Socioeconomic of the Middle Class: How to Balance the Socioeconomic System

By Prof. Leonid M. Polyakov PH.D.

The Middle class is the biggest and the most active part of an American society
(scientists, engineers, entrepreneurs, teachers, health care workers, etc.). Economist
and politicians are talking about the Middle class. But what is the Middle class?
These people pay the biggest part of federal, local, and other taxes. They live in
the very dynamic and not very friendly environment. Crisis hurts them stronger
than other social groups by unemployment, losing health care, shrinking retirement
benefi ts and so on. How to make their life more comfortable? How to protect them
from last and future crises? Who is to blame for and what to do? This book tries to
answer some of these questions.

• Language: English
• Publisher: Xlibris US
• Release date: Jan 31, 2009
• ISBN: 9781462828081

Prof. Leonid M. Polyakov PH.D.

Professor Leonid M. Polyakov is a member of the Computer Science and Math department faculty at Globe Institute of Technology (New York). He earned his Ph.D. in Electrical Engineering and Theory of Control Systems from Moscow Machine Tool Institute. He has written over 100 books and articles. He was principle designer Intelligent Control system of the machine-tool manufacturing company (Odessa, Ukraine). He was teaching Cybernetic and Intelligent Control systems at Odessa Polytechnic Institute and has intensive working experience with different American engineering companies. The most recently published book is “Psychology and Structural Design of Artificial Intelligent Systems. Introduction to Artificial Intelligent System’s Mind”

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Copyright © 2009 by Prof. Leonid M. Polyakov, PH.D.

ISBN:          Softcover                                 978-1-4363-9126-9

                    eBook                                     9781462828081

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Contents

PREFACE

PART 1

INTRODUCTION

THE STRUCTURED ANALYSIS

THE GOAL

CONSUMERISM

THE MIDDLE CLASS DEFINITION

BIG VS SMALL GOVERNMENT

CONCENTRATION OF WEALTH, AND POWER

SOCIAL VALUED LABOR

THE MARKET

THE STRUCTURE OF THE ECONOMIC SYSTEM

STOCK MARKET

INTELLECTUAL PROPERTY

DEFINITION OF FREEDOM

OWNERSHIP

WILLINGNESS TO ACCEPT RISK

PROPERTY TAX

EXPORT-IMPORT, TRADE DEFICITE

THE BANCROPTCY LAW

SOCIAL DIVERSITY

ILLEGAL IMMIGRATION

CONCLUSION

PART 2

INTRODUCTION

FAIRNESS

THE FAIR DEAL DEVELOPMENT

PROTECTION AND EMPOWERING OF PLAYERS AT THE MARKET

ORGANIZED PROTECTION OF INDIVIDUAL BUYERS AT THE CONSUMER MARKET

ORGANIZED PROTECTION OF INDIVIDUAL JOB SEEKERS AT THE JOB MARKET AND UNIONS

THE MATH MODEL

RECESSION AND DEPRESSION

CRISIS

WHO IS TO BLAME AND WHAT CAN BE DONE?

MINIMAL WAGE

THE DOLLAR’S VALUE

HEALTH CARE

SENIOR CITIZENS

EDUCATION

CHARITY

MONEY FLOW

GLOBAL MARKET

SUPPLY-SIDE VS KEYNESIAN POLICY

WORKING COMPENSATION OF MANAGMENT

CONTROL SYSTEM

EFFECT OF NEW TECHNOLOGY

COMPENSATION OF JOB WAS LOST TO AUTOMATION AND GLOBALISATION

THE BRIGHT SIDE OF THE STORY

CONCLUSION

GENERAL CONCLUSION

REFERENCES

To the memory of my Father, an engineer and philosopher, who taught me to think globally and my Mother who had very strong vision of my future that shaped my whole life.

. . . what

a nation’s wealth is, what segments it,

and how a country lives, and why

it needs no gold if a supply

of simple product supplements it . . . 

Adam Smith—Alexander Pushkin

Eugene Onegin

Production is a foundation of economy,

finance is derivative.

There is no substitute for the market mechanism—but the market mechanism has no brain, it has no heart. Without political programs it will inevitably breed inequality.

Paul A. Samuelson, Nobel Prize Winner

PREFACE

Only stable balanced society can achieve its goals. The founding-fathers understood this and created the system with balanced federal government, balanced power between federal and local (state) governments and balanced power between states. Unfortunately a society still face misbalance between power of money and administrative power of a government, between consumer power and production system power, between power of players on a job market, and so on. The Middle class needs to soften this misbalance as much as possible.

Balance and stability in a society can be achieved by fairness in relationships between parties and the right control of the socioeconomic processes. It is very important to remember that point of stability and balance does not have constant economic coordinates. Searching for this point and keep the system around is responsibility of the dynamic control system.

The Middle class is the biggest and the most active part of an American society (scientists, engineers, entrepreneurs, teachers, health care workers, etc.). Economist and politicians are talking about the Middle class. But what is the Middle class? These people pay the biggest part of federal, local, and other taxes. They live in the very dynamic and not very friendly environment. Crisis hurts them stronger than other social groups by unemployment, losing health care, shrinking retirement benefits and so on. How to make their life more comfortable? How to protect them from last and future crises? Who is to blame for and what to do? This book tries to answer some of these questions.

The socioeconomics is not just exercises for a brain. It is not the instruction how to make money. It is search for the stable, healthy, and wealthy society with better life of ordinary people. It is not socialism, it is not capitalism, it is reasonable system—reasonism. This search is impossible without understanding meaning of words: better life.

Some ideas presented below are not new, but if you repeat something useful many times there is the chance that it became power for change even if right now people responsible for economic development are opposed to these changes. Usually people are not ready to make any changes. Some possible solutions of the problem can generate strong opposition, but it can be the platform for discussion.

When I started this book I did not have my own opinion about many things such as the right size of the government and other. I just wanted to find out the truth by following the simple logic. I did not know where I will end up. GENERAL CONCLUSION (p. 174) presents results of my thinking.

Maybe the reader will find logical missteps or wrong presumptions in my thinking. I would be happy to discuss this. I wrote this book to sort out my own thinking. Some reader can tell that ideas presented in this book are artificial. But all society systems are created by people as artificial systems.

PART 1

SOCIOECONOMIC PROBLEMS OF THE MIDDLE CLASS

INTRODUCTION

Economic is the goal driven system that assumes existence of control process. It consists of two types of subsystems:

• production sub systems

• distribution sub systems.

Stability and balance of this system are defined features. It is important to keep the system out of problems that can throw it into disarray. Existing social and economic problems such as unemployment, health care, shrinking retirement benefits and so on can create serious tension and need serious solution. It can be done by up-down reforms or by pressure from bottom up. Unfortunately American’s establishment does not pay too much attention to these problems. It is reason why Nobel Prize winner Paul A. Samuelson said: don’t follow all the American examples—that will fire up only thing for sure: people’s anger [19].

The Middle class is the biggest part of an American society. Economist and politicians are talking about the Middle class. But what is the Middle class? We don’t have acceptable definition. It means we don’t know what we are talking about. All concepts presented in this book are based on proposed definition of the Middle class. Without definition all discussions about the Middle class don’t make sense.

There are many socioeconomic institutions that define life of people: a government, a market, the financial institutions, systems of production, and so on. Fair and balance relationships between these institutions and average people are essential conditions of the healthy society.

THE STRUCTURED ANALYSIS

The socioeconomic system is the complex system. Complexity is determined by a number of variables (V), modules (M), and their relationships (r) in the object structure:

C = F(V, M, r).

Space of variables can be presented as a multilevel tree structure [16].

Decomposition is the method to decrease complexity by which one divides natural phenomena into their constituent parts, and those parts into subparts and so forth. Decomposition is disintegration, replacement of a whole system by their parts. It is based on fractional as fundamental law of nature.

Simplification is the most important way to learn about the world. Strip off unimportant details to highlight the general trend. It is better to find way out between trees than get lost between branches. It is true that devil is in details. Try to get rid of devil. Later you will correct your solution by looking for details. Alexander the Great has become famous person because he has cut the bundle instead of unbind it. Decrease of a problem complexity permits to solve the problem especially in the limited frame of real time. In many cases complex decision cannot be made without simplification. It is better to have the simplified model then have no model at all.

The best way to find efficient solution of the problem is to analysis the whole structure. Maybe it is better to invest in the crime free zone (upper level of a structure) instead of wasting money to buy the expensive locks for each house (low level of a structure). Analysis of the transportation system structure can show that it is better to develop the public transportation instead of new highways and making more cares. Today’s financial crises cannot be fixed by small corrections in Wall Street regulations. Only analysis of the whole economic structure based on understanding of the system’s goal can help to solve this problem for long run.

Discussion of supply-side, monetary theory and other economic theories usually is going without connection to the structure and the goal of a society. Otherwise opponents would realize that solution is in the middle or combination of these approaches.

THE GOAL

All social sciences (psychology, cognitive sciences, and evolution) present duality of the human being as:

• Social creature

• Individualist.

As the social creature a human being is interested in the stable friendly environment. As the individualist he/she is interested in his/her personal position inside of this environment. Each human being and a society as whole are the battlefield between individuals and social human nature (for more or less of individual freedom). Achievement of the first goal (stable environment) is possible through compromise between different social groups within a society. Achievement of the second goal (a personal position) is possible by personal soft aggressive behavior inside of a society. The socioeconomic system reflects this duality and cannot be strictly individual or social. Critical deviation of the system’s parameters from the stability area creates a situation of crises. This area can be design by qualified scientific institutions. Government’s responsibility is to keep process in the limits of this area.

Economic is the social activities that deal with the production, distribution, and consumption of goods and services. The economic system consists of individuals, groups, business enterprises, and a government that seek to achieve of economic objectives they selected. A government’s goal is: direct individual module’s goals to