Economic instability makes the economy vulnerable. Economic instability and unemployment
5.4 Economic instability.
The market economy has a known instability, instability economic development... However, this instability is not an evil that inevitably leads to disaster and disaster. economic system... The phenomena of economic instability should be reckoned with and taken into account in the economic policy of the state.
The task of economic policy is to seek to stabilize the functioning and development of the economy, thereby providing a healthy basis for social and political stability.
Among the many forms of economic instability, the most significant are:
- cyclical fluctuations in the level of GDP, investment, consumption, employment;
unemployment;
inflation.
Economic development in a market economy presupposes a sequential change of periods of production growth, GDP level, employment by periods of their decline.
The regularity of these successive ups and downs makes economic development cyclical.
Economic cycles are periodic fluctuations in the level of economic activity in a society.
The first economic crisis, from which periodically recurring crises are counted, was recorded in England in 1825. Then crisis phenomena began in other countries, repeating every 8-12 years. In 1873, the economic crisis began simultaneously in several countries of the world. This was the first world economic crisis in the history of cycles.
In economic theory, there are:
- long-wave cycles (Kondratyev cycles) with a period of 50 years, which are associated with the change of generations of technology and technology;
average (industrial) cycles with a period of 8-12 years, which are associated with the deviation of demand from supply; their length is determined by the time required for the massive renewal of fixed assets;
It should be noted that all these types of cycles are superimposed on one another.
We will consider and characterize the main phases of the middle (industrial) cycle.
Phases of the middle (industrial) cycle
A cycle is a period of time during which there is a sequential change of the following phases: recession, depression, recovery and recovery.
Decline - starts from the peak of the previous cycle and continues to the lowest point of the cycle.
This phase is characterized by a sharp decline in business activity. Firms suddenly find that they have overestimated the forecast demand for their products and are unable to sell the goods produced at the same prices.
In order to sell off the resulting surplus, they are forced to lower prices for their products. Firms suffer huge losses, they are unable to repay the loans and pay interest on them. A wave of bankruptcies begins and spreads throughout the economy. Unable to sell the already manufactured products, the enterprises reduce the volume of production. Of course, there is no longer any talk of expanding production, and as a result, enterprises are reducing the volume of investments in production, and the demand for equipment is falling.
The decline in production causes a wave of layoffs of workers, and unemployment rises. Population incomes are falling. Due to the decline in income, as well as because of the desire of people to postpone part of these incomes "for a rainy day", household spending on consumer goods is falling, which means that the demand for consumer goods and services decreases.
The standard of living of the employed is declining. Panic and general pessimism reign in society. It should be especially noted that during this period, interest rates on loans are growing: firms are trying to borrow money in order to avoid bankruptcy, there is a general chase for money, the demand for free cash growing. In addition, banks themselves seek to set higher rates, since there is a high risk of non-repayment of their loans.
Perhaps the most severe was the recession of 1929-1933, which went down in history as the "Great Depression", then the United States, according to economists, was thrown back by 146 years, the national income fell by almost 2 times, per capita income fell by 30%, the unemployment rate reached 25%.
Depression: After reaching a low point, the economy stays in this state for a while.
The decline in production has practically stopped, and production and employment are at their lowest. Enterprises avoid long-term investments, and the population does not make expensive purchases. Everyone is in a state of uncertainty, fearful of starting new business.
However, commodity stocks are gradually dissolving, the fall in consumer and investment demand stops, the prices of goods stabilize. Since the demand for money has now fallen sharply, interest rates on loans are falling to the lowest level.
And the business world is slowly beginning to come to life: enterprises that have managed to survive the crisis are beginning to upgrade their equipment by purchasing more modern equipment (since loans are now more affordable), they are introducing new technologies, and taking measures to improve production efficiency. Their goal is to ensure cost savings in order to make a profit in an environment of low product prices.
As a rule, without the participation of the state, the recovery from the state of depression proceeds very slowly, but, having reached the bottom, production gradually begins to pick up speed and revival comes to replace the depression.
Revitalization - begins at the low point of the depression and ends when the economy reaches a pre-crisis peak.
The intensification of economic activity that has begun creates an expectation of an increase in the level of current income. This is manifested in a gradual increase in consumer demand. In response, production begins to increase, primarily due to the involvement of free capacities, employment grows and, as a result, incomes (profits, wages) grow.
Incomes are growing both nominal and real. People have the opportunity to purchase the goods they need. As a result, demand continues to grow. At some point, it becomes clear that it is no longer possible to expand production without large-scale investments and their rapid growth begins. Enterprises have all the conditions for investment growth: there is an opportunity to expand production through relatively inexpensive loans and there is a motive - an increase in profits. Investment demand is growing and at the same time the production of practically all goods and services is expanding.
Expansion of production contributes to the creation of new jobs, an increase in labor demand and, accordingly, an increase in employment. The well-being of people is growing, in society pessimistic moods are replaced by optimistic ones.
Economists note that at this stage, the growth in demand outstrips the growth in supply, and as a result, aggregate demand exceeds aggregate supply.
It should be noted that, since there is an increase in demand for all types of resources, including monetary resources, then simple interest rates begin.
Ascent: Coming after the recovery phase and continuing until its peak.
At this stage, "the trot goes into a gallop", there is an acceleration of economic development, which is manifested in the fact that new goods appear, new enterprises, investments grow, interest rates, prices, wages, and employment rise. Part of the demand begins to be speculative: many have a desire to purchase goods in order to then resell them profitably, since the prices for most of the goods rise. Large loans are taken for these purchases, that is, demand is partially supported by loans. When approaching the peak - the highest point of growth, the economy overheats. Loans are becoming more and more expensive, inventories are growing, and inevitably there comes a time when the whole system collapses like a house of cards, and again the economy finds itself in a state of deep crisis.
In the overwhelming majority of cases, each subsequent "peak" turns out to be higher in level than the previous one, which reflects the overall growth of the economy, its progressive development
Economists associate the abrupt transition from upswing to recession with the fact that production growth is purposefully and systematically organized by producers, and demand is spontaneously formed in the market by buyers and depends on many random factors. And since demand can easily fall, this is exactly what happens during a recession: aggregate supply turns out to be greater than aggregate demand.
Of course, the crisis for the country's economy is a big test, it carries many negative aspects, but let us note the positive side of the economic crisis, which consists in the economic recovery. By the principle of natural selection, inefficient enterprises with high costs go bankrupt during a downturn. The “surviving” enterprises introduce innovations that lead to increased efficiency, and subsequently to increased production. Old technologies are being replaced by new ones.
Currently, recessions in developed market economies have become less deep (up to 2% of GDP) and shorter (6-12 months). There is a clear violation of the classic cycle, the phases of the cycle have become more blurred, some phases completely disappear. Now, in the recession phase, there is no decline in prices; on the contrary, prices are rising. This phenomenon is called stagflation.
Stagflation is a simultaneous rise in inflation and a decline in production, accompanied by an increase in unemployment.
The emergence of stagflation is explained by the fact that the state has a monopoly on the issue of money. The importance of production monopolies has grown, which prefer not to cut prices, but to cut production; on the labor market there are trade unions that do not allow wage reductions.
Reasons for economic cycles
There is no consensus among economists about the reasons for this complex phenomenon. Each economic school explains the nature of economic cycles in its own way.
Some economists argue that cycles are related to external factors. They name such factors as major discoveries in science and advances in technology, natural disasters (droughts, floods), wars, revolutions and other political upheavals, population fluctuations, etc. There is a theory that explains the cycles by a change in the ratio of pessimistic and optimistic moods in society ... There is even a theory that links the dynamics of the business cycle to changes in the configuration of sunspots.
Other economists believe that the explanation for the cycle lies in the internal processes taking place in the economy, and external factors are secondary. They believe that crises occur due to the fact that there are contradictions between the rigid organization of production and an unregulated market, that spontaneous market development leads to market imbalances, and this in turn leads to the emergence of sectoral imbalances. That the crisis can also cause disruptions in the monetary sphere and errors in government budgetary policy.
However, almost all economists agree that:
- fluctuations in the level of economic activity are a consequence of the deviation of the economy from the equilibrium state;
- investments in real capital, primarily in machinery and equipment, are crucial in the movement of the cycle;
- the state can actively influence the mechanism of the cycle, using the methods of budgetary policy, i.e. regulating their income and expenses, as well as methods of monetary policy, i.e. adjusting interest rates and the volume of the money supply.
To regulate the economy, the state conducts a targeted economic
5.2 Government policy to stabilize the economy
The main goal of the state's socio-economic policy is to ensure economic and social stability and promote the country's economic development. This overall goal can be concretized into the following goals:
- economic growth (allows for a higher standard of living);
full employment (provides the population with income and relieves society from losses associated with the underutilization of labor resources);
economic efficiency (use of resources with maximum return to society);
economic freedom (ensuring, within the framework of the law, freedom of choice, freedom of entrepreneurship, etc.);
the growth of the well-being of citizens (all citizens should be given the opportunity to lead a decent life);
price stability;
securing strong positions in relations with other countries.
To achieve these goals, the state uses the following methods of influencing the economy.
1) Administrative methods are based on the strength of state power and include measures of prohibition, permission and coercion. The fact is that the state has special rights that other actors in the economy do not have, primarily the right of coercion. The state has the right, for example, to force you to pay taxes, and if you refuse, then it can deprive you of your property and even imprison you. To monitor compliance with the rules established by the state, it creates special bodies, for example, the tax police. Administrative methods are methods of direct influence on economic agents.
In countries with developed market economies, these methods are used by the state mainly to ensure environmental protection (for example, a ban on the emission of harmful substances); guarantees of minimum acceptable living conditions for the poor (for example, the introduction of a minimum wage), as well as for the fight against shadow business (for example, the requirement to provide information on income in the event of the acquisition of real estate), etc.
2) Economic methods are associated with the creation of additional material incentives or possible financial penalties, for example, in the form of fines and are methods of indirect impact on economic agents. Economic methods are divided into methods of monetary regulation and methods of budgetary regulation.
When it comes on the provision of preferential loans to manufacturers of products that you
are given at a low interest rate (payment for a loan) and for long periods, or when the state changes the amount of money in the economy using the methods available to it, it means that the state resorts to monetary policy measures.
Monetary policy - a set of measures in the field of monetary circulation and credit, aimed at regulating the economy.
When the state uses budget funds to regulate the economy, for example, reduces taxes for individual producers or introduces subsidies for the production of especially important products, then these are already budgetary policy measures.
Fiscal policy - a set of measures to change the volume of budget revenues and expenditures in order to regulate the economy.
3) Another comprehensive instrument of state regulation is the state with
etc.................
The market is not always stable. Periods of instability are fraught with inflation, unemployment, and other grave social consequences. At the same time, instability can play into the hands of some companies. The market itself, of course, is gradually stabilizing, but this can take quite a long time. The state cannot completely eliminate market fluctuations, but it is able to smooth them out, reduce social tension.
In the development of the economy, the state is called upon to correct those shortcomings that are inherent in the market mechanism.
III. Market lack of interest in solving social and global problems.
The market will not get involved in social issues, as there is no benefit. Only the state can pay benefits, pensions, etc. at the expense of taxes.
The market does not contribute to the preservation of non-reproducible resources, environmental protection, cannot regulate the use of resources belonging to all of humanity (ocean fish resources). The market has always been focused on satisfying the needs of those who have money.
There have always been such types of production that the market mechanism "rejects". First of all, this is production with a long payback period of capital, without which society cannot do without, and the results of which cannot be measured in monetary form: fundamental science, maintaining the country's defense, law enforcement, maintaining employment at the required level, supporting the disabled, organizing education, healthcare , creation and maintenance of the normal functioning of the general economic structure ( money turnover, customs control, etc.).
Income and wealth inequality is generated by the market mechanism everywhere and hourly. This mechanism itself is not at all aimed at overcoming too large differences in the welfare of citizens.
The situation can only be changed by regulating income and wealth. Only the state can solve such a difficult task. After all, this requires the creation of powerful systems for the redistribution of income and the implementation of other forms of social policy throughout the country.
Thus, in a mixed economic system, the state takes on several tasks (Fig. 1):
1) elimination of the consequences generated by the weaknesses (imperfections) of the market;
2) mitigation of inequality of income and wealth through their partial redistribution.
In addition, the need for state regulation of the economy is determined by:
Ensuring the integrity of the territorial economic space;
The presence of natural monopolies;
Limited resources;
By creating and maintaining developed infrastructure, especially in the conditions of Russia;
Figure 1. Economic functions of the state
Ensuring the reliability of information;
Ensuring a balance of economic interests of business entities;
§ legal support for the functioning of the market mechanism. Legal protection of producers and consumers is the most important function of the state.
First of all, ownership must be secured. An owner who is not sure of the inviolability of his property will fear its alienation and will not be able to use his creative and material potential in full force. Much attention is usually paid to antitrust regulation. The ability of individual firms to dictate their prices in the market and to impose other terms of transactions is calculated, and measures to combat these phenomena are determined.
In the case of natural monopolies, the state may resort to setting / fixing prices for the goods of such a monopolist.
The state also seeks to prevent unfair competitive practices, the so-called destructiveor destructive competition... For example, a ban may be imposed on dumping, that is, the sale of goods at bargain prices, usually in order to oust competitors from the market. After a competitor leaves the market, the dumping firm increases its market share and raises prices to generate excess profits.
Practically in all countries of the world there are laws protecting exclusive rights (copyright, inventive), which can also be attributed to measures to ensure fair competition. Income from works and inventions should be received by their creators. Copyright infringement is still rampant in Russia.
The laws on the protection of consumers' rights are also very important, since their interests and the interests of entrepreneurs do not always coincide. The issue of consumer protection is also topical in Russia.
The quality of many products, as well as the level of service, is not always at a high level;
§ the fact that not all relationships between people are within the market. So, the exploration of deep space, the world's oceans require very large costs, but they are outside the market and are regulated by states.
State regulation of the economy is a system of legislative, executive and regulatory measures carried out by competent state institutions in order to adapt the existing socio-economic system to changing economic conditions.
In other words state regulation of the economy Is a purposeful coordinating process of the government's managerial influence on certain segments of domestic and foreign markets through micro- and macroeconomic regulators in order to achieve economic growth and the stability of the economic system.
TO objects of regulation include national and international economy, individual sectors, industries and regions where problems arise that cannot be resolved through market regulators.
Subjects of regulation are the central (federal), regional and municipal authorities.
5.4 Economic instability.
The market economy has a certain instability, instability of economic development. However, this instability is not an evil that will inevitably lead to catastrophe and collapse of the economic system. The phenomena of economic instability should be reckoned with and taken into account in the economic policy of the state.
The task of economic policy is to seek to stabilize the functioning and development of the economy, thereby providing a healthy basis for social and political stability.
Among the many forms of economic instability, the most significant are:
- cyclical fluctuations in the level of GDP, investment, consumption, employment;
- unemployment;
- inflation.
Economic Cycles
Economic development in a market economy presupposes a sequential change of periods of production growth, GDP level, employment by periods of their decline.
The regularity of these successive ups and downs makes economic development cyclical.
Economic cycles are periodic fluctuations in the level of economic activity in a society.
The first economic crisis, from which periodically recurring crises are counted, was recorded in England in 1825. Then crisis phenomena began in other countries, repeating every 8-12 years. In 1873, the economic crisis began simultaneously in several countries of the world. This was the first world economic crisis in the history of cycles.
In economic theory, there are:
- long-wave cycles (Kondratyev cycles) with a period of 50 years, which are associated with the change of generations of technology and technology;
- average (industrial) cycles with a period of 8-12 years, which are associated with the deviation of demand from supply; their length is determined by the time required for the massive renewal of fixed assets;
Small cycles with a period of 3-4 years, which are associated with fluctuations in product inventories.
It should be noted that all these types of cycles are superimposed on one another.
We will consider and characterize the main phases of the middle (industrial) cycle.
Phases of the middle (industrial) cycle
A cycle is a period of time during which there is a sequential change of the following phases: recession, depression, recovery and recovery.
Decline - starts from the peak of the previous cycle and continues to the lowest point of the cycle.
This phase is characterized by a sharp decline in business activity. Firms suddenly find that they have overestimated the forecast demand for their products and are unable to sell the goods produced at the same prices.
In order to sell off the resulting surplus, they are forced to lower prices for their products. Firms suffer huge losses, they are unable to repay the loans and pay interest on them. A wave of bankruptcies begins and spreads throughout the economy. Unable to sell the already manufactured products, the enterprises reduce the volume of production. Of course, there is no longer any talk of expanding production, and as a result, enterprises are reducing the volume of investments in production, and the demand for equipment is falling.
The decline in production causes a wave of layoffs of workers, and unemployment rises. Population incomes are falling. Due to a decrease in income, as well as because of the desire of people to postpone part of these incomes "for a rainy day", household spending on consumer goods is falling, which means that the demand for consumer goods and services decreases.
The standard of living of the employed is declining. Panic and general pessimism reign in society. It should be especially noted that during this period, interest rates on loans are growing: firms are trying to borrow money to avoid bankruptcy, there is a general pursuit of money, and the demand for free funds is growing. In addition, banks themselves seek to set higher rates, since there is a high risk of default on their loans.
Perhaps the most severe was the recession of 1929-1933, which went down in history as the "Great Depression", then the United States, according to economists, was thrown back by 146 years, the national income fell by almost 2 times, per capita income fell by 30%, the unemployment rate reached 25%.
Depression: After reaching a low point, the economy stays in this state for a while.
The decline in production has practically stopped, and production and employment are at their lowest. Enterprises avoid long-term investments, and the population does not make expensive purchases. Everyone is in a state of uncertainty, fearful of starting new business.
However, commodity stocks are gradually dissolving, the fall in consumer and investment demand stops, the prices of goods stabilize. Since the demand for money has now fallen sharply, interest rates on loans are falling to the lowest level.
And the business world is slowly beginning to come to life: enterprises that have managed to survive the crisis are beginning to upgrade their equipment by purchasing more modern equipment (since loans are now more affordable), they are introducing new technologies, and taking measures to improve production efficiency. Their goal is to ensure cost savings in order to make a profit in an environment of low product prices.
As a rule, without the participation of the state, the exit from the state of depression proceeds very slowly, but, having reached the bottom, production gradually begins to pick up speed and revival comes to replace the depression.
Revitalization - begins at the low point of the depression and ends when the economy reaches a pre-crisis peak.
The intensification of economic activity that has begun creates an expectation of an increase in the level of current income. This is manifested in a gradual increase in consumer demand. In response, production begins to increase, primarily due to the involvement of free capacities, employment grows and, as a result, incomes (profits, wages) grow.
Incomes are growing both nominal and real. People have the opportunity to purchase the goods they need. As a result, demand continues to grow. At some point, it becomes clear that it is no longer possible to expand production without large-scale investments and their rapid growth begins. Enterprises have all the conditions for investment growth: there is an opportunity to expand production through relatively inexpensive loans and there is a motive - an increase in profits. Investment demand is growing and at the same time the production of practically all goods and services is expanding.
Expansion of production contributes to the creation of new jobs, an increase in demand for labor and, accordingly, an increase in employment. The well-being of people is growing; in society, pessimistic moods are replaced by optimistic ones.
Economists point out that at this stage, the growth in demand outstrips the growth in supply and, as a result, the aggregate demand exceeds the aggregate supply.
It should be noted that, since there is an increase in demand for all types of resources, including monetary resources, then simple interest rates begin.
Ascent: Coming after the recovery phase and continuing until its peak.
At this stage, "the trot goes into a gallop", there is an acceleration of economic development, which is manifested in the fact that new goods appear, new enterprises, investments grow, interest rates, prices, wages, and employment rise. Part of the demand begins to be speculative: many people have a desire to purchase goods in order to then resell them profitably, since prices for most of the goods rise. Large loans are taken for these purchases, i.e. demand is partially supported by loans. When approaching the peak - the highest point of growth, the economy overheats. Loans are becoming more and more expensive, inventories are growing, and inevitably there comes a time when the whole system collapses like a house of cards, and again the economy finds itself in a state of deep crisis.
In the overwhelming majority of cases, each subsequent "peak" turns out to be higher in level than the previous one, which reflects the overall growth of the economy, its progressive development
Economists associate the abrupt transition from upswing to recession with the fact that production growth is purposefully and systematically organized by producers, and demand is spontaneously formed in the market by buyers and depends on many random factors. And since demand can easily fall, this is exactly what happens during a recession: aggregate supply turns out to be greater than aggregate demand.
Of course, the crisis for the country's economy is a big test, it carries many negative aspects, but let us note the positive side of the economic crisis, which is the recovery of the economy. By the principle of natural selection, inefficient enterprises with high costs go bankrupt during a downturn. The “surviving” enterprises introduce innovations that lead to increased efficiency and, in the future, to production growth. Old technologies are being replaced by new ones.
Currently, recessions in developed market economies have become less severe (up to 2% of GDP) and shorter (6-12 months). There is a clear violation of the classic cycle, the phases of the cycle have become more blurred, some phases completely drop out. Now, in the recession phase, there is no decline in prices; on the contrary, prices are rising. This phenomenon is called stagflation.
Stagflation is a simultaneous rise in inflation and a decline in production, accompanied by an increase in unemployment.
The emergence of stagflation is explained by the fact that the state has a monopoly on the issue of money. The importance of production monopolies has grown, which prefer not to cut prices, but to cut production; trade unions have appeared on the labor market, which do not allow a reduction in wages.
Reasons for economic cycles
There is no consensus among economists about the reasons for this complex phenomenon. Each school of economics explains the nature of economic cycles in its own way.
Some economists argue that cycles are related to external factors. They name such factors as major discoveries in science and advances in technology, natural disasters (droughts, floods), wars, revolutions and other political upheavals, population fluctuations, etc. There is a theory that explains the cycles by a change in the ratio of pessimistic and optimistic moods in society ... There is even a theory that links the dynamics of the business cycle to changes in the configuration of sunspots.
Other economists believe that the explanation for the cycle lies in the internal processes occurring in the economy, and external factors are secondary. They believe that crises occur due to the fact that there are contradictions between the rigid organization of production and an unregulated market, that the spontaneous development of the market leads to market imbalances, and this in turn leads to the emergence of sectoral imbalances. That the crisis can also cause disruptions in the monetary sphere and errors in government budgetary policy.
However, almost all economists agree that:
Fluctuations in the level of economic activity are a consequence of the deviation of the economy from equilibrium;
Investments in real capital, primarily in machinery and equipment, are critical in the movement of the cycle;
The state can actively influence the mechanism of the cycle, using the methods of budgetary policy, i.e. regulating their income and expenses, as well as methods of monetary policy, i.e. adjusting interest rates and the volume of the money supply.
To regulate the economy, the state conducts a targeted economic
5.2 Government policy to stabilize the economy
The main goal of the state's socio-economic policy is to ensure economic and social stability and promote the country's economic development. This overall goal can be concretized into the following goals:
- economic growth (allows for a higher standard of living);
- full employment (provides the population with income and relieves society from losses associated with the underutilization of labor resources);
- economic efficiency (use of resources with maximum return to society);
- economic freedom (ensuring, within the framework of the law, freedom of choice, freedom of entrepreneurship, etc.);
- the growth of the well-being of citizens (all citizens should be given the opportunity to lead a decent life);
- price stability;
- securing strong positions in relations with other countries.
Policy to stabilize economic development includes three components: countercyclical policy, policy to achieve and maintain full employment, and anti-inflationary policy. Moreover, each of these directions of the stabilization policy cannot be carried out in isolation from its other directions.
To achieve these goals, the state uses the following methods of influencing the economy.
1) Administrative methods are based on the strength of state power and include measures of prohibition, permission and coercion. The fact is that the state has special rights that other actors in the economy do not have, primarily the right of coercion. The state has the right, for example, to force you to pay taxes, and if you refuse, it can deprive you of your property and even put you in jail. To monitor compliance with the rules established by the state, it creates special bodies, for example, the tax police. Administrative methods are methods of direct influence on economic agents.
Our country relatively recently moved into a market economy, and many still think that a series of economic crisesaccompanying this was caused solely by the mistakes of government, the intrigues of foreign enemies, the costs of the transition period, etc. All of this may be the case, but the truth is that market economy unstable by itself, even in the absence of all these factors. As, by the way, the planned economy, or any combination of them. With this text I'm going to open a series of posts for discussing internal economic factorsdetermining this instability. In it, I will also share with you a decision that recently illuminated me on what is needed to ensure economic stability.
The economy is largely determined by what forms of ownership it is built on. In modern russian economy the main forms of ownership are private and state. Let's take a closer look at them.
Private property belongs to one person who makes all decisions about it - about buying and selling, exchange, donation, use and even destruction. An economy built ONLY on private property can NEVER be sustainable and predictable. The behavior of many people, each of whom makes decisions by himself, is a priori unpredictable. Yes, such an economy will change faster than all other possible ones, but this cannot be equated with development, since not every change is development. A pure market economy is more of a Brownian motion economy than a developmental one. Some of its supporters pass off this property as stability, because this is how it may look on generalized graphs, but this is incorrect. Is there a difference to a person who has lost his home, whether he lost his home due to the collapse of his personal business, or because the entire economy of the country collapsed? There may be different nuances in both cases, but in general it is the same situation: a lost home. In a pure market economy, a part of people constantly wins, and a part loses, and the likelihood that an individual taken at random (or each!) Individual will one day suffer large economic losses for him tends to unity (i.e. almost certainly). In fact, it can be seen as a continuous crisis stretching over time.
Since people for the most part prefer development rather than marking time, there is nowhere a pure market economy, and private property in many cases is regulated and protected by the state. In this case, the authority to make decisions regarding the property object is partially transferred to the state. If all such powers are transferred to the state, then the property becomes state... Decisions regarding such property are taken collectively - by universal suffrage or at least by voting plenipotentiaries, for which everyone voted. In this case, decisions are made to improve the "average temperature in the hospital", i.e. At first there is development, but at the same time and the same for everyone, which means that everyone is moving forward at the speed of the slowest, while those who develop the economy faster than others can be subject to either artificial slowdown or collective exploitation, i.e. all "excess" growth is redistributed by lagging behind. This reduces their motivation for efficiency and incentives to work. Such development tends to slow down until stagnation, after which, over time, a crisis still occurs - even more concentrated in time and space, more massive and obvious than the market one. Actually, those crises that are usually talked about have such a nature, i.e. one way or another, they are the result of government intervention, but more often than not, this intervention was carried out to combat small local crises arising from private management, so that the state simply turns out to be extremely guilty. It is important to note that stagnation is not stability, but a situation when some monitored statistical parameters are held at an acceptable level at the cost of a decline in others, equally important and significant, but not officially monitored statistically. Those. a beautiful picture in a bad state of affairs. The decisions made by the unqualified majority are almost as unpredictable as the decisions of individuals, and strongly depend on the quality of the statistical information supplied, on the honesty of the media.
The main benefit of this form of ownership is the equalization of property differences in order to achieve social stability, even at the cost of reducing economic efficiency and increasing the risk of economic instability. A decrease in economic efficiency occurs, firstly, because maximizing this efficiency is not the main goal, since decisions are strongly influenced by social factors, and secondly, since decisions are very large-scale, and fine adjustment is impossible. Alignment inevitably means that someone will receive more support than he really needs (but he, of course, will not admit it, because the private trader seeks to maximize individual utility, for him there is no concept of "too much"), and someone will receive too much few. Should maternity capital be issued to wealthy families? Yes, all equally! Should we pay pensions to working and wealthy pensioners? Yes, all equally! "Manual control" can allow solving some of the most pressing issues, but always at the cost of social stability, since collegiality and equality are sacrificed.
In practice, these forms of ownership are often mixed or legally modified. For example, public funds can be distributed collectively only at the stage of forming the annual budget, and then decisions are made individually, for example by ministers. This duality is state property, and decisions on it are made individually, as if it were private - and generates opportunities for corruption... The seemingly ridiculous term has already spread "Public-private" property as applied to public corporations. They are state-owned in terms of acquisition and de jure, but in terms of management and de facto they are private. In fact, almost all state property is just such a "public-private", which allows individual decisions to carry out its privatization and turn it into fully private. The problem is that the reason is not only in legal laws, as it seems, Navalny sees it, but also economic. This becomes possible because, in fact, the state form of ownership is really not very suitable for the management of such objects in the current conditions. To be de facto state, it must be governed by universal decisions, which is the slowest and most unskilled way to make decisions. In this way, you can adopt rules, for example: in each city there should be so many lamps per square meter. km., giving such and such a degree of illumination at such and such a time of the day. We decided once, and then we just look at the execution statistics. This method is applicable for managing the planned mass production of the same type of standardized goods of guaranteed demand: "... so many tons of pig iron and steel per capita per year ...", the quality is spelled out in such and such a GOST. But if the population needs more varieties of goods of a certain category, then for such an industry, public administration will not be effective, because either it will drown in a huge number of GOST standards, or it will not produce a sufficient range of goods. Also, this method is weak when trading in market conditions. A private trader can flexibly change prices, while the state sets them centrally once a year or at another period, which means that it will almost always lose. Actually, it is precisely this circumstance that is most likely the deep economic reason for the transformation of state property into "private-state". State administration can ensure the production of oil and gas in accordance with GOSTs, but in order to establish prices for them in market conditions, individual decisions are needed. And if property is governed by sole decisions, then it is no longer de facto state property.
To solve this dilemma, a mechanism has been developed in which the state receives fixed payments, and the corporation - everything else, if any, i.e. the private owner assumes the risks. There is a mechanism of government contracts that can work on the principle of an auction: who will offer the best price. Perhaps corruption could be overcome by making the corporation fully state-owned, governed only by open collegial decisions and selling products at a fixed price set for a year, while private intermediaries would resell at their own risk at market prices, thus avoiding undue exposure. on the state corporation of sole decisions. But at the same time, of course, the state would have to come to terms with the fact that such private traders would work with a profit, i.e. resell his products for more than they bought. Now it looks like a crime for the state, although in fact it is probably the only sustainable solution to the problem.
The state will never be able to trade in a market economy as efficiently as a private trader, if only because of the slower decision-making speed. The clause about the market economy was made here in order to filter out cases like wars when a private trader cannot trade because it is life-threatening, but the state has an army and can trade, i.e. there is a powerful factor of influence of non-economic nature. Public administration is the lowest profitable of all economically possible, otherwise all others would simply not be needed and would not arise. It is impossible to come up with any such magic rules so that everyone could act in the same way and at the same time and evenly get rich faster than if they united in groups of professionals using the effects of team synergy, or each would work for himself to the maximum of his efforts in that area. where they have the best abilities. For different types tasks are better suited to different forms of ownership. Where local profit maximization is needed, private property is better suited. State ownership works best where redistribution is needed between many, for property equalization, rather than exchange between two parties to maximize mutual benefits. There is an opinion that public economic management can be more efficient due to scale, which is not true for all industries, due to the fact that it was said above about inefficiency due to equalization and small assortment.
This is not the only mechanism for transforming state property into de facto private property. Electoral fraud, political blocs, bribes, lobbying, etc. also are forms of private influence on government decisions for personal selfish purposes. In recent years, the public has begun to pay more attention to this and monitor compliance with laws, which is very beneficial for the country. As far as can be judged, these phenomena are mainly not of an economic nature, but of a political nature, therefore we do not consider them here, although, of course, it is important to keep them in mind.
Economic instability and unemployment
Economic situation. As you know, the economy of any country develops cyclically, growth does not occur evenly, but is interrupted by periods of economic instability (rising unemployment, inflation, falling GNP, etc.). Experts distinguish four phases of the peak economic cycle - the economy is full employment, and production is operating at full capacity, the price level tends to increase, and the growth of business activity stops, followed by a decline - production and employment decline, but prices do not yield to the downward trend. the point of decline is characterized by the fact that production and employment, having reached their lowest level, begin to emerge again from the bottom, finally, during the recovery phase, the level of production rises, and employment increases. Despite the common phases for all, individual economic
The neoclassical system was a logically coherent and detailed theoretical concept, but economic instability (crises, unemployment) did not fit well into it. She was unable to explain the reasons and
In each specific case, these problems will be solved in their own way. For example, in the Republic of Belarus, the labor market is characterized by the presence of a large number of inefficient jobs and their slow renewal, insufficient investment in the creation of new jobs, which further exacerbates the imbalance in the demand and supply of labor in the labor market. These problems can be resolved only by reconciling the labor market needs in the labor force with the structure of jobs in the economy and the system of professional training. And this requires certain steps on the part of the state to intensify innovation and investment activities, create favorable conditions for the development of small business and entrepreneurship, renew and improve the structure of jobs, create new jobs by improving the development of the service sector. Sustainable development of small business contributes to the creation of new jobs, as well as reduces the dependence of employment on large economically unstable and unpromising enterprises, and reduces the risk of unemployment. The share of people employed in the production sector is declining from year to year, and in the service sector is increasing. For
The relevance of the problems of employment and unemployment is explained by the fact that, firstly, ensuring full employment is one of the most important goals of the national economy, and secondly, unemployment is a form of manifestation of instability in economic development. Unemployment has negative economic and social consequences... Studying the problems of employment and unemployment contributes to the identification of the causes of unemployment, the development of an effective employment policy. 84
In the previous chapter, we learned about aggregate demand and aggregate supply, and in it we got acquainted with models of macroeconomic equilibrium. But the macroeconomic equilibrium in practice is rather a surprising accident, the exception that proves the rule, the market economy is unstable. Economic history the last two centuries provides us with a great many examples of this instability. Periods of successful industrial development and general economic prosperity have always been followed by periods of recession, accompanied by a drop in production and unemployment.
For high efficiency of the market mechanism, in addition to clearly delineating the boundaries of state intervention in its functioning, it is necessary to solve many other problems. First of all, it is necessary to neutralize the effect of such factors destabilizing the economy as inflation, monopoly and forced unemployment. Their emergence is directly related to the functioning of the market, which itself, without the help of the state, is not able to fight them. The state's activities to strengthen the market mechanism are not limited only to combating these factors of economic instability. It should also include the state stimulation of free enterprise, the denationalization of property and privatization, the formation of an optimal tax policy, and much more that is under the jurisdiction of the state and without which the competitive market system cannot function normally.
In the fourth basic section, devoted to determining the volume of output (chapters 12-18), we return to the problem of economic fluctuations and the role of the state in economic stabilization. We will describe the Keynesian theory of determining the volume of output, highlighting the case of an open economy. Here we will talk about a possible compromise between unemployment and inflation, as well as about the role in shaping the macroeconomic situation and various kinds of shocks - in the emergence of instability in the economy.
In Russia, over the period of the reform course, the unemployment rate (taking into account part-time workers and those on leave at the initiative of the administration) reached more than 20% of the active population. The critical, threshold value of the unemployment rate in international practice (with a normal system of social protection of the unemployed) is 10%. During the period of reforms, as the experience of a number of countries shows, its growth is possible up to 15-20%, but for a period of no more than 3-5 years. In the current situation in Russia, the growth of unemployment, which is a factor in the deepening of poverty and social instability in society, is turning into one of the most significant threats to economic security and social stability. On the one hand, the shrinking of families amid rising unemployment, causing a degradation of consumption, cannot but become a factor in the impoverishment of the population, and, therefore, in the slowdown of economic growth. On the other hand, an increase in unemployment leads to an increase in crime and suicide rates.
In a sense, the requirement for the government to balance the budget over a period equal to a calendar year is arbitrary. However, the alternation of seasons and well-established accounting practices provide a strong basis for such a requirement, and a business practice of regularly balancing receipts and expenses with known variances further reinforces it. If large economic fluctuations can be prevented by other measures, then such balancing is best done during the year, the traditional time for budgeting. Assuming that regulating the supply of money through competition between private currencies really should ensure not only the stability of the value of money, but also the stability of the economic environment, the argument for the need for government deficits to reduce unemployment boils down to the assertion that government control over money is needed to cure disease. which he himself called. It is not clear why, in general, in conditions of stable money, the government should have the right to spend more funds than it has. And, of course, it is far more important that government spending does not cause general instability than to occupy a cumbersome government apparatus (assuming the unlikely assumption that it fires on time) to counteract any weakening in economic activity.
They also put forward the thesis about the allegedly voluntary nature of unemployment. However, if unemployment is of this nature, then why does it fluctuate depending on the phase of the economic cycle of the workplace, employees are very picky and strive for the most profitable job. However, even in this case it is not clear why such workers are sometimes 4-5%, then all 15% But main question, to which the supporters of the neoclassical approach cannot answer - why all hired workers, if their supply exceeds demand, do not offer their labor at a lower price
The growing gap between the demand for food and the possibilities of its sustainable production in the world is accompanied by price instability and competition in the world market, which can significantly destabilize the world economy as a whole. The situation can be aggravated by the interconnectedness of economic, environmental, social and political problems, which leads to an increase in unemployment, a reduction in incomes of the population, malnutrition, an increase in morbidity and a decrease in the quality of life of the population. For example, the annual fish catch in the world is about 83 million tons. However, according to the UN Food and Agriculture Organization, about 70% of the world's fish stocks are depleted as a result of their intensive exploitation, the recovery process is extremely slow.
The thesis is also put forward about the allegedly voluntary nature of unemployment. However, if unemployment is voluntary, then why does it fluctuate depending on the phase of the economic cycle. The thesis of job search as a phenomenon causing market instability is also advanced. Its essence lies in the fact that employees are very picky and strive for the most profitable work. However, even in this case it is not clear why such workers are sometimes 4-5%, then all 15%. But the main question that cannot be answered
For economic risk protection, as well as safety, it is not the indicators themselves that are important, but their threshold values. Threshold values \u200b\u200bare limiting values, non-observance of which prevents the normal course of development of various elements of reproduction, leads to the formation of negative destructive tendencies. As an example (in relation to internal threats), one can name the unemployment rate, the gap in incomes between the most and the poorest groups of the population, and the rate of inflation. Approaching their maximum permissible value indicates an increase in the threat socio-economic stability of society, and exceeding the limit, or threshold values \u200b\u200b- about the entry of society into a zone of instability and social conflicts, that is, about a real undermining of economic development. From the point of view of external threats, the indicators can be the maximum permissible level of public debt, the preservation or loss of position in the world market, the dependence of the national economy and its most important sectors (including the defense industry) on the import of foreign equipment, components, products or raw materials.
The indicator is the number of registered crimes per 100,000 inhabitants. Why this indicator is important Low living standards and unemployment entail a low level of culture, a decline in morals and morals. The crime rate rises in proportion to the falling living standards. Insufficient funding for the maintenance of law enforcement agencies entails a reduction in the number of the patrol and guard service, which in turn increases the risk of every resident of the city becoming a victim of a crime. The rise in crime is the result of many unresolved economic, political and social problems in society. The indicator of the number of crimes shows the level of social tension and instability in the territory. It is used to assess the state and trends in the dynamics of crime in the region and, accordingly, activities to combat crime and reduce criminality in society. This indicator shows the number of all reported crimes per 100,000 population. The negative dynamics of the indicator characterizes the sustainable development of the region.
Let's start by looking at three well-known facts about the growth of Latin American countries over the past 20 years. Fact one is that the economies of many of these countries were exceptionally dynamic, showing a high rate of industrial growth, but that this high rate of growth was extremely unstable, systematically exacerbating inequality in the distribution of income. Best example gives Brazil, where the average annual growth rate of GNP in the period 1965-1980. amounted to 8.5%, but in 1980-1982. fell to minus 0.3%. The income share of the richest 20% of the country's population increased from 54% in 1960 to 62% in 1970 and 63% in 1980.The second fact is that, despite significant vertical mobility, the level of real wages for a long time, unskilled workers did not manage to rise significantly, and industrial growth, even during the period of economic booms, could not accept the excess
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