2012 Cambridge Business & Economics Conference
ISBN : 9780974211428
METHODOLOGY OF DETERMINING ECONOMIC SECURITY
CRITERIA IN GLOBALIZATION ENVIRONMENT
Ainabek Kuandyk Salikhuly
Dr. of Economics, Prof. of Economics, Academician of International Academy of
Informatization; Works as Director of Scientific and Research Institue for New Economy
and the System analysis under Karaganda Economic University of Kazakhstan’s Consumer
Association.
100024, Republic of Kazakhstan, Karaganda, st. Tattimbeta, Building 3, Apartment 69.
Home phone: 8(7212) 33-28-73, (е-mail: ainabek@mail.ru)
June 27-28, 2012
Cambridge, UK
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2012 Cambridge Business & Economics Conference
ISBN : 9780974211428
METHODOLOGY OF DETERMINING ECONOMIC
SECURITY CRITERIA IN GLOBALIZATION
ENVIRONMENT
Abstract
This research work discloses the conditions of simple and expanded reproduction to
ensure the economic security of enterprises, the national economy and proposes the solutions
based on economic models.
Keywords: Macroeconomics; monitoring of economic security; economic security of a
competitive state of the national economy, economic security pre-crisis state of the national
economy, economic security crisis in the national economy, the economic security of the
world economy.
Economic security criteria are predetermined by the kinds of business entities, economic
systems and their scopes in the globalization environment. Thus, determining economic
security criteria needs proceeding from the conditions of simple and extended reproduction of
entities,
economic systems,
their interrelation
in
the environment
of planetary
interdependence, taking which into account will make it possible to detect the parameters and
criteria of the secure state of simple survival or extended reproduction.
The conditions of simple and extended reproduction of business entities, economic
systems predetermine consideration of criteria indicators of three levels, where two levels
refer to the characteristics of their state in the environment of simple reproduction, and one
level – extended reproduction. Whereas the security criteria for extended reproduction should
determine the parameters of the competitive state – raising the qualitative and the quantitative
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ISBN : 9780974211428
level of the business entity, economic system, the security criteria for simple reproduction
should determine the parameters for the threshold state of survival or preservation of the level
within reproduction of the same scope. Let us mention here that the economic security criteria
for simple reproduction are directly connected with the conditions of the pre-crisis state of the
business entity, economic system, and the parameters of the crisis, threshold state of survival
predetermine the inevitable choice: leaving the niche or segment of the given economic
activity or complete retargeting, radical chance in the structure and diversification of the
activity according to the market needs.
Firms or enterprises are the initial form of organization of production, distribution,
exchange and consumption of goods and services. And the dominant factor in them is the
human capital, and all the rest is dead-weight without the first one. Afterwards the fixed and
intermediate capital should be taken into account, as well as the level of technological
effectiveness, innovativeness, competency of personnel, conformity of the management level
to the business scope, etc.
Many existing specific features of business entities will require separate consideration of
their economic security parameters. However, to determine the economic security, it would be
enough to focus on the three main levels of determining the criteria of its state:
● economic security criteria determining the parameters of the competitive state of
extended reproduction;
● economic security criteria of simple reproduction determining the parameters of
maintaining the level within the pre-crisis state of the business entity;
● economic security criteria determining the threshold parameters of survival of the
business entity.
These main levels of determining the criteria of the economic security state are universal
and acceptable for firms, business entities, as well as for economic systems: regional, national
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ISBN : 9780974211428
and global economies. Nevertheless, each economic system has its own specific features.
Thus, for determining the economic security criteria for a firm, the conditions of extended
reproduction, simple reproduction and threshold level of survival in development should be
detected.
The economic security criteria of the competitive state of a firm can be determined
having detected the conditions of this business entity’s extended reproduction conditions.
Thus, among the criteria of extended reproduction and maintenance of the competitive state of
the business entity’s economic security there are the following provisions:
1) С1 + С2 +V + m = W;
2) [(V + m) : (С1 + С2)] >0;
3) 1.5 < [m : (С1 + С2+V)] > 1,
where W – gross output; С1 – amortization of durable means of production; С2 – intermediate
product; V – salary; m – profit.
The first condition implies that the structure of the gross output (W) features all the abovementioned elements: materialized costs (С1 + С2), added value (ДС = V + m), which allows
ensuring extended reproduction where a part of the profit is spent on the business entity
development. And the second condition should be observed, where the effectiveness of using
the materialized costs should be above zero. Further, the profitability should be taken into
account, as the ratio of the profit to the materialized and live labour costs:
{Р = [m : (С1 + С2+V)]}.
Here it is proposed in the form of the third inequation, where the profitability would be above
1 but not more than 1.5. In practice, there are frequent cases when the profitability is two-fold
and more. But this selfishness is punished, being the base of crises, and it contradicts the laws
of the sacred books, the laws of the Supreme Being – the Absolute.
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The criteria of conditions of simple reproduction and maintenance of the level within the
pre-crisis state of the business entity’s economic security include the following provisions:
1) С1 + С2 +V = W;
2) 0< [V : (С1 + С2)]< 1;
3) m
0.
In this event the profit is approaching zero, the effectiveness of using the materialized
costs, production means, labour tools is reduced because the profit is minimized or not
available. However, in practice the owners are not left without profit. They reduce the amount
of the normal salary to the minimum and thus gain that amount of the owner’s income that
seems to be the profit, which leads to reduction of hired labour and increase of partial
unemployment in the hidden and express forms.
The economic security criteria of the crisis state determining the threshold parameters of
the business entity’s survival are as follows:
1) С1 + С2 = W;
2) V
0;
3) m
0;
4) (С1 + С2) = 1.
The economic security criteria of the business entity’s crisis state show the threshold
parameters of survival where in the structure of the gross output there is no profit, and the
salary and payback of the materialized costs are equal to one. In this case radical changes
should be made in production, the market niche should be changed, or the business entity
should leave this sector of economic activity.
The economic security criteria of the conditions of extended reproduction, simple
reproduction and threshold level of survival of business entities are also major for economic
systems of national and global economies. However, expanding the scope needs additional
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consideration of the structure and correlation of components in ensuring extended and simple
reproduction of economic systems.
Thus, the economic security criteria of the conditions of the national economy’s
competitive state include the following provisions making it possible to expand the scope of
reproduction [1, p. 48-52]:
1) WI > I, II, III, IV (С1 + С2);
2) WII >  II, V (С1 + С2);
3) WIII >  III, VI (С1 + С2);
4) W IV >  IV, VII (С1 + С2);
5) WV + WVII >  I, II, III, IV, V, VI, VII, VIII, IХ (V + m2)
6) WVI >  I, II, III, IV, V, VI, VII, VIII, IХ (m1).
Let us not here that W is the aggregate cost of goods of the division’s industries; the
Roman numerals from I to IX inclusive represent the order of the division numbers: division I
– production of production means for production of production means; division II –
production of production means for production of consumption goods; division III –
production of production means for production of production service means; division IV –
production of production means for production of non-production service means; division V –
production of consumption goods; division VI – production services; division VII – nonproduction services; division VIII – commodity circulation of production means; division IX
– commodity circulation of consumption goods. С1 – amortization of durable production
means; С2 – intermediate product; V – salary; m1 – investment deductions from the profit; m2
– normal profit; m3 – superprofit; the symbol  means the sum; Wср. – average value of the
divisions’ goods cost.
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The economic security criteria of the conditions of the national economy’s pre-crisis
state include the following provisions:
1) WI =  I, II, III, IV (С1 + С2);
2) WII =  II, V (С1 + С2);
3) WIII =  III, VI (С1 + С2);
4) W IV =  IV, VII (С1 + С2);
5) WV + WVII =  I, II, III, IV, V, VI, VII, VIII, IХ (V + m2)
6) WVI = I, II, III, IV, V, VI, VII, VIII, IХ (m1).
7)  W =  С1 + С2 + V;
8)  m
0.
These conditions predetermine reduction of the aggregate profit to zero, which leads to
the level of simple reproduction. That is why many authors point at the need for the
investment volume within 25% of the GDP for ensuring extended reproduction [2, p. 18].
It should be mentioned here that reduction of profit just in a certain part of divisions
and industries directly influences the economic state of others, thus conditioning the transition
to the pre-crisis state of the national economy.
The economic security criteria for the conditions of the crisis state determining the
threshold parameters of the national economy’s survival include the following provisions:
1) WI < I, II, III, IV (С1 + С2);
2) WII < II, V (С1 + С2);
3) WIII < III, VI (С1 + С2);
4) W IV < IV, VII (С1 + С2);
5) WV + WVII <  I, II, III, IV, V, VI, VII, VIII, IХ (V + m2)
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6) WVI < I, II, III, IV, V, VI, VII, VIII, IХ (m1).
7) W = С1 + С2;
8) m
0.
9) V
0.
These inequations result in reduction of the added value to zero, predetermining
unemployment, reduction of the volume of production of goods and services to the threshold
level of development, which may bring about the destruction of the economic system, in
particular, the national economy. And referring to the global economy these conditions
predetermine global economic crises.
The conditions of the national economy’s threshold development are confirmed by the
factual data of the economic crises. Thus, during the Great Depression in the USA the fall of
the GDP was up to 40% [2, p. 20], which in the future could have resulted in
deindustrialization of the society. Approximately the same level of the recession in the USSR
brought about the collapse of the empire.
Based on taking into account the parameters of the economic crisis manifestation, experts
determine the economic security criteria of the threshold state of the national economy’s
development. “However, determining the limiting threshold values, - rightly remarks the
Russian researcher V.A. Bogomolov, - might be guilty of subjectivism and eclectism” [2, p.
18]. Thus, to avoid subjectivism, inaccuracy, we should proceed from the conditions of the
national economy’s simple and extended reproduction. Taking these provisions and experts’
opinions into account, we offer the following economic security indicators.
The number of the indicators could be increased for a more profound analysis of the national
economy’s state. But this range of the indicators is sufficient for the general idea of economic
security. In Chart 1, the data marked with the asterix (*) have been taken from various
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competent sources [2, p. 18-25; 3, p. 245-246; 4, p. 184; 5], and the rest have been determined
by the author.
The volume of the GDP during the global economic crisis over 2008-2009 in Kazakhstan
did not rise a lot (103.2-97.5%). But, should the real state of the financial system, small and
medium business, and fall of oil product and metal prices 4-3 times be taken into account,
without the state support this indicator would have been equal to 70%, the level of the GDP
fall would have amounted to 30%, as the major factors have significant negative values
indicated in the last column of the chart. And it does not take into account many other – not
less important – negative factors of economic, social and ecologic nature.
Chart 1 Main economic security indicators of the national economy’s crisis state
#
Indicators
1
GDP volume as a whole, %
2
Level of GDP fall, %
of pre-threshold, of
crisis state
threshold,
crisis state
100-85
60-80
10* - 15
of
Kazakhstan’s
economy state in
2008-2009
100-70
30-
0-30
20*-
12*-28
40*
3
Inflation level per annum, %
10* - 15
30
4
5
6
7
8
9
10
Volume of investments, % to
GDP
Level of unemployment, %
Gap between income of 10%
of population with the highest
yield and of 10% of lowincome groups (times)
Ratio of population living on
poverty line, %
Ratio
of
government
allotments for science from
GDP, %
Ratio of depreciation of
durable means of production,
%
Ratio of import in domestic
consumption, %
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25*
7 - 10*
20*
26.4 – 30.1*
7.4*- 28
8*
10*
7 - 10*
20 - 30
11.1*- 30
2*
1*
0.21*
30
40
60-70*
30*
40
42.6*
20
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ISBN : 9780974211428
And for determining the economic security of the national economy’s competitive state
the conditions of extended reproduction should be considered. They should include social,
ecologic and economic indicators characterizing threshold achievements for maintaining the
national economy’s competitive state: the ratio of the processing industry in the GDP; the
ratio of the informal economy in the GDP; the ratio of the national debt in the GDP; the ratios
of expenditure on science, education, culture and healthcare in the GDP; the GDP per capita;
the ratios of monthly salaries and pensions of scientists, teachers, medical workers, civil
servants in the GDP per capita per annum, etc. [2, p. 20-23].
The modern environment of globalization requires determining the economic security of
interstate formations and of the global community as a whole, as the global business is
strengthening contradictions of national economies, the difference in the level of income of
highly developed countries as compared to most developing countries is increasing manyfold,
and the ecology is actively getting worse. The mankind may find itself in the conditions of
self-destruction due to internal and external contradictions and threats: spiritualculturological, demographic, technogenic, economic, military and ecologic ones.
Solving the problems of economic security on the international and global levels needs
using the criteria of the global business’s extended reproduction, where the following should
be taken into account: conditions of harmonization of international relations, proportionality
of development of the global economy’s structure components, i.e. national and international
economies. However, the modern world is dominated by the rules of the game for enrichment
of strong states at the expense of impoverishment of the weak ones, which are the majority.
This trend of the mankind development is a dead-end option and way to self-destruction. This
track of development contradicts the laws of the Sacred Books and the Supreme Being.
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Thus, the need for monitoring of the public business system economic security will make
it possible to avoid social-economic turmoil, to find ways of progressive and efficient
development in the globalization environment.
References
1.Ainabek, K.S. Methodology of Market Economy Socialization.- Karaganda, 2009.
2.Bogomolov, V.A. Economic Security. – M., 2006; Glaziev, S. Behind the critical line. – M.,
1996.
3.Economic and National Security/Ed. by Goncharenko, L.P. – M.., 2008.
4.Kazakhstan in 2007. Statistic Collection/Ed. by Meshimbayeva, A.E./Statistic Agency of
the Republic of Kazakhstan. - Astana, 2008.
5.www.stat.kz - 15.06. 2010.
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