Social and economic background of a confrontation as escalation of contemporary contradictions

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Social and economic background of a confrontation as escalation of contemporary contradictions

А.А. Hrytsenko

O.А. Hrytsenko

Problem setting. Uncertainty and the contradiction of development are inherent to the modern world. Confrontation is one of social forms of controversy escalation. In general, a contradiction is a source of any movement and evolvement. Therefore, disruption of mechanisms for resolving social and economic contradictions underlies confrontation as a social phenomenon. Capital accumulation is the basis for economic development in the market system. This term consists in transformation of various production factors into capital, i.e. bearers of the value being able to create added value in different forms such as profit, interest income, rent, etc. That is to say, accumulation in the market economy is capitalization of production factors. This process encompasses primitive accumulation as well as accumulation in the process of reproduction of capital. The difference is that primitive accumulation transforms those factors into capital, which have not been involved in the process of capitalist production. At the same time, accumulation in the process of reproduction of capital transforms added value, which has been created in the process of capitalist production, into new capital. This is a process of capitalization of added value. There is an internal contradiction of capital accumulation, which continuously develops. An influence As a result, it transforms into confrontation of subjects involved in a process of capital accumulation.

Analysis of recent research and publications. A problem of confrontation is mainly subject to research of social and political or social and psychological sciences (Siuriupa, 2004; Borysov, 2016; Vynoslavska, 2016). They are concerned with search for sources of confrontation and ways of effective resolving a conflict on the level of social and political contradictions. Simultaneously, basic reasons are in the very economic relations, examination of which needs peculiar methodology of cognition.

Paper objective. A purpose of the article is to search backgrounds of social and economic confrontation on the level of capital accumulation as the basis of functioning of the market economy.

The main material presentation. In the process of production, capital falls into two different functional and structural forms: capital as a means and capital as a subject. Capital as a means is the value embodied in tangible means of production, technologies, objectified knowledge, institutional and other production conditions. Capital as a subject is the value embodied in a person being a participant of a production process. Capital as a subject is the value embodies in a person being a participator of a production process. This structural and functional division of capital differs from division of capital into constant and variable (according to a criterion of participation in creation of the value), fixed and circulating (according to a criterion of participation in each cycle of production), human and material (by a form of embodiment), and indication of other forms of capital (social, intellectual, institutional, organizational, et al.). At the same time, it include all existing types of capital because there is no capital, which may not be used as a means of production (otherwise, it would not be capital) and may not be embodied in a subject of production. The very division into capital as a means and capital as a subject enables to ascertain peculiarities of reproduction of these types in the process of capital accumulation under contemporary conditions.

Division of added value into capital as a means and capital as a subject in a certain proportion occurs in the process of extended reproduction and evolvement of production. The proportion between the value embodied in capital as a means and the value embodied in capital as a subject will be called capital structure in the context of subjects and means. This concept differs from the known classic concept of capital structure (the proportion between constant and variable capital stipulated by its technical structure and its changes) (Lisovytskyi, 2004) because its components are identified according to other principle (capital as a means may comprise elements, which are not included in constant capital, e.g. such intangible asset as a trademark).

Growth of the capital structure in the context of subjects and means is controversial. Such growth is a regularity of capital accumulation. Owing to the technical, technological, organizational, institutional, and knowledge progress, the value of capital as a means permanently increases. The value of capital as a subject increases at a lower rate or even remains almost constant. Since the value of capital as a subject in a reproduction process is appropriated by employees and the value of capital as a means is belonged to capitalists, a gap between incomes and wealth of employees and capitalists rises. In addition, a process of capital accumulation accompanied by growth of its structure in the context of subjects and means in each new cycle of reproduction involves a relatively less share of employees. Such process is a factor of the increase of unemployment, which, for its part, negatively influences a level of employees' incomes. Thus, the main contradiction of capital accumulation constitutes the regular increase of a gap between capital as a means and capital as a subject. In the social sphere, such process results in the increase of a gap between incomes and wealth of owners of capital as a means and owners of capital as a subject. Nowadays, the eight richest persons in the world are estimated to possess wealth that equal to wealth of 3.6 billion of persons. 1 % of the richest persons own approximately 50% of the world's wealth. Simultaneously, the population living in poverty owns only 0.16% of the world's wealth (Eksperty vyyavili rekordnyy razryv mezhdu bogatymi i bednymi v mire, 2017).

This basic contradiction is affected by a set of factors that strengthen or weaken it. Financization of the economy is one of the most influential modern factors. It consists in transformation of finances from an instrument mediating real economic processes into an instrument being the basis of economic processes. Nowadays, financial capital transforms from a mediator of a flow of productive capital into the basis of productive capital, similar to money that has only mediated exchange of goods in simple commodity production, but has not been the basis of this production (commodity - money - commodity) and has transformed from a mediator to the basis (money - commodity - additional money). This fact allows scientists to state that «modern economics is first of all financial market economics» (Biukenen, 2004). Detachment of financial capital from the real economy and its comprehensive growth are preconditions of the above-mentioned process. The value of all securities is ten times higher than the real GDP, whereas in 1980 the world financial assets were 1.2 times higher than the real GDP (Rayh, 2012).

Financization together with globalization forms mechanisms of redistribution and concentration of the value by a sovereign owner, i.e. an owner, who performs a function of targeting and makes strategic decisions in contrast to a formal owner. An owner of car dealership of a certain brand is a formal owner rather than sovereign one because he depends on owners (mainly, transnational corporations), who vendors automobiles. However, the firm's owner is a sovereign owner in the sense that he may change a sphere of capital investing or leave a business. Nevertheless, that is another relation compared to those, where he operates as an owner of car leadership. Global financial mechanisms enable transnational companies to appropriate added value regardless of a part of the financial and economic space, where it has been earned. Such peculiarity enforces the general law of capitalist accumulation and shapes it at the global level.

The law of value of labor power is another important factor providing capital accumulation. The value of labor power is determined by the value of means needed for normal reproduction of labor force, taking into account historical, cultural, institutional, and other factors. Wage of employees may not significantly exceed the value of labor force. Otherwise, its owner may cease to be an employee and will become a rentier, capitalist, etc. (obviously, it is impossible because such process undermines the very basis of capitalist production). For instance, if an employee received annual wage being 12 times higher than monthly wage, he would lose momentum to work on a daily basis. These circumstances explain a phenomenon of freezing real wage in the USA. In «Les Trente Glorieuses», the middle class, revenues of which conformed to the real value of labor force, emerged in the USA. Further growth of real salary would mean deviation of salary from the value of labor force towards an increase. In addition, such growth would reduce the potential of capital. Therefore, mechanisms of competition maintain real salary at a level of the value of labor force, which has formed in the USA by the middle of the 1970^s of the 20^th century. Since the 1980s, real salary in the USA has insignificantly changed or remained the same despite the growth of labor productivity (Yeshchenko, & Samko, 2016). Considerable contradictions are resolved owing to formation of links that combine opposites and mediate their movement. For example, contradictions between the value and consumption value of a commodity are resolved through emergence of money that embodies the value as one of the opposites. In turn, the value deals with a commodity as embodiment of the consumption value. In addition, the value mediates a commodity flow. Contradictions between a man and a woman are resolved through a marriage and childbearing, which mediate generation change.

A policy of economic growth and a policy of employment, which are closely related, are the most important forms of movement and resolving contradictions of capital accumulation. The policy of economic growth enables to increase an amount of capital and thus to compensate the decrease of a share of capital as a subject. The policy of employment aims at job creation. The interdependence of these policies is complicated. Under conditions of the unchangeable capital structure in the context of subjects and means, the policy of economic growth consists in job creation. Simultaneously, providing growth through reconstruction in terms of the increase of a figure of the capital structure in the context of subjects and means in a short-term period leads to job cuts and the unemployment increase. On the other hand, the policy of employment may result in the economic growth or restrain the growth if there is unproductive labor force.

The noticed processes are based on properties that stipulate an effect of derivative processes and factors, diversity of forms for resolving contradictions of capital accumulation. Labor unions, trade unions, tripartism, conceptions of human relations, charity, strikes, emigration and immigration processes are forms of resolving contradictions concerned with capital accumulation. They may be directly oriented towards resolving other problems. Nevertheless, these problems are only a form of manifestation of the basic contradiction concerned with capital accumulation.

Confrontation as a form of escalation of social contradictions emerges, when current mechanisms for resolving contradictions do not work and, as a result, opposites counter each other disrupting the normal course of social and economic development. The very confrontation is one of forms of search for methods of resolving dramatic contradictions in this regard. There are two principally different solutions for this situation: a) suppressing the opposite through violent means (for example, actions of M. Thatcher against demonstrating miners in 1984-1985); b) a compromise. The first method is not a real form of resolving contradictions. It only destroys their confrontational form in case of success and transforms a conflict into an extreme form (and even armed one) in case of failure. The compromise is a normal method of resolving contradictions, which have become too confrontational. Therefore, search for compromises should be considered as a new way of overcoming confrontation.

All these peculiarities are fully inherent to Ukraine. However, a number of circumstances compound the situation in Ukraine because primitive accumulation of capital has occurred in accordance to the inverse model rather than classic one. The inverse model is based on the change of the natural order of market relation development. Under classic conditions, development of industrial capital, where industry is the technical basis of capital, has occurred gradually in the form of a paradigm that has extended, encompassing more economic space and creating own conditions of functioning, an own market, own infrastructure, etc. The classic model contemplates undertaking a transition from small property to greater one, from free competition to emergence of various market structures, from free pricing to inclusion of mechanisms of government regulation.

The inverse model of market transformation consists in undertaking a transition in the opposite direction: from public property to formation of basics of private entrepreneurship; from government monopoly to development of competition frameworks; from planned to free pricing. Obviously, the sense of transformational processes was another compared to the classic model. Ukraine was enough developed industrial country prior to the process of primitive accumulation of capital. Therefore, a process of emergence and accumulation of private capital has been undertaken through distribution and redistribution of already existing objects of ownership rather than in a real economic reproduction process, which forms and effective owner.

Privatization and inflation have become the two main forms of primitive accumulation of capital in Ukraine. The former has created a formal opportunity of private enrichment and the latter has opened channels of implicit redistribution of welfare. Simultaneously, they exempt employees from «extra» property and allow the others to concentrate a considerable part of public wealth in their hands.

Such process of private property formation brings a whole other institutional figure of an owner to center stage. This owner aims at multiplication of welfare through financial mechanisms of asset redistribution rather than at formation of new value in a real production process. Thus, it turned out that enterprises privatized in Ukraine did not become more effective compared to public ones (respective research has been conducted in Institute of Economy and Prognostication of the NAS of Ukraine). The very owners tend to consume «demonstratively» as described in «The Theory of Leisure Class: An Economic Study of Institutions» of T. Veblen (Veblen, 1984). For some years, Ukraine has had the highest rate of import of expensive automobiles and remained relatively enough poor country. There is a social and genetic type of an owner, who aims at enrichment through financial and distributive methods, possesses unique experience, and has achieved political power used as a means of enrichment in Ukraine. Obviously, not only such owners have formed in Ukraine. Nevertheless, they have obtained almost monopolistic economic and political power and cannot abandon ways of enrichment that have provided them with wealth and power.

Simultaneously, a considerable share of the population have not gained particular benefits and even have worsened own position due to primitive accumulation of capital in the inverse market transformation. Small and medium-sized businesses have faced very complicated conditions of survival and development. This fact stipulates the social and economic background for confrontation of the society and power. Due to insufficient development of civilian structures and institutional forms of providing social balances, the society has not been able to advance their interests in non-conflict forms. As a result, contradictions were reflected in confrontational forms of Ukrainian's two Maidans, which, however, did not resolve the contradictions, but rather worsened the situations. The last took the confrontation form at the expense of activation and a negative synergetic effect of interaction of a number of social and economic, civilizational and historical, external political, cultural and spiritual, regional and unitary, metal and behavioral contradictions.

Hence, primitive accumulation of capital in the process of inverse market transformation has not transformed into accumulation of capital on the reproduction and production basis across the economy (the current GDP is lower than the rate of 1990). It has resulted in significant social stratification, escalation of all the social and economic contradictions, and confrontation between the insufficiently organized society and power. The society has not acknowledged results of market transformation, privatization, and capital accumulation as legitimate. The power is not able to offer an appropriate compromise to the society. The society is destined to the confrontational form of interaction between the society and power until institutions find a way for legitimization of results of primitive accumulation of capital.

There are a number of principally important peculiarities of capital accumulation in Ukraine, which extend social and economic frameworks of confrontation. Formation of the destructive basis of economic growth is one of such peculiarities.

Countries, which have accumulated capital according to the classic model, had formed an enough balanced internal market. Then, capital accumulation has exceeded scopes of an internal market and required external expansion. In such case, development of international division of labor enabled to indicate national advantages and conduced to fulfillment of the economic potential.

Unlike the mentioned countries, Ukraine has adapted to various fragments of the world economy as a supplier of raw materials due to combining of the inverse market transformation and globalization processes based on market principles. Simultaneously, the government had not solved a problem of formation of a developed and balanced internal market, internal demand and supply. As a result, internal demand has been restricted at the expense of underdevelopment of enterprises oriented towards the internal market and low incomes of the employed population and distorted at the expense of an excessively high part of «demonstrative» demand of a low number of rich persons. In such case, economic growth has led to strengthening of structural disproportion through the increase of a share of export- oriented commodity production. Such economic growth, on its own, gradually creates basics for a profound crisis, which becomes inevitable. Recent events in Ukraine illustrate the above-mentioned statements.

In addition, such situation leads to excessive vulnerability to external demand and undermining economic sovereignty of the country. This contradiction manifests in the social sphere: it encourage confrontation between export-oriented part of the economic elite and representatives of nationally directed capital, between liberals supporting unlimited free trade and protectors of the internal market. Obviously, such collision is not peculiar only to Ukraine. For instance, the victory of D. Trump in the US presidential elections was stipulated by the very public discontent concerned with a policy of free trade, which had led to job loss and, according to J. Fox, undermined the production fundament of the USA and economic security of Americans (Faux, 2016). In Ukraine, consequences of an inadequate economic policy are more disruptive and a confrontation is sharper because of a low level of development, a high share of indigent persons, and a significant income gap.

Conclusions. Consequently, contradictions being inherent to capital accumulation under condition of the inverse market transformation combined with globalization processes are the main factors determining social and economic backgrounds for a confrontation in Ukraine. These basic contradictions fall into a number of derivative contradictions, controversies, and conflicts and form the general confrontational scope. The most important forms of elimination of contradicting parties, which are considered to be relevant and urgent issues, are as follows: unemployment; a low rate of salary; inadequate mechanisms of social insurance and retirement pay; degradation of villages; disproportions in the spatial development of regions and cities; social stratification; grey economy; corruption; demographic disproportions.

Search of methods and forms, which are adequate to the economic position of Ukraine, for resolving of contradictions related to capital accumulation through redeployment from the distribution sphere to the sphere of a real process of extended reproduction accompanied by corresponding corrections of economic and social proportions through achievement of a compromise between the civil society, business, and power is a cardinal way for elimination of the social and economic background of a confrontation.

References

confrontation contradiction market economy

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