly this kind
of motivation, which generates a rather permanent microeconomic efficiency for
particular social group (efficiency from the point of view of this group), simultaneously
creates macroeconomic or societal inefficiency in terms of exclusive property rights and
property rights imperfections. Both microeconomic and macroeconomic inefficiencies,
thanks to economic competition and to social counteraction (which basically represents
social competition) cannot last too long and sooner or later are vanishing. Though,
disappearance of microeconomic inefficiency normally is taking far shorter period of time
than solution of macroeconomic or societal problems. Microeconomic inefficiency, being
far less persistent and far less prolonged than the macroeconomic one, consequently is far
less important both from societal and from economic points of view. Microeconomic
inefficiency is much easier to discover and almost impossible to justify, while
macroeconomic inefficiency owing to associated imperfections in social and property
relations and owing to a support of this imperfections by entire social infrastructure, by
dominating social ideology and by strong non-socialized interests is far more difficult to
recognize and to eliminate.
First social monopoly probably appears when certain individuals start to recognize their
outstanding personal characteristics or simply their physical strength and exceptional
intellectual capacities. Personality, which is generally unique even according to its
definition, already represents certain exclusivity by itself, especially when personal
qualities are fitting particular individual utmost into some societal network. Production
factor monopoly is determining not only entire complex of social and property relations
in any particular society, not only entire social infrastructure, but most fundamentally it
also determines a particular type of social formation. Slavery, for example, is
characterized by a production factor monopoly on slaves labor on behalf of the slave-
owners, who relying upon mechanisms of power and coercion deny any possibility for
slaves to possess their own labor and even their own lives. Feudalism, on the other hand,
is characterized by a production factor monopoly on land on behalf of the land barons
with an overall limitation for peasants as monopoly dependent social group to own land
property. Communism represents an absolute revelation of the State monopoly, which
nature we will examine in second part of the book. Marx once assumed that it is the type
of dominating property relations (or more precisely private property on particular
production factor) what is shaping and determining social formations. This is a
sufficiently evident observation. Since property and economy are playing an essential
role in human society and in human history, people naturally look at the economic
motives in order to differentiate one type of social formation from another or one
historical period from another. Since property is a corner stone of all economic and social
relations in society as well as a general expression of human economic interests, it also
must have something to do with the process of social evolution, moreover that all other



72
social relations can be drawn from property relations. But, if we observe every historical
stage more thoroughly, we may come to conclude, that property, mainly owing to the
self-interest oriented character of human nature, is immanent to human society and
therefore always exists. We can go even further and say that there is basically only one
type of property. In the second part we will see that, strictly speaking, there is no any
other kind of property except for the private one all property is basically private in their
nature just like all interests are private at the end of the day. Any property finally belongs
to concrete private individuals, who benefit from it the most and, first of all, benefit in
terms of income. At the societal level property is an immanent category and therefore
cannot be divided into a number of independent components without damaging the
entire conception. Since property as economic and social category is attributable to all
historical periods, being inalienable part of human society, we will have to find another
foundation for identification, description and differentiation between the social
formations.
Production factor monopolies are mostly originating in underdeveloped or even in
primitive societies. Lack of advanced specialization of labor is leading to the simplest
monopoly possible monopoly on particular economic resource or on particular
production factor. The most scarce, the most important for economic activity and
therefore the most expensive resource is usually being monopolized. Because division of
labor and living standards in primitive civilizations are minimal, only the
monopolization of entire production factor can earn satisfactory living conditions for
privileged social groups. Afterwards together with economic development and owing to
political, economic, cultural and educational evolution it is becoming more and more
difficult to maintain privileges of certain people and social groups on account of the other
people or even on account of the rest of society. Privileges of monopolistic social groups
and associated with them financial benefits are declining together with the diminishing
level of social monopolization, which ideally suppose to ultimately disappear. Since
social monopoly assures exclusive property rights for particular individuals and social
groups and since some people enjoy exclusive rights for which the others always have to
pay, appears a great deal of social, moral and cultural problems, tensions and conflicts
inherent to society built on social monopolization. All these problems lead to
unavoidable dissolution and self-destruction of particular social formation, to
disintegration of particular production factor monopoly and to elimination of the specific
forms of property rights imperfections. Although, it may seem that such dissolution is
having immediate, straightforward and superficial political and social reasons, deep
down inside all social formations are coming to an end because of the one and the only
immanent reason economic inefficiency and economic injustice based on property
rights imperfections. All monopolies are finally being destroyed because of a simple non-
compliance with the requirements of general economic efficiency. Self-destruction based
on inefficiency and injustice is an inherent characteristic both of the production factor
monopolies and of the underlined by them social formations.
Social formations and production factor monopolies are having their standard



73
development cycle. Under every social formation, under every production factor
monopoly and even under every political regime we can differentiate three major
evolutionary phases. Initial phase is emergence and establishment of particular system of
property relations and of associated with it social order. At this stage a new system of
property relations is emerging, either coercively or peacefully, from the preceding social
formation and is being enforced by the social groups in power. Previous system of
property relations is undergoing a process of its final dissolution and new social groups
in power are establishing their control over the State, property and society. Wide-scale
process of property redistribution in favor of the new social groups in power is pertinent
to this stage. Normally this process is rather painful being associated with considerable
number of human victims and with comprehensive violations of social rights. Property
redistribution or property expropriation is accompanied by annihilation of the previous
type of social monopoly and of the previous power structure. Legislative design of
emerging property relations is merely acquiring its forms from incomplete bits and
pieces of the past laws adjusted to new conditions and circumstances. In their new
quality are merely emerging State and society. Respect of laws and of any social
institutions is rather weak and unequally developed among particular individuals and
social groups. Property rights violations of both private and social nature are quite
common at this stage. Finally, representatives of the new ruling social groups realize that
they have accomplished endurable property redistributions or otherwise that they have
already expropriated enough. At this point in time, they are starting to look for methods
to confirm and to assure their newly acquired possessions and to fix them in legislative
system and in social infrastructure. After all that comes a period of flourishing, maturity
and prosperity of particular social formation. System of social and property relations is
acquiring a stable and mature character. Exclusive property rights and social
monopolization are by now firmly established as well as fixed and embedded in different
parts of social infrastructure. The State at this stage is becoming more powerful, but not
yet powerful enough in order to surmount a dominating production factor monopoly.
Laws are vigorously enforced and mostly respected. Social counteraction is typically
modest, especially forcible or violent social counteraction. Previously ruled social groups
are defeated, while a social conflict between new monopolistic and monopoly dependent
social groups is not yet that sharp, because property relations are not yet significantly
obstructing development of production factors. Level of property rights violations is
diminishing. Private property rights violations are thoroughly pursued by more
powerful State, while social property rights violations and forcible expropriations are
declining or even completely vanishing. Finally, a third phase of social formation
development cycle is characterized by accelerating degradation and disintegration of the
system of property relations. Social counteraction is increasing at this stage because
production factors development is coming in sharp contradiction with an obsolete system
of property relations and is becoming to be significantly hindered by it. Conflict between
the requirements of production factors development and between outdated system of
property relations is determining all social problems and political controversies in
society. State is becoming increasingly reactionary in its attempts to save both itself and
an old system of property relations and, on top of that, very vulnerable to any criticism



74
and to any opposition, because underneath of them the State is feeling a serious threat to
its existence in current form. Property rights violations are intensifying and multiplying
because States principal social interest is now associated with an oppression of social
counteraction and it fails to pay an adequate amount of attention to counteraction of
private property rights violations. Sometimes property rights violations are escalating as
a result of violent social counteraction on behalf of monopoly-dependent social groups,
which is accompanied by spontaneous destructions and expropriations of property. At
the end appears a moment when contradictions between property relations and
requirements of production factors development are reaching a critical level leading to
extermination of state, society and social formation.
Question arises whether production factor monopolies evolve over time or is it merely a
coincidence that initially comes out slavery, then feudalism, afterwards different forms of
monopolization under socialism and finally appears an extreme level of social
monopolization under communism. Marx thought that every social formation has been
challenged and finally changed by more progressive one or by more progressive form of
property relations. However, Marx equalizing property rights imperfections with private
property rather than with social monopolization, finally concluded that the most superior
form of social relations is communism, which does not embrace any private property and
which is the only type of property relations worthwhile. He was led to this conclusion by
a false assumption that private property is the main source and fundamental reason of
economic and social injustice. Instead of counteraction of the property rights
imperfections, he insisted on denunciation of private property or of property generally
for that matter. If historical changes of social formations represent an evolutionary
sequence, then under the conception of property rights imperfections it can only mean
that social formations make a row of diminishing levels of social monopolization and
therefore also of diminishing levels of economic inefficiency and injustice. It seems to be
true in case of slavery, feudalism and capitalism. Slavery, perhaps, is the most severe
type of social monopolization and social injustice, being a source of not only coercive
property appropriations but what is more - of the appropriations of human freedom and
lives (of slaves). Production factor monopoly of slavery is very strong with an
exceptionally obvious distinction between social groups monopolistic (slave-owners),
which exclusively possesses particular type of property (slaves or their labor) and
monopoly dependent (slaves), which represents the very type of property possessed by
the first group (slave-owners). Feudalism in comparison with slavery seems as a more
gentle social monopoly, at least at its maturity. During emergence and establishment of
feudalism social relations close to slavery were rather common as well. Monopolistic
component of capitalism is much weaker than the one of feudalism. Since capitalism in
its pure form of absolute laissez-faire or of entirely free market society has never been
achieved by mankind, a historically materialized incomplete capitalism probably did
incorporate certain types of property rights imperfections of production factor and
structural character. At the same time being based on free market mechanisms and
virtually unlimited private property, it was constantly evolving towards the least socially
monopolized society in the history of mankind. It would seem that the only one



75
exception in this row of production factor monopolies with diminishing property rights
imperfections is represented by communism, which is characterized by severe State
monopoly on any imaginable kind of property. Communism, as a complete State
monopoly, being hideous, but at the same time quite fascinating social phenomenon has
totally revealed a nature of the State, which is exhibiting its bloody terrific possibilities
throughout the entire human history. Communism is quite a lesson that needs to be
learned not only by people in former communist countries, but by the entire humanity as
well. Nature of communism we will consider in the next part since for its explanation
initially we have to examine a nature of the phenomenon of State, upon which
communism is built exclusively.
Society without property rights imperfections, if such kind of society will ever exist,
would not represent the social formation per se. Under such kind of society there will be
no social monopolization and therefore no social groups. Without social groups there will
be no social counteraction. Speaking otherwise, nothing social (based upon mechanisms
of power and coercion) will be left in such society. If there will be nothing social in
society or more precisely in common inhabitancy of private individuals, such kind of
social phenomenon cannot be distinguished as social formation (formation may be, but
definitely not social). Everything connected with society, sociality and with social
formations is built upon mechanisms of power, coercion and forcible persuasion.
Whenever and wherever there will be no such evils, there will be no sociality and no
society in its current understanding. Social infrastructure and sociality relying on
mechanisms of power and coercion primarily are maintaining and protecting non-
socialized interests and privileges of individuals and social groups in power. So far
Homo sapiens is the social specie, which cannot live without sociality, power, coercion
and property rights imperfections. Significant share of our intellectual efforts is wasted
on social counteraction, struggle for different types of social exclusivity and on other
unproductive and inefficient activities.
At the same time, throughout the entire history of mankind we are witnessing a
permanent evolution of human society towards the most efficient type of social
organization based on the most efficient system of property relations. Together with
economic development also advance the property relations. And, vice a versa, evolution
of property relations is providing a strong impulse for economic and social development.
Overall level of human actions efficiency including their macroeconomic efficiency is
rising with social evolution and so does physical and quantitative amount of property
allowing property accumulation. Political, ethical, cultural, educational and other parts of
social infrastructure tend to preserve and to maintain existing system of property
relations and also unfortunately existing in society property rights imperfections.
Economic or production factors development assures intensification of economic
efficiency, which sometimes is coming in contradiction with the current system of
property relations. Since human behavior is not directly oriented towards maximum
economic efficiency, but rather is of the self-interest oriented nature, certain disturbances
are inevitably appearing in development and evolution of human society. Economic



76
efficiency at the macroeconomic level hardly ever represents the main objective for any
particular individual or for any particular group of individuals. Human nature is not
directly oriented towards the maximum economic efficiency outcome. Property
accumulation, evolution of property relations and production factors development are
materializing through a permanent social competition and counteraction between
individuals and social groups. Economic development and social evolution of human
society is more explicit or more observable comparatively with evolution of nature or of
universe owing to availability of reasonably comprehensive information. Thanks to that,
we can draw our own ideas, conceptions and theoretical models relying on facts and
experience, not only from our modern history, but from the past as well. Major problem
with our understanding of society, however, is that on account of our current material
interests and of persuasive social ideologies designed to shadow any reasonable
apprehension of reality, our societal ideas are significantly biased and partial on the
contrary to our exploration of nature and of universe.
From historical experience, we can conclude that social evolution and economic
development are certainly having place. But where does this evolution lead us, what is its
basic principle or its directing tendency, if any? Marx, considering social evolution from
the point of view of historical stages or from the point of view of perfecting social
formations assumed that in historical retrospective the answer would be in overcoming
of particular inefficient types of property relations. Since he believed that private
property is a root of the evil and a main cause of inefficiency, his conclusion was rather
simple eliminate private property and all problems will be solved. Macroeconomic
efficiency exhibits how well all economic agents and all production factors are
interconnected and interacting with each other in particular economy. In other words,
macroeconomic efficiency portrays a level of unification of all vectors associated with
particular economic interests of individuals and social groups directed towards
achievement of maximum economic efficiency. Since economic interests, at the end of the
day, are expressed in property and in property relations, macroeconomic efficiency
exhibits how efficient are property relations in particular society. Generally speaking,
maximum economic efficiency requirements are socializing interests of separate human
beings (interests, which being self-interest oriented are, otherwise, rather detrimental for
property accumulation) and are uniting them under one common vector of economic
development and social evolution. Maximum economic efficiency comprises two major
components efficiency of production factors development and efficiency of property
relations. Only constant integral evolution of both components is leading to the
maximum efficiency outcome. Production factors development being based on
accumulation of production resources is a rather permanent and consecutive process,
while evolution of property relations is materializing on the much more unpredictable
and irregular grounds. Regressive or obsolete property relations are slowing down an
accumulation of economic resources, while progressive property relations are
accelerating it. Whenever old property relations are becoming to be an obstacle for
further development of production factors, they are doomed to vanish.



77
Just like at the microeconomic level every business entity normally is oriented towards
maximum profitability, in the very same way at macroeconomic level maximum
economic efficiency requirements through internal and external, social and economic
competition are directing society towards maximum possible outcome under the given
social and economic conditions. Speaking otherwise, maximum economic efficiency is
directing people towards achievement of maximum possible economic and social effect
under available economic resources. Just like every business entity due to economic
competition cannot just stay at the same level of costs, skills and technology in the very
same way at macroeconomic level every single social group, society and civilization
needs permanent improvement in order to compete and to survive. At the
macroeconomic or societal level competition does exist just like at the microeconomic
one, only at societal level it is mostly a social competition between social groups, social
systems, societies, civilizations, social formations and States. Social and economic
competition also exists at international or global level, where it represents a competition
in production factors development between different countries or between different
societal systems based upon different types of property relations (for example between
capitalism and communism or between dictatorships and democracies). In order to
undertake any economic activity, self-interest oriented human beings have to enter in
some kind of social and economic relations with each other. Although sometimes it is
possible to produce and to consume everything within one single household without any
social and economic contacts normally it is rather inefficient. If a person is entering in
the economic relations with other people, this is normally increasing macroeconomic
efficiency, while if he is entering with other people in the social (based upon power and
coercion) relations this is normally decreasing it.
Efficiency as well as inefficiency can be absolute and comparative. Absolute inefficiency,
from the point of view of property relations, means that amount of property created
within the production process or within particular economic activity is lower than it was
before this production process has started or simply that production output is less than
production input and therefore value creation process is negative. Comparative
inefficiency implies, that although the property is creating certain positive value within
particular economic activity, this value is generally lower than it would be created
otherwise under an alternative way of utilization of scarce economic resources. Absolute
inefficiency is quite evident and usually it does not take a lot of arguments to consent that
it is a pure evil. Absolute inefficiency is very difficult (though possible) to hide under
any social infrastructure. Besides, as we have seen, inefficiency always brings injustice
economic inefficiency and social justice never comes together, and only non-socialized
human interests are trying to hide inefficiency under the slogans of social justice.
Comparative inefficiency is not so obvious and it usually takes time before natural order
of things is helping people to realize its existence. Sometimes comparative inefficiency is
evolving into an absolute one and only then people are starting to notice it. Inefficiency,
in fact, is never stable it is either diminishing or accumulating. Even if we have only a
minor social and economic inefficiency, left alone, it will either develop into absolute
inefficiency or otherwise it has to be somehow diminished. Talking about comparative



78
inefficiency of property relations, we mean that alternative system of property relations is
or suppose to be more efficient and suppose to win economic and social competition with
the current one. It is rather difficult to prove theoretically - without practical illustrations
and social experience that certain type of property relations or certain societal system is
less efficient than the alternative one (and quite often even with illustrations and
experience as well, owing to concealing social infrastructure and to subjective human
interests). Requirements of maximum economic efficiency presuppose that we have to
have an absolute efficiency. Not just any efficiency can endure under the maximum
economic efficiency requirements, but only the absolute one or the maximal. In terms of
property relations this implies survival and existence only of their most efficient form.
Maximum economic efficiency requirements of absolute efficiency represent a major
factor responsible for disintegration of communism. We cannot be sure about late Soviet
statistics before a collapse of Soviet Union, it probably cannot be considered as
particularly reliable and objective, but in certain former communist countries such as
Czechoslovakia, Hungary or Eastern Germany during the later years of communism
probably there was some economic growth and therefore also certain accumulation of
property. Under these circumstances we cannot say that property relations as well as
economic and social systems of those countries right before their fall were absolutely
inefficient. Nevertheless, property relations and economy of those countries were
comparatively inefficient or less efficient than those of Western Germany, for example.
Therefore a system of social and property relations in those countries was not complying
with the maximum economic efficiency requirements and was predetermined to loose
economic and social competition and to vanish sooner or later.
Contradiction between macroeconomic efficiency and self-interest-oriented human
nature is generating two types of relativity in understanding and explanation of society,
social evolution and economic development. Generally speaking, we can talk about space
and time relativity in application to different aspects of human knowledge,
comprehension and to methods of our influence upon surrounding us various types of
environment. Relativity in social science can be referred to a diversity of behavioral
models, of ways and methods of our influence upon societal processes and in our ability
to generally describe different economic and social systems based on evolution of human
knowledge. Relativity is not a law by itself - it is a direct consequence of human
subjectivity and partiality. Social science basically deals with two fundamental methods
of approaching economic and social reality. First one is connected with differences in
methodology of microeconomic and macroeconomic (societal) laws and tendencies. It is
based upon the difference between social and economic (conventional) property rights,
but mainly upon the contradictions between human interests. For example, social
monopolization of steel industry by particular company is absolutely efficient from
microeconomic point of view of this company, while it is definitely inefficient from the
point of view of every single outsider of this monopoly as well as from the point of view
of macroeconomic efficiency. Yet classical school of economics has recognized a
difference in principles and methodological approaches to micro- and macroeconomic
processes and has actually introduced the foundations of the system of macroeconomic



79
knowledge. Classical school was the first one to clearly differentiate between business
(microeconomic) world and between macroeconomic domain. Such differentiation laid a
principle of spaceor scalerelativity. Economic conception of Adam Smith and particularly
its practical applications are still sufficiently controversial even among professionals and
are rather difficult for recognition by general public. Even in our modern times people
are having trouble understanding how purely egocentric business actions can generate
benefits for economy and at the end of the day for the entire society or for all human
beings. Even today we hear a lot of demands to limit and to restrain private interests by
some regulatory entity, which suppose to act on behalf of the entire society. Second type
of relativity can be referred to the differences between long-term and short-term
economics and social science and may well be called timerelativity. For example, in a
short run governmental borrowing might be somewhat practical in order to boost
economy and aggregate demand during severe depression, but it can be equally
problematic in the long run coming from consequential escalation and addiction to
governmental spending. To one degree or another a lot of economists contributed to
better understanding of time differences in economic approaches. John Maynard Keynes
was among the first who were trying to analyze and to explain short-term and long-term
economic controversy. However, we will probably have to admit that economics as a
science, even if it is investigating longer-term perspective, unfortunately rarely goes into
profound historical analysis of economic and particularly of social conditions. Even five
years for macroeconomics is a long run. Karl Marx was one of the few economists who
integrated economic and sociological approaches and in his attempt to understand
economic development, social evolution and phenomenon of society has generally
started right from the beginning of human history. Foundations for time relativity lie in
disparities in influence of economic relations upon societal processes. In the short-term
social and particularly property relations are influencing and even determining a pace of
economic development, while in the long-term situation is quite opposite production
factors development is stimulating qualitative changes in property relations and thus
materializing social evolution. The two types of relativity represent a rather fascinating
and complicated phenomenon, which cannot be ignored when we are talking about the
nature of societal processes, about their evolution and about evolution of property
relations. Nevertheless, both principles are absolutely hierarchical (here lies their key
difference from quantum mechanics principles of relativity) in a sense that short-term
and microeconomic developments are inferior and are finally subordinated to long-term
and macroeconomic (societal) evolutions, while the latter two are always subject to
maximum economic efficiency requirements.



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PART II. THE STATE

Chapter 7. State as Production Factor Monopoly
State and property are probably the two most intriguing and fascinating phenomena not
only in economics but what concerns social sciences generally as well. Economic role and
social nature of the State have attracted and are still attracting a great deal of attention on
behalf of economists, sociologists, philosophers historians and political scientists.
However, we still have a lot of controversy and discussion on this issue without almost
any agreement on what the State really is and what is its role in economy and society.
Indeed, the State is a very complicated and difficult for understanding phenomenon. Not
only its essence is objectively hidden from eyes of observer, but also throughout the
entire human history ruling social groups associated with the State are doing everything
in order to conceal its real nature as thoroughly as possible. Already this fact of
concealment, quite perceptible, however, for objective observer, represents a cause of
alarm. What is wrong with the State and why throughout the centuries it was so
necessary to hide and to decorate its real nature?
The State is emerging and existing beyond the will of society or moreover beyond the
will of particular individuals and social groups. The State is an objective category, which
is materializing owing to self-interest oriented human nature and to peoples want of
economic and social exclusivity, although it may seem that things are happening some
other way. Economic and social exclusivity are guaranteed by power and coercion, of
which the State is a final source, in the most exquisite way. Nobody can create the State,
as well as nobody, including society as a whole, is able to cancel its existence. Egocentric
orientation of human nature towards exclusive benefits and first of all towards exclusive
social and property rights based on mechanisms of power and coercion is generating the
State and is determining its nature further on. After extensive and prolonged period of
tribal equality and animal-like primitive cooperation and probably in consequence of
wars with neighboring tribes and with other enemies, a man is beginning to recognize
that he craves, and moreover, that he can obtain exclusive rights, dominance and
exclusive unavailable for his fellow human beings sources of income and comfort. So he
starts to gain and to use power in order to get all these. He enslaves a part of his
compatriots and is paying to another part in order to serve him and to enslave the first
part. He recognizes that it is much easier, less costly and more profitable to enslave his
weaker compatriots than to fight with the neighbors, which might possess equal or even
superior military capacity. In such way and for these reasons appear States and certainly
not because people recognize some mythical idea of joint cooperation.
States are maintained in accordance with the same principles that called them into being.
The primitive state is the creation of warlike robbery; and only by warlike robbery can it
be preserved.
23




81
There is no doubt that the State is contributing to cooperation between people if we are
considering coercion to be an intrinsic part of the term cooperation. Whether such
cooperation is good or bad, beneficial or not, just or unjust is another story, but it has
nothing to do with how and why the State emerges.
There is a little difference between right of primary occupation of particular private
property or of particular economic resource and between right of primary occupation of
the State. Just like land in primitive societies or more recently in American colonies was
often appropriated according to a principle of primary occupation, arising States have
normally been appropriated by strongest and most fitted individuals who came to be the
kings. Later, both land and state property became to be subject to inheritance, exchange
and frequently even to forcible expropriations. Just like originally private property
possessions were an outcome of primary or even forcible occupation, in the very same
way a balance of power in society or inside political (rather indeed military) hierarchy
has determined original State proprietors. Besides, as we shall see, it is still determining
the real proprietors of State or public property.
The right of occupation, or of the first occupant, is that which results from the actual,
physical, real possession of a thing. I occupy a piece of land; the presumption is, that I am
the proprietor, until the contrary is proved. We know that originally such a right cannot
be legitimate unless it is reciprocal; the jurists say as much.
24

The same is absolutely accurate in relation to State property, especially to State property
under any form of dictatorship. Principle of reciprocity in application to the State
property implies an exchange of recognition of power and property between king and
other most influential and fitted individuals in society. Economic or lawful legitimacy of
property might be a matter of inheritance or of economic activity, but its social legitimacy
is merely an expression of the balance of power in society and of mutual recognition of
rights obtained in the process of social counteraction.
Embryonic State entity exists right from that moment when men begin to fulfill some
kind of productive or exchange activity. Even more than that - no productive activity can
be realized without, at least, some kind of State alike institution. In society of self-interest
oriented human beings, realization of property rights including maintenance of property
regime and income distribution is impossible without some kind of regulatory for those
interests entity based on power and coercion at the societal level. The very same self-
interest orientation of human nature is simultaneously generating an intention to benefit
from privileges of this regulatory power. Cooperation between private individuals
imposed by the State is certainly having place, but it is primarily compulsory and
coercive cooperation of authoritarian character. Nobody is agreeing upon this regulatory
entity, nobody being asked it is simply being imposed by the strongest and the most
fitted individuals in society. According to their private interests per se, those people
never care about any regulation; they only care about property expropriations and
property redistributions. For these regulatory activities society is paying to the State or



82
rather the State is appropriating (expropriating) certain amount of money in the form of
taxes and other payments, which make state revenues and which are allowing the State
to acquire goods and services. State being such an irreplaceable and may be even
unavoidable part of universal economic and social activity can be considered as a
production factor since under the definition of production factor we usually understand
economic resources, without which any productive activity is impossible.
The other thing, which is attracting our attention, when we are thinking about the State,
is its exclusive essence or its replacement impossibility. The State is unique by itself,
according to its definition and to its nature. We cannot have another State in the same
place and at the same time. And if some phenomenon is so remarkably unique and
exclusive, it must have all immanent characteristics and inbuilt potential of monopoly.
Since the State is an important production factor to one degree or another implicated in
economic activity, it must have all consequential effects upon economy and society.
Those effects must be the production factor monopolys effects associated with exclusive
social and property rights. On the other hand, since the State is a unique supplier of
particular product, which is usually called public services, it must have all economic
and social characteristics of structural monopoly. However, the most important, most
influential and most determinative type of monopoly associated with the State is
represented by an exclusive utilization of the mechanisms of power and coercion. Similar
to any other monopoly, State enjoys price influence situation, marking a price of its
services and being a pure price maker. Besides taxation and other forms of price
influence situation, sometimes the State is also able to increase its property by borrowing
(usually with somewhat uncertain obligation to repay neither in the short-term nor in the
long-term) when it needs to cover additional expenses, problems and sometimes even
mistakes of the government. Being price maker and enjoying price influence
opportunities, the State is creating property rights imperfections evaluating single-
handedly and socially (based on power and coercion) its own value and its own
economic contribution. Exclusive rights connected with the State are signaling that they
must be predominantly utilized by particular social group, access of other people and
social groups to State property being either limited or denied.
The entire so-called communist, socialist and interventionist theories are critically
mistaken in one fundamental assumption relating to an overall system of property
relations associated with the State. Every logical inconsistency, every inexplicability,
methodological difficulties and permanent failure in adequate apprehension of reality are
finally coming from this wrong assumption. They all suppose that State property (or as it
is sometimes called public property) belongs to the entire population or even equally
to every member of particular society. This is essentially and fundamentally wrong. In
the best case, State property belongs to all members of society legally or formally. And
even that is not always the case - neither on historical time scale nor even within modern
geopolitical scale. Such assumption is originally unsustainable because it is not
differentiating between the legal basis of society shaped by people with their biased and
partial interests and the real statement of things expressed in objective and



83
uncontrollable by people system of social and property relations. It is considering
modern system of law as absolute, autonomous and as establishing or, at least,
completely reflecting underlying system of property relations. However, law is doing
nothing more than merely describing and putting on paper an achieved at certain point
in time balance of power in society or an existing level of social counteraction. While it is
exactly the system of property relations what is shaping an entire legal foundation of
society. If laws are not adequately reflecting particular system of property relations they
simply doomed on failure and disregard as multiple examples of modern
underdeveloped countries and even more multiple examples from past history of
modern economically developed nations teach us. On the other hand, if property
relations comprise certain imperfections or certain exclusive rights, no legal system will
ever improve or eradicate those imperfections. Law can only replicate on paper existing
system of social and property relations together with all its imperfections nothing more
nothing less.
Hardly there are any real economic differences between public and private (including
partnership and incorporated) property. There is only juridical or legal difference
between them, but if we are considering social and economic processes of long duration
and moreover if we are considering social evolution, this kind of difference is of no use
for us whatsoever. Vice a versa legal difference being imposed by social infrastructure is
shadowing the real true essence of property relations as well as the very fact that
legislative system is completely dependent upon the system of property relations. There
is only one type of property, which is always associated with concrete tangible
proprietors or beneficiaries. Because of that it is called private property. Though, much
more justified is to call it simply property. Understandings of private, partnership,
corporate and state property are rather convenient for statistical purposes and probably
also for certain types of macroeconomic analysis as long as they do not intervene with
our comprehension of societal processes. However, if we are talking about societal
phenomena, property relations and moreover about social evolution we have to realize
that for every property at the end of the day there are always real personified and named
proprietors who are benefiting from it the most and, first of all, benefiting materially - in
terms of income. Partnership or incorporated property for the sake of business efficiency
and according to legal definitions may come as integrated and unified, however, for any
property there are always concrete and personified proprietors with a strictly determined
share of every person or of every economic agent in any particular property. We can
always differentiate that Mr. A is having a share of 75% in a partnership while Mr. B is
having the rest 25%. Very similar situation is with the state property except that the share
of real proprietors in property possessions and primarily in income distribution is always
hidden and is almost unidentifiable. Normally it is rather difficult to recognize real
mechanisms of income appropriation, distribution and redistribution inside the State
monopoly. They are rather hidden and because of that the very nature of the State seems
rather obscure, while in reality it is exceptionally simple.
Furthermore, if we look at the state property from the point of property relations we can



84
see that there is no any particular difference between public property and property rights
on that shop around the corner. The State just like any shop is the conventional
commercial enterprise with a single purpose to extract money from the people for its real
informal proprietors whoever they are (who they really are we will learn in the next
chapter). Even worse, on the contrary to other commercial enterprises the State is getting
any money only by force relying on the mechanisms of power and coercion. State
property similar to any other property is having its real informal proprietors people
who control it the most and who are able to utilize associated with the State benefits (first
of all material benefits) to their utmost personal advantage. Because of States
monopolistic nature, real State proprietors at the same time are acquiring exclusive social
(based on power and coercion) property rights. State, from the point of view of property
relations, is the same economic agent as any other company, corporation, partnership or
private enterprise with its concrete tangible proprietors and the same social monopoly as
any other of a kind with its own egocentric and non-socialized interests. Moreover, that
on the contrary to any other social monopoly, the State so far cannot be subject to social
property rights dispersion and therefore under current social circumstances will be
indefinitely non-socialized. If State property belongs to particular individuals and not to
all members of society on equal basis, then all State actions and all State resources will
primarily benefit those particular individuals with their corporate and non-socialized
interests while only afterwards, if at all, other members of society.
Just like any type of social monopoly is generating exclusive property claims towards any
particular economic property, in the very same way the State monopoly is producing
exclusive property claims upon state property. Who are real informal proprietors of the
State property and who is having exclusive property rights upon the State monopoly is
determined in the same way as any property rights associated with social
monopolization. Just like non-socialized human interests are generating exclusive
property rights, they are equally creating exclusive property claims upon the State. It is
the same question of power and coercive appropriation.
That which belongs to each is not that which each may possess, but that which each has a
right to possess.
25

Since public property does not belong to all people or to all members of society on equal
basis the State does not represent any kind of impartial and unbiased arbiter - neither for
property relations nor for the social ones. Vice a versa it is an enormously co-interested
player in any social and property game with its own exclusive and non-socialized
interests. Therefore it cannot be a judge in questions of fairness or justice as well as it
cannot identify and eliminate societal injustice and, first of all, economic injustice
connected with unfair income distribution in society. The very existence of the State as of
production factor monopoly is immediately creating economic and afterwards also social
injustice. Because of that any societal system, which is relying upon the State cannot
provide an absolute solution to the injustice problems. State property just like originally



85
any property normally belongs to the strongest or to the most powerful individuals in
any particular society.
State property similar to any other monopolized property to one degree or another can
serve societal interests on more or less efficient scale (though always on less efficient scale
than non-monopolized property). At the same time, State monopoly similarly to any
monopoly of the social nature is always oriented against particular individuals, first of
all, in terms of appropriation of the monopolistic income. Formal rights upon the State
property may be dispersed among a large number of stakeholders, who individually
never obtain any property rights upon state monopoly and upon state revenues. Real
informal property claims upon the State monopoly and first of all upon exclusive
patterns of income distribution associated with the State represent much more focused
phenomenon, which always rests with the most fitted and powerful individuals. Main
problem with the State is that in order to get any financial resources it has to expropriate
them from people applying mechanisms of power and coercion. As a consequence we are
always trapped by its single solution to all our problems - escalation of property
redistributions from us to itself and to the people who really control State monopoly,
whoever they are. There is simply no other way no matter what noble objectives the
ruling social groups and people in power are planning to achieve. While the non-
socialized interests based on exclusive property rights associated with the State are never
noble and never even fair.

In coercing them to realize the general will or to give effect to collective choice, the state
is competing with its subjects for the use of the scarce resource that is the liberty and
property of each
26

There is one particular social consequence of the State being both production factor
monopoly and final instance of power and coercion, which basically is immanent to any
kind of social monopoly. Social monopolies throughout the entire history of mankind are
having a very strong tendency to cooperate with each other, uniting their forces and
power in order to enhance their potential for survival as well as in order to elevate their
social and economic strength. Cooperating monopolies are helping each other to cover
up, to hide and to preserve monopolistic social and property relations as well as are
significantly enriching their opportunities to fool, to trick and to coerce people. The State
being an ultimate source of power and coercion traditionally represents an essential tool
for maintenance and support of particular production factor monopolies, which cannot
eternally subsist under a natural order of things because of their inefficiency and
injustice. They all need some instrument of power in order to survive and in order to
oppress any opposition to their exclusive privileges and first of all to their exclusive and
non-socialized revenues. Such an instrument is there for them all the time a power of
State, which being merely another type of social monopoly is always afraid of loosing
privileges and benefits generated as a result of its monopolistic nature and therefore
normally is ready to cooperate with any other social monopoly. In addition to state
coercion, to social infrastructure and to ideology, the power of any social monopoly is



86
also supported by additional exclusive income coming from its monopolistic privileges.
To oppose or to fight with such kind of power sometimes can be dangerous for the State
as well as for the government. It is much more profitable to cooperate with this power
unless the State is constrained by other interests or unless it feels itself to be strong
enough in order to dictate its will to all people including to other monopolistic
proprietors. To make things better for every member of a particular monopolistic social
group, they need some kind of common social agreement for exploitation of their
monopolistic privileges. State is a very handy and suitable institution in order to provide
such services. Both State and proprietors of other social monopolies are benefiting from
each other. All these factors taken together lead to a reality where the State together with
its direct nature of production factor monopoly represents also a key instrument for
coercive maintenance of other social monopolies. Consequential outcomes of such
unification of interests normally are authoritarian and arbitrary governance, lack of
democracy, totalitarian political regimes such as monarchies, dictatorships, empires, etc.
and private property claims upon the State property. On the other hand, even
democracy, relatively eliminating governmental monopoly, cannot do anything about the
State monopoly. Although the State sometimes is equalized with the government, for
societal analysis and from the point of view of property rights imperfections these two
definitions are absolutely different. Major difference stands in the fact that under
democracy the government is only a part (normally elected part) of top-level State
bureaucracy, other parts being representatives and judicial institutions. The State is
always a property and always a social monopoly, while the government is neither
anybodys property nor necessarily a monopoly. The State is embracing an underlying it
property, while the government is only managing the property of the State for a
particular reward and therefore represents a singular part of the social group, which
interests are associated with the State monopoly.
As we have seen, production factor monopolies generally and the State in particular vary
according to their social and economic strength. Under communism the State is realizing
itself as social monopoly to the paramount degree and is establishing an overall
domination in society of the state bureaucracy as of associated with the State social group
with a very limited co-optation or access to monopolistic property of the State on behalf
of the other people. Monopoly of the State is very strong since nobody except for the top-
level state bureaucracy or sometimes indeed except for only one person a communist
party leader - has an access to power and to management of the entire State and state
revenues. Therefore nobody else is having economic and social property claims upon the
State monopoly property rights are extraordinarily concentrated. Communism is a pure
case of the State monopoly. Under other types of social formations and first of all under
dictatorships, power of the State bureaucracy may be limited by power of other
monopolistic groups. For example, in 18th century in France the State bureaucracy
became quite strong and dominant in society and yet its power was limited to certain
extent by the power of land aristocracy as of social group associated with feudalism and
with a production factor monopoly on land. On the other hand, a deteriorating power of
land aristocracy during the period of feudalism dissolution can be explained by a social



87
dispersion of exclusive property rights of this social group upon the land monopoly. At
this point in time, power of land aristocracy portrays a diminishing strength of the land
monopoly and growing association with the land property of other social groups such as
financial magnates, state bureaucracy, bourgeoisie and farmers. Similar kind of property
and power dispersion process, we are witnessing when State governance system is
changing from dictatorship to democracy. Evolution of State from feudalism to
capitalism incorporates an inbuilt transition from dictatorship of a king and land
aristocracy to democracy with wider property claims upon the State on behalf of various
parts of population. Initially wealthy bourgeoisie, financiers, oligarchs, middle classes
and at the end hopefully every particular individual suppose to be associated with
property claims towards the State, though this is a rather idealistic picture. Evolution of
governance system from dictatorship to democracy through conventional property rights
dispersion suppose to provide for more and more individuals and social groups property
rights upon the State as well as formal social or political opportunities to determine a
value of the State services as well as some kind of price influence situation towards the
State property. This is how things are generally understood today in connection with the
value of whatever State is doing in this world. However, since the State is a social
monopoly, its price or price of the State services is based solely on its monopolistic
nature. Particular individuals or people generally cannot establish economic value of the
State simply because there are no any price voting rights and possibilities whatsoever.
Price, which can be determined in relation to the State services, is a social (based on
mechanisms of power and coercion) price of particular monopolized property. And
whoever is establishing monopolistic price of particular monopolized property is also
appropriating attached to this property monopolistic income. Only people acquiring
monopolistic property claims or exclusive rights upon the State property can establish a
price of overall State services. Their possibilities to determine the State value correspond
to monopolistic nature of State, while their interests are associated with the maximum
possible price for State services, which allows to maximize an amount of appropriated
monopolistic income.
Established through political voting or through other mechanisms of social influence,
price of State services or otherwise a level of taxation is not an economic value of the
State as of production factor, but rather is its social value, which is determined by social
and political processes based on power and coercion. Main problem with social processes
is that they are having their winners and their losers. Social and political processes, on
the contrary to economic ones, are never a win-win kind of game simply because they do
not create any value. Within any social or political process we have to take away
resources from certain people in order to give them to certain other people. Social
processes are simply never impartial and objective, because of the subjectivity of human
interests, unequal distribution of power in society and also because of the persuasive
ideological mechanisms of social infrastructure, which main raison d'tre is to justify
redistribution of resources from one social group to another. Very important and very
costly element, which people have to buy under the social price formation, is ideology.
Ideology always serves certain monopolistic interests and does not cost anything under



88
the free market price formation. Core objective of any ideology is to persuade people to
pay an exclusive price for certain exclusive rights. Ideology is vitally important tool for
preservation of social monopoly and is complementing in this task the mechanisms of
power and coercion, especially in modern economically developed society where wide-
scale utilization of the latter might be problematic.
State historically represents the highest in terms of social and economic domination as
well as in terms of association with power and coercion form of property rights
imperfections. Power, coercion and domination in combination with monopolistic
income are those essential returns to which self-interest oriented human nature is always
perceptibly or imperceptibly directed. The very states existence is rooted in self-interest
oriented human nature. As long as exist sociality, anything social in society or more
precisely social means to make a living based on power and coercion, the State will
always be with us. On account of all that, anarchist claims of State cancellation, whatever
attractive they might be, are not really feasible under the self-interest oriented human
nature. It might be possible to rebuild social structure, exchange one type of governance
system with another or one ruling social group with the other. It is also quite possible to
destroy previous type of the State and even previous type of socio-economic formation
together with associated property relations, as was the case of October revolution in
Russia in 1917. Even to destroy nation, country or civilization is very practicable as
comprehensive historical experience is teaching us. But it is very difficult at our present
stage of social and economic development to get rid of the State. Not even violations of
property rights are the main threat under anarchism, but rather self-interest oriented
socially strong individuals who will always find their way through to power and social
domination. Social evolution, economic efficiency, economic and social justice are not
directly connected with any particular production factor or with one particular social
group. It does not matter whether it is working class (Marxism), entrepreneurs and
capital proprietors (classical and liberal tradition) or the State (Keynesian and Marxist
traditions). Social evolution is based on permanent interaction between social groups and
production factors as well as on continuous counteraction of any property rights
imperfections, including primarily of those coming from the State.
The State, similar to any other monopoly, is not doing anything practical without strong
social pressure. State just like any other monopoly is accomplishing any tasks or anything
for that matter only under a constant pressure and counteraction on behalf of the people.
It took humanity several thousands of years of constant battles and confrontation with
the State and with the other social monopolies in order to achieve a present day system of
social and property relations. If this counteraction will decline or even end, our welfare
State will easily transform into welfare monster with a lot of State and a very limited
welfare. In twentieth century we have witnessed an astonishing number of such
transformations including communism, nazism, different types of dictatorships and
persistent human rights violations. Besides, it is not the State what is counteracting other
social monopolies - those are the people who are doing that. The State, ceteris paribus,
simply does not care. Sometimes counteracting other monopolies it is establishing its



89
own social hegemony or increasing its own social strength. Sometimes, vice a versa, it is
cooperating with other monopolies in order to promote its own power. Sometimes the
State bureaucracy might even loose a State control to more influential social groups.
However, the State is never doing anything, what is not in its direct material interests or
rather what is not in direct material interests of its real informal proprietors without
pressure and counteraction on behalf of the people. The same is relevant for any
structural monopoly. Under different social pressures the structural monopoly can serve
customers more or less satisfactory, but just like the State it does not care too much about
them economically or naturally since they do not have any product or property
alternatives they simply do not have any social property rights related to its
monopolistic nature.
Additionally to ideology, exclusive income and to mechanisms of power and coercion the
State monopoly is having other two very strong allies. First one is patriotism, which
represents a non-economic or ideological factor of moral nature. The problem with
patriotism is that normally it is heavily utilized by the State and by associated with the
State social groups in their non-socialized interests either in order to persuade people to
pay monopolistic prices for overall State services or in order to obtain some financially
inexpensive support often at the cost of human lives. Patriotism is not particularly
consistent logically simply because by and large people have no any financial obligations
to foreign countries and therefore foreign countries are materially irrelevant to them,
while their home or residence State have no any other means to appropriate any financial
resources except to coercively confiscate them from its own people. Based on this
powerful material foundation are arising all kinds of social, ethical, cultural and other
immaterial factors related to individual disaccord with particular society or with
particular social infrastructure. Major impasse stands in that a person is not just giving
up a part of his income for procurement of public goods, but that his income is being
forcibly expropriated based on mechanisms of power and coercion and on exclusive
property rights of the State monopoly and is utilized in its non-socialized material
interests or rather in non-socialized material interests of States real informal proprietors.
Second social ally of the State monopoly is income redistribution or peoples innate
desire and sometimes necessity to benefit on account of the other people. The problem
with income redistribution is that no matter what noble purposes it might serve, it is
based on coercive expropriation of peoples property an act extraordinary similar in its
nature to an act of robbery. But even worse is that any income redistribution is escalating
a level of coercion in society, State monopoly (first of all, financially in terms of State
revenues and ideologically) and an amount of exclusive income appropriated by States
real proprietors. These two allies are very persistent and powerful in terms of State
monopolys support. They tend to make people to forget about social counteraction with
the non-socialized State interests.
Nature of the State is based absolutely and exclusively upon the conceptions of property
and property rights imperfections. As a matter of fact, we have separated this part of the
book from the first one mostly owing to differences in a common understanding of the



90
phenomena of State and of property rather than due to any legitimate logical
assumptions. Such separation is a bit artificial also because in the second part we are
examining the very same property rights and property relations and relying upon the
very same approaches and conceptions of property as in the first part. More than that,
second part would hardly make any sense without reading of the first part. State is a
unique social phenomenon, first of all, because any property rights imperfections in
society can emerge only with its direct (State as a production factor monopoly) or indirect
(support of other social monopolies) participation. It is a single and final instance, which
supports and maintains property rights imperfections. If it would not be for the State an
emergence and preservation of social monopolies would simply never happen. The State
is also a single substance, which owing to associated mechanisms of power and coercion
is introducing a phenomenon of sociality into almost any purely economic process.
Sociality, no matter whether it is good or bad, whether it is right or wrong, whether it is
necessary or not, means only power, coercion and forcible persuasion, otherwise there is
nothing social in any economic process and nothing social in society; the only thing left
without sociality is economy. The more barbarian or uncivilized is society or humanity
generally, the more sociality it embraces, whereas the more economically and socially
developed it is becoming the less of anything social it contains or the less it is based on
mechanisms of power and coercion. At the same time, the less it relies on mechanisms of
power and coercion and the less of social monopolization it incorporates the more
socialized it is. While power and coercion is exactly what the State is all about.
Rephrasing words of Marx and Engels
27
history of all previous societies and
civilizations is the history of peoples struggle with the State as with a final source of
power, coercion, injustice, corruption, inefficiency, oppression and forcible persuasion.




91
Chapter 8. Dictatorship and Democracy
Understandings of dictatorship and democracy are so important in social sciences
generally and for us in this book in particular not because of their nature as of two types
of governance regime, but because of their nature as of two different systems of property
relations and because of all applications, which they create for the State property. The
problem with the State property is not only that it is so colossal and influential, but that
whoever controls State property and State revenues simultaneously acquires
straightforward exclusive rights on utilization of the mechanisms of power and coercion.
Furthermore, whoever controls State property, State revenues and mechanisms of power
and coercion is the single real informal proprietor of the State, all other people being
inadequate, imaginary and idealized proprietors. Who owns or who controls State
property and first of all who controls those mechanisms of power and coercion is a rather
complicated matter thoroughly concealed by the entire social infrastructure throughout
the entire human history. Already this fact of concealment is raising or at least should
raise a lot of suspicion. Another problem with the State property is that not only it is
associated with the largest ever monopoly based on power and coercion, but much more
important that in fact it is per se the final instance of power and coercion in any society.
Problems with the State proprietorship by and large are underlying deficiency of any
society. While the whole truth about inadequacy of any society harms not only all non-
socialized interests in this particular society, but might impair a lot of socialized interests
as well. Because of all that, too many people prefer not to think too much or too deep
about such a tricky subject as the State proprietorship and its applications. However,
since State is nearly the main, the most powerful and the most determinative part of
society, without understanding of the nature of State proprietorship we will never be able
to understand the nature of any society.
Dictatorship from the point of view of property relations represents an act of
appropriation of private claims or of private rights upon the State property on behalf of
only one person a dictator or at most on behalf of the narrowest part of his associates
among the top-level State bureaucracy. In common understanding we basically
distinguish three inherent characteristics under the definition of property rights - right to
manage and to control property to ones own personal advantage; right to alienate
property or simply right to sell and exchange property and to appropriate the proceeds
from such selling; as well as the right to appropriate some important income from
utilization of particular property. When we say right we rather mean a real social
opportunity or informal right not necessarily a legal or formal right. As we concluded
previously, exclusive social and property rights based on mechanisms of power and
coercion are purely informal, though sometimes being reflected in law they are becoming
formal as well. Indeed, for a proprietor it hardly matters what kind of rights formally
exist as long as he can realize all the three components of proprietorship above without
any reasonable fear of punishment. Under any form of dictatorship such kind of rights
upon the state property or indeed upon the State generally, normally belongs to an
extremely narrow group within the top-level State bureaucracy or quite often basically to



92
only one person a dictator. Property rights dispersion under dictatorship is very
insignificant in a sense that nobody except for dictator and sometimes also for a narrow
circle within top-level State bureaucracy can control the State property. Dictatorship
implies a pure transformation of property claims towards the State property from
public to private and makes State property to be privately owned by the dictator. Let
us consider a simple historical example. State property and State monopoly under
communism in Soviet Union in 1924-1985 have completely and indivisibly belonged to
people at the highest hierarchical level of the State bureaucracy they were able to do
with it as well as with the entire State revenues whatever they wish and much more than
any modern proprietor with his private property. In the most severe case of Soviet State
monopoly in 1917-1975, State property literally belonged to only one person communist
party leader. Such property rights have also covered the possibility to exchange State
property just like any other type of property, which Lenin had exercised in 1919, when
under the Brest Peace Treaty he abandoned parts of Soviet territory in order to end a war,
which was threatening to communist regime in Russia. We are not concerned here
whether this was right or wrong in historical retrospective, but such an act is
demonstrating a plain truth that only one person together with about five-six of his
associates were managing State property to an unlimited degree and even up to a
possibility of territorial alienations. Generally speaking, from the point of view of
property relations, basic difference between democracy and dictatorship stands in the
fact that under dictatorship dictator or a narrow group of his associates from within the
top-level State bureaucracy are acquiring non-dispersed private (at most partnership if
associates are strong enough) property rights upon the State and upon the mechanisms of
power and coercion. State property and the entire State revenues socially (based on
mechanisms power and coercion and according to the societal balance of power) belong
to dictator and the severer is dictatorship the more evident is such statement of things.
Legally or formally property rights still belong to whoever is mentioned in various
constitutions (most of the time, however, State proprietorship is not even cited there - it is
simply assumed), but really or socially (according to societal balance of power) the State
property rights under dictatorship every time belong to the most fitted and most
powerful individuals in society, who are able to manage and to utilize State property and
first of all to utilize instruments of coercion to their utmost personal (first of all material)
advantage. In the first part of the book we have seen that the law (or legal rights) is quite
a superficial characteristic of proprietorship generally and absolutely inadequate
characteristic of the proprietorship of social monopolies based on power and coercion. In
the best case, law is reproducing on paper existing societal realities as people see them or
by and large is reproducing on paper a current balance of power in society the law is
absolutely nothing and absolutely inoperative without its foundation on the balance of
power. Without its foundation on the balance of power it merely represents a
proclamation of principles. Besides, being a part of social infrastructure, law is never
impartial or unbiased, always protecting and maintaining existent social and property
relations no matter how inefficient and unfair they might be (slaves and slave-owners in
ancient Rome). Proprietorship not based on mechanisms of power and coercion or
ownership of property not based on social monopolization is more or less adequately



93
reflected in laws exactly because the latter are reproducing the societal balance of power
adequately enough in order to establish economic proprietors. Also economic
proprietorship is rather adequately reflected in law because monopolistic social groups
are getting their exclusive rights, privileges and incomes not from the economic property
per se, but from informal social (based on power and coercion) property rights or from
the property rights imperfections. On the contrary to economic property rights, property
rights imperfections or exclusive property rights being the most important and most
determinative part of an overall balance of power in society are almost never reflected in
any laws. Proprietorship of social monopolies based on mechanisms of power and
coercion including proprietorship of the State is never determined by law, vice-a-versa
the law is always concealing real true proprietors of socially monopolized property and
their non-socialized interests, which have a great deal of real power in society owing to
their exclusive privileges and which normally are producing and enforcing all those laws.
Proprietorship of any monopoly based on power and coercion including proprietorship
of the State, on the contrary to economic proprietorship, is never explicit and can only be
uncovered examining a system of control over the mechanisms of power and coercion.
Economic injustice in income distribution to the State monopoly under dictatorship is
simple, rather clear and exceptionally meaningful. State revenues are expropriated from
the people through application of the mechanisms of coercion and in the form of
monopolistic socially determined level of taxation, which is another expression of the
monopolistic price of State services. Afterwards, State revenues are redistributed to a
dictator or to particular ruling elite with certain payoffs to certain people in order to keep
them fed, in one way or another, and in order to hide a real essence of the phenomenon
of State generally and of the phenomenon of dictatorship in particular. Under any form
of dictatorship (monarchy, empire, nazism, communism, etc.), there is simply no any real
informal difference whatsoever between the State property and between the property of
dictator (though sometimes there is a formal one). Under dictatorship the entire State
property and all State revenues everywhere and every time belong to dictator and in real
terms they are inseparable from his private property and from his private income (for as
long as he holds his position). Dictator generally can spend entire State revenues in
whatever fashion he choose as long as he privately controls mechanisms of power, and
coercion persuasion. This kind of property relations is always concealed by social
infrastructure in order to cover up its real essence and to avoid an escalation of social
counteraction to such statement of things. Under any form of dictatorship, things are
generally made to look as though public property belongs to the entire society (whatever
society is). Spreading its influence upon human conscience this is creating an illusion that
State revenues and State property belong to every particular individual in society on
equal basis. But if we would abstract from superficial surface appearances (supported by
the entire social infrastructure in non-socialized interests of top-level State bureaucracy),
from legal and political declarations and consider any type of property, including the
State one, as an informal right or real social (based on power and coercion) opportunity
to utilize and to benefit from particular possessions to ones utmost personal advantage,
it is absolutely clear that only an exceptionally narrow circle within the top-level State



94
bureaucracy is having private or partnership claims upon State property and State
revenues. Other people being completely estranged from the State property are only
paying monopolistic price for the exclusive social property rights of dictators.
Throughout the entire history of mankind have existed and still exist until now various
types of dictatorships, which were established by different individuals and social groups.
Sometimes, dictatorships may even be established by other than State bureaucracy
individuals and social groups. It happens when a social strength of those individuals and
social groups is superior to the one of the State bureaucracy. Ideological and political
objectives of various types of dictatorships may also be rather different. Dictatorships
may bear communist, monarchist, nationalist, imperial, nazi and other ideas. However,
once being established and no matter what are their original intentions, all dictatorships
are generating exclusive social rights for particular ruling elite upon the State property
and upon instruments of coercion. In the long-term, dictatorship is transforming initial
alliance of top-level State bureaucracy with other powerful interest groups into a close
and narrow association of the State bureaucracy with State monopoly.
Therefore, real informal rights upon State property under dictatorship belong either to
only one person dictator (who can be a king, a tyrant, an emperor, a duke, communist
party leader and so on), or maximum to a narrow group of his associates. In the first case,
State property is privately owned by dictator who also acquires private property rights
upon State monopoly and upon the instruments of coercion. State property is simply
transforming into a direct private possession of the socially strongest individual in
society. Under dictatorship it is very difficult to imagine any real and informal rights of
the people upon State property, which might create at least an illusion of public
ownership. Vice a versa, State property is acquiring all attributes of the private property.
First of all this embraces a real social opportunity for dictator to manage and to control
State property up to its commercialization as well as to distribute and redistribute the
entire State revenues. Such opportunity is rather clearly attributed to one single person.
All the State with all its property and with all its revenues is becoming to be a private
property of the dictator. In words of Louis XIV of France I am the State. In the second
case, when property claims upon the State are associated with the narrowest group inside
the State bureaucracy, State property is transforming into a partnership. Partnership
dictatorship is slightly shifting the balance of power in society comparatively with a
single person dictatorship. Partnership dictatorship merely represents a more dispersed
form of dictatorship. Number of partners under such partnership is determined by a
balance of power within the top-level State bureaucracy and in society generally.
Examples of partnership dictatorship are numerous both in ancient and in modern
history. If we think about Soviet Union in 1924-1975, we can see a perfect case of private
property rights upon the State of the communist party chiefs or as they were called then -
General Secretaries. However, beginning from late 1970th, State is gradually
transforming into a partnership property of the narrowest group of top-level communist
leaders - members of Soviet Political Bureau (politburo). Though not even every
member of politburo had an equal voice in administration of the State and of the State



95
property some of them were more influential while others less.

Democracy is more or less liquidating governmental monopoly, even though it does not
eliminate the State one. Thanks to social counteraction to the State monopoly and thanks
to conventional property rights dispersion, democracy is dispossessing dictator and his
associates from absolute social domination, from private claims upon State property and
upon State revenues, but, first of all, from private property claims upon instruments of
coercion. Representative democracy through conventional property rights dispersion is
generally diminishing a social strength of the State monopoly. Diminishing social
strength of State monopoly represents a nature of democracy from the point of view of
property relations. On the other hand, under democracy there is still no any free social
access to the State proprietorship and there are still no any economic and social
competitors to the State on particular territory. The State remains to be a monopoly;
remains to be a price maker and remains to appropriate monopolistic revenues based on
mechanisms of power and coercion. Since the State does not have any economic
competitors and nobody can enter a market of the State services, there is no any sign of
social property rights dispersion whatsoever and therefore the State remains to be the
same social monopoly with the same exclusive social rights. Accordingly it must still
have certain more or less exclusive proprietors. Exclusive property rights upon the State
property belong to the same individuals and social groups, which managed to obtain the
real social control over the State. Individuals, groups of individuals or social groups,
which are executing management, control and administration of the State property, of
State revenues and of the mechanisms of power and coercion or otherwise which are
executing conventional property rights upon the State at the same time are acquiring
exclusive property rights upon the State monopoly. State bureaucracy and particularly
top-level State bureaucracy (including representatives) continue to manage, to administer
and to control State property as well as to appropriate benefits, income and privileges
associated with the State under democracy as well. One of the strong reasons for that,
besides other things, would be a dispersion of interests towards the State property or
varying strength and intensity of interests associated with the State property, State
revenues and with an income received through the State on behalf of different people.
Generally speaking, the less property or less income is enjoying particular individual, the
more concentrated and more focused is his interest in the State and the more elevated is
his want of different kinds of income redistribution. Since the State cannot be sold or
exchanged in any way, it does not have any exchange value, while under representative
democracy just like under dictatorship any particular individual from within the State
bureaucracy is interested in his private benefits from State monopoly. Under the
representative democracy (except, may be, for its early initial stage) State bureaucracy
does not have any strong competing monopolistic groups, which can equally claim
control over the State. Vice a versa, pressure of interests in a society associated with
income redistributions from rich minority to poorer majority thanks to one man one
vote normally is rather strong and is furthermore consolidating the State and therefore
the State bureaucracy as well. Under these circumstances State monopoly tends to
expropriate money from relatively wealthier parts of population, which are not so eager



96
to employ forcible social counteraction and to redistribute financial resources to relatively
poorer, whose interests in State property and in State revenues are much stronger and
much more concentrated. Poorer parts of population are having a stronger disproportion
between what they might gain and what they might loose under the social counteraction
and are more inclined to appeal to organized and sometimes even to violent social
counteraction.
Under the representative democracy top-level State bureaucracy still forms quite a
narrow and rather closed social circle and to enter this circle might be at least as difficult
as to get a nobility title under feudalism. Generally, the top-level State bureaucracy or
State aristocracy being in control of the State property and of State revenues is a rather
inflexible and significantly closed group of people, with which it is not only very difficult
to get an association for common people, but which is also rather distant and
considerably separated from other subgroups inside State bureaucracy.
But what was monarchy? The sovereignty of one man. What is democracy? The
sovereignty of the nation, or, rather, of the national majority. But it is, in both cases, the
sovereignty of man instead of the sovereignty of the law, the sovereignty of the will
instead of the sovereignty of the reason; in one word, the passions instead of justice.
Undoubtedly, when a nation passes from the monarchical to the democratic state, there is
progress, because in multiplying the sovereigns we increase the opportunities of the
reason to substitute itself for the will; but in reality there is no revolution in the
government, since the principle remains the same. Now, we have the proof to-day that,
with the most perfect democracy, we cannot be free.
28
We will go even further and insist that democracy is neither a sovereignty of nation nor
of national majority, it is rather a sovereignty of the top-level State bureaucracy, though a
more dispersed sovereignty comparatively with dictatorship.
From the point of view of property relations, State property belongs either to one single
individual (single person dictatorship), to a group of individuals (partnership
dictatorship with ruling of a narrow group of people usually from within top-level State
bureaucracy sometimes in cooperation with other monopolistic social groups) or at most
to one social group with an overall formal dispersed claims upon State property and less
dispersed claims upon State revenues (representative democracy with a rule of top-level
State bureaucracy). Under representative democracy, State is having all the standard
monopolistic effects upon economy and society price influence situation, income
distribution and redistribution, economic inefficiency, economic injustice as well as
exclusive administration and control over monopolistic State property. With an exception
of certain influence upon the process of income redistribution (retirement, health care,
unemployment, education and so on), generally people are having a very relative
connection and a rather insignificant affiliation with the State property. Besides other
things, income redistribution depends on the balance of power in society. Today
practically every economically developed country is confronting a problem of heavy



97
retirement benefits and of their critical influence upon State budgets. But since elder
people possess quite a strong voting power owing to rising life expectancy, significant
savings (allowing active participation in various lobbying groups and advocacy
campaigns) and also because this group is usually represented by the most responsible
and organized voters, it is very difficult to counteract a tendency of growing retirement
benefits and of their problematic influence upon public finance. It was certainly not the
case, for example, fifty years ago when senior people were not so socially strong and
united. Generally speaking, conventional property rights dispersion is more directing
small proprietors towards claims on income or revenues of a particular economic agent,
rather than towards the claims of real property management. The more dispersed are
property rights the more income claims prevail over property administration claims. The
same is also correct for incorporated property as well as for mutual funds where small
shareholders are buying stock exclusively for the sake of income and not in order to
administer any property. Once again important role is playing here a phenomenon of
interests dispersion towards different types of income received by particular individual.
Income associated with the State monopoly and appropriated by top-level State
bureaucracy is incorporating quite a broad spectrum of social and economic benefits and
privileges such as direct monetary income (salaries and bonuses); office related benefits
(luxurious traveling, wining and dining, office premises, cars etc.); vast possibilities for
promotion of affiliated political parties, organizations, companies and simply of private
interests; career opportunities for relatives and friends; future career and income
expectations related coming from current government position (books, lectures, jobs,
etc.); various privileges, which can be passed on descendants and relatives; contracting
and bargaining power in business; various non-monetary benefits appropriated through
the State, sometimes virtually non-punishable out-of-law and half out-of-law benefits;
possibilities to utilize insider information to private benefit; etc. There are few less
important incentives such as, for example, possibility to spend leisure time, to
communicate, to stay in touch, prestige, pride, self-esteem, respect, etc. Non-monetary
and non-financial benefits often represent any value only if they are linked with future
expectations of monetary rewards; otherwise they are merely elements of consumption.
For example, respect and reputation might serve as preconditions for potential
promotion inside governmental hierarchy and therefore also for higher income in the
future.
Price influence situation and connected with it monopolistic income appropriation
opportunities, State is enjoying not only under dictatorship, but under democracy as
well. Since there are no any competitors whatsoever and no any alternatives to the State,
the price of State services cannot be determined through intermediary of market
mechanisms. State services are generally having very low substitution possibilities the
State simply would not allow any substitution of itself utilizing to utmost degree
different ideologies as well as mechanisms of power and coercion. From one side, State is
redistributing a part of national income expropriating it from particular individuals in
the form of taxes and transferring it to certain other individuals in correspondence with



98
conventional property rights dispersion towards the State monopoly or otherwise in
correspondence with a level of democratization in particular society and with social
welfare standards, which are having a tendency to advance with the time. These
standards to certain extent are influenced by understanding of social justice within
particular historical period and within particular society. But most importantly such
standards fundamentally depend on the balance of power in society or on counteraction
between State, social groups and private individuals. From the other side, the State is
appropriating a part of national income in the form of salaries, benefits and privileges of
top-level State bureaucracy, representatives and of the State bureaucracy generally.
Income redistribution through the State or social (based on coercion) welfare cannot be
considered separately from appropriation of monopolistic income by the State
bureaucracy because both patterns of income distribution are coming from the same
source taxation and both are managed by the very same people. From the point of view
of the State monopoly, income redistributions represent the net costs, while funds
intended for distribution among the top-level State bureaucracy - net profit or net
income. Following this analogy with conventional business enterprise, taxes and other
financial inflows make State revenues. Income redistribution is merely a payoff of the
State to certain groups of people and to certain members of society. It essentially serves in
order to avoid or to diminish social counteraction to the State monopoly and in order to
buy any social opposition to appropriation of monopolistic income by the State
bureaucracy. On the other hand, it helps to create an illusion of common public
ownership of the State property or, so to speak, State communism illusion.
Examining State from the point of view of underlying it property relations, we can see
applications and influences of representative democracy from quite a different angle.
Democracy being undeniably a very important achievement of social counteraction and
being positively superior to any kind of dictatorship, nevertheless, contains certain
immanent straightforward contradictions. Essential cause of those contradictions stands
in the fact that conventional property rights dispersion towards the State property,
symbolized by representative democracy, is associated with economic and social
institution, which is based entirely on social monopolization and which represents a final
source of power and coercion. Connection of the State with social monopolization is
having a significant reflection upon almost any societal phenomenon. Even in its most
developed form (or rather especially in its most developed form) representative
democracy through universal suffrage and under equal universal voting rights implies
that poorer (not just poor) people, who are always in majority, can constantly benefit
on account of affluent people, who are always in minority. This outcome no matter what
are the justifications is embracing a certain abnormality or more plainly an essentially
important contradiction of representative democracy. What is much worse from societal
point of view is that such statement of things unavoidably implicates and together with
development of democracy permanently accelerates utilization of the mechanisms of
power and coercion. If income redistribution is anyway indispensable, most probably,
the proprietors, whose property is being expropriated, must at least have an opportunity
to decide what level of expropriations is necessary and where this money goes. Another



99
reasonable assumption would be that coercive expropriation might be more justified if it
would be equal among all members of society. However, those are too idealistic
pretensions. They are rather difficult to implement because of the current objective
balance of power in society, because of strong monopolistic interests in unequal income
redistributions, but mainly because reason and logic have nothing to do where exclusive
rights and power are involved. On the other hand, even equal taxation cannot eliminate
the State monopoly in any event. Expropriation and redistribution, which are carried out
through the State are always associated with appropriation of monopolistic income by
top-level State bureaucracy. From the point of view of top-level State bureaucracy,
income redistribution serves merely as a social justification for appropriation of
monopolistic income. Income redistribution is not only coercive expropriation in favor of
somewhat vulnerable parts of population, but much rather coercive expropriation in
favor of the most powerful social group in almost any kind of society in favor of the
top-level State bureaucracy. Here stands a fundamental immanent to the State
contradiction between idealistically attributed to it (without taking into account States
real nature and interests of its real proprietors) societal role from one side and exclusive
property rights associated with the State production factor monopoly from the other.
Democracy, no matter how idealistically it sounds, materializes only owing to a certain
evolutionary level of the system of social and property relations. It is another step ahead
in counteraction of property rights imperfections - a big and important step, which is
liquidating a governmental monopoly on instruments of coercion. But those are exactly
the developments in system of property relations and in social counteraction what bring
along democracy. People have to fight for their rights and first of all for their social
property rights. Social counteraction aiming at better and more efficient system of social
and property relations, perceptibly or imperceptibly, is always directed against the State
as the last instance of all property rights imperfections, of economic inefficiency and
economic injustice. At certain stage of economic and social development, social
counteraction is setting up a governance system free from governmental monopoly or,
otherwise, from the point of view of property relations, it is making property claims
upon the State more economically dispersed and eliminating extremely exclusive private
claims upon State property and upon mechanisms of power and coercion associated with
dictatorship.
Democracy is an objective outcome of social counteraction and of an overall process of
social evolution. It will take much more to exchange democracy for something better,
than to merely recognize its inefficiency. But is representative democracy generally the
most efficient form of governance or may be there is something else or something better?
For example, what about some kind of governance system with certain property or
income census when those people, whose money are taken away in the form of taxes, are
predominantly deciding themselves how much of their property and for what purposes
they have to give up. Otherwise unlimited and unconstrained desire to benefit on
account of other peoples property will remain for as long as will be richer and poorer
people and not just rich and poor.



100
But the illustrious orator ought at the same time to demand that each elector shall have as
many votes as he has shares; as is the case in commercial associations. For to do otherwise is
to pretend that the nation has a right to dispose of the property of individuals without
consulting them; which is contrary to the right of property. In a country where property
exists, equality of electoral rights is a violation of property
29

While such desire besides being very difficult to justify brings along an enormous State
production factor monopoly with all its immanent inefficient and unfair outcomes. After
all, the State, besides other things, is an ordinary economic agent conventional
commercial enterprise - managed by common people with a standard self-interest
oriented human nature, which is always eager to boost its income on account of the other
people and without taking into consideration non-material or idealistic factors.
Any dictatorship probably is the worst form of governance and of societal organization,
which can be applied to the State as a final source of power and coercion. Main problem
with dictatorship is that it is attributing to dictator not only private rights upon the State
property, but, what is much more important, private property rights upon the
mechanisms of power and coercion. All consequential misfortunes of dictatorship are
arising solely from this major detail. Once upon a time in certain countries has existed an
alternative both to dictatorship and to representative democracy - a system of governance
based on property census. It used to be a product of emerging capitalism when
bourgeoisie was anxious to protect its newly obtained rights and privileges from masses
of poor population. Property census hardly represents an absolute democracy since
voting rights are limited by certain minimal amount of property, but on the other hand, it
is a bit difficult to associate it with dictatorship either, first of all, on account of rather
dispersed claims upon the State property. In all probability the property census suffrage
is somewhere in-between dictatorship and democracy. From the point of view of
property relations, it is very much distanced from dictatorship also because instead of
private and partnership property claims upon the State on behalf of the top-level State
bureaucracy, it advance clearly expressed exclusive economic and social claims upon the
State property on behalf of all proprietors of capital. Property census denies any social
barriers for voting rights and introducing instead economic or property requirements.
Since property census is a quantitative non-social criterion for voting rights, ideally
anybody can reach it without utilization of the mechanisms of power and coercion and
employing purely economic means. In order to compare property census with
representative democracy we have to analyze their effects related to generation,
preservation and consolidation of all types of property rights imperfections of property
rights violations of private and social nature, of social monopolization and of the State as
a production factor monopoly.





101

Representative
democracy
Property census
Property rights violations of private nature Equal Equal
Property rights violations of social nature More Zero
Generation and consolidation of social monopolies ? ?
Consolidation of the State production factor monopoly More Zero
Table 1. Representative democracy versus property census
Ability to counteract private property rights violations seems to be approximately the
same under both systems of governance. This is based on the fact that police, law
enforcement agencies and courts as public institutions, which mission is to fight property
rights violations of private nature, are relatively indifferent to both types of governance,
while performance and public supervision of these institutions are approximately
identical under democracy and under property census. Property rights violations of
social nature under the property census are close to zero, because normally people in
charge of State administration being at the same time important proprietors are hardly
interested in any property expropriations. Generation and consolidation of the various
types of social monopolies may be the trickiest part of our comparison. There is a
significant evidence of social monopolization both under representative democracy and
under property census. Toleration of social monopolies might be a single reason why
property census vanished in the course of social evolution and under the process of social
counteraction. However, even if this is so, we still cannot say that democracy generates
less social monopolization. Last but not least important point of our comparison is
consolidation of the State monopoly. Under property census such consolidation hardly
ever had place bearing in mind that at times of the property census and emergence of
capitalism, States share in overall national property was absolutely negligible and
therefore the State monopoly was economically very weak. Besides, it is absolutely not in
the interests of voting proprietors to allow any large-scale taxation. On the contrary,
under democracy social and economic power of the State has reached unprecedented
heights. There is no doubt that consolidation of the State monopoly is much more
substantial under representative democracy than under property census. Such statement
of things is perfectly explainable from the point of view of property relations. Under the
property census voting individuals and people in power are relatively wealthy
proprietors, who are in absolute opposition to any property expropriations, while under
democracy we are having an entirely different situation when total State revenues and
total income of the State bureaucracy are based solely on property expropriations.
Necessary adjustments have to be made before carrying out any final judgment. First of
all, property census emerged at a certain historical time period, when feelings towards
the State generally were not of such a worshiping character as they are today and we
cannot fairly suppose how will the property census look like today. Another interesting
subject for consideration in terms of historical parallels is connected with the fact that



102
actually capitalism in its major part and in its traditional understanding is associated
with one or another model of property census. While extraordinary level of State
expenditures, enormous income redistributions and everything we understand under
representative democracy are rather attached with the modern socialism of economically
developed nations. Generally speaking, there is no direct evidence that property census
today will be more efficient than representative democracy even though previously it
probably was, at least in certain aspects. On the other hand, it looks like representative
democracy enormously escalating property expropriations from one side and State
domination in society from the other does not represent an adequate solution for decisive
elimination of all property rights imperfections in society. Today according to a societal
balance of power and even to a general logic of things, property census looks rather
obsolete and the only governance alternative to representative democracy worth
consideration might be an income census democracy, meaning votes in direct
correspondence with peoples contribution to national budget or with the taxes they pay.
The more taxes one pays or the more he invests in the State, the more rights he has to
decide on how his money will be afterwards spend. Income census democracy, which
also implies conventional property rights dispersion towards State property, on the
contrary to representative democracy, provides a strong case towards the social property
rights dispersion related to State monopoly. The more income one earns, the more taxes
he pays the more votes he gets and the bigger State proprietor he becomes. Therefore
theoretically everyone is able to acquire tangible, personified and numerically expressed
property rights associated with the State property (similar to corporate shareholders).
What is extremely important - those property rights in their pure form are not based
upon social mechanisms of power and coercion. However, income received by any
particular individual might be based on coercion and this leaves a room for emergence of
certain types of social monopolization. For example, say a person earns ten billions of
dollars per year. He pays roughly four billions in taxes and is equally having four billions
of votes. There is no any sense for him to elevate general level of taxation (he is rather
inclined to diminish it). Speaking otherwise, it is against his interests to boost State
revenues and to consolidate the State as a production factor monopoly. However, what
he really might do is to use his influence (voting power) in order to obtain certain
privileges and certain exclusive rights for himself or for his private and business interests
Though he is not interested in consolidation of State monopoly, he might be interested in
creation of the other forms of social monopolization. However, it is very unlikely, almost
unbelievable, that somebody with such a fortune will seek to further increase it relying
on mechanisms of coercion. All these need supplementary investigation. The only real
factor, which can prove what kind of governance system, is more efficient and therefore
also more just, is future economic development and social evolution. Unfortunately
today, even though there is strong evidence against representative democracy, we cannot
provide equally strong practical evidence in favor of income census democracy. On the
other hand, immense financial interests, which will not look at any evidence and which
will make everything possible in order to make people blind in front of it as well, are
associated with representative democracy. Those are the interests of top-level State
bureaucracy in higher State revenues and interests related to income redistributions.



103
State similar to any other production factor is permanently evolving throughout the
history. Just like technology, capital and labor, it is becoming more and more
sophisticated and develops capacities to perform its real economic and social functions,
which we will examine later in this book. But together with such kind of evolution it is
also developing its capabilities as production factor monopoly and consequentially a
level of supervision and control over the State on behalf of the people also needs a
permanent consolidation including in terms of financial resources and rather significant
efforts. Money solve everything in society only rich people and rich civil society can
counteract State effectively and efficient. Poor nations are helpless in front of the States
colossal financial resources, in front of its instruments of power and coercion and in front
of its sophisticated and seductive social ideologies.
competition between the state (which successfully maintains the monopoly of force)
and its subjects (whose one strong recourse is rebellionusually risky, costly and hard to
organize) is prima facie so lopsided, so grotesquely unequal, that if the state stops
anywhere short of enslaving its subjects, cogent reasons are needed to explain why
30

For the time being we cannot entirely eradicate social and economic strength of the State
monopoly and therefore State as a production factor monopoly cannot be completely
exterminated. In the best case people can only diminish an overall strength of the State
monopoly. They can do it in three ways - by withdrawing States economic strength
diminishing physical and financial volume of the State property; through conventional
property rights dispersion towards State monopoly or, otherwise, by consolidation of
democracy (though not necessarily of representative democracy) and of social
counteraction to the State and finally through a social property rights dispersion, which
in application to the State thus far stands mainly in strengthening and promotion of the
international competition between countries and societal systems. On the contrary to
other social monopolies, elimination of the State monopoly through social property rights
dispersion and through an overall unlimited access to real economic property rights
upon the State for each member of society for the time being seems to be impossible. In
particular case of the State monopoly, social property rights dispersion is not that
straightforward and accordingly elimination of this particular monopoly is a much more
complicated task. Nevertheless, social property rights dispersion, as we know by now, is
a single necessary precondition for a complete elimination of any social monopoly and in
its ideal form it also has to be a sufficient condition for complete dissolution of the State
production factor monopoly. We have to find in what way social property rights
dispersion may be applicable to the State monopoly. Certain hope in this respect in our
modern times is connected with the competition between social, economic and political
systems including competition between countries and nations. In modern history the
most remarkable example of an effect of social property rights dispersion in application
to the State property is the collapse of communism.
State is not in any way an ideal social phenomenon. It is simply performing certain social
and economic functions. And for carrying out of these functions it is being paid just like



104
any other economic agent or, speaking otherwise, are being paid people associated with
administration of the State and of the State property. If State is not accomplishing those
functions or if it is accomplishing them comparatively inefficient it should be punished
just like any other economic agent. The problem is, however, that since the State
represents a social monopoly based on power and coercion and is hardly engaged in any
market relations it cannot be punished for its inefficiency by the market i.e. economically;
the only way to punish it - is social counteraction.
Conventional property rights dispersion towards the State property or simply democracy
is having two very strong opposing factors in terms of its overall influence upon society.
First of all, a majority of population is normally involved in economic activities not
related to the State property and to the State revenues and owing to a dispersion of
interests simply cannot or do not want to participate in administration of the State
property. Majority of population is simply having much stronger interest in management
of their own property and in income associated with their own property than in those of
the State. Even more than that, other things equal, people are usually trying to manage
their own property in such a way that it would be appropriated or expropriated by the
State to a minimum degree possible. If one day the majority of population will associate
their basic interests with State property and State revenues, may be we will have a new
model of society or indeed a new model of communism. However, it takes to change
human nature in order to achieve that. One of the essential contradictions of communism
was an association of peoples interests with various types of property, while in reality
only one kind of property (the State property) was allowed to exist. This factor, which we
called dispersion of interests, is one of the main objective constraints for conventional
property rights dispersion towards the State or otherwise is one of the main objective
constraints for democracy. The second opposing factor for conventional property rights
dispersion or for democracy is based upon the fact, that any social monopoly (including
the State) and its real proprietors simply would not that easily allow anybody to be
associated with the control over monopolistic property and especially with appropriation
of monopolistic income. No matter what is a forename of property State, public,
incorporated, private or otherwise - only the individuals and social groups, which
managed to obtain real and informal opportunities to control it and, first of all, to
appropriate connected with this property income are having real tangible claims upon
this particular property. While other individuals and social groups, which ideally (or
rather idealistically) pretend to be proprietors or co-proprietors of a particular property,
without an effective permanent social counteraction will always be left behind as long as
property is monopolized at the social level and as long as its control is based upon
mechanisms of power and coercion. In order to appropriate the rights upon exclusive
socially monopolized property based on power and coercion one must have this power
and must fight for this type of property rights. Social property rights on the contrary to
economic ones cannot be appropriated automatically they are absolutely informal
rights and, most of the time, they are not fixed in any legislative acts. They are almost
invisible and almost illusive inside social infrastructure. Because of considerable and
insurmountable so far constraints for social property rights dispersion towards the State



105
property, the above-mentioned constraints for conventional property rights dispersion
are very much determining who are the real State proprietors.
State interventions in economy of direct and indirect nature as well as State social and
economic regulation represent a bright illustration of property rights violations of the
social nature associated with the State monopoly in modern times. They also provide a
perfect example of how property rights of particular microeconomic private proprietors
are limited by mechanisms of power and coercion at the macroeconomic or societal level.
Under the State regulation of economy and society, property rights violations of social
nature are embracing not only direct income distribution and redistribution, but also a
control over private property, which formally or legally does not belong to the State.
The main error that prevents many of our contemporaries from adequately
comprehending the significance of various party programs and the trend of the welfare
policies is their failure to recognize that there is, apart from outright nationalization of all
plants and farms as effected in Russia and China, a second method for the full realization
of socialism. Under this system, that is commonly called "planning" or, in war time, "war
socialism," the various plants and farms remain outwardly and seemingly separate units,
but they become entirely and unconditionally subject to the orders of the supreme
planning authority. Every citizen, whatever his nominal position in the economic system
may be, is bound to toil in strict compliance with the orders of the planning board, and his
income, the amount he is permitted to spend for his consumption, is exclusively
determined by these orders.
31

State interventions in economy and society demonstrate that property rights can be
limited by the mechanisms of power and coercion not only in particular economic sector
or only within particular production factor but in the entire economy and for every single
piece of property as well. We are not interested here whether State interventions are
beneficial or harmful, necessary or useless, efficient or not - our purpose is to discover
and disclose the underlying motives and interests associated with every single State
intervention in economic and social affairs. Identification of types and forms of
desirable interventions and of their quantitative characteristics will not lead us
anywhere in understanding of the State interests connected with accelerating economic
interventions and of the State genius to create economic inefficiency and economic
injustice and is out of the scope of this book. What has to be clearly unveiled, however, is
that the entire State interventions are one hundred percent correlated with financial and
material interests of the top-level State bureaucracy, as we will also see later in the book.
First of all, State interventions are essentially undermining not only any other form of
monopolization but also any source of economic power competitive to the State and to
the top-level State bureaucracy. Second, State interventions create a favorable for the
State though illusory impression of a general control over the peoples exploiting
corporations, of a promotion of social justice in society and of caring for public interest,
whatever that is. Last but not least, State interventions create immense additional sources
of State revenues (since any additional tasks bring along additional organizational



106
structures while additional structures require additional resources) and therefore
additional sources of income for the State bureaucracy.
Economic strength of the State monopoly is based on the size of State property, which in
modern times is permanently growing in practically every single country of the world.
Even if somewhere sometimes is having place at least some minor privatization, within
several years State expenditures, taxes and debts are overgrowing all the previous levels.
On the other hand, privatization carried out against monetary resources is not directly
diminishing amount of the State property, but only changes this propertys physical
form. The larger is the size of State property expressed in monetary units, the larger
amount of monopolistic income is distributed to top-level State bureaucracy.
Representative democracy, eradicating immanent to dictatorship private property rights
upon the State, is generating instead the more dispersed property claims and therefore is
more or less downgrading social strength of the State monopoly. Uniting power of
private individuals into an organized force against any perceptible exclusive interests
democracy to certain degree is counteracting the social strength of State monopoly. On
the other hand, embracing as its immanent outcome virtually unlimited income
redistributions, representative democracy is, vice a versa, consolidating the State
monopoly and its economic strength. At the same time accelerating interventions in
society of the mechanisms of power and coercion for the purposes of taxation and income
redistribution, representative democracy is escalating social strength of the State
monopoly. State similar to any other social monopoly is always eager to enhance its
exclusive social rights (with major objective to elevate a level of monopolistic income)
including through diminishing of the conventional property rights dispersion towards
State property i.e. through minimization and downgrading of democracy. Only a
permanent and effective social pressure on behalf of the people is keeping the State on
leash, otherwise, it is always eager to dominate society and every particular individual as
well as to direct a balance of power in society towards governance forms close to
dictatorship. Dictatorship is preferable from the point of view of the top-level State
bureaucracy because it is generating stronger social monopolization, because it is
attributing to the State bureaucracy more concentrated property rights upon the State
monopoly and therefore also upon utilization of the mechanisms of power and coercion,
but most importantly because it is raising an amount of appropriated by the top-level
State bureaucracy monopolistic income. Saying less technically, dictatorship is allowing
top-level State bureaucracy to absolutely uncontrollably administer State property
(including mechanisms of power and coercion) and to appropriate higher monopolistic
income.
Examining State property under the angle of property relations, we can see that it is
hardly logic to call it public property. In no way State property belongs to every
particular member of society automatically and moreover on equal basis. Social property
rights based upon power and coercion generally do not belong to anybody automatically
- they need to be appropriated. Rights upon the State property, just like any other social
rights based on power and coercion also have to be appropriated. Unfortunately only the



107
most fitted, the strongest and the most powerful individuals are acquiring social property
rights. While if the property rights are appropriated only by a certain group of
individuals or by a certain social group, they are becoming to be exclusive, inaccessible
for other members of society. Democracy just like partnership dictatorship is changing a
state of affairs related to the rights upon State property. However, representative
democracy is generating very different levels of peoples association with the State
property. Representative democracy just like partnership dictatorship does not attribute
equal rights upon the State property to all members of society and in this sense it rather
represents a more dispersed form of dictatorship dictatorship of representatives.
Strictly speaking representative democracy is hardly a democracy per se.
Even though there are a lot of alarming trends generated by representative democracy, so
far it is quite difficult to judge where they are leading us. In our predictions we cannot
completely rely upon ancient societies such as Rome and Greece because they were not
truly democracies even at times of their prosperity, but rather aristocracies (a form of
dictatorship) where a huge number of population (slaves) had no any rights whatsoever.
Although they vanished because of all-embracing in-law and out-of-law corruption,
inefficiency and severe property rights imperfections, we cannot really say that it was
democracy what has destroyed them. Our modern societies and their rather short
democratic history are also giving us a very little input for conclusions. There are two
principal social threats, which we can observe within past and modern democracies and
which are based entirely on property rights imperfections. First one is social parasitism or
massive inefficient and unjust income redistributions coming from a real social
opportunity for poorer majority to coercively benefit on account of rich minority through
universal suffrage or through a voting mechanism of one man one vote. Someone less
wealthy indefinitely welcomes a legally approved redistribution of funds and property of
other people and organizations in his favor and so far there are no any effective means to
counteract such tendency. At the same time, social parasitism is seriously accelerating a
second threat coming from representative democracy State domination in society or
extraordinary boost of financial, economic and social power of the State monopoly.
Escalating power of State monopoly is not only strengthening a non-socialized nature
and non-socialized actions of the State, but is equally making too much people,
corporations and organizations dependent upon the State and, first of all, dependent
financially, in terms of money. Remarkable in size income redistributions, accelerating
material dependency upon the State as well as romantic and idealistic vision of society
imposed by the State are contributing to a decline in peoples abilities of social
counteraction, which is a single available to us tool for annihilation of any exclusive
rights, of economic inefficiency and of social injustice. Persistent problems in State
administration, accelerating in-law and out-of-law corruption, inefficiency which is
difficult to conceal and to justify, ever growing state domination in society, declining
international competitiveness of loaded with redistribution practices societies are
inevitably generating a feeling that something is wrong with an overall governance
system of representative democracy. Private individuals and corporations socially and
economically weakened by heavy taxation, income and property redistributions and



108
dependent upon the State with the strongest type of dependency material one - are
having serious difficulties in counteracting the State and other forms of social
monopolization. Without social counteraction people are at a substantial risk of loosing
their property, liberties and freedom. Democracy is not an idol, it is merely a tool, which
we are having on quantitative scale it is not either we have it or not, it is how much of
democracy we have. Not a single country in modern world simultaneously incorporates
both highly developed democracy and low degree of State domination in society, which
would mean that the State is significantly defeated and dispossessed from majority of its
functions. Although the State as ultimate instance of power and coercion historically and
up until now is a final source of all societal problems and a primary cause of any
injustice, we have to understand the phenomenon of State in all its complexity and
evolution. We do not want to create a new paradigm and new eternal enemies similar to
an aged Marxist story about working class and bourgeoisie. State creates societal
problems because it immanently incorporates exclusive property rights based on power
and coercion. For the sake of scientific justice we have to admit that the same kind of
imperfections may be associated with any other social institution, social group or even
with any particular individual. However, in order to establish and maintain exclusive
social and property rights any one of them has to rely upon the power of State as of a
single instrument of coercion in modern society. Liberalization of capital, commodities
and labor markets and flows and created by this liberalization international order are
working hard towards at least some kind of social property rights dispersion towards the
State property. This new international order much more than any representative
democracy creates preconditions for peoples liberation from the State monopoly. On the
other hand, immense income redistributions immanent to representative democracy and
accelerating power of the State bureaucracy linked to a permanent growth of the State
monopoly are working in a rather opposite direction towards peoples enslavement by
the State. We must not forget that representative democracy brought us Hitler and
Robespierre once upon a time. Not necessarily and not even so much representative
democracy, but rather a real social access to the State as a production factor is an
absolutely necessary precondition for overall societal justice and for economic prosperity.
For the time being, major condition for elimination of any social monopolization - social
property rights dispersion - in application to the State monopoly is only connected with
economic and social competition between States, countries and nations. Among other
things, this competition is finding its expression in emerging unregulated supranational
economic space where people and capitals can escape from enormous State appetites for
property expropriations and income redistributions and in accelerating possibilities for
people and for production factors to exchange State or a country of residence like a pair
of gloves. But States are not just sitting around doing nothing and this unregulated space
is becoming smaller and smaller with every year.



109
Chapter 9. State Functions
Unfortunately identification of the State value or of the price of State services through
intermediary of economic or market mechanisms is impossible. Under representative
democracy identification of price of the State services is appearing as a political voting
process, which together with all associated problems and imperfections, nevertheless
remains to be a single method for estimation of the State value. However, value
established in such a way is not a market or economic price and therefore it does not
demonstrate a real economic contribution of the State. But does the State generally have
any value? And if it does, what this value is based upon and how it is being established
outside of the market mechanisms? Similarly to a value of any other social agent or of
any other social monopoly the price of State services is being determined by a set of
social factors, which are relying on the mechanisms of power and coercion, on the
balance of power in society and on the social strength of State monopoly. Saying
otherwise socially strongest in particular society individuals associated with the
mechanisms of coercion are establishing (in correspondence with the balance of power in
society) a price of any socially monopolized property including that of the State.
Needless to say that price formed in such a way has nothing to do with real economic
contribution of the property or with its real value being purely social price and certainly
not an economic one. In application to the State property the most we can do - is to
investigate what are those State functions for which people are actually forced to pay or
simply to understand what we are actually buying beyond our will.
State besides a number of particular widely familiar economic functions, being closely
associated with the mechanisms of power and coercion is also acquiring certain social
functions related to social agents or otherwise to social monopolies. Since State is a social
monopoly with its real distinctive proprietors and with their non-socialized interests,
speaking about State functions we have to clearly differentiate between ideal state
functions the ones people would like the State to have - and between the real ones,
which can be actually attributed to the State according to its nature and to underlying it
system of social and property relations. Major controversy on fundamental social and
economic principles between socialist ideology from one side and classical liberalism
from the other arises exactly on account of this confusion between real and ideal State
functions. Generally speaking, misunderstanding of the nature of social property rights
based upon mechanisms of power and coercion and idealization of social realities is
making socialist conceptions to rely on the strongest social monopoly ever - the State. We
already know by now, that in direct perceptible or imperceptible interests of the social
groups associated with the State and first of all in the interests of State bureaucracy is to
elevate as much as possible an economic role of the State and its participation in economy
and society in order to increase an amount of property under control and an amount of
income appropriated by the State and through the State. Likewise, in social and economic
interests of the State bureaucracy is to make State monopoly less dispersed in terms of
number of proprietors and therefore to make it socially stronger. Consequently any
single acquired or appropriated by the State function or even any single additional field



110
of the State activity either economic or social - actually represents a direct gain
(including first of all financial or material gain in terms of additional State revenues) of
the State as of production factor monopoly in its counteraction with the rest of society.
Let us start our investigation of the State functions with their ideal set the one, which is
attributed to the State by tradition, by general public and by various etatist ideologies.
From the point of view of property relations based upon our previous analysis of
property rights imperfections we can separate two fundamental groups of ideal State
functions. First one is elimination of different types of property rights imperfections and
creation of efficient property regime accompanied by fair societal system. This is an ideal
social function of the State. Second function is connected with the supply of particular
goods and services, with income redistribution, with economic regulation and with
stimulation of aggregate demand. This is an ideal economic function of the State.








Diagram 3. Ideal State functions
Right away we can see that main outcome of the economic function is consolidation of
social monopolization coming from the State linked to expansion of the State property,
State tasks, State revenues and State economic interventions. Therefore, State economic
functions or rather their consequence is in a straightforward correspondence with the
direct interests of State monopoly or of top-level State bureaucracy as of States single
real informal proprietor. Social function of the State ideally incorporates two major
components derived from an objective to eradicate different types of property rights
imperfections counteraction of social monopolization and counteraction of property
rights violations. We know by now that counteraction of social monopolization and of
property rights violations of the social nature by the State is very problematic because
their very emergence is only possible through utilization of the mechanisms of power
Ideal State Functions
Social Functions Economic functions
Counteraction of
social
monopolization
Counteraction of
property rights
violations
Macroeconomic
functions
Microeconomic
functions
Supply of
certain goods
and services
Boosting of
aggregate
demand
Counteraction
of economic
monopolization
Income
redistribution



111
and coercion or through direct participation of the State. If it would not be for the State
social monopolies simply would never appear especially under the modern societal
balance of power. Another story is counteraction of property rights violations of the
private nature or enforcement of law and order. It seems like a decent and at the same
time appropriate and suitable task for the State. The only problem is that it concerns
security of private individuals and directly is neither in the interests of the State nor in
those of the State bureaucracy. State as a proprietor, as commercial enterprise or as
economic agent simply does not care about property rights violations of the private
nature just like it does not care about any private interests except for those of its real
proprietors. Indirectly, however, State bureaucracy does get revenues as well as its own
important ideological justification associated with this function. State has to take this
function on board partly in order to justify its own necessity and its own existence and
partly as a result of peoples demands under the process of social counteraction.
Extremely important is that this function is making State to enforce law and even the
entire social infrastructure, which serve to preserve existing property rights and property
relations and therefore also to preserve exclusive property rights associated with the
State. On the other hand, this function justifies and so far extremely successfully the very
presence of the mechanisms of power and coercion in society and consequently of the
State generally. This function is extraordinarily imperative for the State because it might
be a single function, which more or less justifies necessity and an overall existence of the
State. Ideal social functions per se are the most artificial to the States nature and the most
strange to the States interests and first of all to the interests of its true real proprietors
(even though indirectly they serve those interests in one way or another) and because of
that people have to effectively impose them under the process of social counteraction.
Ideal economic functions of the State can be divided into two subgroups -
macroeconomic and microeconomic ones. Ideally the State as macroeconomic agent has
to achieve three major objectives stimulate aggregate demand and aggregate supply,
redistribute income in social security and welfare purposes and eliminate economic
monopolies. State as microeconomic agent is expected to supply certain goods and
services either because they are traditionally considered as public goods, or because they
suppose to contribute to the States macroeconomic task of boosting aggregate demand or
because State might have certain economic advantages in their delivery on the market
(advantages, which are very difficult to substantiate). Generally speaking it is out of the
purpose of this book to investigate directly how efficient State economic functions or
different macroeconomic recipes are. One of our principal concerns in this book is to
identify and to exhibit the nature of economic inefficiency and social injustice connected
with certain social institutions or much rather with all of them. We have seen by now that
economic injustice never comes without economic inefficiency, while economic
inefficiency normally is always rather explicit owing to its association with the concrete
patterns of economic and social injustice.
All State macroeconomic functions are quite old. They have neither emerged in twentieth
century nor in modern economically developed countries, and they certainly have not



112
been discovered by Mr. Keynes, by socialist ideology or by other advocates of State
interventions in economy and society. Building of Nile irrigation systems in ancient
Egypt was nothing else as an attempt to boost an aggregate level of national output.
Building of Hotel des Invalides by Louis XIV de France is an example of long time known
social security or income redistribution function of the State. Third ideal economic
function of the State - elimination of economic monopolies though is having its roots
back in history, in its present form may be considered as fairly modern.
From the point of view of property relations, all State macroeconomic functions can be
reduced to one single social function of property and income redistribution. This is most
perceptible in the case of income redistribution function per se related to social security
or social assistance programs. Income redistribution is purely social function because its
materialization is only possible through utilization of the mechanisms of power and
coercion as well as through escalation of physical and financial volumes of socially
monopolized property (of the State revenues) and therefore also through elevation of
appropriated monopolistic income by the top-level State bureaucracy. Any income
redistribution represents a perfect example of property rights violations of social nature.
As a more or less validating argument for income redistribution under social
monopolization can serve the neutralization of negative effects related to existing social
monopolies (others than the State). However, this is not relevant to our modern realities
when State, especially in economically developed countries, represents the strongest and
most of the time a single social monopoly in society.
Income or property redistribution is only possible in consequence of utilization of the
mechanisms of power and coercion and therefore due to some kind of social monopoly
upon those mechanisms, otherwise nobody will give up his property voluntarily. Any
redistribution is always associated with non-socialized interests of real social exclusive
proprietors of this particular monopoly. Even if we suppose that income redistribution
might eliminate certain economic disproportions, this can only happen in the short run
and always on account of the long-term development, on account of economic and social
justice and on account of economic efficiency (not even mentioning on account of certain
people). In reality income redistribution itself creates huge disproportions, hardly
eliminating any other disproportions in society. Income redistribution can only be
realized through socially and economically unjust and inefficient property or income
confiscations directly leading to strengthening of the State monopoly, to consolidation of
social parasitism and to escalation of the State domination in society processes, which
once emerged are very difficult to reverse. Generally speaking, income redistribution in
no way is designed to eradicate any kind of social monopoly, neither the State one nor
any other kind. Vice a versa, through intensification of social and economic parasitism,
through creation of additional interests associated with the State and through
consequential deterioration of social counteraction, income redistribution rather
represents a powerful tool for preservation and consolidation of the State monopoly and
therefore also of the general level of property rights imperfections in society.



113
Under its income redistribution function, the State is not transforming property rights
violations into social monopolization, because no any kind of underlying economic
activity is involved. Income redistribution is a simple long-term coercion and is nothing
else as property rights violations of the social nature. The other thing is income
distribution inside the State monopoly or income appropriation by the top-level State
bureaucracy. Here mechanisms are much more complex. They involve, at least as a cover
up, certain types of production or economic activity (ex. different State works, State
orders and acquisitions, administration of State enterprises, etc.) as well as various types
of social actions (income redistribution, planning, direct economic regulation, elimination
of property rights violations of private nature etc.). If all State deeds under its income
redistribution function are merely acts of property rights violations, appropriation of
monopolistic income by top-level State bureaucracy represents a pure case of social
monopolization.
Generally speaking the State to one degree or another might be able to fight property
rights violations of private nature or simply to fight crimes, even though this task not
necessarily has to be attributed exactly to the State. Private individuals are also able to
contribute to counteraction of private property rights violations and since this book is
about general principles of society and economy, we cannot exclude such an alternative
right away. That is even recognizing that realization of this task by private individuals
generates a strong threat of supplementary forms of property rights violations and social
monopolization taking into account that private security forces may easily transform into
forces of an overall persuasion and coercion. Under significant pressure of social
counteraction the State might be capable to struggle with property rights violations of
private nature more or less efficiently. But this task the State is accomplishing only in
direct conjuncture with income and property redistribution, with other types of property
rights violations of the social nature as well as with social monopolization associated
with the State. State, as we know by now, is a single procreator and promoter of property
rights violations of social nature, particularly under its income redistribution function.
Besides, any interventions in the natural economic mechanism of income distribution are
always violating property rights. What kind of State deeds is overweighing - generated
by the State property rights violations of social nature or counteraction of property rights
violations of private nature is not so easy to tell. What State is really doing from the point
of view of property relations is civilizing mechanism of property rights violations and
raising it on ideologically more advanced foundation.
Second macroeconomic function of the State - stimulation of economic growth - under
closer consideration is nothing else but redistribution of investment resources from
private proprietors to the State. This function is also based exclusively on power and
coercion (otherwise nobody will give away those resources) and therefore is a purely
social function. Clearly, in order to stimulate any economic activity we need to take away
economic resources from certain other activities. Growth stimulation function being
based on property redistribution is not diminishing any monopolistic effects; vice a versa
it is consolidating them elevating economic strength of the State monopoly. On the other



114
hand, redistribution of resources from private to public sector as well as State
involvement in entrepreneurial activities is generally creating smaller value, than
otherwise would be created by private economic agents, if one thinks that the State is
eternally less efficient entrepreneur comparatively with the private ones. Private
investments in this case represent an alternative way of property utilization, which is
comparatively more efficient than the States entrepreneurial activity.
Major problem with States microeconomic function of the supply of goods and services
is that the State is all times least efficient economic agent or the least efficient commercial
enterprise. On the other hand, this is a single State function, which is fairly modestly or at
least not directly based on mechanisms of power and coercion and therefore it is a single
more or less truly economic function of the State. Generally speaking, all State functions
to one degree or another are relying on the social mechanisms of power and coercion and
cannot be accomplished and appropriated by the State without such kind of mechanisms.
General reason why the State cannot be more efficient proprietor or more efficient
economic agent comparatively with private companies is very simple and exceptionally
obvious if we base our judgment upon underlying the State property relations or even
upon common sense not diminished by ideological brainwashing. State is a production
factor monopoly and its involvement in economy brings along various forms of economic
inefficiency and economic injustice. Real material interests of people associated with the
State and first of all of the top-level State bureaucracy not always correspond or rather
most of the time contradict to those ideal functions attributed to the State. State, as a
production factor monopoly and as an agent on behalf of the top-level State bureaucracy,
is seeing its major source of income not in the process of exchange and not in the
economic efficiency, but in social, political, moral and cultural justification of its coercive
acts related to the collection of State revenues. In fact all ideal functions of the State serve
merely as a validating argument utilized by the State ideology in order to justify the very
necessity of the State and necessity of the coercive collection of State revenues. Lion share
of revenues the State is receiving not from any kind of production activity but from
coercive taxation. Similar to any social monopoly, the State is acquiring its income not in
intensive way efficiently serving the market and private demand, but in the extensive
way - escalating amounts of confiscated property (income). Just like any other economic
agent the State does not have as its immanent goal a macroeconomic efficiency. To be
more precise as its immanent goal the State is having exactly the economic inefficiency
related to non-economic coercive collection of State revenues and to elevated state
expenditures. State as a social institution feels efficiency maximization, if at all, very
indirectly - through the entire row of other interests and objectives. For example, when
State is trying to boost aggregate demand, then State expenditures are already
accomplishing this task no matter how efficient they are, while few people see those
opportunity costs (unfortunately opportunity costs are invisible), which arise in
consequence of the relocation of resources from efficient private proprietors to huge
inefficient social monopoly. Equally we cannot identify an economic survival among the
objectives of the State and of the State economic activity. In order to maintain the
possibilities of monopolistic income appropriation connected with the State monopoly,



115
top-level State bureaucracy has to buy certain individuals and groups of individuals.
Such a need is tying up the entire State activity to maintenance of the system of social
(coercive) security. This is definitely not contributing to an overall State efficiency - State
has to prefer social outcomes (employment, social security, superficial social justice
etc.) to economic ones and, first of all, to general economic efficiency.
Growth stimulation function similarly to income redistribution function has nothing to
do with elimination of social monopolies (especially of the State one), rather vice a versa
it is supporting them by pumping with demand and additional financial resources.
Taken separately, this function is actually working towards consolidation of existing
social monopolies (including of the State one). Instead of eradication of whatever
monopolies per se, the State under this function is trying to liquidate their secondary
economic effects overproduction, unemployment, inflation and economic depressions.
Generally speaking, either we are fighting monopolies and do not need elimination
policies for their effects or we are fighting monopolistic effects and then monopoly
elimination policies do not make any sense. State, however, always wants all the
functions it can get - power and reason never come together unless power is counteracted
by another power.
Third ideal macroeconomic function elimination of economic monopolies - by and large
represents the same act of property redistribution but with different participants. Now,
losers are the proprietors of economic monopolies, while the winner ideally suppose to
be society as a whole. However, we already know by now, that monopolies of economic
nature not being associated with instruments of power and coercion in their pure case do
not represent property rights imperfections. Since on the contrary to social monopolies,
economic ones do not generate property rights imperfections, in their pure form they
hardly need to be counteracted at all and their eradication is just a matter of time and
market competition. Elimination of social monopolies, on the other hand, cannot be based
on any economic actions because economic actions never destroy social monopoly. Only
political or social measures, which rely on utilization of some kind of power against the
power of social monopoly, have to be applied in order to diminish its strength or
moreover in order to eliminate social monopoly. In other words, eradication of social
monopolies does not have anything to do with economic methods, with economy and
therefore also with the State economic functions. Any intervention of the State aiming at
elimination of economic monopolies represents a simple act of property redistribution
confiscating certain property or certain rights from particular economic agents and
generating additional State revenues for carrying out of this mostly futile function.
Prevention of economic monopolies is a function of the market, while elimination of
social monopolies is a matter of social counteraction and there is no any appropriate
place for the State in this combination.
Elimination of social monopolies hardly can be related to State functions at all, first of all,
because the very emergence and existence of any social monopoly is only possible as a



116
result of a direct participation of the State as of the final instance of power and coercion.
Besides, understanding of social monopoly is rather vague today and is hardly
recognized either by the State or by general public. In modern economically developed
countries social monopolies in their major part are not represented by conventional
commercial enterprises or by economic agents, against which all antitrust efforts are
normally applied. Today social monopolies are predominantly represented by particular
non-profit organizations, social associations, special interest groups, unions or otherwise
by social agents, which managed to obtain certain exclusive rights and privileges or
saying otherwise which somehow managed to connect their revenues (income) with the
power of State.
Besides absolute and natural failure to accomplish its ideal artificial functions, State
brings along all the production factor monopoly effects upon society as well as immense
net costs to people and economy. These costs can be divided into there major categories
(1) taxes or monopolistic payments to the State, (2) opportunity costs arising from
inefficiency of ideal State functions and from reallocation of resources through the State
and (3) social violations of property rights (property limitations, state interference and
income redistribution) emerging as a result of an essential necessity for the State to assure
peoples support or at least tolerance for its production factor monopoly.
Our ideal State functions have vanished more or less, while the real State functions or
State functions from the point of view of underlying State property relations and from
the point of view of States most adequate proprietor top-level State bureaucracy -
emerged. We are already sufficiently familiar by now with the States real immanent
social nature as of a final source of power and coercion and of a production factor
monopoly. In the end we are also being left with one single real economic function of the
State - comparatively inefficient supply of certain goods and services either under States
growth stimulation efforts or under States involvement in particular microeconomic or
business activities (including State owned enterprises). Besides all that based on our
previous analysis in this chapter we can add four social functions artificially imposed on
the State by people. First one is income redistribution, which from the point of view of
top-level State bureaucracy and of the State monopoly (table 2) represents a net cost and
mainly serves as a tremendous ideological pretext for growing State appetites, State
revenues and appropriated monopolistic income. Second artificial function
counteraction of the property rights violations of private nature and maintenance of
social order as well as maintenance of a particular property regime though is also
external to the States nature seems to be about a single function, which is justifying the
very existence and necessity of the State. Third function - elimination of governmental
monopoly basically marks transition from dictatorship to democracy and also what is
called democratization of society. This function is certainly absent under the
dictatorship, but most importantly is that State has nothing to do with this function,
much rather like vice a versa in line with the immanent associated interests of its real
proprietors (top-level State bureaucracy or representatives), the State is always leaning
towards dictatorship, which is allowing higher levels of appropriated monopolistic



117
income under lesser control on behalf of the people. And finally, rather recently
developed to its height the fourth artificial function of the State economic regulation
and State interventions in economy. All these functions are united in their essence as
being external and strange to the nature of the State. At certain period of time they were
forced by people and willingly or not were taken up by the State. People were inclined to
persuade the State to assimilate these functions partly because of the misunderstanding
of States nature and partly because we simply did not have any choice or any perceptible
alternative. These functions ideally suppose to diminish the power of the State at least
somehow and at a time it seemed perfectly rational to introduce them into the States
agenda. The problem is that all those functions, which suppose to diminish State power,
are performed by the State, inside the State and with additional resources expropriated
from the people.


















Diagram 4. Real State functions

If the State is unable to fight property rights imperfections or moreover if it is their final
or even single cause and if its ability to counteract property rights violations is also
questionable, one might wonder - what is it generally good for? Such a question is not
relevant from the point of view of property relations. Bad and good are subjective
biased categories, which do not interfere with the balance of power in society. For a
number of people the State is good, for others it is bad and for some people it is neither
one or neutral. From the point of view of property relations, the State being a production
factor monopoly is always inefficient and unfair. Another question is what we can have
instead - whether an alternative option is more efficient and more just and whether it will
not generate even more severe types of property rights imperfections. Table bellow might
be somewhat helpful in such comparative insight summarizing economic and social
models connected with various types of property rights imperfections.
Real State Functions
Power and
coercion
Production factor
monopoly
Income redistribution
Supply of certain
goods and
services
Economic functions Natural to the State
social functions
Social functions artificially
imposed by the people
Counteraction of property
rights violations
Elimination of
governmental monopoly
State regulations and
economic interventions



118

Property rights
violations of private
nature (ex. robbery)
Property rights
violations of social
nature(property
expropriations)
Social
Monopolization
TheState
Financial motivation
Revenues Stolen money Expropriation of
property and its
transfer to another
proprietor
(including income
redistributions,
nationalization)
often as a follow-
up of social revolts
Revenues from
goods and services
sold at prices
above free market
level, or from
input factors
procured at prices
bellow free market
level
State revenues (taxes and
other payments)
Costs to
profiteer
Cost of a gun,
special clothe, may
be a car,
information,
knowledge of
habits and
territory, cost of
cashing in of the
stolen property
Financial costs
associated with
expropriations and
political image
costs (the latter
sometimes may
turn into benefits)
Economic and
political costs of
maintenance of
exclusive rights
Income redistributions,
State programs and
general expenditures,
ideology
Profit Money to spend New property in
possession except
costs, which are
usually absolutely
insignificant in
monetary terms
Revenues left after
paying economic
and social (related
to maintenance of
social monopoly)
costs (revenues are
higher because
monopolistic
prices of output
are higher, while
prices of input are
lower than would
be under the free
market conditions)
In-law and out-of-law
income of the top-level
State bureaucracy
(salaries, privileges,
benefits, services en
gratis, power, favors,
influence, luxurious
office related
expenditures, illegal
benefits and so on)
Characteristics
Costs to
people
Personal insecurity Insecurity of
property,
emigration of
capitals and
proprietors,
economic
instability,
underground
economy, strong
dictatorial trends
Economic and
social injustice,
social unrest,
solution of
problems often
leads to
consolidation of
the State monopoly
Social parasitism, social
mendacity, social
idealism or self-
mendacity, social
hypocrisy, huge income
and property
redistribution, buying of
certain groups of people,
State domination in
society, inefficiency
Duration of
a separate
action
One time One time (might be
repeated on
regular short- to
medium-term
Long-term Long-term



119
basis)
Legality Illegal Mostly legal Legal Mostly Legal (except out-
of-law corruption)
Foundation
of action
Force Power and
Coercion
Power and
Coercion
Power and Coercion
Nature of
action
Property rights
violations of
private nature
Property rights
violations of social
nature
Social
monopolization
Social monopolization
Main
profiteers
Robber Normally the State
(top level State
bureaucracy),
sometimes
secondary
profiteers to whom
property was
redistributed
Monopoly
proprietors
The State (top level State
bureaucracy and
representatives)
Table 2. Types of Property Rights Imperfections

State combining property rights violations of social nature (income redistributions,
nationalization, regulations, interference in economy, etc.), social monopolization
(production factor monopoly) and being a final source of coercion is the most dangerous
phenomenon we can ever imagine in human society. In order to be correct from the point
of view of property relations, we will have to exchange our previous question with
another one what can be done (if anything) in order to diminish or even to exterminate
monopolistic nature of the State? There are two fundamental practical ways for that
social counteraction and production factors or economic development. But this is too
general. Speaking more specifically there are three elementary directions, which people
are pursuing accidentally or intentionally within the process of social evolution in order
to diminish social and economic strength of the State monopoly. Those are (1)
consolidation of the conventional property rights dispersion towards State monopoly or
simply real true democratization; (2) diminishing up to a minimum possible level of the
physical volume of State property and of State revenues; and finally (3) promotion and
advancement of a wide-scale competition between different countries and between
different social systems for attraction of economic resources including capital, labor,
population, ideas (social and political ideas as well), technology, investments,
innovations, etc. First direction - consolidation of democracy - promoting conventional
property rights dispersion is reducing the social strength of State monopoly. However,
conventional property rights dispersion never leads to a complete elimination of any
social monopoly, because neither it annihilates monopolistic interests associated with
monopoly, nor it eradicates exclusive rights based on power and coercion, nor even it
particularly awakens peoples interest in administration of the State property (on the
contrary to peoples interest in income redistribution). Representative democracy is the
least efficient way to fight State monopoly among identified above, first of all, because
through income redistribution immanent to democracy it creates the strongest
preconditions for elevation of the States economic strength. Second direction - reduction



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of the physical and material volume of State property and of State functions is
counteracting economic strength of the State monopoly. This direction is utterly
important since declining economic strength is simultaneously diminishing financial
resources essential for maintenance and preservation of the State monopoly inclusively
by withdrawing those resources from the State propaganda or advocacy and from buying
of certain groups of population. Both these policies being tremendously costly cannot
work without significant financial inflows. Advocacy of inefficient and escalating State
expenditures is very expensive, especially when people are becoming more educated and
more intelligent as a result of the development of science, technology, knowledge and
information. Funds necessary for such an advocacy are considerably exhausting State
monopoly, moreover so if States economic strength or State property and State revenues
are declining. On the other hand, diminishing economic strength and melting financial
resources might equally reduce an interest in the State monopoly on behalf of State
bureaucracy and of the other State supporting groups on account of, in a manner of
speaking, general reduction in profitability of the State machine. Nevertheless,
diminishing of economic strength per se also cannot completely eradicate the State
monopoly, because this does not generate any social property rights dispersion while a
complete eradication of the entire State property in reality is very hard to achieve. Third
direction consolidation of international social and economic competition is probably
the most effective one in the long run among the three since by annihilating certain
particularly exclusive social and property rights associated with the State it is at least
generating an economic competition between States if not the social property rights
dispersion related to State monopoly. As a result of economic and social competition
between nations, social systems and between States, people and capitals are becoming
more and more capable to choose among States and societal systems just like they are
choosing a place of residence or investment opportunities within particular country.

Unfortunately, in the modern world there are at least three significant barriers for social
and economic competition between countries and nations. First one is the national
borders, which are still significantly closed especially on behalf of economically
developed countries and particularly for immigration from poor countries with wicked
social regimes. Second one is unification of several countries into one single economic,
social and sometimes even political union. Such unification to one degree or another is
diminishing competition between the States and societal systems and therefore is also
downgrading social property rights dispersion related to the State monopoly. May be
economic and political unification is efficient from economic point of view, but we have
to be rather careful what concerns emerging system of social and property relations in
consequence of any unification. It is much easier to generate exclusive rights and
property rights imperfections in a huge recently materialized State entity without any
experience in joint State administration and even more important - without any
experience in joint social counteraction - than in one separate and relatively small country
with hundreds of years of experience in social counteraction and with a number of
alternative State entities within three-four hours drive. Third barrier for international
competition and primarily for its efficiency is of a more personally driven nature. Under



121
the common international environment people are having a lot of things to exchange and
a lot of things to choose from. What they are selecting is based entirely on their interests,
wants and desires. What they are selecting is certainly not dictated by considerations of
an overall economic efficiency at most of their own private economic efficiency.
Therefore, there is also no guarantee whatsoever that people will be preferring the most
efficient economic and social policies or, vice-a-versa, that they will not be preferring
every time income and property redistribution recipes overflowing from modern
international societal environment.



122
Chapter 10. State Bureaucracy
State property unlike any other type of property seems to have no any private
proprietors. Speaking otherwise, property associated with the State, ideally must belong
to society as a whole or to all people. Relying on common understanding of public
property, the latter is utilized only on behalf of the entire society and to the benefit of its
every single member and therefore no any private and moreover no any exclusive
benefits potentially attached to other types of property possessions can arise here.
Beneficiary ideally is represented only by society as a whole or by all particular
individuals on equal basis, without any private economic proprietors or moreover
without any exclusive social proprietors. However, this is a very idealistic or much rather
even utopian picture. It is considering State property from the point of view of myths and
legends invented by social infrastructure rather than from the point of view of
underlying any economic and moreover any social phenomenon property relations.
Social infrastructure, as we know by now, is bound to create various idealistic myths in
order to support certain non-socialized interests. There are always a government and a
State bureaucracy, which are acting on behalf of the State. While government and State
bureaucracy are represented by particular individuals with their private interests. Those
interests are very much based upon and enforced by the fact that State bureaucracy
through its State activity tends to appropriate certain economic claims upon the State
property, State revenues, privileges and benefits coming from the State as well as
naturally acquires certain exclusive social property rights associated with the State.
Under the State bureaucracy we will understand not only bureaucracy in traditional
connotation of this word, but rather all groups of people, which correspond to two
fundamental criteria. First one is receiving of an important part of personal income and
of other personal benefits from the State and from activities directly connected with the
State property. Second is management and control of the State, state property, state
revenues and of the instruments of coercion as their primary occupation. These criteria
besides bureaucracy in conventional understanding are also embracing a variety of other
State positions such as members of national legislatures (representatives), elected public
officials including judges and public attorneys where relevant, superior members of the
government, magistrates and finally national presidents and presidential
administrations. Since State is more than just a government and since in this book we
have almost no interest in government and all the interest in the State, we can unite three
branches of power legislative, executive and judicial - in one big group of the State
bureaucracy, or even with a certain logical abstraction from particular members of this
group - of the top-level State bureaucracy. Justification for such an approach is coming
directly from the very definition of property rights as of informal possibility to control
particular property and to appropriate income received from this property. For all those
groups of people or for the State bureaucracy as a social group generally, concrete levels
of income appropriation from the State monopoly are established internally without any
serious influence on behalf of the other people or of society as a whole. Even though
undeniably there are certain restrictions and limitations in this respect imposed by



123
outsiders of the State monopoly and also emerged as a result of specific contradictions
between particular private interests inside State bureaucracy as a social group.
In order to understand a nature of the State bureaucracy as of social group and in order
to examine concrete mechanisms of State property administration combined with
appropriation of monopolistic income by the State bureaucracy, first of all, we have to
identify and categorize diverse and often quite isolated in their type of occupation groups
of people associated with the State property and with the State monopoly. State
bureaucracy, particularly under democracy, cannot be simply a renter of the State; State
bureaucracy always has to manage State property at least somehow otherwise it cannot
justify its own existence as of the social group as well as cannot justify the very necessity
of the State. Under dictatorship ideological justification of the State machine is one of the
major tasks of social infrastructure. It is quite unreasonable for any dictator to be merely
a consumer of his power without application of any efforts for maintenance of this
power. Wherever this is the case the power does not last long. Necessity of a permanent
application of efforts and a struggle for survival accompanied by constant exposure in
front of the people is making top-level State bureaucracy to be quite energetic and active
social group in pursuit of their own interests. We must not be misguided by internal
conflicts and controversies within State bureaucracy, which are happening from time to
time both under dictatorship and under democracy. Although the struggle for power
sometimes is weakening to one degree or another particular political parties, lobbying
and interest groups, particular officials and even an overall system of governance, it is
neither eradicating the State as a production factor monopoly nor downgrading an
overall influence of the top-level State bureaucracy, which is administering this
monopoly. Internal struggle within State bureaucracy is hardly even diminishing social
or economic strengths of the State monopoly.
As a fundamental criterion for classification of the State bureaucracy we will use a
relation of particular groups inside State bureaucracy both to generation and to
eradication of the different types of property rights imperfections. Consequently our
classification will rely on real State functions examined in previous chapter. More
generally proposed classification will be based on property relations and on influence of
the State as of social monopoly upon economic development and social evolution.
Originally we will separate two major groups according to their relation to
administration of the State property and to accomplishing State functions. First group
comprises people, who are responsible for the state functions related to economy (both
social and economic) - stimulation of national economic growth, direct income
redistribution and supply of certain goods and services. These people are involved in
administering State both as an economic (supply of certain goods and services) and as a
social agent (income redistribution, regulation, etc.). They are dealing with economic
regulation, taxation, debt management, State property administration, central banking,
social welfare including State owned education, State provided health care and social
security. We will equally add to this group a top level of executive power, represented by
the institution of presidency and by cabinet of ministers. Finally, we will also relate to



124
this category the entire management of all State owned enterprises. Functional
importance of this group is underlined by its closest association with the nature of State
as of production factor monopoly. States second immanent social nature of the key
instrument of power and coercion is finding its reflection within the second group of the
state bureaucracy. Ideally this group is dealing with prevention and elimination of the
different types of property rights imperfections. In reality it represents those very
mechanisms of power and coercion upon which all property rights imperfections are
built. This group covers, first of all, the entire national parliamentary and legislative
system (in case of democracy, while in case of dictatorship their embryonic, ideological
and artificial substitutes), which is bound to eliminate governmental monopoly. Another
very important part of this group is represented by judicial and law-enforcement
agencies, which task is to fight property rights violations. National defense institutions
may also be attributed to this particular group since they suppose to eliminate external
threats of property rights violations and of potential externally induced property rights
imperfections. At the same time, association with this group of the antitrust and
competition enforcement agencies is not that straightforward. Seems that naturally they
also fit in this group. However, since their real function in modern economy and in
modern society is connected with elimination of economic rather than of the social
monopolization, they are primarily counteracting economic monopolies, which, as we
concluded before, do not even make a part of property rights imperfections.









Diagram 5. State Bureaucracy
Inside these two fundamental groups of the State bureaucracy a variety of subgroups and
sub-sub-groups can be identified in relation to specific tasks and functions. However, for
Involved in realization of economic
functions
(Government, Central Bank, governmental
and semi-governmental economic
organizations)
State Bureaucracy
Involved in realization of social
functions
(counteraction of property rights
imperfections)
Internal Protection (Police,
Justice, Judicial system)
External Protection (Army, Navy,
Intelligence)
Counteraction of property rights
violations
Elimination of Governmental monopoly
(Parliaments, Constitutional Courts)



125
our analysis of the nature and of the social role of State bureaucracy exactly the division
into two essential groups above represents a major interest. In fact, absolutely different
classifications of State bureaucracy from different angles of view are valid and illustrative
of specific occasions. We are not inclined here to provide some extra original and
exclusively legitimate one. Our classification serves one specific objective investigation
of the nature and role of the State bureaucracy in society and within the State monopoly.
First group (involved in realization of economic and macroeconomic functions) in reality
is dealing with the support, maintenance, and administration of State property or of State
monopoly as well as with direct management of distributed, redistributed and
appropriated by the State bureaucracy monopolistic income. Social infrastructure makes
it look like this group is working on social welfare, promotion of economic growth,
control over production, reduction of unemployment, maintenance of adequate property
regime, etc. All these tasks are significantly portrayed, especially by socialist tradition, as
a struggle with selfish and egocentric interests of private proprietors. Peoples attention is
being merely diverted from the very same selfish, egocentric and always non-socialized
interests of the top-level State bureaucracy associated with production factor monopoly
of the State. Objectives and role of the first group inside the State monopoly are quite
clear and fairly visible. Second group (involved in realization of social functions) in terms
of its origin and of its objectives is even more interesting and more complicated than the
first one. One part of second group (associated with elimination of governmental
monopoly) actually marks a direct consequence of peoples social counteraction with the
State and with the other forms of property rights imperfections, which are relying upon
the power of State. The very existence and consolidation of this subgroup inside the State
bureaucracy is exhibiting an important victory of non-monopolistic social groups and of
the people generally, for that matter, over a power of State monopoly. Even though this
subgroup in its embryonic form might exist even under dictatorship, under democracy it
symbolizes exactly the end of governmental monopoly. However, being once upon a
time established as a triumph of representative democracy, further on owing to its
association with the State property directly or indirectly, in one way or another it is
starting to serve the interests of the very same State monopoly. Financial or material
interests of the people united in this subgroup are being increasingly attached to the
interests of the State. Misunderstanding must not arise here - activities being carried out
by people in second group might be important and useful. As a matter of fact, tasks being
accomplished by this group (especially counteraction and prevention of property rights
violations of private nature) are much more justifiable and much less controversial than
the tasks and especially the size of the first group. Dealings and responsibilities of the
first group (involved in realization of economic functions) being manifested in State
interventions and State regulation of economy, society and property relations not only
represent property rights violations of social nature, but are also consolidating State
monopoly, general level of property rights imperfections in society, economic
inefficiency, economic injustice and in-law corruption associated with the State property.
Actions of the first group are enforcing social monopolization and consolidating
economic strength of the State monopoly. On the contrary to the first group, the second



126
one (involved in realization of social functions), symbolizes, among other things,
elimination of governmental monopoly (dictatorship), which represents a key barrier for
economic and political freedom as well as for social and economic development.
Maturity of this function testifies that we are dealing with representative democracy.
Besides all that, second group is contributing to maintenance of social order or to
counteraction of property rights violations of private nature. Preservation of human life
and property, which are making society different from wild nature, ideally is another
fundamental goal of the second group. This group is called upon to counteract direct
individual forcible threats to personal property and, first of all, threats to human life,
which is the most important kind of property and which, otherwise, would probably be a
matter of armed gambling. Disregard of this function or its attribution to other social and
economic agents is not that straightforward and because of that an abolition of State even
in theory seems to be problematic. And yet, tasks and actions of the second group,
whatever important and essential they might be, are enforcing and consolidating
exclusive property rights, economic inefficiency and economic injustice connected with
the State monopoly. Major problem with this group as well as with associated State
functions stands in the fact that not only this group is linked with mechanisms of power,
coercion and social persuasion, but that it actually represents those power, coercion and
social persuasion. Second group is associated exactly with that kind of economic and
political power, which is making the first group to permanently grow and
simultaneously to be even further consolidated by such growth. Furthermore, the second
group is associated exactly with that kind of power, which is finding its final expression
in the very existence and in the size of the first group.
Being a part of the State monopoly and, first of all, appropriating income from the very
same sources as the first group, the second group is certainly having significantly State
correlated interests. Actually, the nature and connection with State property of the
second group (involved in realization of social functions) are much more complicated
than those of the first group, which interests and income appropriation patterns
associated with the State monopoly are much more obvious. Based on counteraction of
particular types of property rights imperfections the second group can be divided into
two subgroups. First subgroup (already analyzed above) dealing with elimination of
governmental monopoly marks a direct outcome of representative democracy or more
precisely of the conventional property rights dispersion towards the State monopoly. It
includes people from national legislations as well as people from a judicial branch of
power in their capacity related to elimination of governmental monopoly such as
supreme or constitutional courts for example. Second subgroup is dealing with
elimination and prevention of property rights violations. Property rights violations,
among other things, can be either of external or of internal nature. Threats of property
rights violations of the external nature are a matter of concern for national security and
national defense - for army, navy and intelligence. Property rights violations of internal
character are in the competence of law enforcement agencies of police and judiciary in
their capacity related to counteraction of property rights violations. We deliberately
divided judicial institutions into two parts one involved in elimination of governmental



127
monopoly and the other one implicated in counteraction of the property rights violations
of private nature. If the first part or the first subgroup liquidating governmental
monopoly is introducing an element of personal freedom in society (at least ideally), the
second subgroup (involved in counteraction of property rights violations) no matter what
are the intentions - directly represents an instrument of coercion in the last instance. Even
ideal task of this subgroup is associated with limitations of the very same personal
freedom. Ideally, of course, an objective of the second subgroup is to oppress bad guys
for the sake of the good guys. However, idealistic schemes in human society based on
power and coercion almost never work. The very understanding of who are those bad
guys and who are those good guys represents a quite complicated and permanently
evolving dilemma with constantly changing and challenging one another points of view.
On the contrary forces of coercion exist, compel and oppress every day at any time in
ancient Egypt, in Roman Empire, in times of inquisition, in nazi Germany, in former
Soviet Union and even in modern economically developed democracies. Forces of
coercion are also permanently evolving, sometimes getting gentler under the pressure of
social counteraction, but this evolution does not change a bit their nature and
underlying them material interests.
Government, no doubt, is the most powerful part of the State bureaucracy, which is also
accomplishing a general control over State property and State monopoly. However,
government is not yet all State bureaucracy. It is not even necessarily the most
conservative and inefficient part of the State bureaucracy. Government is always under
scrutiny, permanently experiencing a constant pressure on behalf of different
parliamentary, lobbying and special interest groups as well as on behalf of public opinion
(whatever it is). Government, being appointed directly from inside the State according to
specific political practices and to some extent being indirectly elected under the process
of general elections (in the best case and only under democracy), is subject to a certain
degree of control both on behalf of the parliament and on behalf of the voters or rather of
the co-interested groups of voters and of the special interest groups (which certainly
pursue their own interests ahead of any interests of the voters). General elections under
representative democracy based on universal suffrage and upon a fundamental principle
of one man one vote are simultaneously creating preconditions for virtually
unlimited income redistributions. Both governments and parliaments have to satisfy
voters to one degree or another. While any material or any real satisfaction, first of all,
implies money and financial resources or speaking more generally - different types of
property. Even non-material satisfaction of voters implies huge financial resources and
quite often is more expensive than the material one. Governments and parliaments in our
days are not elected or appointed for descent things such as maintenance of God
established economic order and of property regime or moreover for a complete
elimination of property rights imperfections. Vice a versa, normally it is assumed that
they must do exactly an opposite - violate property regime applying property
expropriations and income redistribution practices, permanently reestablish rules of the
game for economic agents in mythical attempts to assure employment and growth and in
fact constantly hampering the former and slowing down the latter, hasten an implication



128
in society of the mechanisms of power and coercion, and finally reinforce the strongest
social monopoly ever - the State. What government is actually doing is coercively
expropriating property from one group of people and exchanging it with the other group
of people for a right to be reelected and to be re-included in the process of appropriation
of monopolistic income associated with the State monopoly. This is quite a seductive
and corruptive procedure both what concerns overall social and economic incentives as
well as what concerns general morality (whatever that is).
If for the entire growth of income redistribution are directly responsible interests of
parliamentarians, presidents and national governments (i.e. of politicians), who are
always eager to buy short-term political support throwing people a bone of coercive
social welfare, for the entire growth of State revenues and therefore of monopolistic
income associated with the State are responsible compound interests of all groups inside
the State bureaucracy. State bureaucracy is always eager to maintain and to increase its
power, prestige, influence, privileges, incomes and benefits through the expansion of
State revenues and through the diversification of State functions generally as well as
through the expansion of budgets and diversification of functions of every single
governmental agency and of every single governmental department. Generally speaking,
top-level State bureaucracy being triple a single shareholder, a chairman of the board and
chief executive officer of the State monopoly, similarly to the top management of any
business corporation, is always having growth of revenues and of appropriated income
as its major goal.
It is worth mentioning that our classification of the State bureaucracy here is much more
clearly expressed under democracy. Under dictatorship all the groups and sub-groups,
even though exist at least in their rudimentary form, are brought together and merged
quite often with overlapping and intermingling functions in one single class or caste of
the State bureaucracy. When power structure is vertical and property rights both upon
the State and upon mechanisms of power and coercion are private, only a distinction
from the point of view of a relation to the peak of power makes all the sense.
Reading different reports and analytical materials on State activities and governmental
performance throughout modern history one can find a regular rigid set of characteristics
common for all of them. Those are a sincere astonishment about enormous waste and
inefficiency related to an overall State activity, strong believes that all mistakes and
inefficiencies will be corrected if not today then the latest tomorrow and a sincere
wondering why these waste, mistakes and inefficiencies seem like never disappear.

The Federal Government Consists of a Maze of Programs and Agencies, Many of Which
Appear Ineffective
Over the years, Federal programs and agencies have evolved in an ad hoc and random
manner with little consideration of how they relate to each other. Individual programs
proliferated in response to the real or perceived needs of the moment. This committee's
recent report, Creating A 21st Century Government, pointed out that there were 1,013



129
Federal programs in 1985, while today there are 1,390 Federal programs administered by
53 departments and agencies. To support these programs and the bureaucracies that run
them, Federal income tax receipts today have grown 13 times higher than they were in
1960.
As the agency-by-agency survey findings indicate, numerous Federal activities are
chronically ineffective and wasteful. It is unclear, at best, whether many of these activities
serve currently valid Federal missions. Legitimate questions have been raised concerning
the viability of entire departments, including Commerce, Energy, and Housing and Urban
Development. Many other activities that clearly address valid Federal missions are so
beset by chronic problems that it is questionable whether they can carry out these
missions effectively without fundamental change

32


or else,

The historians of the Soviet Union cannot fail to conclude that the policy of the ruling
bureaucracy upon great questions has been a series of contradictory zigzags. The attempt
to explain or justify them "by changing circumstances" obviously won't hold water. To
guide means at least in some degree to exercise foresight. The Stalin faction have not in
the slightest degree foreseen the inevitable results of the development; they have been
caught napping every time. They have reacted with mere administrative reflexes. The
theory of each successive turn has been created after the fact, and with small regard for
what they were teaching yesterday. On the basis of the same irrefutable facts and
documents, the historian will be compelled to conclude that the so-called "Left
Opposition" offered an immeasurably more correct analysis of the processes taking place
in the country, and far more truly foresaw their further development.
33

Concept of property rights imperfections claims that those are in no way temporary
mistakes and occasional inefficiencies, but absolutely immanent outcomes originated in
the very nature of the State as of production factor monopoly. Interests of every single
social group are never directly and voluntarily oriented towards economic efficiency,
social justice and well-being of the other people and social groups. On the contrary, a
single unique rationale for any social group is to establish and maintain exclusive,
unachievable for others social and property rights, generating outcomes, which are
making people worse off in terms of economic efficiency and social justice. Those
mistakes and inefficiencies are direct results of income distribution associated with the
State monopoly and of income appropriation by the State bureaucracy based on exclusive
property rights and on the nature of State as of production factor monopoly. It is not in
the interests of State bureaucracy to make State more efficient; vice a versa inside
inefficient State (the one with a lot of uncontrollable revenues and expenditures) income
appropriation is much easier, a way more hidden, while an amount of appropriated
income is much more significant. Sometimes, State actions owing to their immanent
inefficiency or coming from private interests of particular bureaucrats are creating new
and strengthening existing monopolies. Quite often they cause a situation when
economic agents or market participants are rather co-interested in the State for
preservation of their particular privileges. On the other hand, it is in direct ideological
interests of the State bureaucracy to maintain a certain level of property rights



130
imperfections or at least their image, which might serve as a justification for preservation
and escalation of State interventions in economy, property and society and therefore for
an associated growth of State revenues and State expenditures. But, generally speaking,
the State is quite a self-sufficient and independent economic and social player with its
own separate economic and political interests and ideals.
Nature of all State mistakes and inefficiencies is connected with the two patterns of
State income distribution and of its appropriation by the State bureaucracy. These two
patterns are exhibiting, though to a different degree, a lack of direct interest of every
particular State official in macroeconomic efficiency or rather even a direct interest of the
State bureaucracy in an overall inefficiency of the entire State machine. First pattern we
will call outside-of-state income while the second one - inside-state income; the words
here are speaking for themselves. Let us imagine a director of autonomous but
supervised by particular ministry governmental agency, which is responsible for
construction works for particular State needs. Let us also suppose that the wife of our
director is a member of the board and an important shareholder of some private
construction company. In direct interests of an abstract director of this particular agency
is to award governmental construction contracts to his wifes commission even if her
company is far from being the most efficient bidder. Interests of a concrete director can be
rather different including, for example, to keep his wife away from any contracts in case
if he hates her. But, if we are considering an abstract or general social behavior based on
self-interest oriented human nature, in the interests of our abstract director is to make
everything possible in order to help his wife to win contracts and afterwards to jointly
benefit from such kind of victory. From the point of view of property relations, by doing
so, he is utilizing State monopoly or State property in order to appropriate income (his
informal share in his wifes contract) outside of State distribution and redistribution
functions or at least not directly connected with them, even though in this particular case
contract proceeds are coming from the State revenues. Speaking otherwise, personal
income of our director associated with this particular contract does not represent an
income received from the State directly within his particular position in the State
hierarchy, but rather from personal or private (sometimes illegal) utilization of benefits
and opportunities connected with this position. If we take even more simple case of
bribery, then the difference between material utilization of ones own position inside the
State and between an associated income not linked with the State revenues or with the
State property is even more evident. Even though such income is not distributed or
redistributed through the State, its appropriation is only possible owing to utilization of
the State power and owing to administration of the State property. In this particular
oversimplified pattern of behavior is the entire nature of permanent State inefficiency
related to utilization of public property in the group interests of State bureaucracy as a
whole or in private interests of particular members of this group. Worth mentioning that
this kind of deeds or actions (our directors story and not a clear-cut bribing) can be
perfectly legal not only within the past historical periods or only in modern
underdeveloped countries, but with certain complications in modern economically
developed countries as well. On the other hand, all out-of-law or illegal deeds connected



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with utilization of the power of State monopoly in private interests are positioned exactly
within this pattern of behavior related to outside-of-state income. Second income
appropriation pattern is more complicated and mainly concerns inside-state activity. Let
us try to simplify a picture by following our example. Direct economic interests of our
director of this particular governmental agency are mainly linked with the people who
are paying his salary and responsible for other benefits and who are also in a position to
influence his future income and carrier expectations. These people are certainly not the
ordinary voters, who might never even hear neither about our director nor about his
agency. The lower is the position of particular State official in the State hierarchy the less
visible is his connection with voters. Our directors boss probably a minister, is having a
very common understanding about methods of work, operations and practices, which are
employed by this agency. A boss of his boss the Prime Minister in the best case knows
only general tasks and responsibilities of this particular agency. While Parliament mostly
knows what the Prime Minister wants them to know unless some conspicuous problem
emerges. With every single level of State hierarchy the connection with voters is
becoming more and more ambiguous, while the specificity of tasks more and more
sophisticated. Already Prime Minister appointed by Parliament as a private individual
with his private interests (first of all with his private material interests) is having a very
relative connection with voters. Being a leader of the majority under parliamentarian
system normally he is much more attached to the interests of his party than to those of
ordinary voters. And whenever he is becoming a part of the State administration, his
personal interests are equally becoming to be connected with the government, with the
State and with the State bureaucracy. Mistakes and inefficiencies of the entire State
bureaucracy are now being considered as his own and he is starting to hide them
certainly not being able to get rid of them. By doing so, all of a sudden he discovers his
common interest with the entire State bureaucracy common interest in hiding of certain
things. While it is exactly the common interest in hiding things, which we examined
earlier, what is distinguishing monopolistic social group in the first place. His ties with
voters, on the contrary, are getting more and more indistinct mainly because Prime
Minister is appointed by and is reporting to his own party and to parliament, while
interests of parliament and those of political parties (first of all their material or financial
interests) are not the interests of the voters. Not even to mention a phenomenon of
interests dispersion towards the State property when certain categories of voters hardly
ever care at all about the State as such unless it starts to expropriate too much and too
quickly. Based on self-interest oriented human nature of a concrete director of concrete
agency we might conclude that in the very best case he will try to please his boss the
Minister, may be also the Prime Minister i.e. people directly associated with his
personal income and welfare. Though we must recognize that even this outcome is not
that imminent because particular State bureaucrats usually are quite independent from
their superiors under various systems of public administration.
Generally speaking, neither the president nor Congress has much control over the career
bureaucrats. Their only real power is to change a bureau's mission or its budget. And to
do this, the two branches of government must cooperate.
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Hardly ever our director needs to please voters, society or particular individuals, which
are having rather indirect and weak claims upon the State property and upon connected
with it patterns of income distribution. State or public employees and State institutions
do not have to report any profits or do not have to be micro-economically efficient
under their particular responsibilities. Vice a versa, universal interest of particular State
official and of the State bureaucracy as a whole is to raise budgets of particular State
divisions, of particular ministries and of the State generally as much as possible in order
to boost associated income appropriation opportunities. Growth of any divisions budget
is providing its employees and, first of all, its management with certain additional
material and non-material benefits such as higher personal incomes, privileges,
significance, prestige, power, influence and with a large variety of other benefits
connected with income distribution from the State and with appropriation of exclusive
income from the State monopoly. On the other hand, growing budget and new
responsibilities are leading to even higher degree of autonomy and independence both
from superiors and from the general public. Higher level of specialization of
bureaucracys functions associated with bigger budget is making particular jobs more
exclusive, overcomplicated with technicalities, less technically understandable for
supervisors and normally less exposed both to outsiders and to job cuts within the State
structure. Therefore, general expansion of divisions budget is making our director more
influential and powerful, first of all, owing to an extension of divisional tasks and
responsibilities. On the other hand, growing influence is consolidating and diversifying
our directors possibilities to utilize outside-of-state income appropriation modalities
starting from a simple wining and dining and up to certain out-of-law income
opportunities. Bigger budget and growing number of divisional responsibilities are
signifying to politicians and even to voters that some kind of activity is probably going
on and the higher are divisional expenditures the more important this activity looks to an
ordinary voter. Of course, this is an oversimplified example of income appropriation
patterns connected with the State bureaucracy and it certainly does not pretend to
represent any scientific discovery; displayed cases and practices being widely familiar
and well-known. We brought it here in order to illustrate particular income
appropriation models associated with the State and to elucidate the connection between
income appropriation by State bureaucracy and visual on a surface of social life State
waste, mistakes and inefficiencies. In reality every kind of inefficiency and every type of
economic waste are normally connected with certain patterns of income appropriation.
For any waste, mistakes and inefficiency somebody always has to pay in one way or
another (including in terms of opportunity costs), while certain other people are always
benefiting from them. Any waste and inefficiency in society is never a lose-lose situation
it is a pure win-lose kind of game.
Outside-of-state and inside-state income appropriation patterns, being parts of social
monopolization associated with the State, are interconnected with a very important social
phenomenon of corruption. Corruption is a much more profound and a way more
comprehensive societal phenomenon than what people commonly understand under this
term. Fundamental and determinative part of corruption is the corruption in a system of



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social and property relations and not a widely familiar out-of-law or illegal corruption.
Corruption in the system of property relations, on the contrary to out-of-law corruption,
is not only perfectly legal, but vice-a-versa is always supported and maintained by law
and by entire social infrastructure. We will call it in-law or legal corruption. General level of
corruption in any particular society is marked by one single factor by the consolidated
power of existing social monopolies or by their social and economic strength. The higher
is a level of overall social monopolization in particular society or the higher is a social
strength of all social monopolies in this particular society or the higher is a share of
monopolized property in overall national property possessions - the more corrupted is
this particular society. Corruption in common understanding implies certain illegal or
out-of-law and outside-of-state income appropriation, usually connected with the power
of State and with particular State functions. In this book we are primarily interested in
the legal corruption, which is a great deal socially stronger, a way more socially
influential and is much less visible than ordinary illegal corruption. Fundamental reason
for distinguishing in-law and out-of-law corruption stands in a simple fact that it is not
the legal system and therefore not also its infringements what is finally determining all
problems and imperfections in any society and what is underlying any societal
accomplishments. Social problems related to violations of laws are not yet all societal
problems; vice-a-versa they represent only a visible on the surface of social life tip of an
iceberg of all the problems in society. An underwater part of the iceberg represented by
the system of social and property relations and hidden by social infrastructure forms a
nature of in-law corruption.
Persistent economic inefficiency, economic and social injustice and property rights
imperfections are the direct consequences of in-law corruption. In modern world in-law
corruption is finding its practical economic expression in a permanently growing
dependency of the entire economy including producers, financial institutions, academics,
media, non-governmental organizations and entrepreneurs upon the State, State financial
resources and State regulation. Such situation is further consolidating already enormous
State monopoly and is gradually redirecting economic agents from satisfaction of
customers towards satisfaction of the State monopoly, of the State bureaucracy as a
whole and of particular State officials. In-law corruption is not only creating economic
inefficiency, but is also leading to moral corruption and degradation. People and
economic agents are starting to realize that they can better achieve their goals socially by
serving interests of the State monopoly as a whole and those of particular civil
servants, than economically pursuing real hard work and satisfying consumers
demands. At dawn of the State interventions in economy and society (or at the beginning
of modern socialism of economically developed nations) their scale and spreading were
quite low and corruption effects were not so perceptible. After a while people are getting
used to in-law corruption and do not notice or do not want to notice it anymore. For the
sake of their moral comfort they are even persuaded to believe that minor corruption is
actually what social progress is all about; that only short-term social and economic results
are worthwhile and that theoretical social philosophy does not lead humankind
anywhere. This self-hypnosis is very much enforced by a constant growth of national and



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personal incomes, especially fascinating in comparison with the previous centuries and
civilizations (however, more and more alarming today when in vast majority of
economically developed countries GDP growth most of the time is even slower than in
former Soviet Union). Everything looks nice and bright and people are starting to believe
that nothing can change this prosperity. Nonetheless, neither one known to us
civilization, no matter how advanced it became, was able to survive mounting
inefficiency of the system of property relations, which usually starts with some
insignificant cases (levels) of in-law and out-of-law corruption. Several vanished
civilizations (for ex. ancient Rome) were the most superior for their time period and after
their collapse other nations were not able to achieve their level of economic and social
development (or as we would say today their standards of living) for years. What is
destroying countries, nations and civilizations is certainly not the low level of economic
and social development, but rising absolute and comparative inefficiency within the
system of social and property relations or the in-law corruption per se.

Our pride resents the thought that the great highways of New England will one day lie
deep under layers of encroaching vegetation, as the more substantial Roman roads of Old
England have lain for generations; and that only a group of heavily overgrown hillocks
will be left to attract the archaeologist's eye to the hidden dbris of our collapsed
skyscrapers...
What we and our more nearly immediate descendants shall see is a steady progress in
collectivism running off into a military despotism of a severe type. Closer centralization; a
steadily growing bureaucracy; State power and faith in State power increasing, social
power and faith in social power diminishing; the State absorbing a continually larger
proportion of the national income; production languishing, the State in consequence
taking over one "essential industry" after another, managing them with ever-increasing
corruption, inefficiency and prodigality, and finally resorting to a system of forced
labour. Then at some point in this progress, a collision of State interests, at least as general
and as violent as that which occurred in 1914, will result in an industrial and financial
dislocation too severe for the asthenic social structure to bear; and from this the State will
be left to "the rusty death of machinery," and the casual anonymous forces of dissolution
will be supreme.
35

In-law corruption is generally characterized by an overall orientation of producers,
business units and economic agents towards orders and demand of monopolistic social
groups. Because of the significant economic strength of social monopolies and therefore
of their huge financial resources, they are not merely generating high levels of demand,
but are much rather reallocating this demand and resources from other types of economic
activities. In one of our previous examples we revealed orientation of producers and
financial resources towards needs and tastes of land aristocracy during the dissolution of
feudalism in 18th century in France. Enormous demand for luxuries on behalf of land
aristocracy existed mainly as a consequence of the high level of monopolistic income
appropriated by land aristocracy. Moreover, such demand at that time had significantly
influenced (and is still influencing in our days) international economic specialization of
France in different kinds of luxuries such as carpets and tapestry, fancy clothing,



135
exquisite wines and liquors, gourmet food, etc. Almost similar situation is typical for
other absolute monarchies of that time and particularly for Austrian Empire. Demand of
monopolistic social groups was keeping a lot of producers within an orbit of feudal
property relations, thus opposing an equitable development of all the production factors.
On the contrary, in England of the same times, an aggregate demand and overall
economic development were more balanced with less sharp differences between wealthy
aristocracy and other parts of population. This is essentially explained by a somewhat
smaller persistence of social monopolization in England owing to more advanced level of
social counteraction (which came in France only in 1789) and owing to conventional
property rights dispersion towards the State property (democracy based on property
census). Serving production factor monopoly and its proprietors is having an immediate
effect upon the interests of economic agents, upon their political and social views as well
as upon their social psychology. First of all, any public expression of criticism related to
dominating in society social monopolies even if would not threaten entrepreneurs
physically, would certainly harm their business. Serving social monopoly is not only
tying up the interests of particular businessman to interests of this monopolys
proprietors, but is also limiting a free expression of alternative political viewpoints or is
limiting political freedom. Any offence of dominating social and property relations
would simultaneously offend their main customers - people who are directly benefiting
from existing social order. Increased role of the State in society, economic strength of the
State monopoly and considerable State interventions in economy are orienting economic
agents and their interests towards this huge monopolistic buyer - the State. Together with
permanently expanding role and share of the State in economy and together with
orientation of economic agents towards serving State demands, any political offence
against the State monopoly, against based on it societal system, against dominating social
values, against State bureaucracy and sometimes even against particular bureaucrats
might harm offenders business and income. Even social science may have problems with
a free expression of opinion about direct buyer of some or sometimes even of all of its
products in the form of different scientific and academic grants, subsidies to particular
universities and research themes, scholarships as well as in the form of a variety of other
social and economic benefits, which might be even difficult to trace.
From the point of view of property relations, out-of-law or illegal corruption is mostly
represented by the property rights violations of private nature. Illegal corruption is
generally associated with the different forms of bribing or sometimes with rather
complicated schemes and types of actions, which in one way or another can be reduced
to bribing broadly defined as a favor in exchange for material or non-material benefits.
By and large, illegal corruption means illegal utilization of the State power and State
property in private interests of particular State official. In-law or legal corruption, on the
contrary, is having a much more profound and complicated nature. In-law corruption is
associated with such forms of property rights imperfections as property rights violations
of social nature, absolutely legal forms of social monopolization and State as a production
factor monopoly. In-law corruption is based on appropriation of socially exclusive
income appearing as a result of imperfections in the system of social and property



136
relations. Let us illustrate the difference between out-of-law and in-law corruption on a
very simple historical example. Let us come back again to France of the 18th century. This
time we will take a case of bribing by ammunition manufacturer of a clerk responsible for
ammunition procurement in the ministry of defense. Such action certainly and without
any controversy represents an illegal corruption since common bribing normally is
subject to a prosecution by law. On the other hand, let us consider a gift of several
hundreds acres of land by a King of France to one of his friends, to his mistress or to the
very same clerk in ministry of defense. Such gift already represents an in-law corruption.
It is perfectly legal (because king is the law and nobody would apprehend him), while
resources under consideration (the land) form part of a socially monopolized property
(State property of which the king is a sole proprietor) and are obtained by the King of
France mostly on account of imperfections in the system of social and property relations
or to be more precise owing to social monopolization. Social monopolization in this
particular case probably embraces some complicated combination of dual
monopolization social monopolization of land as of production factor from one side
and social monopolization of the State as of production factor from the other. All
imperfections in the system of social and property relations taken together represent the
corruption of societal system or social corruption, which includes both legal and illegal
corruption. Even if these imperfections are not violating any laws, they are corrupting
particular societal system and are approaching its complete disintegration, which most of
the time is much worse than any violation of laws. The more property rights
imperfections dominate particular societal system the more corrupted it is. Therefore,
diminishing level of property rights imperfections being the essence of social evolution is
simultaneously reducing a level of social corruption in society.
Entire legal foundation of society including constitutions, laws, regulations, normative
acts, decrees and other collective agreements are reflecting an existing in society
balance of power achieved as a result of a permanent process of social counteraction
between a wide variety of human interests. If anything, only production factors
development and an experience of social counteraction are pressing laws to a higher
degree of justice and morality. Until exist supported by laws and constitutions exclusive
property rights and associated with them economic injustice and economic inefficiency,
the legal system is not one hundred percent fair. People do not gather, establish rules for
procurement of public services, select and hire public officials and establish constitutions
and other kinds of collective agreements until they have won these rights in a
permanent fight with monopolistic social groups and, first of all, in a battle with the
State. All laws and constitutions are imposed by those who are in power or by
monopolistic social groups with exclusive non-socialized rights and privileges and only
afterwards (and it might be a very long afterwards including hundreds of years long)
under pressure on behalf of the people, any laws are acquiring more human
characteristics. Every word of any constitution must be fought for, must be appropriated
by people, must be expropriated from monopolistic social groups and must be imprinted
with a permanent struggle and efforts. All societies and civilizations beginning from an
ancient Egypt and up to modern representative democracies comprise particular types of



137
collective agreements. However, first always comes a bloody and forcible
appropriation of exclusive social and property rights, long afterwards their bloody and
coercive reflection in laws when usually only a tiny minority agrees and a great majority
is never asked, then again bloody contestation of such an agreement and then another
kind of agreement, another round of counteraction and so on and on and on up to the
modern days. Sometimes constitution may be almost perfect as a legal document and
what concerns guaranteed freedoms and liberty, but it never works in practice because it
is not based on social counteraction and does not reflect an existing in society balance of
power. Unfortunately words never cost anything in this world even the words of laws
and constitutions unless they are not supported by social counteraction of any property
rights imperfections. Those who have studied economies in transition, former communist
countries or who are dealing with underdeveloped countries, know well how almost
perfect words of liberty and freedom inscribed in constitutions do not work because they
are based on a very insignificant level of peoples counteraction to different types of
property rights imperfections.
What guarantees rather fair or less unfair societal system is certainly not constitutions or
any kinds of social agreements, but only the social counteraction to any property rights
imperfections. It is not the laws; it is peoples permanent resistance to social
monopolization and to any property rights imperfections for that matter what is
working. While laws and constitutions are usually written by wealthy appointees and
self-appointees, who quite often represent different kinds of non-socialized social
monopolies and whose interests at the same time are closely connected with an ultimate
source of power and coercion the State. Even so, laws still have to be respected as much
or rather as long as possible because there is no any guarantee whatsoever, that any
social revolt will not bring along even more disgusting forms of societal order and even
more injustice in society, not even mentioning unavoidable violence accompanying any
social insurrection.




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Chapter 11. State and Communism
Beginning, probably, from the late 1960th and up until today are quite popular the so-
called pragmatic views on social and economic development. Their basic idea is that we
must not argue too much about which social system or which social formation is better
and which one is worse because economic development and social evolution will anyway
put everything in its own place. The more efficient social systems will survive and
prosper while the less efficient will degrade and vanish. Such statement is quite in accord
with the maximum economic efficiency requirements, which basically foretell precisely
the same outcome. It could be absolutely correct and we certainly do not intend to
criticize those ideas here. However, there is no any single reason to believe or there are
no any proofs whatsoever that economic efficiency and Universal evolution is connected
exactly with mankind or precisely with our planet. Our planet is not of such a great
importance on the Universe scale. It can be destroyed in one way or another - by a
nuclear war, by extraterrestrial invasion or by any internal cataclysms - while economic
or energy efficiency trends will still work and the Reason will still govern the world and
the Universe.
36
If our planet will somehow disappear, universal evolution will hardly
ever notice it. Somewhere in the Universe might exist much more advanced and much
more economically and energy efficient planets. Our planet generally seems to be a rather
inefficient one with a lot of waste and with lent social and economic development. We
must not be hypnotized by our modest so far achievements. On the Universe scale we
scarcely know anything outside of our solar system and because of that we cannot even
discuss Universe properly from the scientific point of view, we can only build more or
less adequate hypothesis about it. We do not even know much about ourselves, our own
society. Our social or societal knowledge and our social self-recognition and self-
apprehension remain to be quite unsatisfactory more of criticizing and subjective
character rather than of the positive and objective one. Without at least some abstract or
philosophical understanding of society, nature and Universe and of their evolution we
are not only doomed to repeat our previous mistakes and to prolong inefficiency, but
much more important is that we are risking to completely destroy our planet in the
course of either internal or external violent competition.
Important thing about communism is that it has clearly demonstrated one alarming and
imperative trait related to society and property relations a possibility of the regress in
social and economic evolution not merely a disintegration and collapse of some
particular society, but a long-term regress of the system of property relations.
Furthermore, such kind of regress can be brought in forcibly as a result of mans planning
activity and through mans goal-oriented actions. October revolution in Russia in 1917
was largely an outcome of deeds undertaken by a very small group of individuals, who
quite ingeniously adopted themselves and their interests to political realities and societal
circumstances. Obviously there were a lot of other objective and subjective reasons and
preconditions for Russian revolution, but it certainly was not an evolutionary process, i.e.
a substitution of less efficient property relations with the more efficient ones. Even in
Marxists understanding of social evolution knowing now what it was all about - it



139
cannot be considered as an evolutionary step. There have been certain other (although
except for nazism in Germany not so illustrative) cases of regress in the system of
property and social relations and quite a majority of them happened in the twentieth
century, which suppose to be a century of the triumph of democracy. What is more, very
often those cases of social regress were emerging exactly within the representative
democracy (including nazi Germany). In their majority those cases were the products of
planned human actions based on some kind of emotional motivation and superficial
theoretical ideology. In their majority they were connected with the State oriented
ideologies including socialism, Marxism and Nazism. Isnt it a good reason to think a
little bit more theoretically about social processes and not to rely only on pragmatism and
experience? Otherwise one day we may awake in one big concentration camp and yell -
Look! Experience is showing us, that we really have had some problems with our
societal system or even worse than that - we might not have anymore a planet where to
awake. The problem with pragmatism is that if we all follow our interests as of today,
according to the present days societal balance of power we are very much going straight
to communism. We are already almost there according to share of State in our economy
and according to the level of State domination in our society. Such unpleasant and
probably also controversial conclusion is based on the simplest logical foundation. Under
the one man one vote there is no limit whatsoever for ever growing income
redistribution from richer people to the poorer (who are always in majority just like
always in majority are the people who would love to make a living on account of the
other people) and therefore no any limits for States social and economic domination in
society coming from enormous and ever growing amount of State managed financial
resources intended inclusively for income redistributions. Enormous inflating State,
overflowing from societal realities state regulation of economy and society and a
constantly shrinking share of private property (and consequentially a constantly
shrinking power of private individuals) is exactly what socialism is all about, while only
State and no private property is only a marginal evolutionary logical outcome of this
process.
We can identify three fundamental forms of conventional property rights dispersion in
relation to the State property. Those three forms according to a declining level of
property rights imperfections are communism, governmental monopoly or dictatorship
and State monopoly under representative democracy. Within each form, conventional
property rights dispersion varies significantly among different countries and among
different historical periods. State monopoly, however, exists at every historical stage and
in every social formation while governmental monopoly only under dictatorships
including communism. Severity of social monopolization and of the other types of
property rights imperfections under each of the three types of conventional property
rights dispersion is not only quantitatively differentiating one type from another but is
also having certain specific for every type qualitative characteristics and definitions.
Governmental monopoly is well known under the term dictatorship. Conventional
property rights dispersion or dispersion of real economic claims upon the State property
is a fundamental characteristics, which is differentiating State monopoly under



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representative democracy from governmental monopoly under dictatorship.
Communism can be separated into a specific case because not only it comprises
governmental monopoly, but is also assimilating into the State property and into the
State monopoly an entire economy and all the production factors. On the contrary to
other social formations based upon social monopolization of one single production
factor, communism, though being based on social monopolization of the State, is in fact
incorporating in itself social monopolization of all the other production factors as well.
Such statement of things is bringing along absolute restrictions for productive property
alternatives, absolute restrictions for competition and consequentially huge limitations of
personal freedom based upon unthinkable limitations of economic freedom. Share of the
State property in overall national property possessions is coming close to one hundred
percent including the entire property under all the production factors. Furthermore,
under such a strong and severe dictatorship as communism even entire personal or
non-productive property of particular individuals is subject to a significant State control
and various limitations. Access to any economic property within any production factor is
restricted for each and every private individual with an exception of communist party
leaders. Communism represents a unique social formation where there is only one type
of economic property the State property, and only one microeconomic and social
proprietor in the entire economy communist party chief (at most with few of his closest
and most influential associates). There is no any social property rights dispersion in
relation to any production factor, except may be for labor, though to a limited degree and
mainly at later stages of communism. Labor under communism is a separate case for
inquiry. Labor relations on account of exceptionally low substitution possibilities and of
direct coercion, sometimes and especially at the earlier stages, are very similar to slavery.
Generally, under communism people are allowed to own only one production factor
the labor, and even this kind of possession was more or less allowed only at the later
stages of communism after disappearance of concentration camps. At the initial stages,
people were absolutely literally under the slavery type of labor relations with rather
limited rights to choose or to change their line of occupation (especially for those in
concentration camps) and with all the corresponding applications in terms of social rights
violations and in terms of monopolistic income appropriation patterns of the top-level
State bureaucracy. Due to a severity of exclusive property rights or to a tremendous
strength of the State monopoly, under communism we have a unique price influence
situation related both to input (price of labor) and to output (price of goods and services)
side of the State monopoly. Even though, applications for appropriation of monopolistic
income by the top-level State bureaucracy on each side were different and had their
specifics.
Under communism, the phenomenon of State is finding its complete self-realization and
self-expression. From the point of view of property relations, communism is
characterized by an immense share (close to one hundred percent) of the State property
in overall combined property possessions of the entire nation and, first of all, in total
economic or productive property. Share of State property in overall national property
possessions is one of the main indicators imperative for evaluation of the role and



141
influence of the State upon economy and society. Such evaluation is basically our major
objective in this chapter and, first of all, from this point of view we are examining the
nature of communism. At the same time share of State property (income) in overall
national property (income) is not a single indicator, which has to be taken into
consideration in order to evaluate a level of State domination in society. Significantly
important is also a degree of social (based upon power and coercion) control over private
property, economy, society and private individuals realized by the State. Generally
speaking, the State control over economy and society can be expressed by three
fundamental criteria share of the State property in overall national property
possessions, share of State revenues (or of the State expenditures) in GDP and States
direct coercive regulatory control over private property, economy and society. Latter
criteria incorporates a large variety of actions and measures such as direct social control
through laws and regulations, indirect control through particular economic and social
incentives, macroeconomic regulation, taxation, social security regulation, labor
regulation, contracts enforcement, specific industrial and environment regulations,
sanitary and veterinary regulations, etc., etc., etc.
Diagram 6 is illustrating a correlation between State control over economy and society
and between various social theories and ideologies, which are trying to explain the
nature of State from one side, while from the other are trying to propose adequate social
and economic policies based on this explanation. Extreme outcomes are represented by
pure anarchism with close to zero percent share of the State in society and pure
communism with close to one hundred percent State control over economy and society.
We have to bear in mind that if we are talking about the share of State property in overall
national property possessions then one hundred percent outcome is hardly possible even
under communism. However, if we are thinking about the share of State property in
overall national economic or productive property such outcome is much more realistic
and was practically achieved under the communism in former Soviet Union. In any
event, all the inside figures on our scale - between zero and one hundred percent - are
certainly feasible and were materializing in different times and in different countries.
Outcomes close to zero percent represent what is generally known as a free market and
what we defined in this book as a society with a virtual lack of property rights
imperfections. On the other hand, outcomes close to one hundred percent are suggesting
a pure case of communism. In-between are positioned all kinds of economies and all
kinds of societies, which are reflecting social, economic and political ideals of various
schools of social science as well as those of correlated political parties conservative,
libertarian, liberal, socialist, national-socialist, communist, etc.






142

















Diagram 6. Social Theories Spectrum
Communism being evolutionary inferior is not emerging from the preceding structure of
society or from the preceding social formation naturally. Each and every time it
establishes itself relying exclusively on power and coercion including through
revolutions or foreign invasions. In every particular society there are usually very few
people who are willing to give away all their property possessions (whatever
insignificant they might be) in consequence of the introduction of communist economy.
Those are typically rather poor and uneducated parts of population with very limited or
close to zero quantitative amounts of property, which are hoping to gain from
communism more than they possess. We are not talking now about revolutionary
leaders, who are either motivated by personal ambitions or by potential perspectives of
property redistributions and income appropriations. Exactly on account of a relatively
small number of supporters, ideally communism in a premeditated way cannot be
established through parliamentary system under representative democracy and so far
can only materialize through the acts of external or internal violence and coercion. On the
contrary to various types of dictatorships, which are usually introduced by co-interested
individuals and social groups, communism so far was never established by the most
associated with the State monopoly social group State bureaucracy. Communism is
rather an artificial formation emerging exclusively owing to a misapprehension of the
nature of State as of production factor monopoly. All other dictatorships are normally
established with a direct participation of certain groups from within the State
bureaucracy, including military hierarchy. Communism, however, is not instituted in the
interests of ruling under preceding social formation social groups; rather vice a versa it is
destroying a previous type of State, old social formation and linked with them State
bureaucracy. Instead it creates a new bureaucracy, new State and new type of social
relations. Nevertheless, private property rights upon the State and associated model of
0% 100%

State control over economy and society
Social theories and ideologies
European
Christian
democracy
English speaking
countries
Conservatism
Classical
liberalism
Anarchism
Political Right
National-
Socialism
Socialism
Social-democracy
Communism
Political Left
Libertarianism
Modern
Liberalism



143
income distribution under any form of dictatorship generally and under communism in
particular are so simple and self-evident that they have to be thoroughly hidden under
the most emotional, extra moralistic and sometimes (particularly in the case of
communism) even under the highly theoretical social infrastructure in order to disallow
any rational grasp of reality. For some time it works, but an experience of the former
communist countries shows that not for long. If other social formations, such as slavery
or feudalism, have existed for hundreds of years, communism managed to stay intact for
only about seventy years. Although, there are several communist countries left even in
our days, the end of communism is already in the past. Other dictatorships in modern
history are usually unable to rely on such sophisticated theoretical, emotional and
moralistic infrastructure and they certainly do not possess a huge economic and social
power of the communist State. Their duration is much shorter.
Communism embraces quite a combination of both microeconomic and macroeconomic
inefficiencies, although when there is only one economic proprietor in society it is rather
difficult to differentiate between microeconomic and macroeconomic inefficiency. In case
of the State property both malfunctioning of the State as of economic agent
(microeconomic inefficiency) and associated with the State exclusive property rights
(macroeconomic inefficiency) are significantly interconnected and are very often
indistinguishable among themselves owing to the States single integral nature of
production factor monopoly. Because all productive or economic property belongs to one
single person or at most to a small group of his associates, State property under
communism transforms into a microeconomic commercial private property of the
communist party leader. There is only one employer, only one producer and only one
economic agent in the entire society. Every member of society at the end of the day is
nothing else but an employee of the communist party leader. Communist party leader
cannot simply hire those workers, peasants or engineers in a common market correlated
way. They might very much object and wonder why cannot they organize their own
business - alternative to the communist party leaders one or alternative to the State. In
order to suppress or to postpone such kind of objections people in power or the real State
proprietors have to accomplish two tasks. First and probably the most important they
have to propose some big idea or to sell some convincing ideology and to persuade
people to slave for one particular exclusive employer. Secondly they have to create
certain mechanisms for coercion of dissatisfied and for oppression of any opposite ideas.
Their ability and capacity to do both things will determine the duration of their private
property claims upon the State. It is difficult to say which one among these tasks is more
expensive, but we can easily imagine that taken together they are enormously costly for
the communist dictator and for the communist State especially under absolutely
inefficient and wasteful communist economy.
Communism represents a showcase of social monopolization. Everywhere we look there
are only monopolies. Entire spectrum of structural and production factor monopolies can
be clearly detected and identified within communist social formation including all kinds
of small, medium-size and large-scale vertical and horizontal monopolies. These



144
monopolies are organic parts of one genuine State monopoly on every production factor
and on every economic resource. In the most severe case of former Soviet Union there is
only one employer, one seller and one proprietor. Precisely the same outcome can be
observed in political, social, cultural, educational and in all other areas. All these factors
together attribute to the State an exclusive authority to absolutely uncontrollably
distribute or rather redistribute the entire national income, not to mention an exclusive
price influence power. It is exactly due to its nature of a huge, comprehensive and all-
embracing social monopoly communism is evidently the most inefficient and the most
unjustifiable kind of social construction.
Communism already (or may be rather so far) is a history. For the time being it is
profoundly defeated and will not be able to regain its ideological power or at least its
universal attraction in the nearest future. Communism perhaps vanished, but social
institution, which has created and benefited from communism, nazism and from any
other kind of dictatorship, is still alive and prospers not only in the least developed and
in former communist countries, but in the most economically advanced countries as well
and probably here even more and ever more. Primary and original source of all the
societal troubles of humanity is not the communism, nazism or any other dictatorial
regime for that matter. Those are only particular social derivatives of concrete underlying
the State non-socialized interests. While it is exactly the State itself what always tends to
bring various repulsive types of governance regime and deficient social formations.
Tremendous inefficiency and unprecedented injustice of communism stand precisely in
the enormous consolidation and enrichment of the State monopoly, in the extraordinary
enlargement of volume and share of the State property and in the colossal enhancement
of non-socialized State power. But the State generally and underlying it material interests
under communism are in no way any different from those under the most advanced
modern democracies. The difference is only in the level of social counteraction to power
of State, which has finally crystallized in the modern system of social and property
relations and in brought by it modern democratic institutions, whatever imperfect they
might be. All other types of dictatorships are less inefficient and less unfair than the
communism exactly because a role of the State and of the State property under those
dictatorships is less critical. On account of that, there exists, first of all, an economic
opposition to monopolistic State property and to non-socialized State interests, which
simultaneously and automatically generates social and political opposition to the State
generally.
During recent era of competition between the two opposite social systems or between the
two opposite systems of property relations, communism always supplied an awful and
frightening example of extreme State domination in society. Today communism vanished
and traditional capitalism seduced by the State domination transformed into some kind
of socialism. Without communism, people, especially young and especially in
economically developed countries, who have a very insignificant and indirect experience
of social, economic and political dictatorships are no more frightened and may be even
no more believe that their nice homemade welfare friend can be like that terrible monster



145
from grandfathers fairy tales. However, nature and interests underlying our welfare
friend are absolutely the same as under governance system of Stalins communism and
that of a Nazi Germany. Only more sophisticated peoples counteraction (which is
permanently diminishing under the pressure of socialist ideas), so far is not allowing the
State to establish its absolute and all-destroying social, economic and political
domination.



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Chapter 12. Capitalism, Socialism and State Monopoly
Definition and understanding of capitalism in modern social science, what concerns both
its nature and its historical time frame, seem to be not quite perfect. According to
conception of property rights imperfections, a social formation with the weakest in
history of mankind State monopoly presumably comprises a rather insignificant degree
of social monopolization. Indeed, capitalism in its pure form or more precisely social
formation based on absolute domination of non-monopolized private property or else
free market social system would be exactly a model of society with the lowest degree of
property rights imperfections. However, in its pure form, such model of society probably
has never been achieved so far. Such type of societal construction cannot even represent a
proper social formation since it does not contain any property rights imperfections and
therefore does not bear anything social in it. We already saw that certain types of social
monopolization have probably existed under the earlier stages of capitalism. However,
even these types of social monopolization being rather insignificant were not having any
substantial base in mechanisms of power and coercion and were not acquiring a
persistent character under the capitalist system of property relations. Therefore free
market societal construction in its pure form, which sometimes is associated with
capitalism, is characterized not by a particular type of exclusive property rights, but vice
a versa by the lack of any property rights imperfections. Such ideal or even idealistic type
of societal construction in reality is very difficult to achieve. Modern economically
developed countries after the World War II under enduring influence of different types
of socialist doctrines have significantly consolidated the State and State production factor
monopoly. Consolidation of the State as of production factor monopoly has escalated
property rights imperfections in society and simultaneously made to think about another
term for societal system prevalent in majority of modern economically developed
countries. Enforcement of the State monopoly, elevated income redistributions and high
level of sociality in modern society expressed by enormous interests and incomes
associated with social monopolization and first of all with the State as well as with
mechanisms of power and coercion have procreated a new kind of social formation,
which sometimes is called socialism. Though understanding of socialism in modern
social science and the one in Marxist tradition are rather different. From the point of view
of property relations, justification of the term socialism for present day societal
construction of economically developed countries is based exactly on a considerable
boom of sociality in modern society, i.e. on accelerated involvement in society of the
mechanisms of power and coercion. The latter involvement besides social
monopolization is also manifesting itself in property (income) redistributions, in
elevation of economic strength and of social (based upon mechanisms of power and
coercion) influence of the State monopoly as well as in mounting State interventions in
economy, society and private life of particular individuals (or otherwise in property
rights violations of social nature).
What in social science literature is commonly understood under the term capitalism, is
not entirely straightforward also in terms of its timing. From the point of view of



147
property relations, this terminology can only be applied to that period of capitalism in its
traditional understanding, which was connected with the social monopolization of
capital as of production factor. If such a period ever existed, it ended up completely with
massive State interventions in economy and society of 1920-1930th. Period of Grand
Cartels in late nineteenth and early twentieth centuries reveals probably the last attempt
to save exclusive property rights associated with capital. When this attempt failed, social
domination of the State as of production factor monopoly, which is characterizing the
entire modern system of social and property relations starting from 1920th, brought
something new in societal structure. Significantly weakened by that time, production
factor monopoly of capital (if it ever existed) has dissolved completely. Under the
capitalism an overall economic and social strength of the State monopoly, probably for
the first time in history, was temporarily (up until 1910th) in decline - at least in the most
advanced capitalist countries. However, after a while, a new type of production factor
monopoly the State one, and simultaneously a new type of social formation socialism,
have emerged and rather peacefully especially in comparison with other types of social
formations. From the point of view of property relations, new social formation comprised
a stronger and more powerful social monopoly comparatively with the monopoly of
capital. State monopoly started to expand its power right away, while production factor
monopoly of capital was permanently in decline. This new modern type of societal
construction must be identified and marked separately from capitalism. Term
socialism, besides pointing out a level of sociality in society, to certain extent is
logically approximating this new formation to the communism or to socialism of Soviet
style. According to Lenin - socialism is an initial stage of communism. This statement is
also having a somewhat rational reflection from the point of view of property relations
since socialism means more State, while communism - only State. On the other hand,
communism can be considered as a certain modification or sub-type of modern socialism
since both of them are based upon the production factor monopoly of State and both of
them exactly mean more State and more State domination in society. Term socialism
seems rather suitable for a social formation currently dominating the world and
particularly economically developed countries; moreover that it has already acquired
certain degree of popularity.
Idea of State interference in economy and society in modern history gains its popularity
and momentum predominantly starting from the 1930th together with introduction of
universal suffrage. Though, there are indications and researches, which demonstrate that
this process started even earlier than that and can be attributed to 1920th.
37
In 1920th a
general situation what concerns social and property relations was rather complex. From
one side, have existed leftovers of various structural capital monopolies with
concentrated property rights or mostly with private property rights. From the other side,
to some negligible extent, probably still existed odds and ends of the production factor
monopoly of capital. Finally, as a response to these two types of social monopolies or
rather to ideological call connected with their illusion, have emerged structural labor
monopolies in a form of various labor unions. Therefore, we are having at least three
types of social monopolies in this case and accordingly we have property rights



148
imperfections in society. Opposite sides of capital-labor conflict were eager to oppress
one another and basically considered their interests to be one hundred percent
contradictory. Owners of capital monopolies, both structural and production factor, were
eager to make the most in terms of accessible exclusive benefits by establishing
monopolistic prices of output in case of structural monopolies and monopolistic prices
for labor input in case of capital production factor monopoly. On the other hand, workers
in order to fight an appropriation by capitalists of what they considered to be a part of
their labor have united in different unions and thus created a social monopolization of
labor supply. There were basically two weak points what concerns free flow of
production resources. First, barriers have existed inside certain structurally monopolized
industries. Secondly, certain impediments for free production factors flows were arising
as a result of somewhat limited possibilities for economic flows from labor to capital or of
somewhat limited possibilities for workers to become entrepreneurs or capitalists and to
acquire productive or economic property. Both types of capital monopolies, however,
were significantly weakened by 1920th owing to accelerating social and economic access
for large masses of population to the capital as a production factor.
We will not go into analysis of causes and reasons of the Great Depression; there are a lot
of exceptionally comprehensive studies on that. Rather we will look at what happened
after the Great Depression and mostly as its direct consequence in terms of property
relations. Typical explanation of a long-term influence and of the profound effects of
Great Depression is that the price of labor as a result of labor supply monopolization by
labor unions and prices of certain products of structural monopolies were quite rigid and
failed to adjust to deteriorated demand. Apart from two clashed with one another social
groups - unionized workers and monopolistic proprietors the other groups of people
such as farmers and non-unionized workers have suffered from both monopolies. The
main consequence of this severe crisis is an extraordinary consolidation of the State as of
economic agent and of production factor, which in a little while is becoming to be a
gigantic production factor monopoly. Thus has been created quite a controversial
situation when one type of social monopoly is expected to counteract the other types of
monopolies both social and economic ones (antitrust regulation never does differentiate
between them). In either case, an amount of existing social monopolies accordingly
increased and reached a number of four.
All four monopolies were rather different both in their nature and in terms of the
concentration of property rights. Capital structural monopolies (or indeed by that time
rather oligopolies) were represented by economic agents with high concentration of
property rights and with mostly private proprietors. Capital production factor monopoly
at the time was already significantly socially dispersed and was at the stage of its
complete disintegration. After the World War I its strength is critically diminishing and
by now apparently it can be considered as completely dissolved, at least in modern
economically developed countries. Among the four types of social monopolies existed at
that time, production factor monopoly of capital seems to be the weakest. Labor supply
monopoly was represented by a row of structural monopolies with quite concentrated



149
economic property rights and with even less dispersed social property claims. Economic
property rights were considerably concentrated since informally labor unions were
controlled by a limited number of top executives. Social property claims were rather
concentrated since non-unionized labor often had a rather limited access to labor markets
especially in selected unionized industries owing to restrictions occurred as a result of
labor unions actions and policy. Today labor supply monopoly, though still exists, is far
from being as strong as it used to be. Its strength varies, of course, in different countries
and in different economic sectors. And finally, there is the State production factor
monopoly with formally dispersed, but in reality rather concentrated property rights and
with significantly concentrated social property claims. Generally speaking, modern
economically developed countries have outgrown to substantial degree by now a sharp
conflict between labor and capital described by Marx. Today, almost everybody can get a
bank loan, start his own business and become a capitalist in Marxist sense of the word.
On the other hand, in our days, significant part of population owns one or another kind
of productive or economic property including stock and other financial assets and
therefore those people are also capital proprietors in the Marxist sense. There is no such
clear division between capital and labor anymore as it used to be in the middle of 19th
century, when Marx proposed his principal social conclusions. Today taking into account
diversified capital markets, available bank loans, various grants and subsidies, relatively
accessible venture capital and other types of financing available to practically everybody,
production factor monopoly on capital hardly exists at all at least not in economically
developed countries. On the other hand, certain types of occupation being actually
somewhere in between labor and capital (such as for example engineer, lawyer, doctor,
actor etc.) in Marxist interpretation quite often are closer to understanding of business or
self-employment rather than to understanding of employee. Concentrating significant
amounts of initially invested capital, knowledge and practical skills, these types of
occupation are often providing incomes, which are much higher than those of small and
even of medium-size entrepreneurs.
In the beginning of 20th century a number of significant clashes between the State from
one side and capital structural monopolies from the other have taken place. Little by
little, structural monopolies were significantly weakened by three fundamental factors.
First of all, structural monopolies have diminished in number and were significantly
destroyed by social property rights dispersion and by a general social access to
monopolized property. On the other hand, growth of demand for capital and overall
process of incorporation were leading to conventional property rights dispersion and
have significantly reduced economic concentration of property rights. And finally, have
developed practices of physical liquidation of structural monopolies (both of social and
of economic ones) including also through application of antitrust policies. Final
liquidation of structural monopolies is a direct consequence of the process of social
counteraction - initially between structural monopolies and the people and afterwards
between structural monopolies and the State. Today we do not see any structural
monopolies with a profound social and economic influence. State, on the contrary,
established itself as a single giant monopolistic structure in the modern world. Since all



150
other monopolies by now are almost completely dissolved, today State is the strongest
social monopoly. More than that, it is incomparably more powerful than all other social
monopolies taken together and even much more affluent and powerful than all economic
agents taken together.

If monopolies are practically destroyed and markets are close to perfect competition, why
do we need a giant State monopoly, which every year is growing both in size and in
power? One would think that if the State will stop to interfere in society and will be
suppressed in its economic strength, it might loose its power and in this case the other
strong social monopolies might emerge. This is more or less rational perception from the
point of view of property relations as well as from the point of view of the balance of
power in society. Nonetheless, we must not forget that social monopolies are
materializing only with the support of State as of fundamental source of power and
coercion. The stronger is the State, the higher is the level of social monopolization and of
property rights imperfections in society. Economic monopolies, as we have seen,
generally must not be counteracted unless appearing attempts of their preservation at a
social level relying on mechanisms of power and coercion and, first of all, upon the
power of State. Since creation and maintenance of social monopolies can only be realized
at societal level and since the State is a final source of power and coercion, the emergence
of social monopolies is only possible either with direct or indirect (of particular civil
servant) participation of the State. On the other hand, as we know by now, it is not the
State but peoples counteraction to any exclusive rights and non-socialized privileges
what is eliminating social monopolies. Counteraction of social monopolies by the power
of State looks rather preposterous since initially they have to be created with the
participation of State and then the State suppose to fight them. First of all we have to
realize that State being ordinary economic agent or otherwise being conventional
commercial enterprise, which single purpose is to extract financial resources from the
people and to redistribute them to top-level State bureaucracy, with its incorporated
egocentric interests is never directly oriented either against any social monopolization or
even against any property rights violations. Those are the people who are making State to
do that through the process of social counteraction.
Ideological part of social infrastructure related to interventionist theories is ideally
suitable for the State in its struggle for societal domination with other social monopolies.
Monopoly elimination function or antitrust regulation is empowering State to fight any
monopoly and very often simply any inconvenient economic agent and private interest
with non-economic methods based on pure coercion. Growth boosting function is
providing the State with a possibility to repress any business organization economically
by tying it up to State procurement, orders, expenditures and regulation. Previously
advocated by social infrastructure, nationalization of strategically important industries in
a very recent past was supplying State with the power to destroy economic agents
directly through nationalization of any strong not subordinated to the State economic
interests or of any kind of economic opposition to the State. Income redistribution
function is granting to State an additional power to directly expropriate private financial



151
resources and consequentially to diminish a compound strength of all alternative private
interests taken together as well as strength of every one of them taken separately. Direct
regulation of business and economic activities is endowing State with even more elbow
space for companies oppression or sometimes, vice a versa, for their support and
artificial motivation in the interests of particular State officials or of particular State
regulation units. Philosophy and infrastructure of the State interventions is a precious gift
to the State bureaucracy from theorists and advocates of social welfare. Philosophy of
social welfare is exceptionally convenient for fighting any economic opposition to the
State, for escalation of States own non-socialized monopolistic power and for
disallowing any other powerful groups to control the State property. Any kind of social
monopoly, and the State one in particular, are very proficient in formation of specific
social infrastructure in order to prove and to emphasize their necessity, to justify their
existence and in order to hide a nature of underlying them material interests. We can be
sure that if one day State bureaucracy will recognize an absolute similarity of its interests
with communist ideology, people will be convinced to vote for a lawful introduction of
communism. We are already doing it step by step.
Twentieth century brought a number of remarkable paradoxes in economic development
and social evolution. From one side, it is a century of a widespread establishment and
affirmation of democracy especially in economically developed world. From the other
side, it is a century of peoples permanent loss to the State monopoly. Communism,
Nazism, State socialism, various dictatorships as well as colossal escalation of State social
domination and economic power are the negative results of our battle with the State.
Capitalism of 19th century was somehow in opposition to half-monarchial absolutist
governments, while social disagreement and inconsistency of interests between people
and the State associated with absolute or partly constitutional monarchies and with a
power of land aristocracy were quite evident. Capitalism of the 20th century, on the
contrary, was left alone with masses of relatively poor people, who assumed, that their
major enemy is wealthy individuals rather than the State. State did everything in its
power in order to preserve and to cultivate this opinion and in order to antagonize rich
and poor aiming at spreading its control over both. Today we might say that it has
overwhelmingly succeeded in this task.
Current stage of economic, technological and social progress as well as corresponding
evolutions in division of labor inevitably create preconditions for existence of a wider
range of economic monopolies or of businesses and occupations more or less exclusive in
their nature and in technical skills. Back in history, for example in the time of Adam
Smith, number of occupations and number of economic sectors were quite limited while
capital and labor were able to easily flow from one sector to another. Person could be a
baker today and a construction worker tomorrow without any serious re-qualification or
additional sophisticated education required. However, social evolution generally and
technological progress in particular are carrying a division of labor on such a height,
where practically every single qualification is more and more unique, while fewer and
fewer people possess necessary skills and knowledge in order to accomplish any



152
particular kind of job. The same is also relevant for capital and for the State. Technology
and technological investments have acquired the same degree of sophistication as labor
did. And if we are thinking about the State, it became so complicated and diverse, that
sometimes even for professionals it is very difficult to track all the aspects of an overall
governance mechanism. Today we are witnessing a much heavier accent on
specialization, which is leading us to more and more exclusive qualifications, with fewer
and fewer competitors on particular small niche markets and in particular lines of
occupation. There is a strong tendency of economic exclusivity or of economic
monopolization of skills and technology conveyed by specialization. On the other hand,
exclusivity is what technological progress is all about it would be no any inventions if
their proprietors cannot think about their exclusive utilization. The tendency of
exclusivity is appearing yet at the earliest stages of social history (for example, certain
shamans or special curing qualifications within primitive tribes). Then, it is constantly
evolving together with a specialization of labor, accelerating during industrial
revolutions and gaining its peak mainly starting from twentieth century. Emerging
qualifications are of more and more complicated nature and require either substantial
amount of knowledge, significant capital or sophisticated technology, or even more often
all these three factors in combination. In line with those developments fewer and fewer
competitors are remaining on particular markets as well as within particular
qualifications. In future, this tendency might accelerate even further along with scientific
and technological progress. This tendency is absolutely objective; complaining that it
poses a threat to competition will not reverse it. On the other hand, exclusivity appearing
in consequence of specialization does not represent a social type of monopolization and
therefore cannot be considered as property rights imperfections, even though any
economic monopoly might seek to support itself with social tools of power and coercion.
Trying to follow State intervention doctrines moreover does not seem to do any good,
because the State in its nature is merely another though outstandingly colossal and the
strongest social monopoly in modern world. Following interventionist doctrines we are
actually strengthening the larger social monopoly on account of smaller economic ones.
After the World War II the State monopoly worldwide barely started its way towards
real conventional property rights dispersion or towards democracy per se after
thousands of years of various dictatorships and cosmetic democracies. Even commonly
renowned ancient Roman democracy was not really a democracy in its nature. From the
point of view of slaves, it was a joint coercive force of the slave-owners directed towards
their oppression and enslavement. From the point of view of slaves, it rather represents
the most severe dictatorship in a form of ruling aristocracy (or simply more economically
dispersed type of dictatorship), which embraced all citizens of Rome. We are not even
mentioning here different social and economic limitations for conventional property
rights dispersion towards the State, which have existed and still exist throughout the
entire human history. Perfect competition, free market or laissez faire today or any time
before neither means a lot of buyers and a lot of sellers, nor does it necessarily eliminate
any price influence situation, nor even it implies a complete absence of any monopolies.
All these factors are only over-simplifications suitable for particular historical time



153
periods of one single fundamental criterion for laissez faire the lack of any property
rights imperfections in society.
In parallel with specialization has emerged and in our days is extensively accelerating a
relatively new type of competition - cross-industrial or cross-sector competition, which is
complementing a competition within particular industries or within particular economic
sectors. This new competition is a technological competition, which designs and invents
new technological processes instead of the old ones and which aiming at particular need
and satisfaction of particular demand rather than at manufacturing of specific products is
creating new solutions, new products and new processes. A simple example would be an
invention of aircraft. Before such invention the railway industry used to be a major
carrier. Then, as a new solution, came an airplane, being a strong outside competitor for
railways, which, however, is not in the railway business, but in transportation business.
This new type of competition is a competition of ideas on the contrary to an old
competition in organization, price and quality. It is introducing new solutions, new
products, new organization, new price and new quality simultaneously in one package
and on such a level that old technology, production methods and even old products are
becoming obsolete and non-competitive right away. It creates a new level of efficiency,
which is destroying traditional habits and understandings and which is redesigning
human life. Technological innovations consolidating economic competition as well as
untying and removing the very dependency of competition on a large number of
producers in particular economic sector are simultaneously destroying the entire variety
of arguments invented by social infrastructure in favor of the State interventions.
World in globalization is having one more chance in its struggle with different kinds of
social monopolization. With the globalization of markets and of economic processes,
multinational corporations do not look as immense as they do on national markets, while
a number of competitors is right away becoming significantly larger. On the other hand,
States and governments are loosing their overall economic and political influence. If they
are trying to apply exceptionally inefficient measures (simply inefficient are almost all
their measures) or particularly tight economic regulations, this is working less today than
it used to work before. With internationalization of labor, capital and technology,
economic agents are having a big global unregulated hole, where they can move their
operations fleeing to the countries, which offer more attractive comparative advantages.
This is stimulating economic competition between different States for attraction of
production factors and economic resources. From the point of view of top-level State
bureaucracy, such competition is a competition for more State revenues associated with
new residents and new businesses from one side, while from the other against
evaporation of social idealism or of social illusions of population as a result of fleeing
away businesses and industries and of consequential unemployment and decline in
personal incomes. Globalization in all probability will lead to one single huge world
economy without national states or at least without their present day significance at the
macroeconomic level. At certain point in time, however, globalization will most likely
generate instead some kind of economic and social governance at global macroeconomic



154
level. When this will come up, monopolization will critically escalate once again. If until
then we will somehow escape destruction of our civilization by modern socialism (which
is most unlikely), if mankind will not find trade partners somewhere outside our planet
and if human beings will not evolve into some other biological specie, we will be stuck
face to face with gigantic global State monopoly. For such order of global governance and
global economy to come it will not take centuries as it took mankind to approach the
gates of globalization. With technological developments skyrocketing, piling up, pushing
and pulling each other as well as with acceleration of global interdependence it will
probably take much shorter period of time.






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Notes

1
Franz Oppenheimer. The State
2
Ludwig Von Mises. Economic freedom and interventionism

3
Ludwig Von Mises. Economic freedom and interventionism

4
Ludwig Von Mises. Economic freedom and interventionism
5
Karl Marx. The Capital
6
Ludwig Von Mises. Economic freedom and interventionism
7
Karl Marx and Frederick Engels. Manifesto of the communist party
8
Proudhon. What is property? An inquiry into the principle of right and of government

9
Franz Oppenheimer. The State
10
Proudhon. What is property? An inquiry into the principle of right and of government
11
Murray N. Rothbard Egalitarianism as a Revolt Against Nature and Other Essays
12
All over Marxs and Engels writings, but most thoroughly explained in The Capital
13
Proudhon. What is property? An inquiry into the principle of right and of government
14
Franz Oppenheimer. The State
15
Vladimir Lenin. Imperialism, the highest stage of capitalism

16
Milton Friedman. Capital and Freedom.
17
Hegel. The philosophy of history
18
Fredrick Engels. Socialism: utopian and scientific
19
Karl Marx and Frederick Engels. Manifesto of the communist party

20
Karl Marx and Frederick Engels. Manifesto of the communist party. Preface to 1888 English
edition
21
Karl Marx. The Capital

22
Proudhon. What is property an inquiry into the principle of right and of government
23
Franz Oppenheimer. The State
24
Proudhon. What is property? An inquiry into the principle of right and of government
25
Proudhon. What is property? An inquiry into the principle of right and of government
26
Anthony de Jasay. The State
27
The history of all hitherto existing society is the history of class struggles. Karl Marx and
Frederick Engels. Manifesto of the communist party
28
Proudhon. What is property? An inquiry into the principle of right and of government
29
Proudhon. What is property? An inquiry into the principle of right and of government
30
Anthony de Jasay. The State
31
Ludwig Von Mises. Economic freedom and interventionism
32
Federal government management: Examining government performance as we near the next
century. Eighteenth report by the Committee on government reform and oversight. House
Report 104-861.
33
Leon Trotsky. Revolution Betrayed What is the Soviet Union and where is it going
34
J. Patrick Gunning. Understanding Democracy An Introduction to Public Choice
35
Albert J. Nock. Our Enemy, The State
36
We have next to notice the rise of this idea that Reason directs the World in connection
with a further application of it, well known to us, in the form, viz. of the religious truth, that
the world is not abandoned to chance and external contingent causes, but that a Providence
controls it. Hegel. The philosophy of history

37
Randall J. Holcombe. The growth of the federal government in the 1920s