If the system of macroeconomic regulation is absent or underdeveloped[124] businessmen react to prices being formed on the markets by expanding and starting production of some products and removing production of other products. Accordingly if one considers the processes of production and distribution of products in the society during sufficiently long time periods the so-called «law of value» does regulate the inter-industry proportions and the absolute activities of production in each of the industries.
The market mechanism is capable of regulating many things if not everything in a society’s life. Yet the real freedom of private heterogeneous entrepreneurship under the fundamental economic law of capitalism — «get more profit right now!» — makes all of us face the question about the nature and quality of this regulation.
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During the epoch when macroeconomic regulation did not exist the «law of value» worked the following way. Bad harvest was a calamity: food is short, prices on food rise, curtailing the solvent demand in other industries and causing an outflow of workforce and ruin of producers. A rich harvest was equally a calamity: food is in affluence, prices fall to a level when producers of agricultural goods go broke. This leads to reduction of their share of solvent demand on other markets, a slump in production in other industries whose effort was on satisfying their needs. In historic reality it came to burning grain in furnaces simply to stop the price on it from falling. People utterly forgot about the past bad harvests and about the bad harvest that could yet come in future. A rush demand caused by real needs or by the whims of vogue leads to a rush raising of production capacity in the corresponding industries. Production capacities buildup requires time, and the rush demand could disappear while that time passes. Or the rush rising of production capacity could lead to the supply of the product on the market becoming superfluous in regard to the current needs of society or the solvent demand. This causes prices to fall below the level of production’s self-repayment and to the ruin of entrepreneurs who have invested wrongly.
This kind of mess is «natural» for the historically real capitalism with a free market that has formed on the basis of free private enterprise and free price formation in the sphere of production. Yet this capitalism comes with a special annex of free usury and stock-exchange speculations which the supranational bank corporation is engaged in. This corporation is capable of arranging a financial crisis on purpose and with a pre-planned timing in any country it controls using it as on of the means to achieve goals of a non-financial nature. This was exactly how financial and economic crises in pre-revolutionary Russia were provoked, this was how the «great depression» of 1929 was arranged in the USA spreading throughout the whole capitalist world of the time.
This was what capitalism was like until the mid 20th century. Its market mechanism — the free market — was viewed as a system of self-regulation of production and distribution (including self-regulation of inter-industry proportions) and taken at long historic time intervals. It can be characterized by the following features:
suppressing the potential of guaranteed satisfaction of the demographically grounded needs of all laborers due to its adjustment to satisfaction of degraded parasitic needs as priority, and first and foremost — to satisfaction of degraded parasitic needs of the ruling “elite” due to the way current incomes and savings were distributed within the society;
disrupting productive capacities due to the regulating process’s instability in regard to factors that are beyond the bounds of manufacturing processes and of real needs of people (influence of natural elements, financial and stock-exchange speculations and hysteria, fashion etc.);
disrupting productive capacities due to «overregulating» — redundantly strong reaction to quick changes in the solvent demand distribution among specialized markets of products and services caused by whatever reasons;
being almost completely incapable of reacting to avert an unwanted event in advance and predominantly reacting to events that have already taken place. Even if this does not lead to disrupting productive capacities it results in low efficiency of the production and distribution system measured against the criteria of speed of operation and volume of output and delivery.
The above-mentioned features are inherent to the free market as a system of self-regulation of production and distribution of products in the society and of self-regulation of productive capacities’ levels and inter-industry proportions.[125]
Besides, after a certain production achieves a level of capacity allowing satisfying the demographically grounded needs assuredly and in a short time period, the demand will drop to a minimal level determined by how quickly previously satisfied needs come back. The market mechanism will block the structural reorganization of the multiindustrial production and consumption system yet it encourages artificial stimulation of demand by means of lowering the ergonomic and resource characteristics of production.
On the scale of the society in general this is a macroeconomy directed towards getting lots of people involved into a fuss (vanity) that is detrimental for everyone and not towards satisfying people’s vital needs.
The people are forced to bog down in this vanity by the macroeconomic organization. Thus they waste their vigor and time on it without a chance to develop their personality. Such direction towards creating an artificial vane business has the following reasons:
the market mechanism does not «know» how to dispose of labor resources that are released in the course of technological and organizational progress;
professional politicians, people of culture see no other way of social development but to offer the people released from labor to ruin themselves and waste their spare time indulging in satisfying their passions and sensualities, mostly within the same range of degraded parasitic needs (booze, gambling and shows, «safe» and «non-conventional» sex etc.)
Therefore, the more freedom market gets in the society the further people are from fulfilling their human potential: at work a man is an appendage to his workplace and outside work he has either no strength left or he wastes his time for drowning himself in a sea of pleasures.
In the feudal era and in the earlier times of blunt slavery social life was placed within a pattern of classes and castes preventing money from acquiring that almost absolute power within society it has assumed in the capitalist era, especially in the «wild» capitalism of free market. In the pre-capitalist era this circumstance concealed and partially curbed the flawed nature the system of free market regulation of production and distribution of products had in the society where inhuman psychology, ethics and morals are dominant.
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But in the capitalist era it became evident to many that this system of production and distribution was flawed. That is why starting from the middle of the 19th century various measures were taken in different societies toward curbing its antihuman nature. These measures had and continue to have a broad range.
Among these measures are efforts to introduce the following:
progressive income tax;
progressive prices and charges — more like penalties — on consumption exceeding the limits set in legislature;
tax benefits for businessmen who spend their profits on funding charity foundations and programs of public consequence;