The economy is not static. She, like a living being, is constantly changing. The level of production and employment of the population changes, demand rises and falls, prices for goods rise, and stock indices collapse. Everything is in a state of dynamics, an eternal cycle, periodic fall and growth. Such periodic fluctuations are called business or economic cycle. The cyclical nature of the economy is characteristic of any country with a market type of economic management. Economic cycles are an inevitable and necessary element of the development of the world economy.

Business cycle: concept, causes and phases

(economic cycle) is a periodically recurring fluctuation in the level of economic activity.

Another name for the business cycle is business cycle (business cycle).

In essence, the economic cycle is an alternating increase and decrease in business activity (social production) in a single state or throughout the world (certain region).

It is worth noting that although we are talking about the cyclical nature of the economy here, in reality these fluctuations in business activity are irregular and difficult to predict. Therefore, the word “cycle” is rather arbitrary.

Causes of economic cycles:

• economic shocks (impulse impacts on the economy): technological breakthroughs, discovery of new energy resources, wars;
• unplanned increase in inventories of raw materials and goods, investments in fixed capital;
• changes in raw material prices;
• seasonal nature of agriculture;
• the struggle of trade unions for higher wages and job security.

It is customary to distinguish 4 main phases of the economic (business) cycle, they are shown in the figure below:

The main phases of the economic (business) cycle: rise, peak, decline and bottom.

Business cycle period– the period of time between two identical states of business activity (peaks or bottoms).

It is worth noting that, despite the cyclical nature of fluctuations in the level of GDP, its long-term trend has upward trend. That is, the peak of the economy is still replaced by depression, but each time these points move higher and higher on the graph.

Main phases of the economic cycle :

1. Rise (revival; recovery) – growth in production and employment.

Inflation is low, but demand is rising as consumers look to make purchases put off during the previous crisis. Innovative projects are being implemented and quickly pay off.

2. Peak– the highest point of economic growth, characterized by maximum business activity.

The unemployment rate is very low or virtually non-existent. Production facilities operate as efficiently as possible. Inflation usually increases as the market becomes saturated with goods and competition increases. The payback period is increasing, businesses are taking out more and more long-term loans, the possibility of repayment of which is decreasing.

3. Recession (recession, crisis; recession) – a decrease in business activity, production volumes and investment levels, leading to an increase in unemployment.

There is an overproduction of goods, prices are falling sharply. As a result, production volume decreases, which leads to increased unemployment. This causes a decrease in household incomes and, accordingly, a reduction in effective demand.

A particularly long and deep recession is called depression (depression).

The Great Depression Show

One of the most famous and longest-lasting global crises is “ The Great Depression» ( Great Depression) lasted about 10 years (from 1929 to 1939) and affected a number of countries: the USA, Canada, France, Great Britain, Germany and others.

In Russia, the term “Great Depression” is often used only in relation to America, whose economy was hit particularly hard by this crisis in the 1930s. It was preceded by a collapse in stock prices that began on October 24, 1929 (“Black Thursday”).

The exact causes of the Great Depression are still a matter of debate among economists around the world.

4. Bottom (through) – the lowest point of business activity, characterized by a minimum level of production and maximum unemployment.

During this period, excess goods are sold out (some at low prices, some simply spoil). The fall in prices is stopping, production volumes are increasing slightly, but trade is still sluggish. Therefore, capital, not finding application in the sphere of trade and production, flows into banks. This increases the money supply and leads to a decrease in interest rates on loans.

It is believed that the “bottom” phase usually does not last long. However, as history shows, this rule does not always work. The previously mentioned “Great Depression” lasted for 10 years (1929-1939).

Types of economic cycles

Modern economic science knows more than 1,380 different types of business cycles. The most common classification is based on the duration and frequency of cycles. In accordance with it, the following are distinguished: types of economic cycles :

1. Short-term Kitchin cycles- duration 2-4 years.

These cycles were discovered back in the 1920s by the English economist Joseph Kitchin. Kitchin explained such short-term fluctuations in the economy by changes in world gold reserves.

Of course, today such an explanation can no longer be considered satisfactory. Modern economists explain the existence of Kitchin cycles time lags– delays in firms obtaining commercial information necessary for decision-making.

For example, when the market becomes saturated with a product, it is necessary to reduce production volume. But, as a rule, such information does not arrive to the enterprise immediately, but rather with a delay. As a result, resources are wasted and a surplus of hard-to-sell goods appears in warehouses.

2. Medium-term Juglar cycles– duration 7-10 years.

This type of economic cycle was first described by the French economist Clément Juglar, after whom they were named.

If in Kitchin cycles there are fluctuations in the level of utilization of production capacities and, accordingly, in the volume of inventory, then in the case of Juglar cycles we are talking about fluctuations in the volume of investments in fixed capital.

Added to the information lags of Kitchin cycles are delays between the adoption of investment decisions and the acquisition (creation, construction) of production facilities, as well as between the decline in demand and the liquidation of production facilities that have become redundant.

Therefore, Juglar cycles are longer than Kitchin cycles.

3. Rhythms of the Blacksmith– duration 15-20 years.

Named after the American economist and Nobel Prize winner Simon Kuznets, who discovered them in 1930.

Kuznets explained such cycles by demographic processes (in particular the influx of immigrants) and changes in the construction industry. Therefore, he called them “demographic” or “construction” cycles.

Today, some economists consider Kuznets rhythms as “technological” cycles caused by technology renewal.

4. Long Kondratiev waves– duration 40-60 years.

Discovered by Russian economist Nikolai Kondratiev in the 1920s.

Kondratiev cycles (K-cycles, K-waves) are explained by important discoveries within the framework of scientific and technological progress (steam engine, railways, electricity, internal combustion engine, computers) and the resulting changes in the structure of social production.

These are the 4 main types of economic cycles in terms of duration. a number of researchers identify two more types of larger cycles:

5. Forrester cycles– duration 200 years.

They are explained by a change in the materials used and energy sources.

6. Toffler cycles– duration 1,000-2,000 years.

Due to the development of civilizations.

Basic properties of the business cycle

Economic cycles are very diverse, have different durations and natures, but most of them have common features.

Basic properties of economic cycles :

1. They are inherent in all countries with a market type of economy;
2. Despite the negative consequences of crises, they are inevitable and necessary, as they stimulate the development of the economy, forcing it to ascend to ever higher levels of development;
3. In any cycle, 4 typical phases can be distinguished: rise, peak, decline, bottom;
4. Fluctuations in business activity that form a cycle are influenced not by one, but by many reasons:
   - seasonal changes, etc.;
   - demographic fluctuations (for example, “demographic holes”);
   - differences in the service life of fixed capital elements (equipment, transport, buildings);
   - unevenness of scientific and technological progress, etc.;
5. In the modern world, the nature of economic cycles is changing, under the influence of economic globalization processes - in particular, a crisis in one country will inevitably affect other countries in the world.

Interesting neo-Keynesian Hicks–Frisch business cycle model, possessing strict logic.

Neo-Keynesian Hicks-Frisch business cycle model.

According to the Hicks-Frisch business cycle model, cyclical fluctuations are caused by autonomous investments, i.e. investments in new products, new technologies, etc. Autonomous investments do not depend on income growth, but on the contrary, they cause it. Income growth leads to an increase in investment, depending on the amount of income: valid multiplier effect - accelerator.

But economic growth cannot occur without limit. The barrier limiting growth is full employment(line AA).

Since the economy has reached a state of full employment, further growth in aggregate demand does not lead to an increase in the national product. As a result, the rate of wage growth begins to outstrip the rate of growth of the national product, which becomes inflation factor. Rising inflation has a negative impact on the state of the economy: business activity of economic entities falls, the growth of real incomes slows down, and then they fall.

Now the accelerator acts in the opposite direction.

This continues until the economy hits the line BB – negative net investment(when net investment is insufficient even to replace worn-out fixed capital). Competition is intensifying and the desire to reduce production costs encourages financially stable firms to begin renewing fixed capital, which ensures economic growth.

Galyautdinov R.R.

© Copying of material is permissible only if a direct hyperlink to

It is known that the functioning of a capitalist economy is subject to cyclical fluctuations.

The cyclical nature of macroeconomic processes was first identified back in the 19th century in connection with periodic crises of overproduction in England (since 1825), which have since been regularly repeated at intervals of 7-12 years.

Since 1825 periodic crises those. declines (recessions) in national production and, above all, industrial production And employment, as well as other indicators, are repeated with approximately the same frequency, although with different intensity, and since 1857. This phenomenon began to manifest itself on a global scale.

Such crises are always followed climbs national production. And since it's alternation recessions And rises(hesitation) wears periodic, that is natural character, obvious cyclical nature macroeconomic fluctuations. It is this cycle that modern economists have in mind when they use the term “economic (or business) cycle” (business cycle).

1. The concept of the business cycle. Main components of economic dynamics. Phases of the economic (business) cycle.

2. Classical and Keynesian interpretations of cyclical fluctuations.

3. Modern theories of macroeconomic fluctuations.

4. Forecasting problems.

The concept of the economic (business) cycle. Main components of economic dynamics. Phases of the cycle.

Economic cycle representssuccessive and periodically recurring recessions and increases in economic (business) activity against the background of the general tendency (trend) of economic growth.

Figure 7.1 shows the standard interpretation of the loop: potential GDP in combination with actual GDP.

The purple prime line characterizes the general trend of economic growth, i.e. long-term dynamics of potential GDP.

The wavy red line characterizes short-term dynamics of actual GDP.

As follows from the presented diagram, short-term analysis is required to identify cyclicality as a form of movement (functioning) of a capitalist market economy, while long-term analysis, the subject of which is potential GDP, is necessary to identify patterns of economic growth and development.

In fact, detecting the business cycle is not that easy. The fact is that a market economy (like any other) is characterized by a wide variety of fluctuations, for example, seasonal, of both natural and anthropogenic origin. Both irregular and random fluctuations can be detected. Therefore, scientists are faced with the need to develop methods for eliminating such fluctuations in the course of macroeconomic analysis.

Although the cyclical development of the capitalist economy was noticed long ago and is recognized by most economists, not everyone shares the opinion about the existence economic (business) cycle. Term « cycle » implies recognition natural and therefore regular And projected nature of macroeconomic fluctuations, and also - this is the main thing - recognition endogenous (internal) nature of these vibrations.

Some economists argue that macroeconomic fluctuations– fluctuations in business activity – irregular, since they are conditioned exogenous (external to the economy) factors and, therefore, these fluctuations not natural And not predictable.

Phases of the economic (business) cycle.

Economic ( business, medium term ) cycle consists of four phases (Fig. 7.2):

climb (revival),

highest point of the cycle – peak loop(" boom»),

slump or recession(can go to depression),

lowest point of the cycle (depression, bottom).

Rise (revival) begins with the growth of actual GDP and reducing unemployment, which due to the growth of aggregate demand, primarily investment. Then a slight increase in the price level begins ( premature inflation). Once the economy reaches potential GDP , the next phase begins.

GDP

recession

depression

The presented modern cycle structure is essentially a two-phase cycle model: phase recession(recession) and phase expansion (climb). Depression And peak act as turning points between these two phases.

Has become widespread and four-phase(Fig. 7.3) cycle model. Even K. Marx identified four phases (although he meant industrial cycle):

a crisis(decrease in production volume, increase in unemployment);

depression(the fall in production and the rise in unemployment stops);

revival(some reduction in unemployment, the beginning of growth in production volume - up to so on) A);

climb(rapid growth in production and employment after the so-called A).

Dot A represents the maximum level of economic activity achieved in the previous cycle. The dotted line touching the peak points of the cycles represents the long-term (secular) trend of economic growth.

Cyclicity was first identified as a statistical pattern in the 60s of the 19th century. French statistician K. Juglar. The credit for the theoretical explanation and analysis of the (industrial) cycle belongs to K. Marx. Therefore, these cycles are called Marx–Juglar cycles.

What is characteristic of a crisis (or recession, or recession)?

In the past (in the 19th century), crises usually began with a suddenly discovered gap between excessive aggregate proposal and insufficient aggregate demand. As a result, prices and profits fell sharply, dragging down production and employment (rising unemployment).

K. Marx explained crises (and therefore the cycle) endogenously inherent in a capitalist economy is the contradiction between social nature of production And private in nature assignments production results:

The social nature of production means the universal interconnection and interdependence of macroeconomic processes.

Private nature of appropriation production results is manifested in the fact that firms seeking to maximize profits make decisions and act autonomously ( atomistically– K. Marx’s term), i.e. independently of each other.

Autonomous decisions and the actions of firms based on them lead to violations private, general, and finally macroeconomic equilibrium .

Violations of the conditions of macroeconomic equilibrium are explosive character: suddenly appear all the contradictions that accumulated in the economy in the previous period, first of all:

contradiction betweenproduction and consumption (hence the name overproduction crisis);

contradiction betweenlabor and capital (manifested, in particular, in the growth of unemployment).

other macroeconomic indicators are violatedproportions (what we formulate as the conditions of macroeconomic equilibrium, which manifests itself, in particular, in a sharp increase savings compared with investment demand, primarily due to the accumulation of a depreciation fund, which J.M. Keynes later paid special attention to).

Thus, according to Marx, crisis (recession, recession) is a period of forced return to macroeconomic equilibrium (through restoration of private and general equilibrium). This return opens the way to the new cyclical rise economy. Then everything repeats all over again.

Marx proved that cyclicality is an immanent form of economic movement inherent in capitalism.

Marx believed that based on the periodicity of crises(i.e. at the basis of the cycle) lies periodic mass renewal of fixed capital. The period itself corresponds in terms of duration to the average service life of the active part of fixed capital - industrial equipment.

For our compatriots, the word “crisis” has long become almost familiar. We hear it quite often in the news - after all, the economic crisis in Russia happens even more often than once a decade (if we take the period after the collapse of the Soviet Union).

However, not everyone knows exactly what the causes of the economic crisis in Russia are and how this threatens the ordinary citizen.and when it will end.IQReview I have collected up-to-date information and answers to similar questions in one place.

What is an economic crisis and what are its symptoms?

To summarize: an economic crisis is a set of events during which significant and sharp drop in production.

T This situation has a number of signs, including:

Rising unemployment rate.

Significant depreciation of the national currency.

Imbalance of supply and demand in various markets for goods and services.

Decrease in the solvency of citizens.

Decrease in GDP (or cessation of growth - if before this GDP was steadily increasing).

Decrease in the pace and volume of production in various industrial sectors.

Outflow of foreign capital.

Reducing the cost of raw materials.

The listed “symptoms” are only the main ones - in fact, the list of problems in the economy is much longer. They usually manifest themselves sharply, comprehensively (several points at once), and in a significant volume. For example, if the unemployment rate in the country increases by 5% over a year, then this is bad, but far from a crisis. But if in six months the national currency has depreciated by 30%, GDP has fallen, several thousand enterprises have gone bankrupt, and performance in various sectors of the economy has fallen - this is already a crisis.

Classification of crisis situations

Since a crisis is a large-scale phenomenon, it can be divided into various categories based on a number of characteristics:

Partial or sectoral. It is characterized by the fact that it covers a separate sector of the economy without leading to significant problems in other areas.

Cyclical. Characterized by the fact thatoccurs regularly (repeated at approximately equal time intervals). Typically, its causes are the obsolescence of industrial equipment and technologies, which leads to higher prices for products. To overcome such problems, a reorganization of the production structure is required.

Intermediate. It is similar to cyclical, but differs in that problems do not appear so acutely and sharply. Also, the intermediate crisis is not regular - it does not repeat itself at approximately equal time intervals.

Crisis situations can also be divided by localization. They can occur in a single region, in a single country, several countries (neighboring), or in a large number of countries. The global economic crisis is the last option, when an economic decline is observed in several major countries at the same time.

Modern classification of economics

According to the NBER classification (National Bureau of Economic Research, USA), the state of the modern economy consists of only 4 phases:

Economic cycle

Peak (when the economic situation is at its most comfortable level).

Recession (when stability is disrupted and the economy begins to steadily deteriorate).

Bottom (lowest point of decline).

Revival (overcoming a low point, followed by a way out of a crisis situation).

N A little history: when have serious economic crises ever occurred?

To confirm the words that the global economic crisis is a regular phenomenon, here is a list of the largest economic collapses:

1900-1903. The crisis suddenly began in most European countries, and a little later in the United States. This economic crisis in Russia (in those years - still the Russian Empire) began even earlier - in 1899. Moreover, in Russia it developed into a protracted depression, which lasted about a decade - until 1909.

1914-1922, First World War. The crisis erupted due to military action that stopped or seriously affected the operations of thousands of companies in participating countries. The problems began even before the outbreak of hostilities - when the situation began to heat up and panic began in the financial markets.

“Price Scissors”, 1923. The collapse that affected the economy of the “young” USSR. It arose due to the lack of balance between the prices of industrial and agricultural goods.

"The Great Depression", 1929-1939. It had the strongest impact on the USA and Canada, to a lesser extent on France and Germany, and was also felt in other developed countries. The reasons for this collapse have not been precisely established; there are several versions. It broke out after the stock market crash in the United States, on Wall Street (this is where the expression “Black Monday” came from).

1939-1945, World War II. Naturally, such large-scale military actions led to the decline of the economies of all participating countries and affected other states.

Oil crisis (or oil embargo), 1973. Began due to the refusal of a number of countries (Arab states that are members of OAPEC, Egypt, Syria) to supply oil to Japan, the USA, the Netherlands, Canada, and the UK. The main objective of this action was to put pressure on these countries for supporting Israel in the military conflict against Syria and Egypt. This economic crisis in Russia (USSR at that time) did not bring negative consequences. On the contrary: oil supplies from the Union have increased significantly, and its cost in 1 year has increased from $3 to $12 per barrel.

The collapse of the USSR, the end of the 80s and the beginning of the 90s. The situation that led to the collapse of the Union developed under the pressure of several factors: sanctions from the West, decreased oil prices, lack of sufficient quantities of consumer goods, high unemployment, military operations in Afghanistan, and general dissatisfaction with the ruling elite. The collapse had a strong impact on the countries of the Union, and to a lesser extent on neighboring states (due to the deterioration or complete cessation of cooperation).

Russian crisis, 1994. After the collapse of the Union, the economic situation of the Russian Federation was in a deplorable state, and from 1991 to 1994 the situation steadily worsened. The causes of the problems were errors in state property, loss of economic ties, outdated technologies and equipment in production.

Russian default, 1998. Developed due to the inability to pay government debts. The precondition was the crisis in Asia, a sharp drop in oil prices and a sharp rise in the dollar exchange rate against the ruble (from 6 rubles to 21 rubles in just less than a month). The way out of the situation was protracted and difficult, and lasted for several years (it took different periods for different areas of the economy).

Asian financial crisis, 1997-1998 (one of the reasons for the Russian default). To one degree or another, it affected all states of the planet. It developed due to the very rapid growth of the economies of Asian countries, which is why they began to experience a massive influx of foreign capital. As a consequence, this led to “overheating,” sharp fluctuations in the financial and real estate markets, and subsequently to their destabilization and decline.

2008-2011. The scale and consequences of the economic crisis are comparable to the Great Depression. The collapse developed sharply in the United States, starting with the financial crisis. Having spread to the eurozone, it lasted even longer - until 2013. The crisis had little impact on the Russian segment, and its main consequences were overcome back in 2010.

Current crisis (since 2014). It was reflected in many countries by a sharp decline in the cost of oil. Sanctions that have disrupted economic relations between Western countries and the Russian Federation also have an impact.

Economic situation in Russia: a brief history of the current crisis

Since the last major crisis for Russia has not yet ended, we should dwell on it in more detail.

Economic situation in Russia

One of the first reasons for its development was the “Ukrainian events”, during which the Crimean peninsula passed from Ukraine to Russia. Also, since the first half of 2014, the Russian Federation has been regularly accused of sending troops into the Donetsk and Lugansk regions of Ukraine. There is still no evidence of these accusations, but they still continue to be voiced.

To put pressure on the “aggressor,” Western countries (the United States and a number of European countries) introduced sanctions against the Russian Federation. Restrictions affected the industrial and financial sectors, which led to a sharp deterioration in the situation due to the fact that a number of companies lost the opportunity to receive “cheap” loans abroad and buy foreign equipment (raw materials, technologies).

At the same time, oil prices began to decline rapidly. From 2012 to mid-2014 they were in the range of $100-115 per barrel, and already in December 2014 they reached $56.5 (the lowest point since 2009). After this, the price of oil did not stabilize, but fluctuated regularly, and when it fell, it reached $27.5 per barrel (for the first time since 2003).

Due to the fact that the Russian economy was largely dependent on oil exports, this quickly led to a deterioration in the economy in all its sectors (in addition to the deterioration that arose due to sanctions).

Now (at the beginning of 2017) the country from the economic crisis gradually comes out. The price of oil has stabilized and has been in the 50-57 range since the fall of 2016$ per barrel. Along with the cost of raw materials, the national currency has also stabilized - about 55-60 rubles per dollar.

How do such problems threaten the average citizen?

The crisis is not only felt by companies in various sectors of the economy. It has no less influence on the ordinary citizen. An unfavorable situation leads to the following consequences:

Wages decrease (or slow down, or their growth stops).

Purchasing power decreases (due to rising prices, decreasing wages, and the desire to save).

We have to give up our usual range of products and entertainment.

Opportunities for receiving medical care and education are deteriorating.

Jobs are being cut (this can both lead to dismissal if a person has a job, and makes it more difficult for those who are looking for one).

The selection of goods in stores is decreasing (not always, not critically, and not in all areas).

Add to this other - intangible - problems. For a population whose standard of living is falling, their mood worsens—for every citizen individually. If the situation drags on, social tension may increase: trust in the government decreases, citizens more actively express their dissatisfaction (online, at rallies).

Causes of the crisis

There are many theories and explanations of the causes of crises, but one of the most common is the Marxist version. Proposed by Karl Marx (1st volume of Capital, 1867), it quite accurately describes the essence of problematic situations in the economy. Karl Marx noted that until the end of the 18th century (before the Industrial Revolution, when production began to rapidly develop in many countries), there were no regular cycles of booms and busts in the economy.

According to this theory, crisis is an integral part of the capitalist economy. No matter how stable, reliable and balanced the economic system of the state is, crisis situations still happened in it, are happening and will continue to happen. They can be “tamed,” their impact can be weakened, and they can be made more rare, but they cannot be completely eliminated.

Distributing free food to the unemployed during the Great Depression (USA)

According to the author, this is explained by the fact that any capitalist (owner of an enterprise) strives to increase profits. To do this, you need to sell as many goods as possible at the lowest cost of production. That is, the volume of production is reached to the maximum.

However, no one controls the balance between the total cost of goods produced and the real wages of the population (which always receives less than it produces - otherwise the capitalist would not make a profit). As a result, over time, this leads to the production owner’s profit falling.

To avoid this, he begins to take active steps that are aimed either at increasing the volume of goods or at further reducing production costs. When this does not help, layoffs begin at enterprises until they go bankrupt. As a result, unemployment is growing, and competitors are trying to take over the vacated market space, who will then face the same problems.

To summarize, every new economic crisis arises due to a lack of balance between the production and consumption of goods and services.

If we evaluate more narrowly, then among the causes of problems we can highlight:

Uncontrolled growth of inflation.

Focus on one sector of the economy and insufficient attention to other areas.

Political instability.

Errors in management.

Obsolescence of production.

The production of uncompetitive products that are inferior to imported goods, and at the same time cost no less (or not much less) than them.

Ways out of the crisis

TO Each crisis situation is individual, and therefore there is no single “recipe” for overcoming it. However, we can summarize several basic steps that the authorities need to take to solve the problem:

Diversification of budget funds: creating the maximum number of ways to generate income. In this case, due to a fall in production in one industry (as in oil prices now in Russia), the economy as a whole will suffer less.

Creation of jobs - to increase employment of the population. This is useful for the budget because more funds will come in in the form of taxes, and, in addition, the population will spend more, stimulating production. To create jobs, it is necessary to maintain a conducive environment for doing business.

Containing inflation.

Financial control: exchange rate, interest rate.

Informing the population and enterprises: about the current situation, forecasts and prospects, recommendations for overcoming problems.

Updating the industrial sector: equipment, technologies.

Support for key sectors of the economy, if necessary - adjustment of budget distribution (reducing costs for less important sectors and increasing costs for more important ones).

On the development and causes of financial crises (video)

Greetings, dear readers! I try to visit my grandmother at least once a month.

She still retains clarity of mind and an insatiable interest in events both local and global. Sometimes we can discuss various news with her for hours.

For example, last week we discussed with her the emerging negative trends in the country’s economic development. I want to raise this topic with you, friends. Now I’ll tell you about recessions in the economy - what they are and what consequences ordinary citizens can feel.

What is a recession in the economy, its causes and consequences

A recession is a negative trend in macroeconomics (the national economy), often preceding a crisis. This phenomenon is cyclical in nature and is inevitable for any economic system.

Recession (Latin recessus - retreat) is a concept in macroeconomics that denotes a drop in production rates over a long period (from six months or more).

Warning!

The process is characterized by zero or negative dynamics of GDP (gross domestic product). A recession entails a decrease in business activity and a slowdown in economic development. A reduction in GDP refers to a decrease in the production of goods and a decrease in consumption.

A recession inevitably follows a boom (production boom), which is explained by the cyclical nature of any economic system.

In general, the economic cycle consists of four phases - growth (rise), stagnation (stabilization, absence of any dynamics), recession (fall) and crisis (depression).

The duration of the economic cycle in the modern global world is 10–15 years, which can be tracked by the global financial crises – the 70s, 90s and the last global crisis of 2008–2009.

Causes

There are several main causes of recession, depending on the level of economic development.

For resource-based economies, the decline is driven by lower prices for oil, gas and other exported minerals. The price of raw materials falls, the budget receives less revenue, and a deficit appears that needs to be compensated somehow.

To compensate, tax rates are increased and spending on social needs (education, medicine, etc.) is reduced. Such actions further intensify the decline in production.

In developed (industrial and post-industrial) countries, recession manifests itself as a result of a change in the technological structure, for example, due to the emergence and development of information technology.

The technological structure is understood as the level of development of technology and technology, the main directions of development of scientific and technological progress.

Attention!

It is impossible to influence the indicated reasons for the occurrence of a recession; they arise due to the objective laws of economics, so a recession at the level of an individual national economy will happen sooner or later.

A recession in one country can lead to a recession in other economies, leading to a global crisis.

There are reasons that arise under the influence of market participants. The economic downturn may be caused by problems in the banking sector.

For example, commercial banks have issued too many loans that are not repaid. Then financial organizations are forced to raise rates and raise funds in the foreign and domestic markets.

In a situation when there are too many such banks, the number of loans issued falls, enterprises therefore cannot borrow money and, in the absence of funds, stabilize or curtail production.

Because of this, unemployment is growing, people and companies are not paying off loans, banks are tightening rules, and the situation is entering a vicious circle and getting worse.

Force majeure circumstances, for example, war or a sharp change in energy prices, can plunge the economy into a recession phase. A way out of stagnation is only possible with the participation of the state, which will “pour” money into the economy, supporting various industries and stabilizing the exchange rate of the national currency.

Consequences

The main consequences of a recession in the economy include the following:

• drop in production volumes;
• collapse of financial markets;
• reduction in the volume of loans issued;
• increase in interest rates on loans;
• rising unemployment;
• decline in real incomes of the population;
• decline in GDP rates.

The most powerful and critical consequence of a recession is the economic crisis. Due to the decline in production, the need for jobs and the number of workers decreases. This entails a wave of layoffs and rising unemployment. People begin to consume less, which leads to a decrease in demand for products and an increasing decline in production.

The debt of citizens and organizations to banks is increasing, which, in turn, are tightening the procedure for issuing loans.

Advice!

The volume of lending to individuals and legal entities is decreasing, the volume of investment in industry and science is decreasing, and scientific and technological development is slowing down. The decline in production is followed by a collapse of the securities market - shares of large industrial enterprises sharply lose value.

These events are followed by depreciation of money - inflation, further rise in prices and a decrease in real incomes of the population. Which ultimately leads to dissatisfaction and a decrease in quality of life.

The state is trying to find funds and is increasing its external debt. In the absence of sufficient finance, you have to refinance current loans and take out new ones.

All of these consequences are reflected in one indicator - a decrease in GDP (gross domestic product), which directly depends on the volume of production within the country.

source: http://site/delatdelo.com/spravochnik/terminy/chto-takoe-recessiya-v-ekonomike.html

An economic crisis never happens unexpectedly. It is anticipated by a recession. Any economic system, even a progressive one, sooner or later enters a recession stage. A recession is undesirable, but inevitable.

A recession is a long-term, initially not very pronounced decline in production and business activity, which worsens over time and turns into a crisis.

The recession period is characterized by such phenomena as:

• negative GDP dynamics (both the quantity of products produced and the demand for them decrease);
• low business activity;
• lack of progress in the economy.

A recession is the stage following the stage of rapid economic development. Since all economic systems are cyclical, recession can be considered a natural process.

Warning!

It is known that there are four phases in every economic cycle. Rise and prosperity are inevitably followed by stagnation - a stage of stabilization and stagnation. Stagnation is replaced by recession. The “life cycle” of the system ends with an economic crisis.

It is futile to try to predict when a recession will begin. However, the government can prepare the country for it, take a kind of “depreciation” measures that will partially neutralize the negative phenomena accompanying the recession. A crisis will come only if the state's economic policy turns out to be ineffective.

Causes

An economic downturn does not happen suddenly. It is the result of many events and processes.

The cause of a recession can be global and unexpected changes in the market, which, in turn, are provoked by political changes. Roughly speaking, armed conflicts or jumps in gas/oil prices on the world market may be to blame for a slowdown in production and a decrease in demand for any product.

Unfortunately, the Russian economy is clearly dependent on the cost of oil. As soon as the market price of oil decreases, the budget begins to experience underfunding, which ultimately affects the volume of gross domestic product.

Experts believe that a recession that develops according to this scenario poses the greatest danger to the state, since it cannot be predicted and neutralized in time.

The second possible cause of recession is a total decrease in production volumes. A serious decline in production was recorded in 2008. It amounted to more than 10%.

The lack of “extra” money among citizens and a decrease in their purchasing power also lead to a recession. True, it is believed that a recession caused by these reasons is completely surmountable and does not have such dire consequences as a recession provoked by wars or market turmoil.

Attention!

Another factor causing a recession is capital outflow and lack of investment. Replenishment of the state's fixed capital occurs at the expense of private enterprises.

If the government is interested in these injections, it must provide business with conditions under which it can develop normally within the framework of the national economic system.

Consequences of recession in the economy

Now let's list the consequences of the recession:

1. financial markets collapse;
2. production rates are slowing down;
3. banks limit the issuance of loans;
4. interest rates on loans are rising;
5. the number of unemployed is also growing;
6. household incomes are declining;
7. GDP volume decreases.

All these phenomena together lead to an economic crisis.

The result of the decline in production is a decrease in the need for labor. Industrialists fire people, and they can no longer find a new job. A decrease in income leads to a reduction in needs. As a result, the demand for goods that can be dispensed with decreases. Production does not experience any incentives for development.

Individuals and legal entities become debtors of banks. Circumstances force banks to limit the issuance of loans. Investment in research projects and industrial enterprises is reduced, and the country begins to lag behind in terms of science and technology. Stagnation in the production sector affects the value of shares issued by industrial enterprises. They lose value.

The next stage of the crisis is characterized by rising inflation and the beginning of the devaluation of the national currency. Prices continue to rise and incomes continue to fall. The standard of living of the population is also falling, which leads to mass discontent.

The government is turning to more prosperous countries for financial assistance. The state's external debts are growing. To pay off one loan, you have to take out several others.

All these negative phenomena directly affect the volume of GDP. Its decline indicates a deterioration in the economic situation in the country.

It is noteworthy that there is no consensus among economists about the nature of the recession. Some believe that this phenomenon in itself is not critical, while others believe that recession, collapse and depression are synonymous.

source: http://site/www.temabiz.com/terminy/chto-takoe-recessija.html

Economic recession

What is an economic recession or just a recession? A recession (from the Latin Recessus - retreat) is a decline in production, which is characterized by zero or negative growth of the main macroeconomic indicator - gross domestic product (GDP), lasting for six months or a longer period of time.

Advice!

A recession is one of the phases of the economic cycle that always follows a period of economic expansion, accompanied by the achievement of a peak point in business activity, and precedes the phase of economic crisis and depression.

It is in this state, in a state of recession, that the economies of the vast majority of countries in the world find themselves in at present. Thus, economic growth is necessarily replaced by economic recession.

Depending on the factors that serve as the beginning of the recession phase in the economy, three types of recession are distinguished. In the first case, an economic recession occurs under the influence of unplanned and very profound changes in market conditions.

Among the phenomena that entail such consequences and actually a recession include wars or a sharp change in world prices for natural resources, or more precisely, for oil. An economic recession caused by such phenomena is especially dangerous. Such a recession cannot be predicted or foreseen, so they have a very painful impact on the country’s economy.

The prerequisites for the second type of recession are more likely to be political or even psychological in nature. These include declining levels of consumer confidence or growing uncertainty among entrepreneurs or investors.

Such a recession is less harmful for the country’s economy, and the current situation can be quite easily corrected by lowering interest rates or artificially creating some excitement in the economy.

The third type of recession occurs when the economy loses its equilibrium and is characterized by rapidly rising debts and falling prices in the capital and stock markets.

The prerequisites for the recent global economic downturn and, accordingly, recession were an unprecedented increase in commodity prices caused by active consumption, an unreasonably large number of mortgage loans issued to borrowers with a high degree of risk, as well as the rapid development of the activities of speculators who created a whole world of fictitious capital.

Warning!

An economic recession inevitably leads to a crisis, and in the worst case, to a prolonged depression.

It is impossible to avoid this process, however, the state, which plays an important role in the process of economic recovery, can significantly shorten the duration of the recession and reduce the scale of the consequences of the economic downturn in a particular country and the world as a whole.

What is a recession in the economy

A recession is a depressed state of the economy, a phase of decline and inhibition of all constructive activity. A characteristic feature of a recession is an increase in the unemployment rate, the gross national product (GNP) tends to zero as production declines.

What does the word "recession" mean? Translated from English, recession means “fall, decline.” The word comes from the Latin recessus, which means retreat. Speaking in terms of economic cycles, an economic recession is a moment of decline after a boom, followed by a bottom phase, followed by a rise, after which a peak or boom occurs again.

A variant of a deep recession is called a depression. However, these days the term is completely unpopular. More often they talk about a recession. The most famous great recession or Great Depression occurred in the United States in 1929.

Since then, as economist M. Rothbard notes, the US government was so afraid of something like this happening again that it literally banned the term “depression” and introduced the more common “recession.” But over time, recessions began to occur more and more, so instead of them, the concepts of recession, deviation, and slowdown in production were introduced.

In the global economy, not a single downturn goes unnoticed by other market players. Since in macroeconomics all countries are ultimately “tied together” by a single market for sales and consumption. The largest global recession in recent memory occurred in 2008–2010.

Starting with the collapse of the real estate market in the United States, the economy of the largest power on the continent of North America pulled the whole world with it. This decline led to a reallocation of resources in markets. People in all countries lost money, the savings of many sank into oblivion.

Causes

By definition, the economy develops in cycles. The cycle of contraction (recession, recession) is followed by a cycle of expansion (rise). Due to its cyclical nature, it cannot be said that a recession is an unpredictable or unusual phenomenon. On the contrary, almost any recession can be predicted.

Attention!

In modern economic theory, there are four types of economic cycles of different stage durations (rise, peak, recession, depression) - from 2-3 to 50-60 years. In general, it cannot be said that cycles are so clearly measured; in life, one stage can last longer or shorter, depending on current world events.

The more-mentioned cyclicality can be traced in the model of the 19th century French physician and economist C. Juglar. The duration of each phase, including the recession phase, is from 6 to 12 years.

A typical recession is a decline in business activity for three months or more. Since a recession follows an economic peak, the reasons can be considered the emergence of new technologies, increased harvests, and changes in prices for raw materials. A recession can also be triggered by force majeure in the form of a war, natural disaster or revolution.

The recession is growing like an avalanche: anticipating a possible recession, consumers begin to buy more or, conversely, save, firms begin to produce more or reduce production rates, in a word, massive fluctuations in business activity occur.

The market is trying to find a new equilibrium point, as a result this leads to a decline in production and a decrease in investment activity.

Types

There are three types of recession depending on the causes.

1. Political recession. It is based on psychological reasons. As a rule, it is associated with an increase in investor uncertainty and entrepreneurial doubts. Consumer confidence is declining.
2. Debt recession. Associated with an increase in the country's external debt. Characterized by falling stock prices and outflow of funds. May last for many years.
3. Force majeure recession. Occurs due to powerful factors such as war or a sharp decline in oil prices.

Each type of recession is surmountable and will pass in any case, the question is how long this economic phase will last.

The first type is easily eliminated by increasing citizen confidence, for example, by lowering interest rates. The second type may take years to emerge and move from the depression phase to growth. It is associated with the restructuring of the economy of a country or an entire region and finding a new equilibrium point.

The third type of recession, on the one hand, is the most unpleasant due to the suddenness of its occurrence, on the other hand, measures must be selected depending on the factors that provoked the economic recession.

Signs

How to understand that an economic recession has already begun? A number of characteristics that indicate the beginning of a recession followed by stagnation:

• increasing the level of inflation in the country;
• rising unemployment;
• fall of stock indices;
• reduction in production rates;
• outflow of capital abroad.

According to another classic definition, the signs of a recession are:

1. the fact that the phase follows the boom;
2. decrease in business activity;
3. decline in production.

The above economic indicators are clear to specialists, but how can ordinary citizens see the impending recession?

Due to the fact that prices for well-known goods have crept up, purchasing power, i.e. how many goods can be bought for the same money as before has fallen. Inflation has increased (you can learn about this from the news), unemployment is growing.

Advice!

The recession period can last from three to ten years. Its duration can be roughly judged by the boom cycle before it. The end of a recession means the economy has reached bottom, i.e. as deep as possible in the minus relative to typical economic indicators.

The end of a recession, although it leads to a lower point - a trough or depression - means the beginning of economic growth afterwards. The economy will be rebuilt and a new wave of prosperity and prosperity will begin.

Consequences

From the point of view of economic theory, a recession in itself is not harmful or malicious. There is no need to be afraid that it will happen. It is precisely the opposite expectation that growth will continue continuously that is erroneous and leads to the collapse of hopes.

Growth gives way to boom, but they cannot last forever, some economic instruments become imperfect, new technologies and production appear. And this is good.

A recession is, in some way, a “cleansing” of the economic body of a country or a number of states. It helps the economy rejuvenate and enter a new stage of development.

For ordinary citizens, the consequences of a recession are:

• job losses;
• decrease in purchasing power;
• depreciation of money;
• reduction in the variety of goods due to a decline in production.

In short, it's time to tighten our belts. However, if you look at this period as a time of getting rid of unnecessary things and adjusting to a more suitable wave of economic growth - undergo additional training in order to then find a new, higher-paying job, expand career opportunities, review and reduce family expenses, start buying only what you need. What is really needed is that, having emerged from depression, you will not be in the position of a victim beaten by economic squabbles, but will begin to reap the fruits of the success laid down during the recession.

source: http://site/business-poisk.com/recessiya-v-ekonomike.html

What is a recession: definition, signs and characteristics, types of recession, causes and consequences

Recession (from the Latin recessus - retreat) is a phase of the economic cycle, characterized by a moderate, non-critical decline in production in the country; recession is also called a slowdown in the rate of GDP growth or its decline, accompanied by an increase in unemployment, a decrease in bank lending and a decrease in the volume of investment in fixed capital. A recession, as a rule, is a precursor to a crisis in the economy.

Why does a recession occur?

The causes of a recession may be:

1. natural development of the economy, when after strong growth, having exhausted the possibilities for upward movement, the economy needs a break;
2. wars and civil strife;
3. sharp changes in prices for raw materials, in particular oil;
4. undermining customer confidence;
5. uncertainty among entrepreneurs and investors;
6. growth of internal and external debts (possible consequence - default);
7. fall in stock and capital prices.

What are they?

Depending on the reasons, there are three types of recession:

Unplanned recession. This type of recession occurs as a result of some unexpected events: wars, a sharp drop in world prices for oil, gas and other minerals. As a result, there is a deficit of financial budget funds and a decrease in the level of GDP.

Recession at the political or psychological level. This type of recession arises as a result of increased distrust among the consumer population, entrepreneurs and capital holders. It is a consequence of a decrease in purchasing activity, a decrease in investment and a decrease in the value of securities.

Recession as a consequence of the country's external debts. As a result of such debt, there is a decline in prices and an outflow of funds from the country. This type of recession is considered the most dangerous and can last for many years.

What is it characterized by?

Characteristic signs of a recession are:

• Gradual, without sudden jumps, increase in the unemployment rate.
• Industrial production volumes are falling, but enterprises operate producing products in smaller volumes.
• Fall in stock indices.
• Growth of inflation indicators.
• Increased capital outflow abroad.

In a modern economy, a recession is characterized by a non-critical drop in key indicators over two quarters.

When are you attacking?

The economic cycle consists of four phases:

1. growth (rise),
2. stagnation (stabilization, absence of any dynamics),
3. recession (fall)
4. crisis (depression)

The duration of the economic cycle in current realities is 10–15 years.

What are the consequences of a recession?

The main characteristic consequences of a recession are:

• Fall in production volumes in the state.
• Collapse of financial markets.
• Reducing the number and size of loans issued by banks.
• Rising interest rates on loans.
• Rising unemployment rate.
• Reduction in citizens' incomes.
• Rising inflation.
• Systemic price increases.
• Increase in public debt.
• Fall in GDP.

source: https://fortrader.org/birzhevoj-slovar/ekonomicheskie-ponyatiya/recessiya.html

Recession, what is it in simple words - causes and significance in economics

The question of what a recession is in a state’s economy may worry the majority of its residents who are interested in the situation. Understanding this economic process will allow you to understand what impact it has on the economy and life of the state and whether it is worth fearing.

Concept

There are many definitions of this economic term, so it is worth familiarizing yourself with the most significant ones. A recession is one of the phases of the economic cycle, which is a precursor to a financial crisis.

Attention!

Recession is a term related to the macroeconomics of a state; it denotes a decline or noticeable reduction in production rates immediately following a so-called boom, characterized by a gross domestic product indicator equal to zero or even having a negative value for 6 or more months.

Recession is a moderate, non-critical decrease in production indicators, entrepreneurial activity and economic development rates, usually associated with a decrease in GDP.
Recession is a slowdown or decline in the growth rate of gross domestic product.

A recession is one of the phases of the economic development cycle, which follows the economic recovery, accompanied by the achievement of the maximum indicator of economic activity. This phase is a precursor to depression or crisis.

Recession is a state of the economy when GDP has been declining for 2 or more quarters, that is, factories begin to reduce output, stores sell less, and, accordingly, buyers buy less.

Advice!

A recession is a serious reduction in business activity in a country, which is accompanied by a large number of negative consequences (unemployment, decline in stock exchanges, reduction in investment, etc.).

A recession is certainly accompanied by three main signs:

1. The phase of economic life immediately following an expansion or boom;
2. Accompanied by a reduction in economic activity;
3. Leads to a reduction in production.

Many definitions mention that a recession is a phase of the economic development cycle, and the cycle itself consists of 4 main phases:

• Climb.
• Stagnation.
• Recession.
• Economic depression.

The duration of all phases of the economic cycle, as practice shows, is about 10–15 years.

The recession does not mean at all that important indicators have stopped growing. This phase may indicate that the growth rate of key indicators simply decreased over the course of six months. Usually a recession is a precursor to a crisis, but if all the necessary measures are taken in time, then such consequences can be avoided and the situation can be returned to normal.

Reasons for the attack

This phase of the economy can occur as a result of a whole list of various factors, starting from the cost of petroleum products and ending with the number of unemployed in the country. The main reasons for its occurrence are considered:

The emergence of conditions favorable to the development of a recession due to unplanned internal economic changes. Thus, this state of the economy may be caused not by economic events in the country, but by political ones, or by changes in prices at the world level for natural resources, and, in particular, oil.

The Russian economic region is dependent on the price of this mineral, and in the event of a serious drop in its value, the country's budget will lose a significant amount, which, in general calculations, leads to a drop in GDP.

Economists argue that this type of recession is the most dangerous due to the impossibility of predicting it in order to take measures in advance to support the economy.

A drop in the pace of industrial production processes, which inevitably entails a recession.
The transition of the economy to the recession phase can be provoked by a decrease in the income of the population, which leads to a decrease in the ability to buy and worsens the economic situation of the country.

Warning!

This type of recession is not the worst, and economists argue that it can be dealt with easily and quickly, preventing a crisis.

A recession may be a consequence of capital flight abroad or a reduction in foreign investment and government capital. As a rule, most of the investments are attracted by private entrepreneurs. And in order to avoid such a recession, the government should create conditions so that entrepreneurs seek to invest their funds in the national economy.

Kinds

Economists distinguish three main types of recessions, depending on the reasons for their occurrence:

Unplanned recession resulting from unexpected changes. Such events could be: the onset of war, a sharp decline in the world price of oil, gas and other minerals. The consequence of such events is a deficit of financial budget funds and a decrease in the level of GDP.

It is this type of recession that is most dangerous due to the fact that it is simply impossible to foresee, and it is even more difficult to determine an effective exit method.

Recession at the political or psychological level, resulting from increased mistrust of the consumer population, entrepreneurs and capital holders. It is a consequence of a decrease in purchasing activity, a decrease in investment and a decrease in the value of securities.

This type of economic recession can be overcome simply by regaining the trust of buyers, which is done by reducing prices, interest rates and by putting various psychological techniques into practice.

Recession as a consequence of the country's external debts. As a result of such debt, there is a decline in prices and an outflow of funds from the country. This type of recession is considered the most dangerous and can last for many years.

In addition to this causal classification, there is a division of recessions into types depending on the shape of the graph reflecting changes in GDP indicators:

1. V recession. Characterized by a fairly powerful and high-speed decline in GDP, which in such conditions does not reach depression. The fall in such circumstances is pronounced, unique and subsequently leads to a return of GDP to its previous level.
2. U recession. GDP in such a situation has a fairly long-term and stable position at a low level without serious movements along the schedule either up or down, with a rapid recovery in the future.
3. W recession. As a result of this phase of the economy, there is a fairly short-term jump in the growth and development of GDP to a high level in the middle of the recession stage. The graph of such a recession resembles several type V recessions in a row.
4. L recession. In such a situation, there is a fairly rapid decline in GDP, which is followed by a long and fairly smooth recovery.

Characteristics of an economy in recession

It is possible to identify that a stage of the economic process such as a recession has already begun in a country by the presence of a list of its obvious factors:

• The unemployment rate is gradually increasing without sudden jumps.
• There is a clearly noticeable decline in production, but production does not stop, but functions, providing citizens with the necessary products, but in smaller volumes.
• Stock indices began to fall.
• Inflation indicators are increasing.
• There is a significant transfer of funds abroad.

At the stage of economic recession, not all its signs become critical. So, for example, a recession is indicated by an increase in inflation of only 2–3%, at a time when all other recession indicators are active, which is evidence of the onset of an economic depression.

What does it lead to?

The main and most obvious consequences of this period of economic decline include:

1. Reduction in production volumes of the country's enterprises.
2. A complete financial collapse of the markets.
3. Reducing the number and size of loans provided by banks.
4. Increase in lending interest rates.
5. Soaring unemployment rate.
6. Decrease in income of the population.
7. Inflation rate increases.
8. Constant price increases.
9. Increasing the country's debt.
10. Fall in GDP indicators.

The most serious, dangerous and powerful consequence of a recession is the economic crisis. The decline in production volumes leads to a decrease in the number of jobs and massive layoffs. People lose their jobs, begin to save, cutting their expenses, which results in a reduction in demand, which leads to an even greater decrease in production volumes.

Attention!

The debt of residents and enterprises to banks also begins to increase, which react by tightening the conditions for issuing loans. Lending volumes are sharply reduced, and this leads to a reduction in investment in science and industry.

A reduction in production volumes leads to a collapse of markets and a decrease in the value of securities, especially shares of large industrial companies.

Such changes are followed by a depreciation of the country's monetary units, leading to an increase in prices, a reduction in income levels, an increase in citizen dissatisfaction and a reduction in the quality of life for the population.

The government, trying to correct the situation, begins to borrow more from its neighbors and all this leads to a reduction in the same GDP, which is a sign of the onset of a recession that can develop into depression and crisis.

The difference between recession and stagnation

The period of decline or increase is the main difference between recession and stagnation.

The stagnation phase is characterized by:

• Complete economic stagnation lasting for a long time.
• Increase in the number of unemployed.
• A serious decline in the quality of life of citizens.
• Low or almost zero GDP.

If economic stagnation is characterized by high inflation, then it is called stagflation.

A recession is not characterized by a rapid decline, but not by stagnation. And this clearly indicates that recession and financial stagnation are distinguished by periods of decline in GDP and its consequences for the situation in the country.

To understand whether a decline during a recession or stagnation during stagnation is worse, it is necessary to consider each specific case separately.

A recession does not mean that the country is facing depression and people should prepare for difficult times. With a competent economic approach to government management, all the consequences of a recession can be prevented, bypassing the phase of economic depression.

But, of course, this is not always possible, so before drawing conclusions about the economic situation in the country, you should consider all economic indicators and the reasons for the onset of a recession.

Country However, this growth is neither constant nor smooth. The economy is subject to fluctuations, which are often called business cycles or economic cycles.

Business cycles have long attracted the attention of economists who seek not only to identify patterns of cyclical development, but also to predict future economic development.

Economic cycle call the period of time between two identical states of economic conditions.

Economic (business) cycle— ups and downs in levels of economic (business) activity over several years. This is the period of time between two identical states of economic conditions.

Cyclical fluctuations can be experienced in various ways, but the most common is the analysis of business cycles using the example of fluctuations in the value (or). In Fig. 4.1 shows a diagram of the business cycle. The trend line (or the average value of GDP over a number of years) shows the general direction of economic development over time, the GDP line shows the real fluctuations of this indicator.

Rice. 4.1. Business cycle

Economic cycles are characterized by the following important indicators:

• vibration amplitude— the maximum difference between the largest and smallest value of the indicator during the cycle (distance CD);
• cycle duration- the period of time during which one complete fluctuation in business activity occurs (distance AB).

By duration, cycles are divided into:

• short cycles, associated with the recovery in the consumer market, with fluctuations in wholesale prices and changes in firms' inventories. Their duration is 2-4 years;
• average cycles, associated with changes in the investment demand of enterprises, with long-term accumulation and improvement of technologies. Their duration is 10-15 years;
• long cycles (waves), associated with discoveries or important technical innovations and their dissemination. Their duration is 40-60 years.

The theory of long waves of the business cycle by Nikolai Kondratiev

The theory of long waves was developed in detail by an outstanding Russian economist Nikolai Dmitrievich Kondratiev(1892-1938) in a number of works, including the monograph “The World Economy and Its Conditions During and After the War” (1922) and the report “Large Cycles of Economic Conditions” (1925). N.D. Kondratiev from the end of the 28th century. Based on factual material, he identified three large waves:

• I. from the late 80s - early 90s. XVIII century until 1844-1851;
• II. from 1844-1851 from 1890-1896;
• III. from 1890-1896 approximately 1939-1945

If we continue the main trends outlined by N.D. Kondratiev, we can distinguish the fourth and fifth waves:

• IV. from 1939-1945 from 1982-1985
• V. upward wave from 1982-1985.

The main role in changing cycles, according to N.D. Kondratiev, scientific and technical innovations play a role. Thus, for the first wave (late 18th century), inventions and changes in the textile industry and iron production played a decisive role. Growth during the second wave (mid-nineteenth century) was primarily due to the construction of railways and the rapid development of maritime transport, which made it possible to develop new economic territories and transform agriculture. The third wave (beginning of the twentieth century) was prepared by inventions in the field of electrical engineering and was based on the mass introduction of electricity, radio, telephone and other innovations.

Continuing the analysis of N.D. Kondratiev, it can be assumed that the fourth wave (40s) is associated with the invention and introduction of synthetic materials, plastics, and first-generation electronic computers, and the fifth (80s) - with the mass introduction of microprocessors, achievements of genetic engineering , biotechnology, etc.

It should be noted that in real life, one cycle overlaps with another, and several short cycles occur within longer oscillations.

Cycle phases

Cycles differ in duration and intensity, but all cycles go through the same phases:

There are 4 stages (or phases) in the structure of the cycle:

1. Climb. In the recovery phase, national income grows from year to year, declines to the natural level, and the amount of real capital grows, but this growth slows down. Also, due to increased consumer and investment demand, prices and rates increase.
2. Boom. The boom phase ends with a boom in which there is super-high and overloaded capacity, the price level, wage rate and interest rate are very high. Investments in production are almost non-existent due to the high cost of attracting resources.
3. Recession. Production and employment are declining. Due to decreased demand, prices for goods and services fall. Investments become negative because at this stage of the cycle, firms not only do not make new capital investments, but there is an increase in idle capacity. Many companies suffer losses or go bankrupt.
4. The bottom of the recession. The rate of decline is slowing down and at this stage stabilizing. The decline in production and growth in unemployment reach their maximum values. Prices are minimal. Only the strongest firms survived. The potential for future growth accumulates - at low interest rates, the volume of investment increases. The transition to the recovery stage occurs after a certain period of time, when investments begin to bring returns.

The four phases of the cycle considered may vary in duration or depth. So, for example, against the background of an upward long wave of the Kondratiev cycle, medium and short cycles will have a longer and more intense rise and a short-term slight decline. In a situation of a downward long wave, on the contrary, the declines will be deep and long, and the rises will be insignificant and short-lived.

It should be noted that the behavior of macroeconomic indicators does not coincide with that described above for all cycles. There are situations when, against the backdrop of a decline in production and rising unemployment, prices also rise. This situation is called stagflation and most often occurs during sudden changes in the economic situation. Stagflation was observed in the 70s. in developed countries during energy crises caused by rising oil prices. Another example is Russia in the 90s. after the start of economic reforms.

Crisis as the most important element of the cycle

The phase of economic downturn is also called the phase of crisis and depression. This stage is of particular importance for the economy, since after the crisis the composition of enterprises is renewed, the strongest and most efficient firms survive, new inventions appear and new economic opportunities open up. However, the crisis is also a major social upheaval - people lose their jobs, their incomes are reduced, and the standard of living of the population is reduced. Therefore, preventing or mitigating crises is one of the most important tasks of the state.

The cyclical development of the economy began to clearly manifest itself starting from the 19th century. The first cyclical crisis of overproduction occurred in England in 1825. In the 19th century. cyclical crises occurred in individual countries, they did not coincide in time and were caused by internal reasons for the development of countries or global non-economic events (in particular wars).

The first crisis called global, which began in the USA and spread to other capitalist countries in 1929 - 1933, was called the Great Depression. Among its causes were the deformed structure of the economy after the First World War, the disruption of traditional world economic ties, and the monopolization of the economy. The crisis manifested itself in a significant drop in production, high unemployment, and a significant reduction in world trade. It covered all sectors of industry (especially ferrous metallurgy, mechanical engineering, mining, maritime transport, etc.) and agriculture. The general nature of the crisis reduced the ability of countries to maneuver at the global level. The consequences of this crisis were overcome only as a result of the recovery caused by the Second World War.

After the Second World War, a rapid economic recovery began, associated with economic recovery and overcoming the destruction caused by the war. However, the restoration potential was exhausted quite quickly, and already in 1957-1958. A new global crisis broke out, affecting the United States the most. For the first time in the post-war period, total exports of finished products fell, and a series of structural crises began (in the primary industries, shipbuilding, etc.).

The reason for the next crisis(1974-1975), one might say, is random, not subject to the laws of economic development. The impetus was the OPEC cartel raising prices for the oil they exported fourfold. Many developed countries are facing severe shortages of energy resources. Oil importing countries were forced to reduce its consumption or look for substitutes and introduce energy-saving technologies. National output fell while prices rose, i.e. a situation of stagflation was observed.

In 1980-1982 a new crisis has broken out, the main victims of which were developing countries. Most developing countries during the second half of the twentieth century. went through the stage of transition from the agrarian structure of the economy to the industrial one. Since their own funds were not enough to achieve this goal, they were forced to attract foreign capital. By the beginning of the 80s. The external debt of developing countries turned out to be too large, and many of them were unable to pay not only the principal amount of the debt, but also the interest on it.

90s turned out to be years of stagnation for most developed countries - production developed at a slow pace, fluctuations in unemployment and inflation levels were insignificant. However
90s became years of upheaval for the countries of Eastern Europe and the USSR, which ceased to exist in 1991. The deep transformation crisis in Russia, which was a consequence of the transition from a planned method of economic management to a market one, covered all aspects of economic life. During the reforms, industrial production decreased by approximately 60% (many economists talk about deindustrialization of the economy), the country experienced a period of high inflation, property inequality among citizens increased, and more than 30% of the population found itself below the poverty line.

To summarize the above, several features of cyclical development can be noted:

1. With the development of national economies and increasing international interdependence, crises from local (national) turn into global ones.
2. The time period between crises is shortening, i.e. the period of cyclic oscillations decreases.
3. The factor of randomness is added to the patterns of cyclical economic development.
4. Systemic (or transformational) crises do not fit into the generally accepted cycle scheme. As a rule, they are caused by institutional transformations occurring not only in economic, but also in other spheres of public life.

Cycle theories

Multiplier-accelerator model

This approach assumes that economic cycles reproduce themselves. Once started, they, like a swing, make endless oscillations. Only the reason for the fluctuations here is not external, but lies in the very essence of the cycle.

The mechanism of fluctuations is described as follows: an increase in demand for firms' products causes an increase in investment and, as a consequence, gross domestic product. Moreover, it increases by a greater amount than investment due to the effect. Further, an increase in GDP requires new investments both for the reproduction of increased capacities and for further development. The intensity of this process is determined by the size of the accelerator. At some point in time, all available resources become exhausted and become saturated. In this situation, the reverse process begins - investments are reduced, as a result, GDP is reduced, and there is a further decrease in investment according to the accelerator principle. Having reached a certain point, the process reverses.

This theory is difficult to apply to explain real economic cycles, since in life cyclical fluctuations are not regular; there are other factors that influence the system from the outside. The following theory tries to take into account the already mentioned randomness factor.

Pulse-propagation mechanism

This model assumes that the economy is subject to random but recurring disturbances, shocks, or shocks. They can affect demand (for example, the mood of entrepreneurs or buyers, who may become optimistic or pessimistic; the behavior of the government), as well as supply (for example, an all-time low or high harvest, natural disasters, important inventions and discoveries, etc. .). Favorable shocks can cause GDP to increase, while unfavorable shocks can cause it to contract.

The list of potential shocks is endless. These shocks take the economy out of its current state and cause a chain reaction (Figure 4.2). The shocks in question, or impulses, change the conditions of demand or supply in the economy. After experiencing a random shock, national output begins to fluctuate according to the pattern described in the previous section until the next shock occurs. The discovery that economic cycles are generated by purely random factors was made in the late 20s and early
30s Russian economist Evgeniy Slutsky and Norwegian economist Ragnar Frisch, the latter of whom was awarded the Nobel Prize.

4.2. Pulse-propagation mechanism

Monetary concept of economic cycles

In the two models discussed above, cycles are caused by some change in demand or supply. In contrast, monetary concepts link fluctuations in economic activity to changes in the monetary sector.

The starting point of the economic cycle, according to this theory, is the growth in the supply of credit from the banking system. As a result, the interest rate decreases, investment increases, and, consequently, aggregate demand increases. This creates a recovery phase, which is accompanied by an increase in the price level. Over time, the economic recovery stops due to two main factors. Firstly, the excess reserves of commercial banks are reduced (their ability to issue loans is reduced), and secondly, the country’s foreign exchange reserves are reduced, since due to the high level of prices, imports increase (the outflow of foreign currency increases), and exports decrease (the inflow of foreign currency decreases). currency). These factors create a shortage in the money market, and the interest rate begins to rise and the volume of investment begins to decline. The recession phase begins: production and employment decline, the nominal wage rate decreases, the price level decreases, net exports increase, foreign exchange reserves and the monetary base increase. This sets the stage for a new increase in bank credit.

Evolutionary theory

The evolutionary theory of business cycles is the youngest and still least developed in economic science. There is a very limited number of works on this topic (theories of J. Schumpeter, K. Freeman, S. Glazyev, etc.).

4.3. Dependence of GDP on the emergence and development of macrogenerations

The basic idea of ​​evolutionary economics is the concept of economic natural selection, when the development of the most competitive economic entities occurs due to the displacement of other, weaker ones from the economic space. If the macro-level of the economy is represented as a set of economic subsystems, in each of which “natural selection” occurs, then these subsystems can be called macrogenerations. Macrogeneration can be interpreted as part of the means of production that produce part of GDP and include a certain technical level of production in various sectors of the national economy. Its lifespan is limited in time, i.e. it is born, exists for a period of time and dies. The relationship between macrogenerations and GDP is presented in Figure 4.3.

The cyclical development of the economy can be represented as a change in macrogenerations. The emergence of new macrogeneration, caused, as a rule, by the development of scientific and technological progress, causes economic growth in the country. Old, already existing macro-generations are gradually disappearing from economic life, causing a reduction in production.

From the perspective of evolutionary economics, the following features of cyclical development can be distinguished:

• each new macrogeneration most often appears during periods of decline in production, or more precisely, at turning points from recession to recovery;
• during the growth of new macrogeneration, as a rule, there is an economic recovery, a slowdown in the growth of macrogeneration is accompanied by a cessation of recovery;
• from the moment of the emergence of a new macrogeneration until the birth of the next one, the GDP trajectory goes through both a rise and a decline phase, i.e. full economic cycle.

Other cycle theories

The cyclical development of the economy has long attracted the close attention of economists. The above theories do not exhaust the entire list of explanations of cycles. Other theories include the following:

1. Theory of periodic solar activity. The idea is that the sun greatly influences agricultural yields. In the event of drought and crop failure, agricultural production is reduced and spreads to related industries and beyond.
2. Model of interaction between savings and investment. The accumulation of savings by the population leads to a decrease in the interest rate, the volume of investment increases, and national production grows. Further, due to an increase in demand for investment, the interest rate rises, which reduces the attractiveness of investment and reduces national production.
3. Psychological theories. These theories consider people's behavior depending on the economic situation. People can have positive or negative assessments of future events and act according to their predictions. If economic agents expect the onset of a boom phase, they increase their activity, but if they predict a recession, then, accordingly, they reduce business activity.