Economic cycle: concept, phases, causes and types

The development of social production, which depends on many factors, is not uniform and continuous. In some periods, the growth of total output is very rapid, in other years it is slower, sometimes there is even a decline. Thus, the economic development of countries does not occur evenly, i.e. it is characterized by macroeconomic instability, which manifests itself in unemployment and inflation in the form of cyclical development. The latter assumes such a single process. development of the economy, in which the phases of crises and recoveries naturally alternate. And the general oscillatory movement of business activity is formed of several components with different periods and mechanisms of fluctuations. This process is carried out around the equilibrium position, which is considered the normal state of the economy. Therefore, a cycle can be called wave-like fluctuations of different durations around the equilibrium position. Or, in other words, the economic cycle is the period of time between two identical trends in economic activity during several years.

Individual economic cycles differ from each other in duration and intensity, but they all have the same phases: crisis (recession), depression (stagnation, lower point of decline), revival (rise, expansion), peak (boom, top of the cycle), fig. 4.1.

The main phases of the cycle are the crisis and the rise and their corresponding points are the maximum decline as the lowest point and the peak is the top of the rise.

The crisis is characterized by a sharp decline in business activity – there is an excess of goods compared to the demand for them from consumers, which leads to a decrease in prices. Since the created goods do not find a market, commodity producers curtail production, the number of unemployed increases sharply, the incomes of the population decrease, which causes a further reduction in demand. As a result, many entrepreneurs are insolvent and fail. The crisis is exacerbated by a loss of confidence. The crisis is exacerbated by a loss of confidence. subjects of the market economy to each other, shocks of the credit system.

Distinctive is the crisis that took place in England in 1825, then it re-erupted in England and engulfed the United States (1836). The world crisis first occurred in 1857. Later such crises began to be repeated with a frequency of 8-10 years. The most destructive were the crises of 1900-1903, 1929-1933. The crisis of 1929-1933 began with a collapse on the stock exchange on “Black Tuesday” on October 29, 1929. The volume of production in countries, covered by the economic downturn, decreased by 44%. World trade turnover fell by 61%. The number of unemployed reached 40 million people (every fourth was out of work). After the Second World War, the economies of developed countries experienced recessions in 1948-1949, 1953-1954, 1960-1961, 1980-1984.

The crisis is followed by a depression, which can be prolonged. In this phase, production and employment, having reached the lowest level, practically do not change. The “excess” of goods gradually dissolves. Unemployment remains high in the economy. The supply of loan capital is increasing, but since the demand for them from business is low, the interest rate is falling. Despite these negative aspects, many economists consider this phase of the economic cycle as a preparation for the subsequent recovery: here the spread of technical achievements in the national economy is carried out, the structure of production is changing, which is freed from unprofitable enterprises and unpromising industries. The period of depression is characterized by a state of uncertainty and disorderly actions of economic entities, especially trade intermediaries, exchange agents. Even after the recession has stopped, the trust of entrepreneurs in each other is restored with difficulty.

However, economic conditions are gradually stabilizing, and the next phase of the cycle is coming: recovery. At first, it is characterized by a slight gradual increase in capital investment, production, employment, prices, interest rates. The conditional boundary of this phase can be drawn at the point where macroeconomic indicators reach the pre-crisis level. Then the rapid growth of production begins. Unemployment is reduced to the minimum. The demand for loan capital and the rate of interest grows. interest on loans. Rapid development continues until the economy reaches the highest point of development and the cycle ends.

It should be noted that the cycles, having common features, are not an exact copy of each other and differ in different countries in terms of the level of decline in production volumes, the duration of each phase, etc. Thus, for the cycle that followed the crisis of 1929-1933, the absence of a recovery phase was characteristic. The crisis of 1957-1958 was characterized by an uneven drop in the level of production: for example, in the USA – by 14%. and in Belgium – by 6%.

In modern conditions, the course of crises is affected by the regulatory activity of the state. For example, the time of their course is reduced, but they occur more often. The amplitude of fluctuations decreases – the rise is not so high, and the crisis is not so deep. The structure of the cycles is changing.

Along with the general cyclical crises affecting all spheres of the national economy, partial crises periodically arise covering any one sphere of the economy, for example, credit relations. There are sectoral crises that extend to certain branches of industry, agriculture, transport. Structural crises (energy, raw materials, food) are caused by large disproportions in the development of the national economy. At the same time, there are large disproportions in the development of the national economy. At the same time, cyclical development, despite its oscillatory movements, reveals a strategic growth trend, i.e. has a progressive direction of movement (Fig. 4.1).

The reasons that cause changes in the economic activity of production over time are studied by the theory of economic cycles, which is sometimes called the theory of economic conjuncture. To date, there are many such theories. However, the nature of the cycle is still one of the most controversial and little-studied problems. Researchers engaged in the study of conjunctural dynamics can be conditionally divided into those who do not recognize the existence of periodically repeating cycles in social life, and on those who stand on deterministic positions and argue that economic cycles manifest themselves with the regularity of tides.

Representatives of the first direction, to which the most authoritative scientists of the modern Western neoclassical school belong, believe that cycles are the result of random influences (impulses or shocks) on the economic system, which causes a cyclical model of response, that is, cyclicity is the result of the impact on the economy of a series of independent impulses. The foundations of this approach were laid in 1927 by the Soviet economist E. E. Slutsky (1880-1948). 30 years later, this the direction has received wide recognition in the West.

Representatives of the second direction tend to consider the cycle as a kind of primary basis, an elementary indivisible “atom” of the real world. The cycle in this interpretation is a special, universal and absolute formation of the material world. The structure of the cycle is formed by two opposite material objects that are in it in the process of interaction (Y. N. Sokolov, Cycle as the basis of the universe. Stavropol, 1995).

It should be noted that the idea of cyclicity as the primary basis of the world has been floating in world science since the times of Ancient Greece and Ancient China (especially in the works of Chinese Taoists).

If philosophers were interested in the problem of cyclicity for many hundreds of years, economists paid attention to it relatively recently, at the beginning of the XIX century. It was then that in the works of J. Sismondi (1773-1842), K. Rodbertus-Yagetsov (1805-1875) and T. Malthus (1766-1834) there were studies of crisis cyclical phenomena in the economy. Moreover, the problems of the crisis and the cycle were dealt with, as a rule, representatives of side currents of economic thought. Economists of the orthodox direction rejected the idea of cyclicity as contrary to the law of J. B. Say (1767-1832), according to which demand is always equal to supply. Therefore, the classics: A. Smith (1723-1790), D. Ricardo (1772-1823), J. Smith (1723-1790), D. Ricardo (1772-1823), J. S. Smith (1772-1823), J. S. Smith (1772-1823), J. S. Smith (1723-1723), J. S. Smith (1723-1 Art. Mill (1806–1873), A. Marshall (1842–1924) the phenomenon of the cycle, if at all, was observed, then in passing, as a private and fleeting phenomenon. In addition, the founders of the classical school – neither A. Smith nor D. Ricardo – witnessed economic cycles.

K. Marx (1818–1883) was one of the first economists to pay close attention to this problem. He identified four phases that successively followed each other: crisis, depression, revival, and upsurge. However, the Marxist school of economics studied exclusively the industrial cycle of 7–12 years, treating all other types of cyclicality with prejudice as products of hostile bourgeois political economy.

Until the 30s of the XX century, economists considered cyclicality, paying attention only to the phase of the crisis, believing that it is random, transient in nature. This approach was due to the dominance in economic science of the neoclassical direction, which considers the economy as a self-regulating mechanism that automatically adapts to violations of the equilibrium of supply and demand. As a result, exogenous concepts appeared that explain the economic cycle by the action of external to the economic system of factors (wars, political cataclysms, demographic problems). So. W. Jevons associated the emergence of business cycles with the configuration of sunspots: solar activity causes fluctuations in yields, which in turn generate industrial and trade recessions and rises.

At the beginning of the XX century, the first endogenous theories arose, in which the economic cycle was considered as a product of factors inherent in the economic system due to its instability (the timing of the renewal of fixed capital, the level of investment activity, etc.). Thus, M. Tugan-Baranovsky, G. Kassel, A. Spithof believed that the characteristics of capital accumulation are the basis of crises.

J. Clark, studying the problems of cyclicity, discovered the principle of the accelerator, according to which an increase in demand for consumer goods multiplies the subsequent demand for equipment, machinery and other resources, as a result of which small changes in consumer demand can cause significant fluctuations in net investment.

J. Schumpeter in his works “The Theory of Economic Development” and “Cycles of Business Activity” considered economic growth as a cyclical process caused by the uneven introduction of innovations. As a result, new goods are created in mass quantities, which causes a drop in prices, leading to a crisis and depression. Adhering to classical views on the mechanism of the functioning of the market, J. Schumpeter, however, did not give specific recommendations for getting rid of crises, Considering that the most important method of “treating” the economy is to improve forecasting of market conditions, maintain freedom of private entrepreneurship, competition.

The publication of J. Keynes’s work “The General Theory of Employment, Interest, and Money” marked the beginning of the development of the Keynesian theory of cycles. According to it, the cyclical process is formed by the dynamics of effective demand, which is caused by the functions of consumption and investment. Considering the capital accumulation underlying cyclicality, J. Keynes paid special attention to the dependence of the growth of national income on the growth of capital investments (the principle of multiplier), as well as the growth of capital investments from growth. national income (accelerator principle), as factors that generate economic instability. Keynesian theory offers specific recommendations for countercyclical regulation of the economy, designed to increase aggregate demand during periods of recession and limit it in the phases of price rise and rise. The main instruments of regulation here are fiscal and monetary policy.

After the crisis of the 70s of the XX century, the Keynesian model of countercyclical regulation gave way to the monetarist theory (M. Friedman). In accordance with it, one of the causes of cyclical fluctuations, along with the instability of the money supply, is too active state intervention in the economy. The main direction of stabilization, according to M. Friedman, is the regulation of the money supply in circulation.

As you can see, there are many concepts that explain the causes of cyclicality and offer recipes for curing the economy. Obviously, none of them can be considered as dogma. The optimal version of countercyclical regulation is at the points of contact and synthesis of various theories.

Currently, statisticians and economists are not able to give accurate forecasts of the economic situation, but can only determine its general trend. This is explained by the fact that, firstly, it is difficult to take into account all factors, especially in times of economic instability and political upheavals. Secondly, the international environment has a significant impact on the national economy. Thirdly, even after correctly determining the trend, it is difficult to predict the exact dates of the passage of phases and change it in time. economic policy. Finally, the actions of entrepreneurs can exacerbate undesirable deviations of the conjuncture.

Modern social science knows more than a thousand types of economic cyclicality. 4.1. the six most common are noted, but the economy operates mainly with the first four of them.

Table 4.1.

Main types of economic cycles

Zhuglar cycles. Previously, economics distinguished a cycle of 7–12 years, which later became known as Juglara (1819–1905) for his great contribution to the study of the nature of industrial fluctuations in France, Great Britain, and the United States on the basis of a fundamental analysis of fluctuations in interest rates and prices. As it turned out, these fluctuations coincided with the investment cycles that in turn initiated changes in GNP, inflation and employment. For example, J. Schumpeter (1883–1950) in 1939 for the period from 1787 to 1932 identified 11 cycles of Juglar

Kitchin Cycles (Stock Cycles). Kitchin (1926) focused on the study of shortwaves of 2 to 4 years in length by studying financial accounts and sales prices in the movement of inventories.

In the 1930s, studies of the so-called “construction cycle” appeared in the United States. J. Riggholman, W. Newman and some other analysts built the first statistical indices of the total annual volume of housing construction and found in them consecutive long intervals of rapid growth and deep recessions or stagnation. Then the term “construction cycle” appeared, defining these twenty-year fluctuations. In 1946, S. Kuznets (1901-1985) in work “National Income” concluded that indicators of national income, consumer spending, gross investment in manufacturing equipment, as well as in buildings and structures reveal interconnected twenty-year fluctuations. At the same time, he noted that in construction these fluctuations have the largest relative amplitude.

After the publication of Kuznets’s work, the term “construction cycle” practically ceased to be used, giving way to the term “long wings”, in contrast to Kondratiev’s “long waves”. In 1955, as a recognition of the merits of the American researcher, it was decided to call the “construction cycle” the “Kuznets cycle”.

In 1968, the American scientist M. Abramovich described the core of the mechanism of 20-year fluctuations, or the “chain of multiplicative-accelerator circuit”, which “generates” 20-year fluctuations: income ? immigration ? housing construction ? aggregate demand ? income (the growth of GNP or the commodity mass stimulates the inflow of the population and the birth rate, this leads to an acceleration of investments, including in housing construction, then the reverse process occurs).

Kondratiev’s cycles. The first attempts in the field of creating the theory of “long waves” were made at the dawn of the XX century by A. Gelfand (Parvus), J. Van Gelderen and S. de Wolf. However, the greatest contribution to the theory of “long waves” was made by the Russian scientist N.D. Kondratyev (1892-1938), who published several fundamental works in this field. He presented the results of his research on the dynamics of commodity price indices, Interest rates, rents, wages, production of the most important types of products, etc., for a number of developed countries from 1770 to 1926 Kondratyev associated the beginning of the “big” rise with the mass introduction of new technologies into production, which implies the expansion of the investment process with the involvement of new countries in the world economy, with changes in the volume of gold production.

As a result, N. Kondratyev concluded that the world economic situation has not only a progressively upward, but also a wave-like trajectory of its development lasting 47-60 years. Within the framework of these cycles, periods of economic revival, improvement of market conditions, general liberalization of economic life (upward wave according to Kondratiev) are certainly replaced by a period of slowdown in economic growth and even a decline in production (a downward wave).

N. Kondratyev determined the time frame of three long waves: from the late 80s – early 90s of the XVIII century to 1810-1817 (upward wave), from 1810-1817 to 1844-1855 (downward wave); respectively from 1844-1855 to 1870-1875 and from 1870-1875 to 1890-1896; from 1890-1896 to 1914-1920. 1870–1875 and 1914–1920) researchers call it the “T phase.” Already after the death of N. Kondartyev, the fourth (1945-1973) and fifth wave, which began in the 80s of the XX century, was singled out.

Kondratiev associated the rise of the first large cycle with the industrial revolution in England, the second with the development of railway transport, the third with the introduction of electricity, telephone and radio, the fourth with the automotive industry. Modern researchers associate the fifth cycle with the development of electronics, genetic engineering, and microprocessors.

There is a relationship between normal business cycles and long waves. Long waves contain several business cycles, have a significant impact on their course, forming structural specificity. For example, if small cycles have a starting point on the lower wave of a large cycle, then the phases of short- and medium-term crises are deeper, periods of depression are longer, and the rise is weaker and shorter. If the starting point for a small cycle is an upward wave, then the specificity of the course of the phases of small cycles is the opposite.

Based on a comparison of the patterns identified by N. Kondratyev, Russian economists conclude that the social development of Russia, including Belarus, is exposed to the long waves of the world economy as a whole and obeys the laws and trends of its dynamics.

As for the period of the existence of the USSR, the deformation of the Soviet economy in itself removes the question of any cyclicality, which is an attribute of the market mechanism. With the collapse of the USSR and the transition to a market economy, the problems of the cyclicality of the stage are also relevant for us, which causes the need to rethink and study the theories of economic cycles and oases. The crisis in which the Republic of Belarus is now located. is special – it can be qualified as transformational, which is characterized by the crisis of the transition period from a planned command-administrative to a market economy.