Kuandyk Ainabek
The Philosophy of Life and Business
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CHAPTER 5. DETERMINATION OF MONETARY EQUIVALENT OF MAN’S LIFE IN MODERN CONDITIONS
The problem of determining the value of the man’s life is getting more and more burning in developing countries, where the degree of exploitation of hired workers is quite high, going off scale to 200-500 per cent and more, and their life is virtually unprotected. Therefore the possessor looks at the hired worker as at an instrument which should be exploited to the maximum and put on the scrapheap with depreciation. There are multiple examples of it, both within the CIS and Kazakhstan. But the history shows that such a psychology of possessors, resulting from the traditional rules of the game within the scope of the state, leads to stagnation and antagonism in development of economy and community. Hired workers are the majority of the country’s population, and they are masters of innovation, economic and production processes. Thus, in Kazakhstan, the state should legally fix the procedure of determining the man’s life value, to change the attitude of possessors, monopolists and firms to the hired worker and so direct the development of economy to the social and innovative orientation. The competitive ability of the country and firms, the prosperity of community will depend on it, and the status of the worker will rise.
It should be borne in mind that the man is the goal and initial, basic element, or the core of the economic system and public business. Therefore the evaluation of his life in monetary terms is needed as an essential element, especially if the mankind is developing in the environment of the market and social orientation of the economy, where relations between the possessor and the hired worker, and the state, should be harmonized. This approach will facilitate a qualitative transition to the new level of economy and community development. The confirmation to it can be found in highly developed countries: Japan, Sweden, Finland, the USA and others. Thus, for instance, the economic equivalent of the average man in the USA in 2005 was 2.63 million dollars, in Sweden – 2.48 million dollars, in the UK – 2.32 million dollars. Upon the whole, in economically developed countries the evaluation of the man’s life ranges from1 1 to 9 million dollars, and actual payouts to families of casualties account for 0.5 to 100 million dollars per casualty [1]. This evaluation of the man’s life will make any possessor, entrepreneur, state official think, first of all, about the security of their hired worker or customer for whom they should be responsible.
And what is the situation in Russia and Kazakhstan with regards to the economic equivalent of the average man’s life? The practice of life shows that the lives of the Russians and the Kazakhs are evaluated as much cheaper; it can be said that their lives’ value is artificially marked down, as the policy is aimed at protection of interests of possessors and entrepreneurs, whereas it grossly violates the rights of hired workers, citizens of the country with the same, equal rights.
Resorting to the data from the practice, insurers note that “in average a human life in Russia is evaluated approximately as 3 million rubles (or 107.2 thousand US dollars). The data of the survey have shown that the average amount of compensation depends on the respondent’s belonging to a certain property group. Whereas in the lower property groups the amount of the compensation is at the level of 2.6-2.7 million rubles, in the upper property group the figure is 4.25 million rubles. By now, only the payouts to the relatives of the casualties in “Ulianovskaya” mine (3.2 million rubles) have met these requirements” [1].
In Kazakhstan, there is also a specific example where the women whose husbands died on September 20, 2006, during the explosion in the mine named after Lenin in the city of Temirtau, filed lawsuits for moral damage against JSC Mittal Steel Temirtau, evaluating their losses as 7 million tenge per each. But all families of the casualties received compensations in the amount of 10 annual salaries. The executives of JSC Mittal Steel Temirtau claim that they paid 2.8 million tenge (or 608.7 thousand Russian rubles) for buying lodgings. In addition, all loans taken by the dead miners were closed, and studies of their children-students and those who wished to get an education were paid for. Therefore the company does not intend to increase the amount of the compensations. However, the aggrieved families of the workers believe that the compensations they received do not correspond to the extent of the moral damage they incurred [2]. This doubt in evaluation of life of Kazakhstan’s and Russia’s citizens witnesses the lack of the scientific methodology for determining this phenomenon.
In the mass media, they write: “At present there is no consistent method for calculation of the monetary equivalent of the man’s life in Russia. In each case, the insurance amount is calculated individually, and even if the cases are similar, payouts to the relatives of the casualties differ a lot. The sociologic research with the view of determining the economic equivalent of the man’s life value in Russia was made by the experts of “Rosgosstrakh”. The population survey showed that almost 90% of the country’s residents think that the amounts now paid by the authorities to the casualties of catastrophes are insufficient. But the amount they think acceptable is over ten times lower than that payable in the USA in similar cases” [1].
The monetary evaluation of the citizens’ life is made by the insurers mainly on the basis of the amount of their salary and income gained by the victim of the industrial accident or accident through the fault of service providers for a particular period, for instance, 10-30 years. They also take into account the amount of the life insurance of the customer who had found themselves in a fatal situation. And the amounts of the compensations in the examples of Western countries quoted above also differ on this base.
With regards to it, the Russian author S. Guriev writes: “the value of life is equal to the amount of the “human capital” – how much added value this man produces over his entire life”, and as the second component in determination of life value, he proposes the average duration of labour activity, which is equal to about 40 years [3]. Furthermore, trying to find the correct option, he emphasizes that “an attempt to evaluate the Russian man’s life can be made by extrapolating the American data. The analysis shows that when the incomes is increased X times, the value of life is increased only as multiplied by the square root from X. Therefore the value of the Russian man’s life is about 3.5 times (square root from the ratio of the GDP per capita in Russia and in the USA) lower than the value of the American’s life” [3].
It should be mentioned that S. Guriev’s viewpoint at determination of the man’s life value, where using the figure of the added value per capita, fully coincides with our own solution. However, as for the second component, we propose to take not the average duration of labour activity, which is equal to about 40 years, but the average lifespan of the country’s citizens (60-65 years, depending on the national life standard). The evaluation should be made not only on the base of the man’s contribution to the national economy but on the base of his entire value over the average lifespan of the country’s citizens based on the GDP per capita, as the latter figure also takes into account the share of everyone in the common outcome. Thus, it would be correct to use these two figures in determining the man’s life value.
Further, the monetary evaluation of the people’s life should not be based on the average value of the salary, as its differentiated amounts seem to be discrimination of significance of each country’s citizen’s life, while the states declares their equality and equal right for life. The calculation of the life value (S) should be based on the figure of the GDP per capita (Y*) and the average lifespan of the country’s citizens (R). And then it will be determined as the product of the GDP per capita (Y*) times the average lifespan of the citizen (R):
S = Y* • R. (1)
More prosperous citizens can insure their lives for a bigger amount than the value guaranteed by the state by law, and the compensation will be payable by the direct parties in fault of the tragedy and insurance companies. If the figure of the GDP per capita (Y*) is equal to USD 6771.6 in Kazakhstan for the year 2007, and the average lifespan is 63 years, then the value of the Kazakhstan citizen’s life should be determined as USD 6771.6 • 63 = USD 426610.8, or 52.3 million tenge [4, p. 427]. For Russians, this amount will be somewhat higher, over 10.5 million rubles. Based on the value of life, the state should build its entire social policy, esteeming the life of fellow citizens. Then, the evaluation of the injury, industrial accident (T)) should be based on the amount of the life value, with the adjustment based on the coefficient (k) of the extent of the damage to health, which should range from 1 to 0, and plus the disability allowance per year of life (p). The amount of the disability allowance should be based on the amount of the average salary and be at least one third of it. Then Т=S• k+ p. (2)
Comparing the figures of life value of Kazakhstan residents and those of Western countries, we will see a significant difference, as their GDP per capita is much higher, as well as their income, salary, and average lifespan.
Our opponents may contradict saying that the figure of the country’s citizens’ lifespan (R) should be reduced by the part already lived. On the one hand, it seems correct, but in this case they do not take into account the part of the value added by them, which should have been repaid to them in full, considering their share in the overall wealth of the country. The unlived life of the man’s average lifespan counts only by the reason that he, having such a potential prescribed by the state, should have nurtured and fostered children for ensuring both reproduction of population and economy in the timing space. Therefore the compensation for losing a member of the family should be fully paid for the continuation of the kin, growth of population. It should be specially stressed that it is the growth of population and level of community and economy management that will determine the national competitive ability. It is proven by the rapid development of China.
Furthermore, we should state that the laws should be supplemented with the right for getting the equivalent of the life value of the victim of industrial accident or harmful services given only to the family members, not to the succeeding relative.
Therefore, knowing the science-based evaluation of life and injury, industrial accident, people should stand for their rights together with trade unions, deputies, attorneys, parties and international organizations representing interests of the man and of the country’s citizens. The consistent methodology of determining the monetary equivalent of the man’s life will make it possible, in the age of globalization, for socially oriented countries to take actual care of the man, creating civilized conditions of harmonious personal development and humanization of community.
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