Modern society is trying with all its might to improve the level and conditions of their lives. This can be achieved with the help of stable economic growth not only at the expense of one state, but also of each of the world countries. History shows that each period of prosperity ends with temporary economic instability.
Flooding states of the economy
Many of the world's minds note 2 states that the economy of each country flows from time to time.
- Balance. It is characterized by a balance between social production and social consumption. In the market, these two concepts are known as supply and demand. The process of economic growth is characterized by a visual movement in a straight line. In simple terms, we can say that output increases in volume in proportion to the increase in production factors.
- Disequilibrium. This is a kind of crisis of overproduction on a social scale. Normal connections are broken, therefore, as well as proportions in the economy.
What is the economic crisis?
The economic crisis can be called a complete imbalance in the economic sector, which is characterized by losses and breaks in harmonious ties, both in production and in market relations. Translated from Greek, the concept of "krisis" is interpreted as a turning point. It indicates a radical deterioration in the economic condition of the state, which is characterized by a decrease in production and a break in production ties, the bankruptcy of a large number of enterprises and an increase in unemployment. The fall of the economy leads to a decrease in the standard of living and a deterioration in the well-being of the entire population. The crisis is associated with global disturbances in development. One of the formats of the phenomenon is the systematic and massive accumulation of debts and the inability of people to repay them in the optimal time frame. Most economists associate the main causes of economic crises with the imbalance in the supply-demand pair for goods and services.
Superficial causes of economic crises
The global prerequisite for the emergence of a global crisis can be called the contradiction between non-productive labor and production itself, or between production and consumption, between the system and the outside world. With an imbalance of production and non-production forces, commodity-money relations are violated. In the interaction of the system and the external environment, in the event of cataclysms that cannot be controlled, a failure occurs in the system of functioning of society. Experts associate the causes of economic crises with deepening andthe development of cooperation, specialization, which exacerbates the disagreement between management and production. Even the slow transition from commodity production to cooperation and manufacture is already pushing the manifestation of local crises. In most situations, crises of a local nature are resolved at the expense of the internal reserves of the system with an independent regulation structure.
Preconditions and signs of crises
The reasons that lead to economic crises have a great influence on the formation of demand for the currency, leaving an imprint on the indices, which are actively used to analyze trading. The global economy faces imbalances from time to time. The phenomenon occurs every 8-12 years. This manifests itself in a wide range of problems:
- difficulties with the sale of goods;
- acute economic imbalances;
- production reduction;
- rising unemployment;
- decrease in investment activity;
- dislocation of the lending sector.
All the problems described in the complex in history have been called the crisis of overproduction.
Money plays a big role in shaping the unfavorable situation in the country, but only if it is considered as a means of communication and a tool for making payments. It can be seen from history that the imbalance of the economy in countries around the world began to appear only after the monetary form of the economy was introduced in combination withcapitalism. It was the contradictions of this political system that made recessions in the life of countries simply necessary. The underlying premise of the phenomenon is the conflict between social production and the private capitalist form of ownership. The conditions of production and the conditions for the sale of commodities are essentially different due to surplus value. The release of large volumes of production is hindered by the productive power of the public, and the sale of the released goods is prevented by the proportionality of the spheres of activity of society, which is determined not by the needs of people, but by their ability to pay. The main contradiction lies in the fact that world production began to produce so many goods that the world society is simply not able to consume them all.
The role of capitalism in the formation of the crisis
Many causes of economic crises are directly linked to capitalism, since its basic nature is based on the unlimited expansion of production. The focus on systematic enrichment stimulates the constant release of more and more new products. There is a modernization of equipment and the introduction of new technologies in all branches of activity. Such active measures for the prosperity of the industry are simply necessary for companies and large enterprises in order to withstand a sufficiently high level of competition. The need to reduce production costs in an active struggle with competitors makes most entrepreneurs severely limit the growth of wages. This leads to a sharp increaseproduction far exceeds the expansion of private consumption. In order to smooth out the conflict between production and consumers, to solve the basic issues of the economy, to provide the labor market with an optimal quality workforce, states go to global social spending. The current crisis can be called a systematic consequence of credit expansion.
Types of crises
World crises can be called a temporary period of aggravation of confrontation between the state economy and private entrepreneurs. It is on companies that the most acute problems in the operation of the system are reflected. Among them it is worth highlighting:
- collapse of the financial system;
- overproduction and underproduction;
- crisis in sales of goods and services;
- crisis in the relationship of counterparties in the market.
All this reduces the solvency of the population, therefore, entails the bankruptcy of many successful companies. The crisis at the macroeconomic level is characterized by a sharp decline in GDP and a drop in business activity. Inflation is growing in an exponential direction, unemployment is increasing, and the standard of living of the population is significantly reduced. Economic issues related to the crisis of the financial subsystem are fraught with sad consequences. This is the gulf between the demands for a new economic standard of living and the conservatism of most financial institutions. Economic crises, the causes and consequences of which have been classified for many years, can originate fromminor social and economic problems. The reason for this is the presence of close relationships between the elements of the system and the processes of subsystems. Local difficulties quickly cover the entire system, and it is impossible to eliminate individual difficulties when the prerequisites for a crisis arise for the entire system. The causes of world economic crises can be very diverse, but the phenomenon has a cyclical nature. If you make a visualization of the development of the economy, the movement will be carried out in a spiral.
Main phases of crises
The history of economic crises (together with many years of researchers and prominent scientists) made it possible to single out the development of each economic crisis in 4 main stages:
- The Veiled Stage. This is a period of problems. The true causes of the economic crisis are already taking place, but they are not yet clearly expressed. The period is notable for the bright development of the country's production and prosperity, which reached its peak.
- The accumulation of contradictions. During this period, there is a drop in indicators of social dynamics. Crisis processes that were invisible at the first stage are beginning to appear.
- Temporary stage of stabilization. This is a temporary lull in the very beginning, from which all large-scale economic crises begin. The causes and consequences can be horrific. Society is on the brink of survival. The society is stratified depending on the activity of the citizens of the states. Two groups of people are clearly visible. Some quietly sit through difficulties in the hope that everything will end soon, others are actively working,to improve their standard of living, looking for a way out.
- Restoration. Despite the fact that the global economy is in a recession, people have already adapted. This becomes a prerequisite for the stabilization of most of the local subsystems. At this stage, the main exit programs for their situation have already been developed and are ready for implementation. Optimistic moods in society are intensifying. Social dynamics are improving.
US influence on global crises
The history of economic crises has shown that negative moods in society can arise as a result of problems that have arisen in the United States. It is quite obvious that all the economies of the world are interconnected and America is the key link. The weight of the country's GDP in the planet's economy is more than 50%. The state accounts for about 25% of oil consumption. The export of most world countries is focused specifically on the United States of America.
At the heart of the American economy lies the most complex financial system, which, unfortunately, forms the causes of global economic crises. By the way, recently the financial system of the state began to function more independently. At the same time, the main assets are not extracted from industrial production enterprises, but are earned through currency fraud. Consequently, a kind of "soap currency bubble" has formed, the size of which is many times greater than the volume of products produced by the industrial sector. There are experts whobelieve that the causes of economic crises are not related to the mortgage collapse in America. The phenomenon only became an impetus that led to changes in the development of the economy.
Lending is a step towards the crisis
In accordance with the laws of a market economy, demand creates supply. At the same time, as a result of the systematic overproduction of goods, it was possible to find out that supply can also generate demand, which will be actively supported by credit funds. When banks actively continue to lend to citizens, systematically reducing their interest rates and offering favorable terms of cooperation, the funds fall into the hands of insolvent people. Massive outstanding payments are causing collateral, especially real estate, to sell off. Unfortunately, the increase in supply and the reduction in demand do not allow the bank to return its assets. The construction sector is under attack, and the lack of liquidity is becoming the root cause of the crisis in the very real sector of the economy.
Despite the objectivity of lending as a prerequisite for the formation of a crisis, the causes of the phenomenon are very controversial. The impact on the systematic appearance of identical factors in different time periods occurs in different ways. Moreover, each country has its own individual characteristics of development. Most experts associate the cyclical nature of the phenomenon with the scientific and technological development of states. The active part of material capital ages within 10-12 years. This leads tothe need for its renewal, which is a secondary signal for the revival of economic activity. The role of a push in the development of the state can be played by the introduction of new equipment into production and the emergence of new technologies, which is directly related to lending. This is the basis of the entire economic cycle. As time went on, the aging of capital began to shrink. In the 19th century, the period was reduced to 10-11 years, a little later to 7-8 years. In the post-war period, the manifestation of crises of various scales began to be noticed every 4-5 years.
A little about crises in world states
Practically every developing country has experienced crises. They are an integral part of progress. Stability and imbalance in the economy are simply inseparable. Before capitalism, problems arose as a result of underproduction; today, difficulties are associated with overproduction. The first economic crisis had to face the inhabitants of England back in 1825. It was during this period that capitalism began to dominate the country. Britain and America were next in trouble in 1836. Already in 1847, the crisis swept almost all the countries of Europe. From the very beginning of the capitalist dawn, the first deepest decline in the world is attributed to 1857. Great difficulties in the economy of the whole world could be observed from 1900 to 1903, and also in 1907 and 1920. All this alone was only preparation for the most difficult period in the history of the world. The standard causes of the economic crisis of 1929-1933 led to a recession in all sectors of the world economy. Only in the USAat least 109,000 companies went bankrupt. The depression after the recession was protracted. It didn't end there. After 4 years of cataclysms, after a short period of rehabilitation, a new decline set in, successfully skipping the recovery stage. At this time, the volume of world industrial production decreased by more than 11%. In the US, this figure has reached 21%. The number of produced cars decreased by 40%. The development and aggravation of the problem was interrupted by the Second World War, which lasted from 1939 to 1945. The end of hostilities was marked by a local economic crisis that hit not only America, but also Canada. In the US, industrial production fell by 18.2%, Canadian - by 12%. Capitalist countries cut production by 6%.
The next global crises were not long in coming. The capitalist countries began to struggle with regression in the economy already in 1953-1954, and also in 1957-1958. One of the difficult moments in the development of mankind, historians refer to 1973-1975. A distinctive feature of this time period in history is the high level of inflation. The most important industries were affected. The problems affected the energy industry, raw materials, currency systems and agriculture.
