Part II . Components of Capital and Prospects of Their Modernization

The attem pt of M. Rudenko to build an innovative model of economic balance, based, from ontological perspective, on the principles of even and uneven numbers is analyzed. The thesis tha t conscious manage­ ment of balanced economic development in the long run, keeping the balance in economic management in particular, needs to be assured in the industries generating absolute wealth and producing relative wealth is discussed. The components of absolute capital and relative capital are highlighted. It is demonstrated that the fundamental natural principle of economic management is keeping with the energy conservation law, within consideration for the energy distinction between the living and the non-living. This fundamental scientific law is central in sustaining the economic balance and economic development in the long run.

In Part I of the article it was mentioned th at the work of M. Rudenko "Balance of Absolute Wealth and Relative W ealth" contains the formula of capital [1, p. 372]: where К is capital, Е is energy of progress, F is en tropy.
It should be noted th at M. Rudenko addressed capital in narrower and broader sense.Because E constitutes annual surplus of absolute value, K will be annual surplus of absolute capital.As regards ab solute capital, according to M. Rudenko, it includes land "which accumulates solar energy year by year", and crops, or "the value of annual harvest and elevator stocks" [1, p. 372].
The structure of absolute capital can be consi dered as full, when it includes all the kinds of absolute wealth required for life activities of human societies.To make physical-economic interpretation of the ab solute capital structure complete, its above mentioned components like land (given its capacity to increase fertility) or crops (annual harvest of grains and their stocks in elevators) should be added by the following categories of absolute wealth: • straw, as a form in which new, additional solar energy comes to Earth together w ith crops; • livestock, including working animals and ones to meet consumer needs.Given th a t "instead of work ing animals, beef cattle and milk cattle is being bred now", increasing of its stock offers "a vast reserve of biological energy" [1, p. 372].Also, livestock is a unique generator of pus; • pus, a bioenergy resource w ith the rare capacity to regenerate the fertility of land.
Therefore, management of absolute capital needs to be interpreted as control over five categories of absolute wealth: land, crops, straw, livestock, and pus.Several im portant characteristics of this totality should be emphasized.First, each category of absolute wealth has not alternative: it cannot be substituted.If each of them is worsened or lost, the life activities or existence of a human will be affected or even de stroyed.Second, all the categories of absolute wealth constitute the organic symbiosis.If this symbiosis is managed in a conscious way, the absolute wealth will self-regenerate, increase and multiply.As dem onstra ted by M. Rudenko, each category has the capacity for unlim ited increase.
The above given algorithm for absolute capital assessment by physical economy principles opens up several theoretical generalities of fundamental im portance.It enables for comprehending the physicaleconomic essence of absolute capital and its most essential difference from relative capital, which, ac cording to S. Podolynsky, follows from the energy difference between the living and the non-living, and, according to V. Vernadsky, from the insurm ountable distinction between the living and the rigid.
Also, the algorithm shows the most im portant factors behind the capabilities for more effective ma nagement of the processes involved in the progress energy capitalization.To capitalize the output gene rated by agrarian sector, crops in particular, is to di rect energy of progress on its further increase, and on the increase of this energy scopes.This opportunity exists only in the sphere of the living.In view of this, energy of progress needs to be directed to the agrarian sector first and foremost.
Also, as follows from the above algorithm, energy of progress can be capitalized by minimizing the en tropy.Because the larger is the entropy, the higher is the need to increase the absolute capital by its reduc tion, the larger are the reserves for progress energy capitalization and the capabilities for their utilization.
Therefore, utilization of the generated energy of progress will be productive once its largest possible part is capitalized and creation of entropy is pre vented.Progress energy capitalization needs to be managed along w ith measures to prevent its losses.Therefore, progress energy needs to be increased and entropy reduced, to generate a larger scope of abso lute capital.
Physical-economic vision of bioenergy structure of crops harvest is strategically im portant in manag ing the processes involved in progress energy capita lization.As shown by M. Rudenko w ith reference to R. Harst, an American farmer, 60% of fodder units of corn are formed from the grain, and 40% from stalks and heads.Therefore, the bioenergy structure of crops harvest produced annually in the agrarian sector con sists of five bioenergy units: three units of crops and two units of straw, capable to ensure the extended re production of absolute capital.
As regards distribution of annual harvest of crops by social strata, determ ined by M. Rudenko accord ing to F. Quesnay, three bioenergy units (one un it of crops and two units of straw ) are due to farmers, they remain w ith farmers and ensure capitalization of the agricultural output.The rest is due to industry and government (one bioenergy unit for each).
By substituting the estimates of absolute capital, progress energy and entropy, measured in bioenergy units, in formula (1), by use of Table 1, the distribu tion of annual crop harvest can be found, which is fa vorable for the extended reproduction and capitaliza tion of agricultural products.Reserves for capitalization of agricultural output are not utilized in this way now because of the lacking physical-economic vision of management in theory and practice.This raises the necessity of finding the essential meaning of the progress energy on the ba sis of physical economy principles, which, if enlarged, will increase the absolute capital, and the entropy, which, if increased, will have effects for capitalization of agricultural output.
Our distinguished contem porary came to the conclusion th a t "... governm ent and industry are ex plicitly entropic bodies of the society" [1, p. 372], w ith th e latter being entropic to the largest extent.Entropy, therefore, seems to be a sort of "trib u te" paid due to the objective need or to defects in economic management.It will be smaller once the annual agri cultural output is preserved and capitalized through preventive measures.The character of the entropy's effect for capitalization of the agricultural output can be easily com puted by substituting the estimates of capital, progress energy and entropy, measured in bio energy units, in the above algorithm.This effect has several manifestations.
As shown in Table 2, the first manifestation is the distorted natural laws of social distribution of crops harvest between farmers and government.
Table 2 Balance o f production and distribution o f crop harvest given the distorted social distribution As can be seen from Table 2, agriculture receives a smaller part of the crop harvest, two bioenergy units of straw, remaining w ith farmers after the enforced expropriation of crops by government.Industry re ceives one bioenergy unit of crops, as earlier, whereas government receives two bioenergy units of crops, of which one un it is expropriated from farmers.

Number of bioenergy units
The distorted natural laws of social distribution of harvest make effective management of ba-lanced economic development impossible.
An effective management of balanced economic development cannot occur w ith the distorted natural laws of social distribution of harvest because of the ruined conditions for the extended reproduction of the absolute capital and the total social product.This ruining effect is subsequently aggravated by the af term ath of harvest expropriation from farmers.Being depredated by government, farmers are left w ithout foods and seeds.The seeds given to farmers by go vernm ent's order from centralized funds can guaran tee the harvest of two bioenergy units, bu t not three.In accordance w ith natural laws, the output of straw will decrease, too: instead of two bioenergy units, farmers will produce only 1.3.The rest of crop output will be again distributed w ith preference to industry and government: one bioenergy unit per each, but the calculation basis will be 1/3 lower.Consequently, the social reproduction of the absolute wealth (the abso lute capital and the social product) turns from the ex tended one to the simple one, entailing the respective reduction in the output of crops, w ith the subsequent m alnutrition and famine of the population (Table 3).The latter circumstance has destructive effects for social morals and the statehood per se, as was the case of the USSR, which collapse had been predicted by M. Rudenko.In his address to the soviet power office, made more than three decades ago, he had said th at high soviet officials had been incapable or unwilling to realize it.Yet, the same is true w ith contemporary governments blinded by scientific ignorance and lazi ness of thought.
According to expert estimates published in 2012 by "Frankfurter Rundschau" journal, to achieve the German level of welfare, the hum anity would require the am ount of resources equal to 2.5 of the planet.If all the earth men were Americans, 4 planets would be needed [2].This calls for the impartial assessment of economic management models on which the global economy is built, especially German or American one.Because, as the above figures show, the hum anity is on the way to th e resource abyss, and the accelerated slipping to it is fraught w ith self-destruction.
According to M. Moiseiev, the life keeping with the natural circulation of substances requires not less than tenfold reduction in the hum anity's total needs (energy ones in the first place) [3, p. 80].We believe th at the needs, especially energy ones, can be substan tially reduced by laying physical economy as the ba sis for functional improvement of economic develop ment, by use of an effective tool for finding reserves as functional and cost analysis in particular [4; 5].Its use will help to find ways for multifold reduction in the production costs of herbicides, pesticides, other poi sonous chemicals, mineral fertilizers etc., which are m anufactured by industries w ith vast energy capa city.Once functional and cost analysis relies on physi cal economy principles, prospects for modernization of relative capital will be opened.
A part from critical scientific reviews of existing economic management models, M. Rudenko was in vestigating the problem of the maximum progress ener gy over nearly a quarter of a century [1, p. 127, 362].The thinker pointed out to "the fertile layer of the planet, which could accumulate the unlim ited am ount of solar energy for m illennia", and to the respective ca pacity to have "unlim ited am ount of w heat" [1, p. 365, 361], to dem onstrate the unlim ited nature of energy of progress: E > x .If the formula (1) is transformed as E = K + F, w ith substituting the estimates from Ta ble 1 and expressing the equation by E, the equation E = 0,6E + 0,4E will be derived.
Entropy F is the expression of the limit for non productive consumption of progress energy, which, if crossed, is fraught w ith danger: F < 0,4E.C onsider ing th a t the capital K is fixed by "residual" principle, it has the lower limit, which crossing cannot be ac cepted: K > 0,6E.
Therefore, quantification of the limits for progress energy components shows th a t a deviation from the limits K i F, fixed by laws of nature (if the reasons for deviations are not considered), will reduce the poten tials for economic development of societies.
We believe th at the structure of absolute capital, proposed by M. Rudenko, is essential in introducing innovative methods for management of relative capi tal.In view of this, the above given considerations should be laid as the basis for forecasting, innovation and investment, and m odernization of relative capital, w ith interpreting its structure by analogy w ith abso lute capital.Only then the balance of absolute and relative capital will be meaningful.So, the algorithm modified according to the targets set, takes the form: where K is relative capital, D. is relative added value, Ft is entropy of relative added value.
The simplicity of the algorithm disguises the com plexity of the essential meaning of technical develop m ent of the hum anity in the long run.In fact, each simple (a t the first glance) indicator in the algorithm refers to the gains (relative capital K) caused by tech nical and scientific advancement, and losses (entropy F) over the historic era of the human civilization de velopment.In view of this, at least a brief physicaleconomic description of the management objects, which, in the context of the study, are the essential types of relative capital, is required.The development of each reflects the long-lasting process of science and technology advancem ent of the humanity.
The first object is the type of relative capital, en compassing technical devices and technologies for cul tivation of land, gathering of w heat and straw, tech niques for cattle-breeding or utilization of pus etc.
The second type of relative capital is techniques and technologies to accumulate and utilize "soft" energy: solar emission, falling water, wind etc., also enabling to cultivate land, gather grain and straw, breed the cattle, utilize the pus and do other agricul tural works.
The third type of relative capital include tech nical means and technological processes to burn the so called extracted energy sources (coal and brown coal, oil shale, peat, oil, gas etc.) for generating th e r mal, chemical, electric or other energy; the energy generated in this way is used in the above mentioned agricultural works.Technical means and technologi cal processes generating energy due to decay of radio active elements should also be included, or be classi fied as the fourth type of relative capital.
The to tality of above m entioned "overlapping" facilities, techniques and technologies used in culti vation of land, gathering of grain and straw, cattlebreeding, utilization of pus etc. forms the relative capital of today, capable to develop and improve, in order to lay the basis for innovation and investm ent driven economic development.
The absolute capital, being in continually compli cated interactions w ith the relative capital, needs to be in the balance, consciously managed and maintained by societies over the longest possible time.Because, as shown by M. Rudenko, on the one hand, a relative added value results from an absolute added value, i. e. from the source of absolute value increase [1, p. 369].On the other hand, "industry, having impact on agri culture, becomes a progress energy generator".This energy occurs after the invention of steam engine, which invention preceded by extraction of coal.F ind ing the progress energy background, M. Rudenko concludes th at everything depends on w hether or not the economy is managed in the conscious way.
Although quantitative characteristics of econom ic development determ ine quantitative parameters of progress, respective qualitative characteristics are always prim ary ones.Both categories of chara cteristics are subject to management.There exist economic entities capable to maintain the balance, dem onstrating in this way the capability of societies for economic management by sustaining its balanced development over the longest possible time.From the perspective of absolute wealth generation, these entities are w heat fields and livestock farms, which, improving for centuries and millennia, are capable to transform into anti-entropic photosynthetic ecolo gical-economic systems, the main generators of abso lute capital.W hen it comes to generation of relative wealth, these are workshops (joineries, metal works or smithies), windmills watermills and sawmills, and stokeholds, steam engines etc.They are supposed to transform into entropic technical-economic systems, anti-entropic non-photosynthetic power generating systems and entropic power generating systems, to be modern generators of relative capital of the above m entioned types.
The balance of absolute and relative capital needs to be consciously managed in building up clusters, cluster networks and infrastructures, which need to harmonically combine self-reproductive and self sufficient components of the above mentioned sys tems.It needs to be done by principles of likening the economy to the nature and "fitting" economic management into the environment.On the one hand, absolute and relative wealth, i. e. absolute and rela tive capital, constitutes the value capable to generate the added value.On the other hand, it is generated by the value added generated before.This problem and the problem of balanced economic growth require a separate study.The algorithms built on M. R udenko's formula of progress energy, determ ine the capacities and limits of hum an's impact on physical-economic balance of economic management in the long run.This balance is manageable, and a human constitutes an active factor in sustaining the balanced economic development.
M. Rudenko keeps dem onstrating th a t the land enriched through interacting w ith progress energy ISSN 2 5 1 9 -1 8 5 3 СТАТИСТИКА УКРАЇНИ, 2 0 1 7 , № 1 is the living engine of the civilization.To illustrate the balance of absolute and relative wealth, the sci entist looks at the pattern of interactions between a car battery and a car alternator.The former one is continually fed by the latter one.If the alternator is taken off, a car can be driven for a while by the energy of the charged battery, bu t it will have to be thrown away after a while [1, p. 372].The true battery of solar energy, according to M. Rudenko, is the humus layer of the Earth.It can be generated by human work, once it is free.This generator will get out of order once the work is subjugated.
Therefore, the central principles of nature re quired for the contem porary economic management are keeping w ith the energy conservation law, on the one hand, and consideration for energy distinc tion between the living and the non-living, on the other hand.These fundamental scientific theses have critical role in sustaining the economic balance and economic development in the long run.Form ulated earlier by French physiocrat F. Quesnay and German naturalist R. Mayer, from 19 till 21 century they were developed by Ukrainian intellectuals, S. Podolynsky, V. Vernadsky, M. Rudenko and others.Yet, the valu able scientific results of Ukrainian thinkers have been overlooked by contem porary Ukrainian and foreign economists, practitioners and theorists.
The provisions determ ining the structure and ba lance of absolute and relative capital on the physical economy principles are especially im portant, because they open up the modernization perspectives, to as sure the economic development driven by innova tion and investment.At the same time, the potential for combining the innovatory results of Ukrainian pioneers of physical economy w ith scientific develop ments in theoretical and applied cybernetics, econom ic cybernetics in particular, is still underused.
The gains of European science in 18 century and achievements of pioneers of the Ukrainian academic school of physical economy need, therefore, to be in corporated in the contem porary arsenal of theoretical and applied tools of economic development manage ment.Scientific substantiation of economic develop ment management in the long run needs to be based on harmonization of physical-economic and manage rial approaches.Taken in totality, they should create fundamental principles of the strategy for manage ment of the innovation-driven economic develop ment, adequate to challenges of 21 century.