Types of cycles. Cycle stages and duration
) and economic recovery (economic revival). The cycles are periodic, but usually irregular. Within the framework of Keynesian-neoclassical synthesis, cycles are usually interpreted as fluctuations around the long-term trend of economic development.
Rise
Rise(recovery) occurs after reaching the lowest point of the cycle (bottom). It is characterized by a gradual growth in employment and production. Many economists believe that this stage is characterized by low inflation rates. There is an introduction of innovations in the economy with a short payback period. Demand pent-up during the previous downturn is being realized.
Peak
Peak, or the top of the business cycle, is the “high point” of an economic recovery. In this phase, unemployment usually reaches the lowest level or disappears altogether, production capacities operate at maximum or close to it load, that is, almost all the material and labor resources available in the country are involved in production. Typically, though not always, inflation rises during peaks. The gradual saturation of markets intensifies competition, which lowers the rate of return and increases the average payback period. The need for long-term lending is increasing with a gradual decrease in the ability to repay loans.
Recession
Impact on the economy
The existence of the economy, as a collection of resources for a steadily growing consumption, is of an oscillatory nature. Fluctuations in the economy are expressed in the economic cycle. The “thin” moment of the economic cycle is considered to be a recession, which, at some scales, can turn into a crisis.
The concentration (monopolization) of capital leads to “wrong” decisions on the scale of the country's economy or even the world. Any investor seeks to receive income from their capital. The investor's expectation of the size of this income comes from the boom-peak stage, when the income is maximum. At the stage of recession, an investor considers it unprofitable for himself to invest in projects with a yield lower than yesterday's.
Without such investments (investments), production activity is reduced, as a result of the solvency of workers in this area, who are consumers of goods and services in other areas. Thus, a crisis in one or several industries affects the entire economy as a whole.
Another problem of capital concentration is the withdrawal of money supply (money) from the sphere of consumption and production of consumer goods (also the sphere of production of the means of production of these goods). The money received in the form of dividends (or profits) is accumulated in the accounts of investors. There is a shortage of money to maintain the required level of production, and as a consequence, a decrease in the volume of this production. The unemployment rate is growing, the population is saving on consumption, and demand is falling.
Of the economic sectors, the service sector and non-durable goods industries are somewhat less affected by the devastating effects of the economic downturn. The recession even contributes to the revitalization of some activities, in particular, increases the demand for the services of pawnshops and lawyers specializing in bankruptcy. Firms that produce capital goods and consumer durables are most sensitive to cyclical fluctuations.
These firms are not only the hardest to weather the business downturn, but they are also the ones who benefit the most from the recovery. There are two main reasons: the possibility of postponing purchases and market monopolization. The purchase of capital equipment can often be postponed for the future; in difficult economic times, manufacturers tend to refrain from purchasing new machinery and equipment and constructing new buildings. During prolonged recessions, firms often choose to repair or modernize outdated equipment rather than spending large sums of money on new equipment. As a result, investment in manufacturing goods is sharply reduced during economic downturns. The same applies to consumer durables. Unlike food and clothing, buying a luxury car or expensive home appliances can be put off until better times. During periods of economic downturns, people are more likely to fix rather than change durable goods. While sales of food and apparel tend to decline as well, the decline is usually less than the decline in demand for durable goods.
Monopoly power in most capital goods and consumer durables stems from the fact that the markets for these goods are typically dominated by a few large firms. Their monopoly position allows them to keep prices at the same level during economic downturns, reducing production in response to falling demand. Consequently, falling demand affects production and employment much more than prices. A different situation is typical for industries producing short-term consumer goods. These industries usually respond to falling demand with a general decline in prices, since none of the firms has significant monopoly power.
History and long cycles
Business cycles are not truly "cyclical" in the sense that the length of a period, say, from one peak to another has fluctuated significantly throughout history. Although economic cycles in the United States have lasted about five years on average, cycles have been known to last from one to twelve years. The most pronounced peaks (measured as a percentage increase over the trend of economic growth) coincided with the great wars of the 20th century, and the deepest economic downturn, excluding the Great Depression, occurred after the end of World War I. It should be noted that along with the described economic cycle, the so-called. long cycles. Indeed, at the end of the 20th century. the American economy appears to be in a long recession, as evidenced by some economic indicators such as real wages and net investment. Nevertheless, even with a long-term downward trend in growth, the US economy continues to grow; Although in the early 1980s, the country recorded a negative GDP growth, in all subsequent years, except for 1991, it remained positive. Symptomatic of the long-term recession that began in the 1960s is the fact that, although growth rates have rarely been negative, the level of economic activity in the United States has hardly exceeded the growth trend since 1979.
Economic Cycle Models
A dynamic model of aggregate supply and demand
The main criterion by which economic cycles are distinguished is their duration. The cycle classification is shown in table 1.1.
In 1923 J. Kitchin's work Kitchin, Joseph (1923) was published. Cycles and Trends in Economic Factors, in which he examined the emergence of short-term cycles. According to his theory, the cycles depended on the fluctuations of world gold. This cycle lasts from two to four years. Currently, short-term cycles are associated with the occurrence of time lags.
Suppose there is a slight excess of supply over demand in the market, and there is a gradual accumulation of goods. This information reaches the manufacturer with some delay. It also takes a certain amount of time to make the appropriate decisions. It also takes time to implement the plan. The last time lag exists between the reduction in production and the implementation of all available stocks.
Most modern economists prefer to consider short-term cycles not as an independent phenomenon, but only a part of widespread medium-term cycles named after K. Juglar.
Juglar cycles have a duration of 7-12 years and are usually associated with the monetary system. He viewed the crisis as a necessary, healing phenomenon. During the crisis, the general price level decreases and insolvent enterprises are eliminated.
The duration of Juglar's cycles coincides with the period that Karl Marx considered necessary for the renewal of fixed assets. This was one of the reasons for the occurrence of cyclicality. In order to identify the timing of the onset of cycles, Juglar analyzes data on crises in France, Britain and the United States.
The medium-term cycle includes 4 phases, each of which has its own sub-phases:
- · Phase of revival (sub-phases of start and acceleration);
- • phase of recovery, or prosperity (sub-phases of growth and overheating, or boom);
- · The recession phase (sub-phases of the acute crisis and recession);
- · Phase of depression, or stagnation (subphases of stabilization and shift).
In 1930, the American scientist S. Kuznets S. Kuznets Secular Movements in Production and Prices. Their Nature and their Bearing upon Cyclical Fluctuations. Boston: Houghton Mifflin, 1930 construction cycles were discovered, later named after him. Kuznets' cycles last approximately 15-20 years and are associated with the renovation of housing and industrial buildings. The scientist himself connected them with demographic processes, in particular with migration, which required the construction of residential buildings.
A great contribution to the theory of cyclicity was made by the Russian scientist N.D. Kondratyev. His long-wave theory still attracts the interest of the scientific community. Long waves are associated with the fact that the life of various economic goods is not the same. In fact, big waves are a long-term disruption and restoration of macroeconomic equilibrium.
At the beginning of his work, Kondratyev studied the economic performance of some countries in Europe and the world for 150 years. After processing the data, using mathematical methods, he revealed clearly pronounced cycles with a duration of about 55 years. Data on the periods of passage of large cycles are given in table 2.1.
Table 2.1 Chronology of large cycles of economic dynamics according to Kondratyev
Kondratyev studied such indicators as:
a) England - prices, wages, capital interest, foreign trade, metallurgy;
b) Germany - coal and steel
c) France - prices, capital interest, rates of the French Bank, domestic consumption of goods, sown area of oats, foreign trade;
d) USA - prices, metallurgy, sowing and processing means of cotton area;
e) World Economy - Coal and Steel
In the course of the study, scientists have deduced the so-called "4 empirical correctness" - common features characteristic of upward and downward waves.
The first correctness: for the beginning of an upward wave, a change in production technology is characteristic, associated with both innovations and scientific discoveries, the involvement of more countries in the world economic system, a change in the economic structure in the sphere of monetary circulation.
The second is correct: upward waves account for more social shocks than downward ones. For example, the second upward wave fell on: the Crimean War of 1856, the wave of revolutions in Europe, the Sepoy uprising in India in 1867-1869, the American Civil War in 1861-1865, the wars for the unification of Germany in 1865-1871, the French revolution of 1871 During the downward wave, only the Russian-Turkish war of 1877-1878 took place.
The third correctness: in a downward wave, agriculture is stagnant for the longest time.
The fourth correctness: during an upward wave of a major crisis, medium cycles are characterized by small crises, a short duration of depression and a rapid rise. In a downward wave, everything happens exactly the opposite.
Kondratyev's long waves also affected XX, so many scientists took up their explanation, over time, more and more theories were developed. But the question is still open. At the moment, all theories explaining the existence of long-term cycles can be classified as follows (Table 2.2)
Table 2.2 Theories explaining the existence of the "Kondratieff wave"
Group of theories |
Surnames of scientists |
|
Marxist theories |
P. Baccarat, L. Fontvieille, E. Manuel, D. Gordon |
|
Innovative theories |
J. Schumpeter, S. Kuznets, G. Mensch, |
|
The theory of overaccumulation in the capital sector |
J. Forfester |
|
Labor theories |
K. Friedman |
|
Price theories |
W. W. Rostow, B. Berry |
|
Integration approach and monetary concepts |
J. Delbecke, P. Korpinen, R. Batra |
|
Sociological explanations and cycles of class struggle |
K. Perez-Perez, I. Milendorfer, M. Olsen, J. Gutten, B. Silver, V. |
|
War cycle theory |
J. Goldstein |
In the context of the current global crisis, Kondratyev's theory of long waves is being confirmed. Thus, it is possible to single out several general statements that have reasonable confirmation at this stage.
- 1. Long waves do not have a strict periodicity. Based on the economic indicators of advanced countries, it can only be argued that such quasi-cyclic fluctuations can occur up to fifty years. Moreover, each wave is unique, it arises in an era of certain economic and technological development. Therefore, it is impossible to predict the nature of the subsequent waves.
- 2. The chronology of long waves depends entirely on the indicator chosen for the analysis of economic activity. This is due to the complex relationships between the elements of economic activity. The process of constant interaction is never repeated, which is associated with the emergence of various lags in its mechanisms. Until now, there is some disagreement among researchers of long waves about dating and determining turning points in the phases of long waves.
- 3. Long waves are presented in the form of a logistic curve, consisting of phases characterized by the rate of development of its indicators. The phases of a long wave are primarily associated with technologies that develop at the stage of its emergence.
- 4. Long-wave fluctuations arise as a result of many nonlinear feedbacks operating between technological, macroeconomic, institutional, social subsystems with various lags and with a high degree of uncertainty. Revealing the logic of these connections is the main subject of further research.
The more science becomes aware of the nature of the long-wave mechanism, the more problems arise that require prompt resolution. These include:
- 1. Determination of the relationship between the market and technological components of the long wave.
- 2. Investigation of the process of changing the technological order.
- 3. Disclosure of the mechanisms of integration of individual technological trajectories into the life cycle of the technological paradigm.
- 4. Determination of the role of the state at each stage of the long wave.
- 5. Research into the interaction of different countries during the spread of the technological order, as well as the economic exchange arising during this period.
Further study of the long-wave mechanism will allow solving many problems in the modern economy, one of which is the maintenance of macroeconomic stability.
The cyclical nature of the economy is a special form of development with uneven economic growth in different periods, which are called stages or phases of the economic cycle.
The economic cycle includes four phases:
- crisis (recession, recession),
- depression (stagnation),
- revival (expansion),
- rise ending in a boom or peak.
In this way, economic cycles or waves- These are periodic fluctuations in economic or business activity, during which the market economy passes from one phase to the next the same.
Let's consider the features of each phase of the economic cycle.
The phases of the economic cycle are shown in the figure.
The first phase of the economic cycle is a crisis, i.e. a sharp violation of the existing balance.
A crisis differs from an imbalance between supply and demand for a certain commodity or in any branch of the economy in that it arises as a general overproduction, accompanied by a precipitous fall in prices, bank failures and the shutdown of manufacturing enterprises, an increase in loan interest, and unemployment.
A crisis is the most devastating phase of any industrial cycle. This is due to its surprise for entrepreneurs, they, as a rule, are not ready for it. Therefore, the crisis is in the nature of a collapse. Before him, the economy thrives in all respects, everyone gets big profits, and then a crisis begins, and the foundations are crumbling not in one industry, but in all at the same time.
In the recession phase of the economic cycle, demand begins to decline, while supply remains at the same level. Enterprises work, producing products in large volumes than required by the current market environment. The market is overflowing with goods, demand is rapidly decreasing, but production continues, although the volume of inventories is already very large. A rapid fall in prices begins, the interruption of the mechanism of capital circulation. The crisis of non-payments, lack of cash, difficulties in marketing lead to a belated but rapid curtailment of production, which leads to an increase in unemployment and a decrease in the purchasing power of society, which further complicates marketing.
A period of crashes begins, the closure of enterprises, banks "burst", as loan defaults are massive. In the crisis phase of the economic cycle, unemployment rises sharply, reaching its critical point. Naturally, in such conditions, no one thinks about capital investments. Firms are unable to pay current payments, as there is a "freeze" of capital in the form of unsold goods.
At this stage of the economic cycle, in a downturn, there is a general pursuit of money, therefore, the payment for a loan - the interest rate on loans - is growing rapidly. Stock market crashes, bankruptcies and business closures mark the end of the crisis and the beginning of the depression. The recession presents such a bleak picture. The actual recession phase in the economic cycle usually does not last long, the crisis looks prolonged if it is combined with depression.
Depression (stagnation)- this is the phase of the economic cycle in which a certain stabilization of the situation takes place. "Depression is a period of adaptation of economic life to new conditions and needs, a phase of finding a new balance."
The crushing fall stops, since there is nowhere else to "fall". Macroeconomic indicators, prices, wages, unemployment stabilize at a certain level. After the end of the recession, the upward trend is not outlined immediately, since production is carried out on a narrowed basis. This is due to the fact that manufacturers are afraid to expand production due to the lack of confidence that there will be sufficient demand for their products.
In the depression phase of the economic cycle, confidence in a stable environment is difficult to recover. Entrepreneurs fearfully look around "around", even after some stabilization of demand, they are afraid to invest additional funds in their business. This phase is long lasting and may be the longest in the entire economic cycle. The stagnation can last from several months to several years.
With a general stagnation in the economy, only one indicator continues to change: the interest rate is falling due to the fact that the "surviving" entrepreneurs have free money due to low production costs, because wages have frozen at their lowest point. If we take the classic version of the economic cycle, then in this phase the rate of interest on cash loans drops to its lowest point within this cycle.
During the depression stage, prices stabilized at a low level stimulate consumption, and the economic cycle continues. As a result of the increased demand for civil goods, the demand for means of production also increases. But the crisis showed the insolvency of fixed capital in the technical and technological sense. The first investments are made to renew it, and if they turn out to be successful, the level of investment starts to rise slowly. Production begins to unfold slowly. The next phase of the economic cycle begins - the stage of recovery.
Revitalization- this phase of the economic cycle is characterized, first of all, by the expansion of production of means of production. Therefore, the impulse begins with enterprises that produce equipment, elements of fixed capital. "The recovery phase is a phase of slow growth in production, caused by the first successful investments, a gradual increase in prices, which entails an increase in wages, higher levels of employment, profits. The reaction to this is an increase in interest rates."
A characteristic feature of this phase of the economic cycle is the absence of clear boundaries for the beginning of the phase. This is due to the fact that after a depression, various sectors of the economy begin to come out of it after different periods of time. In a recovery period, entrepreneurs venture to take their first steps forward, finding that the risk is justified and the investment is profitable. Production expands following the growth of demand, unemployment decreases, and wages rise. At some point, economic indicators reach the pre-crisis level, and then the next phase of the economic cycle begins - an upturn.
It is the achievement of the pre-crisis level of production that is the end of the recovery and the beginning of the recovery phase of the economic cycle.
Rise- all economic indicators begin to rise at a much faster rate than in the previous phase. Prices begin to rise, but they are offset by an increase in wages, as a result, the entire volume of output is absorbed by the growing demand of the population. However, in this phase of the economic cycle, the condition for the excess of the growth rate of prices over the growth rate of wages must be observed. The consequence is an increase in employment, and labor resources are becoming the only limiting factor for further development. "The acceleration of economic development can be seen in waves of innovation, the emergence of a mass of new goods and new businesses, in the rapid growth of capital investment, stock prices and other securities, interest rates, prices and wages. Everyone produces and trades at a profit."
Naturally, this cannot continue indefinitely, and at some point the boom phase ends at the highest point of the economic cycle, called a peak or boom. During this phase, discoveries are made that allow the economy to reach a new level within a given economic cycle, but the introduction of new technologies inevitably leads to an increase in production costs, which results in an increase in the prices of goods produced without an increase in the level of wages. This leads to a drop in consumer opportunities. The imbalance between supply and demand is growing. The economic boom turns abruptly into a crisis of the entire economic system, the economic cycle ends, and a new one begins.
The paradox of the recovery phase lies in the fact that after a difficult overcoming of the crisis and its consequences, the economy, within the framework of the economic cycle, through the development of crisis factors, is rapidly moving towards a new crisis.
New features of the phases of economic cycles
Currently, economic cycles and crises in developed market countries have acquired new features and characteristics. The foundation for this was the anti-crisis policy of the state, which is applied in all countries following the capitalist path of development, and the development of international integration, the socialization of production and capital. Currently, crises in Western countries are different from Russian crises. The following features of the modern economic cycle can be distinguished.
First, crises have become much more frequent, the duration of the cycles has decreased to 5-7 years. At the end of the 19th - the first half of the 20th century, the duration of the cycles was 11–12 years.
Secondly, the nature of the onset of the phases of the cycle has changed. In the past, phases of the cycle, such as a crisis or an upswing, occurred in different countries at different times. Due to this, the destructive power of the cycle was less than at present, when the phases of the cycle occur in most countries at the same time. This is largely due to the fact that, as a result of the increased integration of national economies, a crisis in one country gives rise to a crisis in other countries. There is a kind of chain reaction in the business world.
Third, as a result of the countercyclical regulation policy, the entire course of the cycle changed. The sharp boundaries disappeared, the phases began to smoothly transition into one another. This policy is also due to the phenomenon of "dropping out" of some phases from the course of the cycle. For example, after a crisis, recovery could immediately begin, bypassing the depression phase (Fig. 2).
Smoothing business cycles - the result of the use of countercyclical regulation
Fourthly, from the end of the 60s. the cyclical crisis is accompanied by growing inflation. Unemployment is becoming chronic and affects new categories of workers. In fact, a new type of crisis economy has emerged - a stagflationary economy.
Fifth, the nature of crises has changed. After a series of cycles with weak crises and a short depression, or no depression at all, a crisis ensues that covers all spheres and sectors of the economy. The force of the crisis is enormous, and all countries are involved in it.
Features of economic development cycles
An important feature of cyclical fluctuations is the difference in fluctuations in employment and output levels in industries producing capital goods and durable goods, and industries aimed at producing non-durable goods. The former react to cyclical fluctuations with much greater force than the latter. The reasons for this are as follows.
- The purchase of new equipment or durable goods can be postponed because they are not essential and the demand for them is sharply reduced.
- In addition, a small number of firms exist on the market for capital goods at the same time, and such an oligopolistic nature of the market makes it possible for the management to quickly reduce the number of employees and the volume of output during periods of downturns.
- At the same time, prices for their products remain approximately at the pre-crisis level.
- The level of employment and production volumes in enterprises producing non-durable goods cannot be subject to strong fluctuations, since more developed competition in the markets for these goods and firms cannot resist lower prices, reducing the number of employees and the volume of production.
Business cycles have never been similar to one another, each of them has its own characteristics.
Cycles may be missing some phases, for example, immediately after a crisis, a revival may follow.
Between crises, the business world does not remain calm. The economy can experience large or relatively small downturns and unrest. With regard to economic cycles in this regard, "German researchers have ingrained the term pre-crisis (Vоrkrisе) - a short-term phenomenon, but often heralds the approach of a catastrophe."
There are the following main types of crises:
- cyclical,
- intermediate,
- partial,
- industry,
- structural.
Types of crises |
Description |
---|---|
Cyclical crisis |
A cyclical crisis is the most profound crisis in its impact. It covers all spheres and branches of the economy. A characteristic feature of this crisis: violation of the existing equilibrium causes the organization of production at a qualitatively higher level. As a result, the next cycle will begin on a qualitatively different economic basis. Outdated equipment is being squeezed out and new equipment is being introduced; production costs are reduced; the structure of production comes in line with the economic requirements of society. |
Intermediate crisis |
The interim crisis does not cover all sectors of the economy, it is local and is short-lived. It is a timely response to the emerging contradictions and imbalances in the economy. As a result, the recovery or recovery phase may be interrupted for a while. Intermediate crises are not particularly acute; they smooth out contradictions, softening a cyclical crisis, which turns out to be less deep and destructive. |
Partial crisis |
A partial crisis can occur both during an upswing and during a depression or recovery. The crisis affects only one specific area. For example, the 1997 financial crisis affected the monetary sphere in almost all countries, although it began on the stock exchanges of Southeast Asia. |
Industry crisis |
The sectoral crisis covers related sectors of the economy. The reasons for its occurrence may be the rise in prices for raw materials and energy carriers, cheap imports, natural aging of industries, the emergence of new ones, and a change in the sectoral structure. |
Structural crisis |
A structural crisis usually lasts several economic cycles. The need for a radical change in the structure of production with the use of new technological advances is the main reason for structural crises. Examples of structural crises are the energy, raw materials, food crises of the 70s and 80s. |
The paradox of crises is that in this phase of the economic cycle, not only the limit of development is revealed, but also the impetus for the further development of the economy. Such a kind of "stimulant" with destructive properties and consequences, after the onset of which, willy-nilly, it is necessary to create new economic realities.
During the crisis phase of the economic cycle, at first, the motives for reducing production costs appear sharply and new opportunities are sought for this. Then there is an awareness of the need to update production and economic activities on a new technical and technological basis. Having marked the end of one economic cycle, the crisis in this way begins the next.
Crisis and depression are always followed by recovery. As a result of crises, the economy does not collapse completely, but moves to a qualitatively new level of development.
Types of economic cycles
In economic life, a variety of fluctuations are observed, which are of an objective nature. Of these, there are four types of economic cycles most used by economists.
- The cycles of renewal of individual elements of capital are 2–4 years.
- Fixed capital renewal cycles are 7–12 years.
- The cycles of renovation of parts of buildings and structures are 18–25 years.
- The cycles associated with demographic processes and agricultural production are 45-50 years.
The cycles of renewal of individual elements of capital are called Kitchin cycles. These are small cycles that are associated with fluctuations in world gold reserves. Construction cycles are called Blacksmith's cycles, and they are associated with the periodic renewal of dwellings and certain types of production facilities.
The main interest for the business world is Zhuglyar's cycles associated with the renewal of fixed assets. This type of business cycle has other names: business cycle, industrial or production cycle. When studying economic cycles, economists drew attention to the effect of a larger increase in the production of national income with relatively smaller capital investments. This effect is called acceleration.
The essence of the accelerator lies in the fact that an increase in demand for consumer goods leads to an increasing demand for means of production, and, consequently, for investment. Acceleration generates, on the one hand, instability in the economy, on the other hand, during periods of recovery and recovery, it contributes to the growth of investment, which speeds up the cycle. But in the phases of crisis and depression, due to the existence of an accelerator, the destructive force of the recession increases, because the reduction in investment outstrips the reduction in production.
The accelerator is the ratio of investment to an increase in production or national income and is expressed by the formula:
Where V is an accelerator, I is an investment, D is income or finished goods, t is the corresponding year.
The theory of long-term or "long waves" was developed by the Russian scientist ND Kondratyev in the 1920s. XX century. According to it, in the history of economic development, periods of about fifty years with accelerated or slowed down development can be distinguished. After analyzing the data for 140 years, Kondratyev identified three cycles of economic development with "upward" or "downward" waves.
An upward wave - since the end of the 80s. XVIII century to 1810-1817
A downward wave - from 1810-1817. until the period 1844-1851.
An upward wave - from 1844-1851. until the period 1870-1875.
A downward wave - from 1870-1875. until the period 1890-1896.
An upward wave - from 1890-1896. until the period 1914 -1920.
A downward wave - from 1914 to 1920.
If you follow his theory further, then the lowest point of the bearish wave will be right in the period of the Great Depression. And then on a serious crisis in the mid-70s. XX century. Kondratyev explained the existence of large cycles by different periods of functioning of economic goods, the production of which also needs to spend different time, especially on the accumulation of capital for their creation. Another breakthrough in scientific and technological progress marks the beginning of a new cycle. Then, at the stage of recovery, the products of this breakthrough are widely introduced.
If we analyze the long Kondratyev waves, we can see the following feature: the industrial cycles occurring during the upward wave are characterized by long and powerful rises and relatively short and weak depressions. At the same time, the industrial cycles of a downward wave have absolutely opposite signs.
Studies of the patterns of long-term economic development made it possible to generalize them in the theory of technological structures.
The technological structure is an integral complex of technologically related industries and the corresponding technical and economic paradigms, the periodic process of successive replacement of which determines the "long-wave" rhythm of modern economic growth.
The chronology of technological orders corresponds to Kondratyev's theory of long waves, according to this, the following types of economic cycles or waves are distinguished:
- The first wave (1785-1835) - the first technological mode based on textile production technologies.
- The second wave (1830-1890) - the second technological mode, formed on the basis of steam engines, railway and water transport based on them, as well as ferrous metallurgy and machine-tool industry.
- The third wave (1880-1940) is the third technological mode, the core of which is the electric motor and steel production.
- The fourth wave (1930-1990) - the fourth technological mode based on the internal combustion engine and petrochemical production.
- The fifth wave (1985-2035 presumably) is the fifth technological mode, formed on the basis of the semiconductor industry and technologies for the production of microelectronic components, as well as information technology and biotechnology.
In the course of every structural crisis in the world economy and every depression that accompanies the process of replacing the dominant technological order, new opportunities for economic success open up. The countries that were the leaders in the previous period are faced with the depreciation of capital and qualifications of those employed in the sectors of the aging technological order, while the countries that have managed to create the groundwork in the formation of production and technological systems of the new technological order are centers of attraction for capital, released from the aging industries. Each time a change in the dominant technological order is accompanied by serious shifts in the international division of labor, a renewal of the composition of the most prosperous countries.
Cyclicality can be viewed as one of the ways of self-regulation of the market economy. Cyclicity is the fundamental basis for the development of not only a market economy, but society as a whole. If there were no cyclicality, the development of the whole society would have stopped somewhere at the level of the Middle Ages.
Literature
- Bunkina M.K., Semyonov V.A. Macroeconomics. - M .: Dashkov and K, 2008.
- Zhuravleva G.P. Economic theory. - M .: INFRA-M, 2011
- Halperin V. Macroeconomics. - SPb .: School of Economics, 2007
- Sazhina M.A. Economic theory. - M .: INFRA-M, 2007.
- Shishkin A.F. Economic theory: In 2 vols. Book. 1. - M .: VLADOS, 2002.
- Economic theory. / Ed. V.D. Kamaeva. - M .: VLADOS, 2004.
- Salikhov B.V. Economic theory. - M .: Dashkov and K, 2014.
E Economists distinguish between three types of economic cycles, depending on their duration.
Short-term cycles it is customary to call Kitchin cycles, who devoted his work to this problem in 1923. Joseph Kitchin linked the cycle duration, which he assumed to be three years and four months, with fluctuations in world gold reserves. However, at present, such an explanation of the reasons for the short-term cycle can satisfy very few.
Most modern economists who support the idea of the existence of short-term economic cycles tend to view them only as an integral part of the general cyclical system, the basis of which is mid-term economic cycles called Zhuglyar's cycles, named after a French economist who studied economic fluctuations in the second half of the 19th century.
Clement Zhuglyar considered the economic cycle as a natural phenomenon, the reasons for which lie in the sphere of money circulation, more precisely, credit, and believed that the repetition of all economic processes caused by banking occurs every ten years.
The crisis, the main phase of the cycle, was assessed by Zhuglyar as a healing factor leading to a general decline in prices and the liquidation of enterprises created to meet the artificially increased demand.
The duration of the Zhuglyar cycle coincides with the duration of the cycles, the main reason for which some economists saw in the timing of the physical wear and tear of the active part of fixed assets.
Mention should also be made of the so-called construction cycles, or cycles of S. Kuznets(American economist). S. Kuznets believed that oscillatory processes (cycle duration 15-20 years) are associated with periodic renewal of dwellings and certain types of industrial structures.
Scientists who have studied the problem of medium-term economic cycles have drawn attention to the fact that a change in demand for finished goods entails, as a rule, a significantly increasing demand for means of production.
The tendency for the erosion of the phases of industrial cycles, their more frequent non-coincidence in different countries and regions, combined with the tendency of increasing difficulties in the development of a market economy caused by structural crises, forced scientists to look for new reasons for such complex economic phenomena.
There was renewed interest in the half-forgotten studies of the period 20-30. XX century
On February 6, 1926 at the Institute of Economics of the Russian Association of Scientific Research Institutes of Social Sciences, 34-year-old professor Nikolai Dmitrievich Kondratyev made a presentation on the topic “Large cycles of the economic conjuncture”.
After processing data on changes in the main economic indicators of Western European countries and the United States from the end of the 18th to the beginning of the 20th century, Kondratyev discovered certain patterns and formulated the theory of "long waves" in the economy, which brought him worldwide fame.
According to this theory, countries in their development go through stages of economic ups and downs, forming 40-60-year cycles. Such large cycles are called "Kondratieff waves". According to the scientist, such fluctuations are generated by serious changes in technology, the introduction of large inventions into production. The material basis for "long waves" may also be the need to update all types of structures and equipment.
By the beginning of the 20th century, according to Kondratyev's calculations, 2.5 long waves had passed:
Cycle I - from the beginning of the 1890s. until 1844-1851
II cycle - from the beginning of 1844-1851 to 1890-1896.
III cycle - from 1890-1896 to 1914-1920.
After analyzing in detail what happened during this period, N.D. Kondratyev came to a number of conclusions:
1. An upward wave is necessarily preceded by significant scientific and technical inventions and innovations.
So the rise of the first big cycle is associated with the industrial revolution in England, the second - with the development of rail transport, the third - with the introduction of electricity, telephone and radio.
2. The upward stage, as a rule, is rich in social upheavals (revolutions and wars).
3. Downward waves have a particularly depressing effect on agriculture.
4. Ordinary 8 - 10-year cycles are strung on large waves, the nature of their course depends on what phase of the long wave they hit.
In accordance with the concept of ND Kondratyev, the beginning of the rise in the new large economic cycle was to fall in the mid-40s, and the next one - in the mid-90s.
The development of the ideas of this scientist is very relevant, since scientific and technological progress, revolutionary technologies have an increasing influence on the world economy, new factors of influence on "long waves" have appeared, which should be investigated. Thus, the turning point from increasing to decreasing the share of knowledge-intensive industries and construction in the GDP of seven leading countries occurred in the 1960s. It was a signal that the prosperity phase was ending. The next phase of recovery is possible when there are signs of large-scale growth of new sectors of the economy in the leading countries of technological progress and an increase in the overall rate of capital investment, and especially investment in buildings and structures, begins. As for the new industries, their circle is determined by the innovations of the 80s - 90s. The most promising of them should be considered the development of informatics based on advanced technologies using electronics, space and laser technology.
The dream of every investor is to work in a constantly growing market. In such a situation, even a beginner could make good money. Unfortunately, not everything is so rosy. The experience of past years and the existing economic theory indicate that growth is always followed by a recession or even an economy. Therefore, we can safely talk about its cyclical nature.
What is the essence of business cycles?
Business cycles are fluctuations in business activity between two points - an economic boom and an economic recession. In this case, the cyclicality can be conditionally divided into four phases - peak, decline, rise and bottom (lowest point). Let's briefly analyze the features of the most important stages.
What is the peak of business activity?
With this level of economy, there is practically no unemployment in the country, the economy is almost 100% loaded, which guarantees timely replenishment of the state treasury. But there is a negative point here - the inflation rate is increasing significantly.
What's next? After the peak of activity, the decline begins. This period is characterized by a significant decline in production and an increase in the unemployment rate. If this situation continues for more than six months, then we can talk about a prolonged recession.
What Happens When Business Bottoms Up?
In this case, most of the production may stop, and the unemployment rate exceeds the critical level of 10%. There is an opinion that when the bottom is reached, further deterioration of the economy is not expected. But other examples are also known in practice.
For example, in the same USA, the “Great Depression” did not end immediately - the problems in the economy stretched out for almost 10 years. Moreover, each cycle lasted about five years (although, for each country, these indicators are individual).
There are cases when the duration of the cycles ranged from one to twelve years. After the Great Depression, the largest economic downturn in many countries occurred immediately after the end of the First World War.
Cyclicality in the economy
In principle, everything that surrounds us in the world has a certain cyclicality. Economics is no exception in this regard. The only thing is that such cycles are based on other phenomena - patterns of scientific and technological progress and business activity (which we have already mentioned above). For example, with the appearance of any significant invention, it can become a serious impetus for the development of industry. At the same time, some entrepreneurs are so into "taste" that they overestimate their capabilities. As a result, they suffer serious losses. If there are a large number of such “losers” companies, then the period of growth sooner or later gives way to a period of stagnation or a strong recession.
You can get rid of cyclicality if you completely regulate the economic sphere or achieve the linearity of scientific and technological progress. But, neither the first nor the second is unattainable in practice. Consequently, economic cycles have to be put up with.
Every economic downturn causes so many problems. What is the reason for this?
In fact, how significant recessions in the economy occur quite rarely. For example, an ordinary European or American can live a life, but still not find serious problems in the economic sphere. It is logical that many specialists are also not always ready for severe downturns in the economy, because for them this is a new experience, to which they have to adapt as soon as a problem arises.
conclusions
Thus, every recession is always followed by an economic recovery. The only question is when it will happen. But in recent years, there has been a tendency to quickly exit the economic cycle. Moreover, each new cycle is a "brick" necessary for the construction of the country's economy.
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