Throughout the history of the development of the entire world society, the economies of most countries have been shaken by crises, accompanied by a decline in production, a fall in prices, the accumulation of unsold goods on the market, the collapse of banking systems, a sharp increase in unemployment, and the ruin of most existing industrial and trade enterprises.
What is this - a crisis? What are its symptoms? What threatens it to the economy of the country and to us, ordinary citizens? Is it inevitable and what can be done? Let us try to give at least approximate answers to most of the questions posed.
First of all, we consider the crisis as a general concept.
This term is translated from Greek as “decisive transition”, “global change”, “critical condition” of any process. In general, a crisis is an imbalance of any system and at the same time its transition to a new quality.
His role and stages
For all its soreness, the crisis performs useful functions. Akin to a serious illness that struck a living organism, the accumulated hidden contradictions, problems, and regressive elements undermine any developing system from the inside, be it the family, society, or a separate part of it.
Therefore, crises are inevitable, that without them it is impossible to move forward. And each of them performs three essential functions:
- elimination or serious transformation of obsolete elements of a exhausted system;
- Strength test and strengthening its healthy parts;
- clearing the way to create elements of a new system.
In its own dynamics, the crisis goes through several stages. Latent (hidden), in which the prerequisites are brewing, but have not yet come out. A period of collapse, an instant exacerbation of contradictions, a rapid and severe deterioration of all indicators of the system. And the stage of mitigation, the transition to the phase of depression and temporary equilibrium. The duration of all three periods is not the same; the outcome of the crisis cannot be calculated in advance.
Characteristics and reasons
There may be general and local crises. General - those that cover the entire economy as a whole, local - only part of it. Macro- and micro-crises are distinguished by problems. The name at the same time speaks for itself. The former are characterized by large scales and serious problems. The second concern only a single problem or group of those.
The causes of the crisis may be objective, coming from the cyclical needs for updating, and subjective, arising from political mistakes and voluntarism. They can also be divided into external and internal. The former are related to the peculiarities of macroeconomic processes in the economy, as well as the political situation in the country, the latter to the ill-conceived marketing strategy, shortcomings and conflicts in the organization of production, illiterate management and investment policies.
The financial and economic crisis may result in updating or the final destruction of the monetary system, its recovery, or the coming of the next crisis. The way out of it can be sharp and sometimes unexpected or soft and long. This is largely determined by the crisis management policy. All shocks affect the state of power, state institutions, society and culture.
The essence of the economic crisis
The economic crisis is a sharp, sometimes landslide deterioration in the state of the economy of an individual country or community of countries. Its signs are a violation of industrial relations, rising unemployment, bankruptcy of enterprises, and a general decline. The end result is a decline in living standards and the welfare of the population.
The crises of economic development are manifested in the overproduction of goods relative to demand, changes in the conditions for obtaining capital, mass layoffs and other shocks of a socio-economic nature.
How does this happen?
The economy of any country in a specific period of time is in one of two states.
- Stability when production and consumption (respectively, supply and demand) are generally balanced. Moreover, economic growth follows a direct trajectory.
- Imbalance when the normal proportions of economic processes leading to a crisis state are violated.
The economic crisis is a global imbalance in the financial and economic system. It is accompanied by the loss of normal relations in the sphere of production and trade and ultimately leads to a complete imbalance of the system.
What is going on in the economy
From the point of view of science, the economic crisis is a violation of the balance of supply and demand for goods and services.
Its essence is observed in excess production of goods in comparison with demand.
Modern economists characterize the crisis as a state of the economy in which it is doomed to internal and external changes. Its characteristics are strength, duration and scale.
Moreover, as already mentioned, the consequences of the economic crisis can be beneficial. Ultimately, it gives an impetus to the development of the economy, bearing a stimulating function. Under his influence, production costs are reduced, competition is growing, and an incentive is created to get rid of obsolete means of production and update on a new technical basis. Therefore, the crisis is the most important element of self-regulation of the market and economic system.
What is the impact of the crisis?
The recession, as a rule, affects the industries that produce goods and durable goods more than others. Especially the construction. Industries that produce goods for short-term use do not react so painfully.
The exit routes depend on the causes that caused it. In order to eliminate the social economic crisis, the state should proclaim that the main goal is the transition to a normal economic regime, for which it is necessary to pay off all existing debts, analyze the state of resources and prospects.
Now let's try to consider what is happening in society, using specific examples. Let us recall the most famous of the most difficult trials that shocked the world economy at one time.
Back to the past
Crises occurred throughout the history of society. The first of them, which hit the US, England, Germany and France at the same time, happened in 1857. The impetus for its development was the collapse of the stock market and the bankruptcy of many railway companies.
Other examples include the Great Depression (1929-1933), the Mexican (1994-1995) and the Asian crises (1997), as well as, without a doubt, the 1998 Russian crisis .
About the crisis of 1929-1933
The world economic crisis of 1929-1933 in its nature is a cyclical shock of overproduction. To it was added a general turning point in the economy, the beginning of which occurred during the war. That led to a rapid increase in production, the strengthening of monopolies, which led to the impossibility of restoring after its end those economic relations that were before the war.
The features of the economic crisis of those years were manifested in the coverage of all, without exception, capitalist countries and all spheres of the world economy. Its uniqueness is also in extraordinary depth and duration.
Let's look at the causes of the economic crisis of those years in more detail.
What happened in the world
The period of stability of the 1920s was characterized by an increased growth of centralization and concentration of capital and production, which led to an increase in corporate power. At the same time, state regulation has sharply weakened. In the traditional sectors of the economy (shipbuilding, coal mining, light industry), the pace of development has decreased, and the level of unemployment has increased. In agriculture, there was a risk of overproduction.
The economic crisis of 1929 led to a mismatch between the low level of purchasing power of the population and large production capabilities. The bulk of the investment was invested in stock speculation, which increased the instability of the economic environment.
The United States, as the main international lender, has condemned most European countries to financial dependence. The lack of own finances in most of them required free access of manufactured goods to the American market, but the increased competition and increased customs duties caused the countries to become dependent on the US for debt.
Chronicle of the Great Depression
How did the economic crisis of 1929-1933 begin? This happened on Black Thursday (October 24, 1929), when an unprecedented stock exchange panic arose in the USA. The value of shares of the New York Stock Exchange fell by half (and even more). This was one of the first manifestations of an overdue crisis of unprecedented depth.
Compared with the pre-crisis level of 1929, US industrial output fell to 80.7% in 1930. The crisis led to a sharp collapse in prices, especially for agricultural products. Unprecedented size has become bankruptcy and the ruin of commercial, industrial and financial enterprises. The crisis with destructive force hit, in addition, the banks.
What should be done?
The Anglo-French bloc saw a solution to the problem of reparation payments in Germany. But this path turned out to be untenable - Germany lacked financial opportunities, competitors limited its possibilities in international trade. The country's leadership sabotaged reparations, which demanded the provision of new loans and further upset the unstable international monetary system.
The economic crisis of 1929-1933 is known as one of the worst in the world economy. It took several long years to stabilize the global system. Most countries have long experienced the effects of this global economic turmoil that has gone down in history.
The crisis in 2008
Now we will consider the general patterns and characteristic features of the studied concept on the example of such a well-known event as the 2008 economic crisis. Its nature has three important features.
- The global crisis has swept almost all countries and regions. By the way, it was more successful in successful ones, and stagnant places suffered less. In Russia, the majority of problems were also observed in places and regions of the economic boom; in lagging regions, changes were felt minimally.
- The economic crisis of 2008 was structural in nature, suggesting the renewal of the technological base of the entire world economy.
- The crisis was innovative in nature, as a result of which financial innovations as new market instruments were created and widely spread. They have fundamentally changed the commodity market. The price of oil, which previously depended on the supply-demand ratio, and therefore partially controlled by producers, has now begun to form in the financial markets through the actions of brokers trading in financial instruments related to its supply.
The whole world community had to accept the fact of strengthening the virtual factor in the formation of the most important trends. At the same time, the political and economic elite lost control over the movement of financial instruments. Therefore, this crisis is called the "riot of cars against their own creators."
How it was
In September 2008, a catastrophe occurs for all world offices - the New York Stock Exchange collapses. All over the world quotes are rapidly falling. In Russia, the government simply closes the exchange. In October of that year, it became completely clear that a global crisis was already inevitable.
The ruin of the world's largest banks takes on an avalanche-like character. Mortgage programs are being curtailed, interest rates on loans are rising. Steelmaking plants stop blast furnaces, plants, and fire workers. Due to the lack of "long" money and loans, construction is stopped, new equipment is not being acquired, the engineering industry is falling into a stupor. Demand for rolled metal is falling, the price of metal and oil is falling.
The economy is a vicious circle: no money, no salary, no work, no production, no goods. The cycle closes. There is such a thing as a liquidity crisis. Simply put, buyers have no money, goods are not produced due to lack of demand.
2014 economic crisis
Let's move on to current events. No doubt, each of us is concerned about the situation in the country in connection with recent events. Rising prices, the depreciation of the ruble, the confusion in the political arena - all this gives the right to say with confidence that we are experiencing a real crisis.
In Russia in 2014, the economic crisis is a deterioration in the country's economy due to a sharp decline in energy prices and the imposition of economic sanctions against Russia by Western countries. It manifested itself in a significant depreciation of the Russian ruble, an increase in inflation and a decrease in the growth of real incomes of Russians.
What are its premises?
Since the beginning of the 2000s, priority development of the raw materials sector has been observed in Russia. The active growth of world oil prices at the same time strengthened the dependence of the country's economy on the operation of energy production sectors and on the external economic situation.
And the fall in oil prices is caused by a decrease in demand for it, an increase in its production in the USA, and the refusal of other countries to cut supplies. This led to a decrease in revenue for the sale of energy, which is approximately 70% of all domestic exports. Other exporting countries, such as Norway, Kazakhstan, Nigeria, and Venezuela, also felt the negative consequences of the collapse in prices.
How it all started
What are the causes of the 2014 economic crisis? What exactly served as the trigger? Due to the accession of Crimea to Russia, considered by the EU countries as an annexation, sanctions were imposed on Russia, expressed in the prohibition of cooperation with defense industry enterprises, banks and industrial companies. Crimea was declared an economic blockade. According to the Russian president, the sanctions imposed against us are the cause of about a quarter of the country's economic problems.
Thus, the country is experiencing both an economic and a political crisis.
Stagnation continued in the first half of the year, economic indicators in 2014 fell below forecast, inflation instead of the planned 5% reached 11.4%, GDP for the year fell by 0.5%, which has not happened since 2008. The depreciation of the ruble December 15 was a record, this day was called "Black Monday". Separate exchange points decided to establish a five-digit currency rate display in the event of even greater growth of numbers on them.
On December 16, there was an even stronger fall in the national currency - the euro reached 100.74 rubles, and the dollar 80.1 rubles. Then some strengthening took place. The year ended with courses of 68.37 and 56.24, respectively.
The capitalization of the stock market decreased, the RTS stock index fell to last place, the fortunes of the richest Russians decreased due to asset devaluation. Russia's credit rating in the world was downgraded.
What is happening now?
The 2014 economic crisis is gaining momentum. In 2015, the problems in the country remained the same. Instability and weakening of the ruble remain. The budget deficit is expected to be much larger than predicted, the same applies to the fall in GDP.
Due to the sanctions, Russian companies lost the possibility of refinancing and began to seek help from the state. But the total funds of the Central Bank and the reserve fund were less than the total external debt.
Prices for cars and electronics, which are actively bought up by the population in a panic, have risen. The booming demand at the end of 2014 reigned in furniture stores, household appliances, and jewelry. People rushed to invest free funds in the hope of saving them from depreciation.
At the same time, demand for everyday goods, clothes and shoes fell. Due to rising prices, Russians began to save on the purchase of necessary household goods or to buy the cheapest. Many foreign manufacturers of clothing and footwear of famous brands were forced to curtail their activities in Russia due to lack of demand. Some stores closed. Thus, the crisis in the country indirectly hit foreign investors.
Significantly increased food prices. Before the onset of 2015, the population, fueled by rumors of an impending global rise in price, began to sweep salt and sugar off the shelves.
Many banks have suspended the issuance of consumer and mortgage loans, especially long-term ones, due to an incomprehensible financial situation.
The social economic crisis hit the welfare of ordinary citizens. Real incomes fell, unemployment increased. It was especially difficult for people with serious illnesses requiring expensive drugs or treatment abroad.
At the same time, Russian goods have become more accessible to foreign tourists. They began to buy the inhabitants of Belarus, Kazakhstan, the Baltic countries, Finland and China.
Is there any good news?
Throughout the past year, the Russian Government has been trying to influence the economic crisis in the country. During the year, the Central Bank raised the key rate six times, conducted currency interventions to stabilize the ruble. Vladimir Putin recommended the largest business representatives to help the state by selling surplus currency in the domestic Russian market.
“The Central Bank” has softened the terms of the currency mortgage, the State Duma is planning measures to help borrowers who are faced with difficulties due to exchange rate fluctuations.
Nevertheless, economists' forecasts for 2015 are not optimistic. The crisis continues to rage, and its speed has not yet been reduced. We all have a long enough time to deal with difficulties. It remains to take measures of reasonable savings, limit costs and try at all costs to maintain available jobs and other sources of income.