HOW DO YOU SLAY A DRAGON?

Peter the Great created centralised industry that was almost totally dependent on the state. The Bolsheviks carried this tendency to a logical conclusion, leaving standing only a state-planned economy. It’s not worth dwelling on the cost of this, nor the result. It was always a crude, harsh and uneconomic way of doing things, but it carried on working for centuries.

Why doesn’t this work now? Because when you have a society with a developed system of information, monopoly as the basic way of regulating the social sphere is outdated.

When all societal relationships have become much more complicated, and their success depends more and more on the actions of a solitary individual or small groups, it becomes virtually impossible to support the dynamic development of society by way of a monopoly. Russia has no choice but to move from a monopoly economy to a competitive economy. But doing this is no easy task.

The advantages of competition may not be very obvious, although it’s abundantly clear that competition beats monopoly. The experience of economic development in nearly all large economic systems shows this: USA, Russia, China. The death of the Soviet system is in many ways on the consciences of those who failed to recognise in time the fatal flaws of the monopoly. I would even dare to suggest that had the Soviet system evolved along the lines proposed by Alexander Shelepin and Alexei Kosygin, rather than that of Leonid Brezhnev and Mikhail Suslov, and had Kosygin’s reforms been carried out in full, then the end of the USSR might have been different.

But it’s less a question of what’s abundantly clear from experience, rather than the basic principle. Competition is simply a more efficient way of running any area of society. It’s very potential outweighs monopoly. Competition is an individual’s game, organised according to general and strictly observed rules. It encompasses both sides of the coin: there’s the players’ freedom of action, and their freedom to choose the direction in which they move, whilst at the same time having previously agreed rules that no individual can change or simply ignore. In other words, the main thing about competition is its rules which, by observing them, give each player a wide freedom of choice.

In monopoly, on the other hand, the main thing is orders. Under monopoly, only one player is free: the person who establishes both the rules and the direction of travel. It’s specifically because it encompasses the two elements – order and freedom of choice – that competition is more efficient than monopoly. Psychologically, it’s competition and not monopoly that suits man’s natural instincts more closely.

From this understanding of competition, it follows that its key features are the drawing up and then the observation of the rules. There can be no competition if “some are more equal than others”. But this isn’t enough.

There has to be equal and fair access to the process of creating the rules, because if they give someone an advantage then competition turns into the opposite of what it’s supposed to be: it becomes a hidden monopoly and leads to chaos. So genuine competition is possible only when there’s a developed civil society and a state governed by the rule of law. These things go together, rather like a “set menu”. If there is no constitutional state governed by the rule of law watching over the economy, then it will be impossible to build an economy based on the principles of competition.

And this is where we come to the most important point. There are countries like South Korea where a monopolistic private company that is under the control of a constitutional state works efficiently. There are countries like Switzerland or Norway, where state corporations controlled by a democratic state work very efficiently (just look at the Swiss railway system). But there are no countries where a state or a private monopoly that is controlled by an authoritarian and corrupt state works efficiently. A combination that starts out like this nearly always ends up like Venezuela.

Corrupt and unchanging authorities (a political monopoly) plus an economic monopoly is guaranteed to be a disaster.