Journal of Managerial Economics, Vol. 3, No. 1, pp. 12-28, February 2005
26 Pages Posted: 16 Mar 2004
Do Financial accounting practices as per the political setup and their administrative strategies, pose problems to the pace of Socio-economic development of any nation?
This paper addresses this question with a preview to the dawn of human civilizations on earth, and mathematically cumulating the thoughts of Socio-economic development in four facets from Individual to National level. The primary aspect of Socio-economic development, which needs to be measured correctly and monitored properly, is the status of prosperity and degree of progress of a nation. This is represented by the Gross domestic product (GDP), devoid of Foreign Assistance. Different Financial Management Techniques are used under the two divergent political setups, namely the Capitalism and the Communism, towards the assessment of GDP.
A Capitalist setup represents an approach to Socio-economic development through cumulating the contributions by the individual Corporate and Government units, towards a macro level GDP. A capitalist setup provides the freedom of corporate control under each individual entrepreneur or a corporate unit (I), under private or government control (G), to function as an autonomous body. These units could function towards their self goals, using the Return on Investment as their motivating guideline.
A communist setup represents a centralised approach to the macro level GDP through individual work contributions at micro level. Under this setup, the national demand is pre-assessed and fixed by the State. The factors and the facilities of production are provided by the State. The financial management is taken care by the State Bank. The individual households and the society is left only with the responsibility of converting the material resources into planned outputs at socially acceptable quality and economically justifiable costs, through efficient techno-commercial production techniques. Thus, a communist setup represents a centralised approach to macro level GDP through individual work contributions at micro level.
These financial overviews lead to the conclusion that irrespective of the political setup, the Socio-economic development is a Three Dimensional Closed Cycle Economic process. This process is a function of the optimum utilisation of Manpower, Materials and Techno-commercial infrastructure, in a preset Seven Sequential order. Of these, the Manpower is the Prime component. It should be supported by adequate Infrastructure Systems, and Performance Feed back. The Politico-Financial overview infers that the Cost and Quality of Domestic goods and services, decide the status of Socio-economic development. This directly depends upon the proper utilisation pattern of the three ingredients and the Productivity orientation of the Prime component (Manpower). A nation should select the appropriate political infrastructure, which will aid the faster achievement of the Cost reduction and Quality improvement objectives, and better adaptable to the local households, at any point of time. A forced or wrongly introduced political infrastructure is bound to destroy this objective, and introduce a negative dimension to the Pattern of Socio-economic development. The world experiences support the Closed Cycle Economic process.
Between 1760 and 1860 the British Empire pioneered their Socio-economic development, by practicing a Monarchical Capitalism, which had the characteristic similarities with Communism. The Ruler (King or Queen) represented the State. All the needs and welfare of the society was taken care by the Ruler. Individuals do not have any freedom or had no authority to participate in any decision process. The system took care of the needs and aspirations of the domestic Manpower in Britain, but not those in their colonies. The result was that Britain had to award independence to the colonies, one by one, and dilute the Monarchical Capitalism to Conservative Capitalism and Labour Capitalism, existing in the British Parliament today.
The United States of America in the West, reached a fully developed status in 1900, using a Capitalist approach. This approach continues as a Democratic Capitalism or the Republican Capitalism in the Federal Government, even in the current Millennium (2000s). It is not the simple Capitalist approach which motivates their forward progress, but their approach towards the Management and Control of the Prime component, namely the Manpower, with a progressive Research/Development in the area of Materials and Techno-commercial systems, in the Government sectors as well as among the private entrepreneurs.
Germany reached a developed status in 1910, as an unified nation, through a Mixed approach. But the World War 2, which ended in 1945, divided the Germany into 2, to practice Capitalism in the Western side and Communism in the Eastern side, on either side of the great wall of Berlin (13th August 1961). During late 1900s, the Communist Germany in the Eastern side dwindled down in the Socio-economic setup, broke the wall (9th November 1989), and merged with the Capitalist Germany in the Western side. East Germany was progressing well with Communist principles. But their development status continued from 1910 up to a point in 1989, till the needs and the aspirations of the Prime component, namely Manpower was satisfied to a Socially acceptable level.
Russia in the East reached a fully developed status in 1950, using the Communist approach. But in late 1900s (December 31, 1991), the Communist dominated largest continent USSR (Union of the Soviet Socialist Republics), dwindled into pieces of several smaller nations, each diluting their Communist principles (full State control), towards Private entrepreneur-ship as well as associations and collaborations with the Capitalist dominated Western USA. It is Communism which provided a push for the forward progress for Russia, and kept the great nation together. Their development status continued from 1950 upto a point, till the needs and the aspirations of the Prime component, namely Manpower was satisfied to a Socially acceptable level.
India was under British Rule from late 1800s till mid 1947 (August 15, 1947), and enjoyed the Developed Socio-economic status of their care taker (ruler), under a Monarchial Capitalism. But after independence, the united Manpower formed groups of individual characteristics and aspirations (Based on Religion & Cast, Rural & Urban, Labour & Capitalist, Agriculture & Industry, Poor & Rich etc.). The ruling Government also continues to support and encourages these group divisions even today, nearly 56 years after independence. These approaches have inducted a non-returnable trend to unite and meet the aspirations of all and divergent Prime Manpower component, without keeping pace in Cost-benefit approaches in the prime sectors (Food, Clothing and Housing), and a slow pace in Materials and Technological innovations, even though large sums are spent to reach an advanced growth level in elegant sectors (Atomic power, Space exploration etc.). With a high rate of population growth and majority below the poverty-line, India is dwindling between a Developing and Under-developed Socio-economic status, scuffing gradually towards Under-development. The Government from Village to Central level, the Political parties, the Corporate setup in private and government control, and all the individuals in India are providing full-scale incentives and support to this downward slide, by keeping their individual gains in a micro level as more important, than the macro level national development. Now, as a result, India has turned as a source to provide the top quality Prime component Manpower to all the developed nations, without any infrastructure to utilise them in-house effectively, inadequacy in all essential needs, and inefficiency/corruption in the government services.
In short, the development orientation of any nation is independent of the Politico-Financial setup, and could progress and upgrade themselves into a higher strata of Development either by a Capitalist or Communist approach. Hence, the nation should select the appropriate and simple political structure, and financial summary techniques, that will assist the evaluation and monitoring the three input components, and provide the development oriented feed back to the Prime component (Manpower), at any point of time. Finally, this approach is expected to bring the heavenly happiness down to the earth, to these nations.
(The matter is supported with 4 Creative and Comprehensive Schematic Diagrams summarising the Capitalist Financial Approach, Communist financial Approach, Closed Cycle Economics and the Productivity relationship of the Prime component Manpower, respectively in the Author's Website.)
Keywords: Accounting System, Communist, Capitalist, Financial Methods, Infrastructure, Manpower, Materials, Information Systems, Political, Techno-commercial
JEL Classification: A13, B41, E65, F43, J58, O23, P12, P21
Suggested Citation: Suggested Citation
Subramaniam, Viswanatha Sankara Rama, Socio-economic Development: A Politico - Financial Overview. Journal of Managerial Economics, Vol. 3, No. 1, pp. 12-28, February 2005. Available at SSRN: https://ssrn.com/abstract=508863