I. Historical experience 
Brief gradation of cybernetics systems 
Intermediate summary 

II. The leaders 
Lenin, Stalin, Hitler 

III. The Democracy 
The term «democracy» definition 
Do we have the Democracy? 
What type of a model our life is ruled? 

IV. The perfect model. 
Common conception 
Reasons for changing the governing model 
What kind of model it has to be? 
Technology of model designing 
How it works 
Organized crime 
Conception advantages 



«Perhaps no more daring experiment has been 
tried on a large scale upon the face of the Earth 
than that embodied in Ottoman- Ruling Institution.»
(Arnold J. Toynbee «A study of history»). 

Try to picture a long, up to the horizon, procession of captured German troops, who wander on the snowy Stalingrad roads in 1943. Now visualize what would have happened if these pitiful, blackened from the hunger and cold, broken soldiers Russia had assigned to the leading positions in the government institutions. However, it have happened already once. In the Ottoman Empire of sixteen century was deliberate recruiting of slaves and turning them into ministers of State. Recruits from beyond the Ottoman frontiers were obtained either by capture in war or by purchase in slave markets, or by gifts of previous owners, or by voluntary enlistment to the Ottoman Ruling Institution. With certain exception, the Ruling Institution constituted the Government of the Ottoman Empire. They considered the guidance of the educational system, the management of the army of the empire, the conduct of a local government, the oversight of the household, the care of sultan gardens, pastures and forests, the regulation of ceremonies at his court… They advanced slaves gradually. Taking account of their services, their courage, and their merit. Thus a slave who had just been purchased serves for one year on foot. Clothed in a cotton tunic, he walked beside the strip of his chief; they did not have him mount on a horseback, either in public or in private, and he would be punished if it were learned that he had done so. When his first year of service was ended, the head of the chamber informed the chamberlain, and the latter gave the slave a Turkish horse that had only a rope in its mouse, a bridle and a halter in one. When he had served one year on horseback, whip in his hand, he was given a leather girth to put on a horseback, whip in his hand; he was given a leathern girth to put on the horse. The fifth year they gave him a better saddle, a bridle ornamented with stars, a tunic of cotton mixed with silk, and a mace, which he suspended by a ring from his saddle-bow. In the sixth year he received a garment of a more splendid color; and in the seventh year, they gave him a tent held up by a pole and fixed by sixteen pegs: he had three slaves in his suite, and he was with the title of a head of chamber. He wore on his head a hat of black felt embroidered with silver and he was clothed in a silk robe. Every year his position was advanced… This man wields the sword, the pen, and scepter.
The most vital and characteristic features of Ruling institution were, first, that its personnel consisted, with exceptions, of men born of Christian parents: and, second, that almost every member of the Institution came into it as the sultan’s slave, and remained the sultan’s slave throughout life no matter to what height of wealth, power, and greatness he might attain. They were never allowed to forget the responsibilities of their condition. They must to the end of their days go where the sultan chose to send them, obey his slightest wish, submit to disgrace as readily as to promotion, and, though in the highest office of state, they must accept death by his order from the hands of their humblest fellow-slaves. If one of them was executed, all his property went to his master [4]. 
Christian parents often were against recruiting. The grief of parting was heart breaking. The mother whose son was taken by forth to unknown life among enemies of all that she had been taught to hold dear would hardly have suffered more at the death of her son. On the contrary, many parents were glad to have their sons chosen, knowing that they would thus escapee from grinding poverty, receive a first rate training suited to their abilities, and enter upon the possibility of a great career. Some parents in fact, came to regard the process as a privilege rather than a burden; and they had reason to do so, since Turkish parents envied them the opportunity, and sometimes tried to evade the regulations by paying Christians to take their Moslem sons, and declare them as Christian children, so that they might be enrolled as the sultan’s slaves.
Cannot restrict myself from pointing to the following fact: in the Soviet Russia there was buying Jewish passports for thousands dollars, because to become a Jew was the only legal way for immigration.
Sultan created cruel, but effective system with very strong positive and negative stimulation. Positive - you received the possibility, in case of good, honest work, to rise on top of society. Negative - you received the possibility to loose your head for bribes or other misbehavior. This approach eliminated corruption, nepotism and other harmful influence of family connections, which significantly improved governing model and made it possible to develop Turkey with temps much higher then any other country at the same historic period of time.
The similar motivation for good work was in Russian «Sharashka» - special prison institution with unusual prisoners. Each prisoner was a scientist. Their work – scientific researches. For positive results they received freedom, apartments in Moscow, car, 100,000 rubles Stalin’s award, otherwise they would spend behind the bars the rest of their lives. Through this system came such a world famous people as Korolev (the top USSR cosmos rockets designer), Tupolev (he created new air crafts which were capable to fly extremely long distances, even over North Pole to USA), Alexander Solzenitsyn (world famous writer) etc. Solzenitsyn described Soviet «Sharashka» in the novel «In the first circle».
Increasing positive and negative stimulation is a mighty management instrument for improving people’s management. And it doesn’t matter whether it prison, factory, country or other gathering of human beings. 
British forces for 11 years, Russians for 4 years made futile attempts to change the way of living in Afghanistan according to the way of governing in their countries. Americans made attempt in Iraq to make some life improvement to Iraq people. But Iraq people killed Americans after the war was over.
Historical example of the Ottoman Empire governing model deserves the most attentive scientific research not only because no sooner, no later nothing similar happened in mankind history, but because we have an example of the improvement of governing model in Muslim country without any military conflict and without religion institutions involved. If we failed to understand what they need and how to reach that, a big lot of corpses is waiting for us on the way to democracy in Muslim countries. We are making attempts for logical way of communication with them. But they have the other logic. Like men and women have different logics. We managed to live in relatively peaceful coexistence with women nevertheless their brains are working like analog computer and men’s like discreet. Women can estimate the situation faster than men, but men are better in strategic thinking, calculating situation on many steps forward. So what? We cannot say that women are more stupid than men, or vice versa. They are not stupid. They are different. So are the Muslims. And we must take it into consideration while building in Muslim countries self-organizing governing model with free market economy. Model, which would not conflict neither with religion, nor with Science. Model which would make it possible to fulfill the will of Muslim people Majority, only that will be Democracy for them, but not the will of ours Majority. 



There are different ways of improving the State Governing System. Historic example of 16-th century Ottoman Empire shows us how governing system could be improved by skillful using of positive and negative stimulation. Below we are going to illustrate what results could be achieved by skillful using Principles of Efficiency in army as well as in state management.

At the second half of Eighteen Century occurred a historical event, which cause transference of the leadership in Europe from a French Emperor to a German Emperor and the transference of leadership in oriental North Pacific from a Chinese Emperor and Russian Emperor to a Japanese Emperor. 
After 1850, Lois Napoleon was for twenty years the dominant figure in European politics. The British cultivated his friendship, the Italians looked to him for liberation, the Turk begged his protection, Russia was humbled by him, and Austria sought his alliance. 
At the same time, in the little kingdom of Prussia, about size of Colorado, there were two men - Bismarck, the Statesman, and Von Moltke the Organizer… At this time Von Moltke created 12 principles of efficiency, which he proposed to Bismarck for approbation in army [5].

12 principles of efficiency 
1. Correct ideals and aims
2. Common sense
3. Competent counsel
4. Discipline
5. The fair deal. Honest relations with workers
6. Reliable, immediate, adequate, and permanent records
7. Dispatching
8. Standards and schedules
9. Standardized conditions
10. Standardized operations
11. Written standard-practice instructions
12. Efficiency reward
(Examples of each principle see in the Supplement #2).

King William had succeeded to the throne of Prussia in 1861. He was 64 years old, imbued with all the moldy traditions of the past, but he trusted implicitly his two advisers (Bismarck and Moltke) … His ideals were a tremendously powerful German empire with the Prussian State and King William at its head… Von Moltke could not count on having as many man, as much money, as abundant equipment, or as much material, as his opponents… The struggle, before it began, even in its first planning, was to be one of efficiency against inefficiency; of efficiency, applying to the army all the twelve principles, which Moltke created…
They started with little Denmark. Austria was invited to become an ally. Prussia occupying, province Schleswig, Austria occupying Holstein. Moltke tried out on a small scale his own organization and studied the weakness of the Austrian organization. In 1866 Bismarck quarreled with Austria and precipitated war. Prussia had at that time about 22,000,000 population, Austria - 59,000,000. Prussia on July 3, 1866, nineteen days after the declaration of war, defeated Austrians.
Then events developed as following. On July 4, 1870, the throne of Spain was offered to a German prince, Leopold. On July 19, 1870 the French Emperor declared war. Moltke was asleep when the telegram came. When Moltke was awakened, he said: «You will find the plan of campaign in the third drawer of my desk», than he turned over and went to sleep again. From that moment over a million men in Germany stepped, ate, filled every minute of their time, according to pre-arranged plan and schedule. Because the French plans contemplated mobilization in nineteen days, Von Moltke had planned for eighteen days, knowing that this would place the seat of war in France, not in Germany. On September 2, forty five days after the declaration, Napoleon and his army, beaten at Sedan, surrendered and passed as prisoners into Germany. «It was not German soldiers who won the war; Von Moltke would have won equally well had he applied his principles to Italian, Austrian, French, Russian, Japanese or Americans,» - says Emerson [ 5 ]. We can add that it was not Germans drill or tactics, not equipment, not German money that won the war, for France was far richer. It was Von Moltke’s principals and organization that won; and generation later the same organization and principles applied by a different race on other side of the globe produced exactly the same fruit in very similar manner, under other able man. We have Japan on mind. 



In 1867 Japan was still feudal. Her peasantry was impoverished her finest man and women, feudal dependants without initiative. In 1870 Japan sent out a delegation of 5 Samurais that conducted consultation with Moltke not with Bismarck. They came back to Japan with 12 principles of labor efficiency. In 30 years Japan, its population approximating to 40,000,000, won the war against Chine the population of which amounted to 400,000,000 and, then in 5 years against Russia, the colossus of the North that shattered Napoleon 1.
It was not the flash and blood and brains of the Japanese that make them industrially dangerous because in 1867 Japan was still a feudal country somewhere in civilization backyard; it is not their money, for they are poor, not their equipment, for they have but little, not their material recourses, because they are meager. They only changed the way of governing, they changed existing model on better one. «It is von Moltke’s tremendous gift to the world that he applied to the army the other type of organization, which ought always to have been used in business» [5].
If I were Japan Emperor, I would construct The Monument to Moltke to the size of the Freedom Monument in USA. And to Bismarck also. On top of the horse. Standing on Moltke’s palm.
The Principles of efficiency were the first mighty nonmaterial resource for Japan. Another mighty nonmaterial resource successfully used by Japan was information.
In mankind history occurred 3 informational revolutions. The first started when the origin of tasks became far more complicated than means of communication human being had and he started to talk.
The second informational revolution was growing ripe when the volume and amount of knowledge became much bigger than human memory could accumulate. People invented alphabet and started to write and read.
The third information revolution took place when human brain possibilities became less than the tasks it needed to solve. That is when computer appeared [3]. 
The Japan scientist U. Masuda describes the future postindustrial era as «…era of information society, in which consumption of knowledge will be of more value than accumulating of material wealth». 
I believe, next step will be the governing models – the most valuable informational product. 



All the twelve principles of efficiency are good for nowadays and will be used in future. They can be used while organizing the work of any government, corporation or workshop. 12 principles of efficiency were formulated more than century ago, but the best world managers still use them or created something similar. There are far more than 12 principles of efficiency. Thousands other talented managers have something new in their practice, which shows enormous possibility for new and new improvement of peoples work management, enlarging non material reserve of mankind.
Let us address to one of the world best managers - Lee Iacocca, President of Ford Motor Company since December 1970, who on November 1978 joined Chrysler and pulled it out from crisis.
«Management is nothing more than motivating other people… The only way you can motivate people is to communicate with them… Over the years I’ve regularly asked my key people - and I’ve had them ask their key people, and so on down the line - a few basic questions: «What are your plans, your priorities, your hopes? And how do you intend to go about achieving them.» (See Supplement 2, the first principle). «Every three months, each manager sits down with his immediate superior to review the manager’s past accomplishments and to chart his goals for the next term. Once there is agreement on these goals, the manager puts them in writing and the supervisor signs off on it. As I’d learned from McNamara, the discipline of writing something down is the first step toward making it happen.» (See principles 4,6,11). «…Even the right decision is wrong if it’s made too late» (See 6-th principle)… «When you give a guy a raise, that’s the time to increase his responsibilities.» (See 12-th principle).
«Once, at a private dinner with Vince Lombardi, the legendary football coach and friend of mine, I asked him about his formula of success», says Lee Iacocca. « I wanted to know exactly what made a winning team. What he told me that evening applies as much to the business world as it does to sports. «You have to start by teaching the fundamentals», Lombardi said. «A player’s got to know the basic of the game and how to play his position. Next, you’ve got to keep him in line. That’s discipline. The men have to play as a team, not as a bunch of individuals. There’s no room for prima donnas.» He continued: »But there have been a lot of coaches with good ball clubs who know the fundamentals and have plenty of discipline but still don’t win the game. Then you come to the third ingredient: if you’re going to play together as a team, you’ve got to care for one another. You’ve got to love each other. Each player has to be thinking about the next guy and saying to himself: ‘ if I don’t block that man, Paul going to get his legs broken. I have to do my job well in order that he can do his».
«The difference between mediocrity and greatness,» Lombardi said that night, is the feeling that guys have for each other. Most people call it team spirit. When the players are imbued with the special feeling, you know you’ve got yourself a winning team.» (You will not find this neither at Moltke, nor at Emerson). «Another example: sales and manufacturing were under the same vice president. This was inconceivable to me because these were huge and primarily separate functions. To make matter worse, there was virtually no contact between the two areas. The manufacturing guys would build cars without ever checking with the sales guys. They just built them, stuck them in a yard, and then hoped that somebody would take them out of there. We ended up with a huge inventory and financial nightmare.» (This item also was never touched nor by Moltke, nor by Emerson) And so on…
A well-known Japanese manager Rity Hasimoto said, «Conditions should make people work, not managers». Good Model creates condition not only to use all known principles of efficiency but to create those we can not imagine for now. 

A little bit of science

The next few historical examples we need to study only having at least basic knowledge in cybernetics


Self-organizing systems (theoretically the best [13]). The term «self-organizing» includes regulating abilities, which are established by the nature of the object. The tree leafs change – process that is running without interference from outside, but it is strictly determined process, so the leaves never fall in spring. Something similar is going on in socioeconomic systems. Chaos and order are installed in nature of different governing models. Our task is to create such a model, in which self-organizing processes would suppress entropy (see supplement 3) and contribute to one’s determined (predicted) behavior. Mankind inevitably approaches such models and this process as much predetermined, as leaves fall in autumn.
We have a large spectrum of tools for governing. Whip and reins operate horse vehicle. Electronic lamp is operated by positive and negative potentials (see supplement 1). The leaving creatures are governed (taught) by means of positive and negative stimulation. Positive and negative stimulation are deeply inserted in the nature of human relations. For any level of development, for any definite situation, which need governing and control processes, there exist such a drawback link, which is able to enforce given object to keep this or that line of behavior without additional outside interference. By changing sign and depth of drawback, it is always possible to choose line of behavior, which will coincide with governed object interests. After this chosen line of behavior becomes the line of object’s behavior itself and continued to fulfill the program without additional interference. In such (approximately) sense cybernetics are using the term «self-organization». 
So, self-organizing systems are those, which, reacting to changes of external conditions and allowing for previous experience, can change not only their behavior (response) but their structure also.
Self-educating systems can change theirs behavior according to changing outside conditions. 
Cybernetic turtle can be good example of self-educating system. Cybernetic turtle is some sort of regulator, which has memory and ability to move. They put the turtle inside labyrinth. The turtle tests all the directions and choose the correct one. If it meets the dead lock it returns back and changes direction. The way to dead lock it remembers and never repeats. The turtle will try all the ways out of labyrinth until it finds the exit. If you will give to turtle another chance it will choose the right way from the very beginning to exit by the shortest way. The turtle became self-educated. If you will put the same turtle to other labyrinth it will change its behavior according to new condition and find new way out of labyrinth. 
Self-tuning systems can choose this or that programs of behavior from the program library of this system and adjust its behavior to program chosen. Example of how it works can see (Supplement 1, pictures 6, 7).
Planning systems are working according to some preliminary developed plan without using stabilizing feedbacks. The best example - The Soviet Union planning system, which was planning behavior of all the participants of national economics processes on 5 years ahead. Ministerial plans were based on enterprises plans, which always asked money and materials much more then they need. Planning systems was not able to follow market changes. That’s why plants and factories often produce goods which market already do not need. How it worked you can see from following short example.
It is a letter in «Ogonjok» weekly which stuck with my memory, because of a bulk of information per unit of the text. In my manual for university students [2] I assumed that the amount of information per text unit (a letter, a word...) could make a measure of geniuses. For example, think over Pushpin’s lines:
«I loved you, darling, so sincerely, so tender, as help you God, be loved by someone else».
In this line we have a novel and the character of a hero is disclosed. 
Now let’s take the masterpiece from «Ogonjok». This couple of lines shows us essence of Soviet way of management. Quotation: «Since 1985 they’ve begun to supply dolomite flour (a fertilizer) from Omsk by inland water transport. The supplies were steadily increasing. In 1988 it amounted to 71100 ton in Tjumen region, and to 130500 ton in Omsk region. Everything was being unloaded onto the banks of the Irtysh River to be blown away by winds and spilled over with rains till the river overflow. Then everything was washed away into the river.» (P. Zakharov, Omsk, «Ogonjok», N 15, 1989 p. 5). 
Scientific research of how to govern people and countries has one significant problem: nobody has nor power, nor rights to make scientific experiments which governing model is better to manage peoples’ life. Fortunately, the history already made all the main experiments and our task is to understand the results and make correct conclusions.



Events, occurred during seventies years of last century in Chile, can serve an excellent illustration of positive changes in definite country due to changing governing model on theoretically better one. Transition to better model was realized by military junta with general Pinochet on top. This group of professional military men were clever enough to follow recommendations of young economists group graduated Chicago University. These events were described in literature [6] 
So, the Pinochet-led military junta, advised by a group of Chilean economists mostly trained at University of Chicago, imposed a radical program of free-market policies. The junta did so by decree, without the constitutional rule and democratic institutions that had once been pride of Chile. Everything started in June 1955. Four professors from the University of Chicago, Theodore Schulz, Arnold Harberger, Simon Rottenberg and Earl Hamilton arrived in Santiago. They all came from university’s Economic department. The professors came to Chile in order to help launch an extensive program of technical cooperation between the University of Chicago and Chile’s Catholic University. Some 150 promising Chileans received full graduate fellowship at the University of Chicago. Later they were called «Chicago Boy’s». At least fifteen Chicago Boys would occupy top policy making positions in Pinochet military government. By the mid-1970s «Chicago Boys» had become a household name even among the poor.
On September 11, 1973, while jet fighter planes still buzzed terrifyingly low over Santiago, the lights were burning at the Lord Cocherane publishing house. Inside the photocopy machines were whirling non-stop, cranking out copies of a thick document known to the Chicago Boys as «the brick».
The brick was a 500-odd-page plan for reversing the economic polices of Chile implemented over the previous half century. No ordinary time and no ordinary publication, the plan authors wanted copies to be placed before noon on the next day on the desk of every general in new military regime. 
It was far from all of generals’ support new ideas. Many military officers worried about the political repercussions of the first two concessions to the free-market proponents - a drastic currency devaluation along with the «liberation» of the prices of most goods and services. Both moves automatically hiked the price of imported goods on which Chile was very dependent and only further fuelled inflation throughout the economy. The admiral who was then finance minister who had taken the decision was sharply rebuked by junta member Admiral Merino: «We’ve all been deceived. When we took the decision to devaluate no one told us that the price of wheat was going to go up and up and therefore also the price of bread and many other things was going to increase. It’s intolerable and it creates problems for us. The military junta cannot be increasing prices. We will be accused of killing the people with hunger». 
In March 1975 Professor Milton Friedman (later awarded Nobel Prize) visited Chile. He trooped over to Pinochet’s office to give the general one-hour lecture. He consulted the dictator to ignore his extremely bad press abroad and keep free market line. After that visit Pinochet appointed Sergio de Castro, a leading Chicago boy, as the Minister of the economy. Then Pinochet decreed the centralization of all economic policy under the Minister of Finance on top with Jorge Causas, an ardent convert to University of Chicago doctrines.
De Castro and his team began to push through their broader free-market agenda. Economy started to recuperate. The regime sold off the principal government - owned banks as well as a multitude of small publicly owned companies. The government opened wide door to foreign investment. Finally through a less-than-free-market manipulation of peso’s exchange rate with the dollar, inflation was brought down at last to a tolerable annual 30%. Chile was poised for its long promised «miracle». 
«The Pinochet’s government dutiful payments to the foreign banks and its persistence in free-market reforms won Chile the favor of the IMF and World Bank, which funneled short term credits to help pay interest on the debt and supervised the financial restructuring. A drop in the world price of oil, a rise in price of copper, and decreased shipping costs for Chilean exports all favored recovery after 1985. Over the ten years after the U.S Congress blocked U.S. bilateral aid to the Pinochet regime the World Bank and the Inter-American Development bank made 46 loans to Chile totaling over $3.1 billion. Chile’s free-market economic team at once became the darling of the international financial institutions.
When the government completed to sale of companies that had failed in the crash, the Chicago Boys launched a second wave of privatization that included Chile’s largest traditional public companies, such as electric utilities and communication monopolies. The companies were sold off at bargain prices to domestic and foreign investors. Further neo-liberal reforms in social programs were stepped up in the months before the 1988 plebiscite on Pinochet’s continued rule, since his future and that of the Chicago boys hung in doubt. 

Strong growth in the economy after 1985 - especially impressive to the stagnation or worse in the rest of Latin America - led supporters of free-market policies in and outside the country to speak again of a «Chilean miracle». In 1988 plebiscite, voters rejected an additional presidential term for General Pinochet. In December 1989, voters chose the Christian Democrat Patricio Aylwin, candidate of center-left coalition, as the first civilian president to succeed Pinochet. Pinochet remained as a head of armed forces, and with the support of the appointed handpicked senators, held in effect a likely veto over fundamental change. The economic program of the Chicago Boys was firmly in place and watched over by the structures of «protected democracy».
«An emphasis on freedom or liberty is the distinctive element of the neo-liberal world view, on which everything else turns. Freedom is defined in terms of individual autonomy. Key to that autonomy is that the individual not be hemmed in or coerced by society» [6].
Chile’s experiment showed that in free market, free from outside interference (from government, price-fixing, «interest groups», etc), prices for products or services would find their «natural level» determined by the «law» of supply and demand. According to the neo-liberals, this market mechanism, ever objective, maximizes efficiency and benefits all individuals who participate. Market economics need self-organizing model. The less outside interference the better it develops. But freedom ought to be protected. That’s why free market need democratic environment.



At the same time, but on the opposite part of the globe, extremely left Deng Xiaoping was implementing the same Model as extremely right Pinochet.
Everything started after famous Tiananmen incident of April 1976, when Deng had once again been purged as «unrepentant capitalist roader». Deng’s main tormentors now were the members of a bureaucratic clique who claimed to embody the radical spirit of both Mao and Cultural Revolution, the most prominent of whom where soon be branded the «Gang of Four» - Zhang Chunqiao, Maoist theoretician; Yao Wenyuan, Shanghai polemist, whose celebrated article announced the opening of the cultural Revolution; Jiang Qing, Mao’s wife and would-be cultural czar; and Wang Hongween one of the highest level Party leader. Deng Xiaoping prepared to do battle which could lead to civil war as well as his own death. In the summer of 1976, Deng reportedly told his supporters: «Either we accept the fate of being slaughtered and let the Party and the country degenerate, let the country which was founded with the heart and soul of our proletarian revolutionaries of old generation be destroyed by this four people, and let history retrogress one hundred years, or should struggle against them… If we win, everything can be solved. If we lose, we can take to mountains» [7].
Particularly within the PRC (People’s Republic of China) it was fashionable to regard the third plenum of December 1978 as the great turning point in China’s twentieth-century history. The reform era that started with third plenum had resulted in substantial economic transformation and political change. The economy has grown at an annual average of something over 9% of GNP (Growth National Product). By 1994 the state section of the economy only produced a little over half of the output value of industrial production. Only those, who lived under communist governing, can imagine what it means.
In the late 1980s and early 1990s there had been a tendency within China to regard Deng Xiaoping as a metaphor for the whole of the reform era since 1978, or at least for its achievements. Large number of books has been published on different aspects of the reform processes where Deng is justifiably regarded as the architect of the reform era. Supporting in experimenting with different kind of decentralization in economic management came from two long-term associates - Wan Li and Zhaj Ziyang. Wan Li in the late 1970s was the leading party secretary in Anhui Province where he oversaw the decollectivization of agriculture [8]. 
«The «capitalist» forces of competition and profit seeking are necessary for successful growth of the productive forces in a developing country and for producing many of the prerequisites of a free democratic society. China needs these forces and that this is more or less explicitly acknowledged by China’s present leaders» (Peter Nolan).
Zhao Dziyang declared in 1986: «Economic departments of the government at all levels should no longer devote their energy to assigning quotas, approving construction projects and allotting funds and materials».
These words prove that contemporary China leaders understand how useful decentralization is in economics management. Understand, but unfortunately, not enough as to reject the dictatorship of Communist Party. China’s example proves the fact, that good «capitalist’s» model can work in communist country, if it will be created friendly environment: decentralized governing and free market.
A little bit of political economics
Revolution is a phenomenon resulting in changing the country governing model while, the process which results in changing the Government only, is nothing else but coup d’etat.
When nice and intelligent President Aliende led Chile, this country rated the last in Latin America on the list of living standard, and when the «bloody» Pinochet came Chile jumped to the first place. Why?
Why China, led by communists, achieved labor productivity in free economical zones much higher, than average in the USA?
How one can explain the economic explosion in these countries? By similarity of their political systems? But Deng Xiaoping was extremely left and Pinochet - extremely right. Can we explain this by the fact that communism and dictatorship are better than democracy? Or, may be, economical growth in these countries is associated with the transition to the market model, which personifies a classic example of a self-organizing system - theoretically the best one as far as management and control is concerned? In contrast to this model, the program-controlled system, incorporating no rigorous stabilizing feedback links, is theoretically the worst. It was this model abided diligently by socialist countries, which ruined their economy. Conclusion: it does not meter political orientation of those who implements new model. If new model theoretically better than the old one, living standard in country, after implementing, is rising independently of political orientation of government. As a rule, any significant improving of living level or might of the country is connected with changing the state-governing model to better one. In other words, any movement up the scale of importance, the scale which shows the place the country occupies among other countries of the world, is connected with changing the government model on theoretically better one. 
If revolution results in changing governing model, those political leaders, who changed governing model – are revolutionaries. Deng Xiaoping and Pinochet are revolutionaries like Lenin, Trotsky, and Fidel Castro. The difference between them: Deng and Pinochet changed the model to better one and rose the living level in their countries but Lenin and company change the model to the worse one: self-organized model on centralized one, which brought to living level fall not in Russia only, but also in any country (Cuba, Poland, Vietnam, North Korea…), no matter of it geographical location.



Finland once was a backward, underdeveloped part of Russia with mentality significantly lower than average in Russia. They lived in dirt and poverty. But due to some unbelievable miracle, after 1917 October Revolution, Russian living level became worse and worse and Finland living level - better and better. Enormous difference between living level in Finland and in Russia is continuing to exist more than 80 years up till now.
There is no direct dependence between living standard and political orientation of the country. In equal conditions democracy guarantee better living level because democratic environment much closer to self-organized systems, than dictatorship. There is no direct dependence between living standard and nation’s mentality also.

A little bit of statistics


Area (thousands sq. km, July 1998) 338.1 17,075
Agricultural area 
(thousands sq. km, July 1998) 27.5 2,220 
Population (July 2003) 5,147,000 144,526,278 
Gross Domestic Product 
(July 2002) 136.2 bil. 1.35 tril.
GDP per capita 
(purchasing power parity, July 2002) $ 26,200 $9,300 

During more than half a century Finnish economy was performed very well. In the past four years real GDP (Gross Domestic Product) expanded by almost 5 per cent on average - more than double the OECD (Organization for Economic Co-operation and development) average - due to significant easing of monetary conditions, incomes policy that delivered moderate wages and price developments, fiscal consolidation and important steps toward European integration. Finland has not high living level only, but many years at a row it keeps the first place of competition ability in Europe ahead of Sweden, France, England etc. Can you explain this by the Finnish higher mentality than the Swede, the Russians, the English or the French? Or special geographic conditions? If not, than why? Miracle?
Some miracle really took place. 
Soon after the 1917 October Revolution a delegation from Finland visited Vladimir Ulianov (Lenin) and asked him to permit Finnish separation from Russia. Lenin signed the paper. I still cannot explain why he acted like that. Whom this delegation represented? No expertise was made. Was it really representatives from working class and peasant’s majority? God knows. From the other hand, if enlarging Russia was not among his plans, what for were rivers of blood while conquering Southeast Muslim republics? May be suddenly Lenin’s conscience awoke? But it looks like he never suffered from being too much of conscience. Parvus history good illustration to that. Parvus made a schedule of every step of revolution, supplied it with money and almost by force pulled Lenin from Zurich with almost 30 other Bolsheviks in separate, highly guarded railway car. After all Lenin gives nothing he promised to Parvus. So Finland’s freedom remains, as sir Winston Churchill says, a puzzle, wrapped in mystery inside an enigma. All the rest is easily explicable because it was going on according to Common Systems Theory predictions.

We already knew that Revolution is a phenomenon resulting in changing the government model. The 1917 October Revolution resulted for Russia in changing from progressive «capitalist» model, with free market economy, to a «socialist» model with a programmed government and control. We already know that free market economy is close to a self-organized system (theoretically the best). Centralized, hierarchical models with program control without strict stabilizing drawbacks are theoretically one of the worst. To explain what happened in Finland we have to underline that self-organized model is closer to democratic way of governing; centralized models are closer to mono-party regimes and dictatorship. That’s why, if to start from the same basic conditions (natural resources, geographic situation etc.), democratic way of development is always better than dictatorship. So, Russia changed governing model and in Finland remained old one. That is why between these two countries, which started from the same positions, such a big difference in living level exists during such a long historical period. Finland continues to develop by old but more effective, capitalist model and Russia choose new one, which brought to economics disaster not in Russia only, but in all the countries - followers in so called Socialist Camp. Till now still alive historical examples of faulty use of centralized governing model: Cuba, North Korea (I did not touch African tribes). 
Finland still continues to improve governing model through constant improving monetary conditions, income policy and so on. At the same time Russia is returning back from short period of democracy to centralize way of government. That is why majority of Russians still continue to suffer though no more Socialism or Communism left. If they will continue hierarchical centralized governing all the real troubles in Russia are still ahead. And they’ll start the day oil prices drop.



According to Dellheim [9], in the autumn of 1976, Britain suffered from a severe case of economic woes apparent throughout the Western world. Unemployment was at 5.6 percent, an unacceptably high figure for a labor government committed to full employment. There was the puzzling problem of how to overcome stagflation/inflation had been cut in half, but was still running at more than 12% and threatened to spiral up again if strikes led to high-priced wage settlements. Britain’s economic grows was substantially below its European competitors. 
British Airways epitomized the ills at the heart of Britain’s decline. From its founding in 1939, BOAC (British Overseas Airways Corporation) was nationalized company, «no mere capitalist business, the be-all and end-all of which is profits and dividends», as the labor politician Herbert Morrison put in. Public corporations did not use the vulgar word «profit», preferring instead the term «surplus»- as if they were storing up nuts for winter. Nationalized companies employed so many workers that they were almost untouchable, politically, especially when Labors was in power. 
Frustrating was the task of running the airline, which was subject to frequent strikes from pilots, engineers, and ground staff, that from 1945 to 1970 it had twelve chairman. Among them was an admiral, Sir Matthew, who remarked, «I think the way it is expected to operate is bloody crazy.» The same one can tell about coal industry. Coal miners strikes shake the country. 
If socialism was the cause of the British disease, capitalism was surely the cure. Socialism was unfair. It concentrated power in the hands of government officials and deprived the individual of basic economic freedoms. At the core of Margaret Thatcher’s vision, then, was a call to return to the free economy. This meant: «A man’s right to work as he will, to spend what he earns, to own property, to have the State as servant not the master.»
Mrs. Thatcher and her inner circle had an attack plan that focused on three key targets: banishing inflation; conquering the trade unions; and reforming the nationalized industries one by one. 
After the 1979 election, Mrs. Thatcher established a subcommittee to explore suitable candidates for privatization; it was called E (DL); «E» stood for Economic, «DL» for disposal. The Thatcher government had another hurdle to jump. Given to nationalized industries’ record, who would line up to buy shares in them? It was the preparation for privatization rather than the actual transfer to private hands that provided the impetus to improve performance. But the run-up to market freedom was something rocky. For instance, the erratic financial results of British Airways (as well as turbulence in the airline industry) delayed its sell-off. 
The privatization program began modestly enough in 1980 with the sale of two subsidiaries of the British Technology Group. The next year, British Aerospace and Cable & Wireless went on the block. They were followed in 1982 by Amersham International, in 1983 by National Freight, and in 1984 by one of the great names of the automotive industry, Jaguar Cars, which managed to escape from British Leyland. The turning point came in November 1984, when the sale of British Telecom raised nearly 4 billion pounds in proceeds for the Treasury. Than came major issues of British Gas, British Airways, Rolls Royce, and British Airports Authority [9]. As we see, it took 4 years for Mrs. Thatcher to denationalize substantial part of English economics. In Russia Anatoli Chubice did it much more quickly. But they started from deferent positions. I still do not know whether to scold Chubice or to praise.
Mrs. Thatcher’s capitalist revolution was more necessary than glorious. It is tempting to conclude that Britain’s last successful political revolution took place in 1688 when the Parliament declared its sovereignty over the Crown.
To be a good person is not enough to lead the government. For example, as President Clinton’s friend Strob Talbot ( the former editor of «Time» magazine) says, «The Republicans believe deeply in that the private initiative is the source of all the national prosperity, while the government machinery is the sort of problem. And it seems natural that the smaller the importance of a government, the smaller the problem. But the democrats keep a deep trust in this state governmental machinery. Under the democrats you are sure to fix the rise in the importance of the governmental structures». The science allows the determination of an erroneous origin of such an approach. Luckily for Clinton, Republicans do not allow him to make this mistake and saved him for second Presidential term.
While comparing Talbot and Thatcher, I caught myself on temptation to say: clever people have the same way of thinking, each fool is stupid on his own manner.

A little bit of science.
Mrs. Thatcher’s capitalist revolution was so successful because everything she did has coincided with the main recommendations of precise sciences connected with governing and control processes. Judge yourself: privatization is the same as denationalization; denationalization is the same as decentralization, and decentralization is one of the major requirements for self-organized model of big systems. 
According to Systems Common Theory, scientific laws of regulation and control, used in precise sciences, could be used in Social systems. From this point of view any country is a super-system with enormous amount of objects to be ruled. Management of super-systems has its own laws. Some of them are quite opposite to the laws of governing the small systems. For example, if we have to govern less then 5 objects at a time, nothing can be better than centralized governing and control. If you have to govern thousands of objects, a centralized hierarchical governing becomes a disaster, because if in the given system amount of objects to be ruled runs to infinity the governing ability runs to zero. The same situation we have in reliability theory: if in the given system amount of objects is running to infinity the reliability of system is running to zero, even if you will double all the elements. It happened because a reliability of any system is a result of multiplication of reliabilities of its elements. At the same time, reliability of any device or separate element cannot be more than 1. In practice, all of known devices and elements have reliability less than 1. The result of multiplication figures, less than 1, runs to zero as quickly, as quickly rise the amount of elements involved in multiplication. That is why the more elements are in device, the less it’s reliability. 
Russian aircraft designer Sukhoi, the creator of «Cy» – series of military aircraft changed centralized way of aircraft control as one common system to decentralize control by separated control systems: engine control, fuel control, wing devices control and so on. Reliability has risen significantly. 
Any country has a big lot of objects to be ruled, from hundreds to hundreds of thousands and millions. That’s why centralized models of governing are bad not to any country only, but even to big corporation. That’s why the obvious fact, that denationalization is nothing else but decentralization of governing (from the management and control point of view), gives the answer to the question why «Capitalist» (market) economy is better than «Socialist» (centralized) one: quality of regulation in decentralized market model does not depend on amount of objects, whereas in centralized model – the more objects the worse the quality of regulation. Due to denationalization of some leading industry branches Margaret Thatcher saved the Country from economic crises.
Once, Japanese state railway employees declared an unusual strike - they started to perform exactly according to each command, which authorities demanded them to do. Result: the railway stopped to work at all.



The Soviet Union economics is the best example for demonstration how centralized hierarchical model is working. To understand the main idea, it is enough to take one of millions life examples and no comment will be need.
Here is an example. 
One of the TV sessions of «Projector Perestroika» (September, 1988) narrated about the conditions in one of the Moscow vegetable warehouses. A great number of trucks, in front of the warehouse gates, were shown. Some drivers told to TV reporter, that they were waiting there to be unloaded for several hours. You know, vegetables cannot wait, they are getting rotten. But those vegetables, which managed to come inside, have only 50 percent chances to come into the stores, because of bad conditions of preserving vegetables inside the warehouse. 
I watched this TV program with one of the Moscow scientists (he was a chemist). He told me, that his institute designed and produced a special gas exchange-control diaphragm. These diaphragms could be arranged in the store windows and were intended for making shelf life of vegetables longer. Here comes the most interesting part of the story: the scientists of his lab failed to realize their experiment because the workers of the warehouse systematically punctured with knife all the diaphragms. For it proved unprofitable for them to have vegetables fresh, it allows them to make quick profits by letting the vegetables get rotten in enormous proportions: more rotten, less efforts to waste on hiding thefts. Instead of market laws some other laws start to work. And what officials’ muddle-heads do to avoid this. Instead of changing the nature of regulating effects and introducing stabilized feedback control, i.e. paying directly proportional to a safe keeping of vegetables and a volume of sales, they indulge in pronouncing slogans, bringing shames upon crooks etc. As a result, the «Majak» radio station announced that, to the end of March 1989, only in Moscow, there was so much rotten cabbage that the seasonal demands of a city of 600 thousands population could have been met.
I dwelt on this problem in detail because all soviet national economy was like a large vegetable store, wherein everyone thinks of how to steal and keep the traces of stealing unnoticed. This would never cease to go on until the stimulation of activity was changed, or, in other words, until the other feedback control links stabilizing the system appear. The art of governing is the art of selecting appropriate feedback control links. 
The leader, who wanted to raise economy of the country like former USSR, must have known what to start with. Such country needed reforming the governmental machinery prior to reforming national economy. It can be changed only based on one condition: transition not simply to more progressive, but to the most progressive model. And we, scientists, know well enough how this transition can be made. Should we manage to make it, the rates of development of Russia or any other country would exceed the rates of development of all other countries in the world until these «other countries» will change their model of government to theoretically the best. 
The model of government, in force on the territory of the former USSR, is an aggressive surrounding for new market reforms, because reforms are built around a self-organizing principle, while the existing in Russia model still runs on a centralized control. As a result, the state machinery wages a war against reforms rather than supports them. The struggle is serious one; because the outcome is either reforms supporter’s death or the death of old model supporters. 
And one more point. The interest vectors of ordinary people, as well as the interest vectors of different parties and groups within the scope of this model can disagree with each other and with the interests of the government. As a result, we get continuous national and religious conflicts. The disagreement between vectors of interests of people and the state combined with absence of normal stimulation of one’s activities produces the conditions allowing all kinds of workers to crook the State, than to work for it.


The first point. Improvement of a management model should precede the realization of economic and financial reforms. Improvement should be effected by proceeding from rigorous scientific regularities rather than from political considerations.
The second point. The more we centralize governing, the more complex system we create. The more complex system we create, the more unreliable it becomes. The more unreliable it becomes, the more we centralize the governing. 
The third point. As a rule, people live better or worse not because of political system, not because of people’s mentality, (as a rule) not because of geographical disposition, but because of what extent this system approaches the best theoretically-substantiated cybernetic model.
The forth point. Decentralised governing and control makes capitalism inevitable, centralized governing and control make capitalism impossible. 
The fifth point. The historical experience of mankind development shows us that, always changing the governing model to the better one leads to economics rising in the country, changing to the worse one always leads to economics down fall. 
The political system predetermines the choice of government model, but you should differentiate between cause and effect. The standard of living depend not on a political system, but on conditions the political system creates for development of the economy, because even a worse political system can choose a better model and vice versa. I’m going to point out again, as soon as the communists, the same ones who were fired at the students at Tan-Yan-Min Square, took advantage of some other model of government in free economics zone, a friendly medium was formed for realization of market reforms. As a result, the temp of economic progress set in China, left most of the developed democratic countries behind, but it does not mean, that democracies must be replaced with communism. Conflict between communist powers (centralised nature) and marketing economics (decentralised nature) could be finished with big social explosion. Democracy will win, because democracy is the best environment for free market. That’s is why we need democracy not as citizen’s freedoms guarantee only, but for construction the most perfect economics also. 
It looks like, the science and historic experience advises us to build the government system as a chain of regulators which are independent but tuned on fulfillment the common aim. 

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Vladimir Tsymbal, Democracy: a New Model