Modern society is trying its best to improve the level and conditions of its life. This can be achieved through stable economic growth not only at the expense of one state, but also of each of the world countries. History shows that each of the periods of prosperity ends with temporary economic instability.
Overflowing economies
Many global minds note 2 conditions in which the economy of each country flows from time to time.
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Equilibrium. It is characterized by a balance of social production and social consumption. In the market, these two concepts are known as supply and demand. The process of economic growth is characterized by visual movement in a straight line. In simple words, we can say that the output increases in volume in proportion to the increase in production factors.
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Imbalance. This is a kind of crisis of overproduction on a public scale. Normal ties are broken, therefore, as are proportions in the economy.
What is an economic crisis?
An economic crisis can be called a complete imbalance in the economic sector, which is characterized by losses and ruptures of harmonious ties, both in production and in market relations. Translated from Greek, the concept of "krisis" is interpreted as a turning point. It indicates a cardinal deterioration in the economic condition of the state, which is characterized by a decrease in production and a break in production ties, the bankruptcy of a large number of enterprises and an increase in unemployment. A falling economy leads to a decline in living standards and worsening the well-being of the entire population. The crisis is associated with global developmental disabilities. One of the formats of the phenomenon is a systematic and massive accumulation of debts and the inability of people to pay them off in the optimal time frame. The main causes of economic crises, most economists associate with the imbalance in the pair supply and demand for goods and services.
Superficial Causes of Economic Crises
The global prerequisite for the emergence of a global crisis can be called the contradiction between labor of a non-productive type and production itself or between production and consumption, between the system and the world around it. With an imbalance of production and non-production forces, commodity-money relations are violated. With the interaction of the system and the external environment, in the event of disasters that cannot be controlled, a failure occurs in the system of functioning of society. Experts associate the causes of economic crises with the deepening and development of cooperation and specialization, which exacerbates the differences between management and production. Even the slow transition from commodity production to cooperation and manufacture is already pushing for the manifestation of local crises. In most situations, local crises are resolved through internal reserves of the system with an independent regulatory structure.
Background and signs of crises
The reasons that lead to economic crises have a great influence on the formation of demand for the currency and leave an imprint on the indices, which are actively used for trading analysis. The world economy is sometimes confronted with an imbalance. The phenomenon takes place every 8-12 years. This is manifested in a wide range of problems:
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difficulties with the sale of goods;
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sharp failures in the economic equilibrium;
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reduction in production volumes;
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rising unemployment;
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decrease in investor activity;
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location of the lending industry.
All the problems described in the complex in history are called the crisis of overproduction.
Money plays a big role in creating an unfavorable situation in the country, but only if it is considered as a means of communication and a tool for making payments. From history it is clear that the imbalance of the economy in countries around the world began to appear only after the introduction of the monetary-commodity form of the economy in combination with capitalism. It is precisely the contradictions of this state system that made recessions in the life of countries simply necessary. The underlying premise of the phenomenon is the conflict between social production and the private capitalist form of ownership. Production conditions and conditions for the sale of goods differ significantly due to surplus value. The production of large volumes of production is hindered by the productive power of the public, and the sale of goods released is prevented by the proportionality of the spheres of society, which is determined not by the needs of people, but by their ability to pay. The main contradiction is that world production began to produce so many goods that world society is simply not able to consume them all.
The role of capitalism in the formation of the crisis
Many of the causes of economic crises are connected directly with capitalism, since its main nature is based on the unlimited expansion of production. The focus on systematic enrichment stimulates the constant release of more and more new products. There is a modernization of technology and the introduction of new technologies in all sectors of activity. Such active measures for the prosperity of industry are simply necessary for companies and large enterprises in order to withstand a sufficiently high level of competition. The need to reduce production costs in an active struggle with competitors forces most entrepreneurs to severely limit wage growth. This leads to the fact that the sharp increase in production far exceeds the expansion of personal consumption. In order to smooth out the conflict between production and consumers, to solve the basic problems of the economy, and to provide the labor market with a workforce of optimal quality, states go to global social spending. The current crisis can be called the planned consequence of credit expansion.
Varieties of crises
World crises can be called a temporary period of aggravation of the confrontation between the state economy and private entrepreneurs. It is companies that reflect the most acute problems in the operation of the system. Among them it is worth highlighting:
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financial system crash;
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overproduction and underproduction;
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crisis in the sale of goods and services;
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crisis in the relationship of counterparties in the market.
All this reduces the solvency of the population, therefore, entails the bankruptcy of many successful companies. The crisis at the macroeconomic level is characterized by a sharp decline in GDP and a drop in business activity. Inflation is growing exponentially, unemployment is increasing, and the standard of living of the population is declining significantly. The economic issues associated with the crisis of the financial subsystem are fraught with sad consequences. This is the gap between the requirements for a new economic standard of living and the conservatism of most financial institutions. Economic crises, the causes and consequences of which have been classified for many years, can arise from small socio-economic problems. The reason for this is the presence of close relationships between elements of the system and the processes of subsystems. Local difficulties quickly cover the entire system, and it is impossible to eliminate individual difficulties in the event of the prerequisites of a crisis for the entire system. The causes of world economic crises can be very diverse, but the phenomenon has a cyclical nature. If you make a visualization of the development of the economy, the movement will be carried out in a spiral.
The main phases of crises
The history of economic crises (together with long-term researchers and major scientists) made it possible to single out the development of each economic crisis in 4 main stages:
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Veiled stage. This is a period of emergence of problems. The true causes of the economic crisis are already taking place, but they are not yet pronounced. The period is notable for the bright development of production and prosperity of the country, which has reached its peak.
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The accumulation of contradictions. During this period, there is a drop in indicators of social dynamics. Crisis processes that were invisible at the first stage begin to appear.
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Temporary stabilization stage. This is a temporary lull in the bud, with which all large-scale economic crises begin. The causes and consequences can be horrific. Society is on the brink of survival. The society is stratified depending on the activity of citizens of states. Two groups of people are clearly visible. Some quietly out-sit difficulties in the hope that it will all be over soon, others actively work to improve their standard of living, looking for a way out of the situation.
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Recovery. Although the global economy is in recession, people have already adapted. This becomes the premise of stabilizing most of the local subsystems. At this stage, the main exit programs for their situation have already been developed and are ready for implementation. Optimistic moods in society are strengthening. Social dynamics are improving.
US influence on global crises
The history of economic crises has shown that negative moods in society can arise as a result of problems that arose in the United States. It is quite obvious that all the economies of the world are interconnected and America is the key link. The weight of the country's GDP in the global economy is more than 50%. The state accounts for about 25% of oil consumption. The export of most world countries is focused specifically on the United States of America.
The American economy is based on a complex financial system, which, unfortunately, forms the causes of global economic crises. By the way, recently the financial system of the state began to function more independently. In this case, the main assets are not extracted from industrial enterprises, but are earned through fraud with the currency. Consequently, a kind of “soap currency bubble” has formed, the size of which is many times larger than the volume of products produced by the industrial sector. There are experts who believe that the causes of economic crises are not related to the mortgage collapse in America. The phenomenon only became the impetus that entailed changes in the development of the economy.
Lending is a step towards crisis
In accordance with the laws of a market economy, demand creates supply. Moreover, as a result of the systematic overproduction of goods, it was possible to find out that supply can also generate demand, which will be actively supported by credit funds. When banks actively continue to lend to citizens, systematically reducing their interest rates and offering favorable conditions for cooperation, the funds fall into the hands of insolvent people. Massive outstanding payments lead to the fact that guarantee coverage, especially real estate, begins to sell out. Unfortunately, an increase in supply and a decrease in demand do not allow the bank to return its assets. The construction sector is hit, and a lack of liquidity is becoming the root cause of the crisis in a very real sector of the economy.
Despite the objectivity of lending, as a prerequisite for the formation of a crisis, the causes of the phenomenon are very contradictory. The effect on the systematic appearance of identical factors at different time intervals occurs in different ways. Moreover, each country has its own individual development features. Most experts associate the cyclical nature of the phenomenon with the scientific and technological development of states. The active part of material capital is aging within 10-12 years. This leads to the need to update it, which is a secondary signal to revitalize economic activity. The role of a push in the development of the state can be played by the introduction of new equipment in production and the emergence of new technologies, which is directly related to lending. This is the basis of the entire business cycle. As time went on, the aging periods of capital began to shrink. In the 19th century, the period was reduced to 10-11 years, a little later to 7-8 years. In the post-war period, the manifestation of crises of various sizes began to be noticed every 4-5 years.
