The economy is not static. She, like a living being, is constantly changing. The level of production and employment of the population is changing, demand is growing and falling, commodity prices are rising, stock indices are collapsing. Everything is in a state of dynamics, eternal circulation, periodic fall and growth. Such periodic fluctuations are called business or business cycle. The cyclical nature of the economy is characteristic of any country with a market type of management. Business cycles are an inevitable and necessary element in the development of the world economy.
Business cycle: concept, causes and phases
(economic cycle) is a periodically repeating fluctuation in the level of economic activity.
Another name for the business cycle is business cycle (business cycle).
In fact, the economic cycle is an alternating rise and fall in business activity (social production) in a single state or around the world (some region).
It is worth noting that although we are talking here about the cyclical nature of the economy, in fact, these fluctuations in business activity are irregular and poorly predictable. Therefore, the word "cycle" is rather conditional.
Reasons for business cycles:
- economic shocks (impulse effects on the economy): technological breakthroughs, the discovery of new energy sources, wars;
- unplanned increase in stocks of raw materials and goods, investments in fixed assets;
- changes in prices for raw materials;
- the seasonal nature of agriculture;
- struggle of trade unions for higher wages and job security.
It is customary to distinguish 4 main phases of the economic (business) cycle, they are shown in the figure below:
The main phases of the economic (business) cycle: rise, peak, recession and bottom.
Period of the economic cycle- the time interval between two identical states of business activity (peaks or bottoms).
It should be noted that, despite the cyclical nature of GDP fluctuations, its long-term trend has upward trend. That is, the peak of the economy is also replaced by depression, but each time these points move higher and higher on the chart.
The main phases of the economic cycle :
1. Rise (revival; recovery) is the growth of production and employment of the population.
Inflation is low and demand is picking up as consumers seek to make purchases they put off during the previous crisis. Innovative projects are implemented and quickly paid off.
2. Peak- the highest point of economic growth, characterized by a maximum of business activity.
The unemployment rate is very low or virtually non-existent. Production facilities operate as efficiently as possible. Inflation usually picks up as the market becomes saturated with goods and competition increases. The payback period increases, the business takes more and more long-term loans, the possibility of repayment of which is reduced.
3. Recession (recession, crisis; recession) - a decrease in business activity, production volumes and investment levels, leading to an increase in unemployment.
There is an overproduction of goods, prices are falling sharply. As a result, the volume of production decreases, which leads to an increase in unemployment. This causes a decrease in the income of the population and, accordingly, a reduction in effective demand.
A particularly long and deep recession is called depression (depression).
The Great Depression Show
One of the most famous and longest global crises is “ The Great Depression» ( great depression) lasted about 10 years (from 1929 to 1939) and affected a number of countries: the USA, Canada, France, Great Britain, Germany and others.
In Russia, the term "Great Depression" is often used only in relation to America, whose economy was hit especially hard by this crisis in the 1930s. It was preceded by a precipitous decline in the stock price that began on October 24, 1929 ("Black Thursday").
The exact causes of the Great Depression are still a matter of debate among economists around the world.
4. Bottom (through) - the lowest point of business activity, characterized by a minimum level of production and maximum unemployment.
During this period, an excess of goods diverges (some at low prices, some simply spoil). The fall in prices stops, production volumes increase slightly, but trade is still sluggish. Therefore, capital, not finding application in the sphere of trade and production, flocks to banks. This increases the money supply and leads to lower interest rates on loans.
It is believed that the "bottom" phase usually does not last long. However, as history shows, this rule does not always work. The previously mentioned "Great Depression" lasted for 10 years (1929-1939).
Types of economic cycles
Modern economic science knows more than 1,380 different types of business cycles. Most often you can find a classification according to the duration and frequency of cycles. According to it, the following types of economic cycles :
1. Short-term Kitchin cycles- Duration 2-4 years.
These cycles were discovered back in the 1920s by the English economist Joseph Kitchin. Kitchin explained such short-term fluctuations in the economy by changes in world gold reserves.
Of course, today such an explanation can no longer be considered satisfactory. Modern economists explain the existence of Kitchin cycles time lags- delays in obtaining by firms the commercial information necessary for decision-making.
For example, when the market is saturated with a product, it is necessary to reduce the volume of production. But, as a rule, such information is received by the enterprise not immediately, but with a delay. As a result, resources are wasted in vain, and a surplus of hard-to-sell goods is formed in warehouses.
2. Medium-term Juglar cycles– duration 7-10 years.
For the first time this type of economic cycles was described by the French economist Clement Juglar, after whom they were named.
If in Kitchin cycles there are fluctuations in the level of utilization of production capacities and, accordingly, in the volume of commodity stocks, then in the case of Juglar cycles, we are talking about fluctuations in the volume of investments in fixed capital.
The information lags of Kitchin cycles are supplemented by delays between making investment decisions and acquiring (creating, erecting) production capacities, as well as between a decline in demand and the liquidation of production capacities that have become redundant.
Therefore, Juglar cycles are longer than Kitchin cycles.
3. Rhythms of the Blacksmith– duration 15-20 years.
They are named after the American economist and Nobel laureate Simon Kuznets, who discovered them in 1930.
Kuznets attributed such cycles to demographic processes (in particular, the influx of immigrants) and changes in the construction industry. Therefore, he called them "demographic" or "building" cycles.
Today, some economists view Kuznets rhythms as "technological" cycles driven by technology upgrades.
4. Long Kondratiev waves– duration 40-60 years.
Discovered by Russian economist Nikolai Kondratiev in the 1920s.
Kondratiev cycles (K-cycles, K-waves) are explained by important discoveries in the framework of scientific and technological progress (steam engine, railways, electricity, internal combustion engine, computers) and the changes in the structure of social production caused by them.
These are the 4 main types of economic cycles in terms of duration. a number of researchers distinguish two more types of larger cycles:
5. Forrester cycles- Duration 200 years.
They are explained by the change in the materials used and energy sources.
6. Toffler cycles– duration 1000-2000 years.
Due to the development of civilizations.
Basic properties of the business cycle
Economic cycles are very diverse, have different duration and nature, but most of them have common features.
Basic properties of business cycles :
- They are inherent in all countries with a market type of economy;
- Despite the negative consequences of crises, they are inevitable and necessary, as they stimulate the development of the economy, forcing it to ascend to ever higher levels of development;
- In any cycle, 4 typical phases can be distinguished: rise, peak, decline, bottom;
- Fluctuations in business activity that form a cycle are influenced by not one, but many reasons:
- seasonal changes, etc.;
- demographic fluctuations (for example, "demographic pits");
- differences in the service life of fixed capital elements (equipment, transport, buildings);
- uneven scientific and technological progress, etc.; - In the modern world, the nature of economic cycles is changing, under the influence of the processes of globalization of the economy - in particular, a crisis in one country will inevitably affect other states of the world.
Interesting neo-Keynesian Hicks–Frisch business cycle model with strict logic.
The neo-Keynesian Hicks-Frisch business cycle model.
According to the Hicks-Frisch business cycle model, cyclical fluctuations are caused by autonomous investments, i.e. investments in new products, new technologies, etc. Autonomous investments do not depend on income growth, but rather cause it. An increase in income leads to an increase in investment, depending on the amount of income: multiplier effect - accelerator.
But economic growth cannot occur indefinitely. The growth barrier is full employment(line AA).
Since the economy has reached a state of full employment, further growth in aggregate demand does not lead to an increase in the national product. As a result, the rate of wage growth begins to outpace the rate of growth of the national product, which becomes inflation factor. Rising inflation has a negative impact on the state of the economy: the business activity of economic entities is falling, the growth of real incomes is slowing down, and then they fall.
Now the accelerator is acting in the opposite direction.
This continues until the economy hits the line BB – negative net investment(when net investment is insufficient even to replace depreciated fixed capital). Competition is intensifying, the desire to reduce production costs encourages financially stable firms to start updating fixed capital, which ensures an upsurge in the economy.
Galyautdinov R.R.
© Copying material is allowed only if you specify a direct hyperlink to
Speaking about the economic status of a certain group, two main types of fluctuations should be distinguished. The first refers to the economic decline or rise of the group, and the second to the growth or contraction of economic stratification within the group itself. The first phenomenon is expressed in the economic enrichment or impoverishment of social groups as a whole; the second is expressed in a change in the economic profile of the group or in an increase or decrease in the height, so to speak, of steepness, of the economic pyramid. Accordingly, there are the following two types of fluctuations in the economic status of a society:
I. Fluctuation of the economic status of the group as a whole:
a) an increase in economic well-being;
b) a decrease in the latter.
II. Fluctuations in the height and profile of economic stratification within society:
a) the rise of the economic pyramid;
b) flattening of the economic pyramid.
We begin our study of fluctuations with the economic status of the group.
2. Fluctuations in the economic status of the group as a whole
Whether a group rises to a higher economic level or falls is a question that can be broadly decided on the basis of fluctuations in per capita national income and wealth measured in monetary units. The same material can be used to measure the comparative economic status of different groups. This criterion allows us to make the following assertions.
I. The wealth and income of different societies varies greatly from one country to another, from one group to another. The following figures illustrate this statement. Taking the average level of wealth of Wisconsin in 1900 as 100 units, the corresponding indicators of the average level of wealth for Great Britain (for 1909) are 106; for France (for 1909) - 59; for Prussia (for 1908) - 42". In societies like Chinese, Indian, or, even more so, primitive, the difference will be even more significant. The same can be said about the average per capita income 2. Speaking not of whole nations, but of smaller territorial groups (province, regions, counties, various parts of the city, villages, including families living in the neighborhood), we will come to the same conclusion: the average level of their material well-being and income fluctuates.
II. The average level of wealth and income in the same society is not constant, but changes over time. Whether it's a family or a corporation, the population of a county or an entire nation, average wealth and income fluctuates up and down over time. There is hardly a family whose income and level of material well-being would remain unchanged for many years and during the life of several generations. Material "ups" and "downs," sometimes sharp and significant, sometimes small and gradual, are normal phenomena in the economic history of every family. The same can be said about larger social groups. As confirmation, we present the following data 3 .
US median national income per capita ($)
|
Qualification year |
Qualification year | ||
These figures, translated into the purchasing power of the dollar, would be slightly different, but would still show a similar fluctuation. Despite the general upward trend, the numbers show significant fluctuations from census to census, from year to year. Another example of a fluctuation in the opposite direction is illustrated by the average annual income of the Russian population over the past few years.
Per capita income in Russia
|
Qualification year |
Qualification year | ||
Great Britain, in accordance with the calculations of A. Bowley, "the amount of average income in 1913 was almost one third more than in 1880; this increase was mainly achieved before the beginning of our century, and since that time it has been on a par with the depreciation of money "2. There is no need to add anything to this data. The income statistics of various European countries, without exception, show the same phenomena of fluctuations in the average annual level of income. The specific forms of manifestation of these fluctuations are different in different countries, but the phenomenon itself is common to all nations.
III. In the history of the family, of the nation, or of any other group, there is no steady tendency either towards enrichment or impoverishment. All well-known trends are fixed only for a limited period of time. For long periods, they can act in the opposite direction. History does not give sufficient grounds for asserting either a trend towards a paradise of prosperity or a hell of poverty. History shows only futile fluctuations.
The essence of the problem lies in the following: whether there is a continuous cyclicity in fluctuations in the average level of well-being and income within the same society or not. Science does not have sufficient grounds for a definite answer to this question. All that can be done is to put forward a hypothesis, which may or may not be true. With this reservation in mind, let us consider a number of hypothetical statements.
First, income statistics in the US, UK, Germany. France, Denmark. Russia and some other countries shows that since the second half of the 19th century there has been a tendency to increase the average level of income and well-being. Assuming the calculations are correct,
the question arises whether this trend is constant (or is it only part of a "parabola"), which can be replaced by stagnation or even movement in the opposite direction? The second possibility turns out to be more true. If we represent economic development in time schematically, then it will not be a straight line (A), nor a spiral (B), ascending or constantly descending. It is rather closer to the image (B), which does not have any constant direction (see diagram 1).
Here are some arguments in support of this hypothesis. First of all, we note that the economic history of the family, or corporation, or any other economic organization shows that among such groups there was not a single one that would continuously grow economically. After a short or long period of time, during the lifetime of one or several generations, the upward trend was supplanted by its opposite. Many rich families, firms, corporations, cities, regions in antiquity and in the Middle Ages, and even in the New Age, became poor and disappeared from the top of the financial pyramid. Among the existing magnates in Europe and America, there are few, if any, except perhaps some of the royal families who were rich two or three centuries ago and have been getting rich continuously all this time.The vast majority, if not all, of the truly wealthy families have appeared in the last two centuries or even in the last two decades.All the rich clans of the past have disappeared or impoverished. This means that after a period of enrichment came a period of impoverishment. It seems that many financial corporations, firms and houses had a similar fate. If this is the fate of these social groups, why should the fate of the nation as a whole be different?"
Secondly, the fate of many nations of the past shows that they repeat the fate of small social groups on a larger scale. However insufficient our knowledge of the economic history of Ancient Egypt, China, Babylon, Persia, Greece, Rome, Venice or other Italian republics of the Middle Ages, the fact remains that all these nations had many "ups" and "falls" in the history of their economic development. prosperity, until at last some of them were impoverished altogether. Hasn't there been the same "ups" and "downs" in the history of modern powers? Were not they also typical of years of acute famine followed by relative prosperity, decades of economic prosperity superseded by decades of disaster, periods of accumulation of wealth followed by periods of waste?
Concerning the economic status of large masses of the population, dissimilar to each other, one can say this with a sufficient degree of certainty. It is known that the economic situation of the masses in ancient Egypt between the thirteenth and XIX dynasties and after Seti II, and even in the later Ptolemaic period 2 , deteriorated sharply in comparison with previous periods 3 *. Similar periods of famine and impoverishment were observed in the history of ancient and medieval China, which continue to be repeated even today. "Similar fluctuations were in the history of Ancient Greece and Rome. As an example of a major economic decline in many policies of Greece, we can cite the 7th century BC era; further - the time of the end of the Peloponnesian War; and finally, the III century BC - Athens became the richest policy after the Greco-Persian wars and the poorest after the defeat in Sicily 2. Sparta became rich during its reign in the Balkans (end of the V century BC BC) and became poor after the Battle of Leuctra (371 BC).In the history of Rome, as an example of periods of decline, we recall the 2nd-1st centuries BC and the 4th-5th centuries AD 3. "and "falls" occurred repeatedly in the history of the economic situation of the masses in England, France, Germany, Russia and in many other countries. They are well known enough to speak about them in detail. But it is especially important that in many past societies, as and, however, in the present, the final or later stages of history were rather more modest economically than the preceding periods. If this is the case, then these historical facts give no grounds for assuming a permanent trend in any direction.
Thirdly, the following calculations also testify against the hypothesis of a continuous increase in wealth over time. One centime, invested at a four percent profit in the time of Jesus Christ, would have brought in 1900 a huge capital, expressed in the amount of 2,308,500,000,000,000,000,000,000,000,000 francs. If we assume that the earth consists of pure gold, then it would take more than 30 "golden" planets in order to provide this huge amount of money. The real situation, as we know, is far from presented. In the time of Christ, huge capitals were concentrated in the hands of individuals, but they nevertheless would not have amounted to a sum of material values even remotely approaching the above. A sum of one hundred thousand francs, invested at a three percent profit in the time of Christ, would rise to 226 billion francs in the first five centuries, a fortune close to the national wealth of France at the present time. Since the actual amount of wealth is incomparably less than it would be according to these calculations, it follows that the level of their growth was much less than expected and that periods of accumulation of wealth were accompanied by periods of its waste and destruction 4 .
Fourth, the cyclical hypothesis is supported by the fact of business cycles. The existence of "small business cycles" (periods of 3-5, 7-8, 10-12 years) is now beyond doubt.
Different points of view exist only about the duration of the cycle 5 . "The change that occurs is a succession of leaps or jerks, periods of rapid growth followed by periods of stagnation or even decline."* But was there progress in the second half XIX century as a whole part of a larger cycle? The theory of Professor N. Kondratiev answers this question in the affirmative. In addition to the small cycles mentioned above, he discovered the presence of larger cycles - lasting from 40 to 60 years 2 . This is a direct confirmation of the hypothesis that the aforementioned progressive trend of the second half of the 19th century was only part of a long-term cycle. But why stop at such cyclicality rather than move on to even bigger economic changes? If their periodicity is difficult to prove 3, then the existence of long-term economic "ups" and "downs" does not raise any doubts. The history of any country, taken over a fairly long period of time, shows this with a sufficient degree of certainty.
Fifthly, the slowdown and halt in the growth of the average level of real income in England, France and Germany since about the beginning of the 20th century 4 , the obvious impoverishment of the population during and immediately after the World War are unconditional symptoms of at least a significant and temporary reversal movement. " Sixth, "the law of income reduction operates inexorably. The more people inhabit our earth, the less each person receives from nature to maintain his existence. After reaching a certain density, large masses of people come to greater poverty. Inventions and discoveries may delay, but cannot prevent the day of reckoning." 5 It is true that the birth rate in European countries and America has fallen, but not so much as to stop population growth in them; it is still quite high in the Slavic countries, not to mention about the Asian continent. It is also true that there are more and more inventions, but despite this, they still do not guarantee a high standard of living for everyone in our world, even just in Europe. These reasons explain, in my opinion, why the hypothesis of a continuous increase in average income (or a continuous decrease) is implausible and why the hypothesis of small and large business cycles seems to me more correct When we are told that the standard of living of the average Parisian is almost as high as that of King Charles IV of France 6 , and when we see the dramatic and astonishing rise of modern production technology, it is truly difficult for us to admit that all this can hit the wall and fall to pieces.Nevertheless, the years of the world war and especially the years of revolutions have shown how easy wealth and even any tiny gains of civilization can be destroyed in a period of about a dozen years.
On the other hand, it was our time that happened to discover many civilizations of the past. And the more we study them, the more erroneous is the notion that supposedly before the 19th century there was nothing but primitive culture and primitive economic organizations. Even civilizations whose age passed many millennia ago were brilliant in certain respects. Yet their brilliance faded, they ceased to prosper, and their riches disappeared. But this does not mean at all that since they were destroyed, the same fate awaits us, just as it does not give reason to think that the current European countries and America are some kind of exception to the rule.
We may be asked: how then to be with the development of progress in a spiral? But if progress is understood as a spiral of constant improvement in the economic situation, then such a hypothesis has not yet been proven by anyone. The only possible proof of this hypothesis is economic progress in some European countries, and even then only in the second half of the 19th century. But, according to the above considerations, this fact does not confirm this hypothesis. To this it should be added that the same trend was not observed at the same time among the majority of Asian, African and other peoples. Moreover, part of European prosperity has been achieved at the cost of exploiting the populations of backward and less developed countries. The aboriginal population of New Zealand in 1844 was 104,000; in 1858, 55,467; and by 1864 their number had dropped to 47,000. The same trend is observed in the demographic processes of Tahiti/"Fiji and other parts of Oceania". And this is only a small fraction of the limitless number of such facts. What do they mean and why were they mentioned? Yes, because they convincingly show that, instead of improving, the level of economic and social well-being of these peoples worsened and led to their destruction, and that the economic prosperity in Europe in the 19th century was due in part to exploitation and colonial robbery. What was good for one group turned out to be devastating for apyi oh. To ignore all these groups - hundreds of millions of people in India, Mongolia, Africa, China, natives of all non-European countries and islands, at least those of them to whom progress in Europe has cost very dearly and who have hardly improved their standard of living over the last century - to ignore them and insist on "continuous progress in a spiral" only on the basis of some European countries is to be completely subjective, biased and a dreamer. Many primitive and civilized societies of the past, which ended their economic history in misery and poverty, strongly do not allow us to speak of any law of progress "in a spiral or not in a spiral" for all societies 2 . At best, such progress has been a local and temporary phenomenon.
Summary
1. The average level of well-being and income varies from group to group, from society to society.
2. Average wealth and income varies within a society or group over time.
3. There is hardly any permanent trend in these fluctuations. All directions - down or up - - can only be "directions" in a very relative sense (temporal and local). If viewed from the point of view of a longer period, they are rather all part of a longer cycle of time.
4. From this point of view, the following time cycles are distinguished: small business cycles and larger ones in the social sphere and in economic development.
5. The upward trend in average wealth and income in the second half of the 19th century in Europe and America is most likely part of such a major economic cycle.
6. The theory of endless economic progress is wrong.
FLUCTUATIONS OF HEIGHT AND PROFILE OF ECONOMIC STRATIFICATION
Having discussed the changes in the economic status of society as a whole, let us now turn to changes in the height and profile of economic gratification. The main questions to be discussed are: first, are the height and profile of the economic pyramid of society constant, or do they change from group to group and within the same group over time? Secondly, if they change, is there any regularity and periodicity in this change? Thirdly, does the being have a constant direction of these changes, and if so, what is it like?
Fourth, the cyclical hypothesis is supported by the fact of business cycles. The existence of "small business cycles" (periods of 3-5, 7-8, 10-12 years) is now beyond doubt. Different points of view exist only about the duration of the cycle 5 . "The change that occurs is a succession of leaps or jerks, periods of rapid increase followed by 1 U-eM.
R.
AND.
The Economic History of China. N. Y., 1921. P. 40--121; ChenHuang Chang. The Economic Principles of Confucius. N.Y., 1911. Vol. 2. P. 507 ff.; Grosset R. Histoire dc TAsie. P., 1922. Vol. 2. P. 179ff., 249ff., 331ff. 2 See: Aristotle. Athenian polity. Ch. 28--29. 3 As for the history of Greece and Rome, refer to any fundamental research on ancient history and in particular to the works on the socio-economic history of K. Beloch, R. Poelman, D. Bury, P. Giro, T. Mommsen, M. I Rostovtsev and many other scientists cited in this book. 4 Pareto V. Trait... Vol. 2. P. 1528ff. 5 Aftalion. Les Crises periodiques de surproduction. P., 1913; Robertson. A Study of Industrial Fluctuation; Mitchell W. business cycles. N.Y.. 1913; Moore
H.
L.
economic cycles. N. Y., 1914. periods of stagnation or even decline "1. But was the progress of the second half of the 19th century as a whole part of a larger cycle? Professor N. Kondratiev's theory answers this question in the affirmative. In addition to the small cycles mentioned above, he discovered the presence larger cycles - lasting from 40 to 60 years 2. This is a direct confirmation of the hypothesis that the above-mentioned progressive trend of the second half of the 19th century was only part of a long-term cycle. changes? If their periodicity is difficult to prove 3, then the existence of long-term economic "ups" and "downs" does not raise any doubts. The history of any country, taken over a fairly long period of time, shows this with a sufficient degree of certainty. Fifth, the slowdown and the halting of the growth of the average level of real income in England, France and Germany from about the beginning of the 20th century 4 , and the apparent impoverishment of the population during and immediately after the World War are indisputable symptoms of at least a significant and temporary reversal. Sixthly, “the law of income reduction operates inexorably. The more people inhabit our earth, the less each person receives from nature to maintain his existence. After reaching a certain density, large masses of people come to greater poverty. Inventions and discoveries can delay, but cannot prevent the day of reckoning" 5 . It is true that the birth rate in European countries and in America has fallen, but not so much as to stop the growth of population in them; it is still quite high in the Slavic countries, not to mention the Asian mainland. It is also true that inventions are becoming more and more, but despite this. they do not yet guarantee a high standard of living for everyone in our world, even just in Europe. These reasons explain, in my opinion, why the hypothesis of a continuous increase in average income (or a continuous decrease) is not plausible and why the hypothesis of small and large business cycles seems to me more correct. When we are told! that the standard of living of the average Parisian is almost as high as that of King Charles IV of France 6 , and when we see the dramatic and astonishing rise of modern production technology, it is indeed hard for us to admit that all this can hit the wall and fall apart. in pieces. But nevertheless, the years of world war and especially the years of revolutions have shown how easily the wealth and even any tiny gains of civilization can be destroyed in a period of about a dozen years. 1 pigouA.
WITH.
The Economics of Welfare. Cambridge, 1920. P. 799. 2
Cm.: Kondratiev N. Large cycles of the conjuncture /,/ Questions of the conjuncture. 1925. No. 1. 3 In recent years, the number of works confirming the presence of periodic cycles in various spheres of social life has been growing. O. Lorenz, J. Ferrari insist on cycles with a frequency of 100-125 years; K. Joel, V. Scherer set cycles at 300 years; others, like Millard, at 500 years; J. Brownlee - at 200 years old. However, along with periodic cycles, many researchers also record non-periodic long-term cycles covering many social processes (Pareto, Senzini, Spencer, Schmoller, Heizen, Ammon, Spengler, Ogburn and others). And if one can doubt the periodicity of long-term cycles, then the presence of long-term fluctuations is a fact of reality. Cm.: Sorokin P. A Survey of the Cyclical Conceptions of Social and
Historical Process // Social Forces. 1927 Vol. 5.4 Bowley A.L. The Division of the Product of Industry. Oxford, 1919. P. 58. 5 King W.I. The Wealth... P. 176. 6 D'Avenel. Le mechanisme de la vie moderne. P., 1908. P. 158-159. On the other hand, it was our time that happened to discover many civilizations of the past. And the more we study them, the more erroneous is the notion that supposedly before the 19th century there was nothing but primitive culture and primitive economic organizations. Even civilizations whose age passed many millennia ago were brilliant in certain respects. Yet their brilliance faded, they ceased to prosper, and their riches disappeared. But this does not mean at all that since they were destroyed, the same fate awaits us, just as it does not give reason to think that the current European countries and America are some kind of exception to the rule. We may be asked: how then to be with the development of progress in a spiral? But if progress is understood as a spiral of constant improvement in the economic situation, then such a hypothesis has not yet been proven by anyone. The only possible proof of this hypothesis is economic progress in some European countries, and even then only in the second half of the 19th century. But, according to the above considerations, this fact does not confirm this hypothesis. To this it should be added that the same trend was not observed at the same time among the majority of Asian, African and other peoples. Moreover, part of European prosperity has been achieved at the cost of exploiting the populations of backward and less developed countries. The aboriginal population of New Zealand in 1844 was 104,000; in 1858, 55,467; and by 1864 their number had dropped to 47,000. The same trend is observed in the demographic processes of Tahiti, Fiji and other parts of Oceania 1 . And this is only a small fraction of the limitless number of such facts. What do they mean and why were they mentioned? Yes, because they convincingly show that, instead of improving, the level of economic and social welfare of these peoples worsened and led to their destruction, and that the economic prosperity in Europe in the 19th century was due in part to exploitation and colonial robbery. What was good for one group turned out to be devastating for another. Ignore all these groups - hundreds of millions of people in India, Mongolia, Africa, China, natives of all non-European countries and islands, at least those of them for whom progress in Europe cost a lot and who hardly improved their standard of living over the last century - ignore them and insist on "continuous progress in a spiral" only on the basis of some European countries - is to be completely subjective, biased and dreamer. Many primitive and civilized societies of the past, which ended their economic history in misery and poverty, strongly do not allow us to speak of any law of progress "in a spiral or not in a spiral" for all societies 2 . At best, such progress has been a local and temporary phenomenon. 1 See: Arnoldi-Lavrov. Civilization and wild tribes. SPb., 1904. S. 141-M8; Triggs. The Decay of Aboriginal Races // Open Court. 1912. No. 10. 2 I think that a quote from the work "Byzantism and Slavdom" by the outstanding Russian thinker K. Leontiev will confirm this idea: "There is nothing terrible or wrong to believe that Moses crossed the Sinai, that the Greeks built their acropolises, the Romans conducted wars, that the great Alexander the Great crossed the Granik and won the battle of Gaugamela, that the apostles preached, the martyrs suffered, the poets sang their songs, the great artists painted their paintings, the knights fought in tournaments just to make modern French, Prussian or Russian bourgeois in in their ugly and comical attire, they could profit and enjoy existing on the ruins of this former splendor! It would be a great shame to mankind if everything turned out in this way.
3. Summary
- The average level of wealth and income varies from group to group, from society to society. The average level of wealth and income varies within a society or group over time. There is hardly any permanent trend in these fluctuations. All directions - down or up - can only be "directions" in a very relative sense (temporal and local). If viewed from the perspective of a longer period, they are most likely part of a longer time cycle.
- From this point of view, the following time cycles are distinguished: small business cycles and larger ones in the social sphere and in economic development. The upward trend in average wealth and income in the second half of the 19th century in Europe and America is most likely part of such a major economic cycle. The theory of endless economic progress is wrong.
FLUCTUATIONS OF HEIGHT AND PROFILE OF ECONOMIC STRATIFICATION
Having discussed the changes in the economic status of society as a whole, let us now turn to changes in the height and profile of economic stratification. The main questions to be discussed are the following: first, are the height and profile of the economic pyramid of society constants, or do they change from group to group and within the same group over time? Secondly, if they change, is there any regularity and periodicity in this change? Third, is there a consistent direction for these changes, and if so, what is it?1.Main hypotheses
In modern economic science, among the many answers to these questions, the most important are probably the hypotheses of V. Pareto and K. Marx, as well as some others, but they have already been mentioned above. Pareto hypothesis. Its essence lies in the assertion that the profile of economic stratification or the particular distribution of income in any society (the original statement of the scientist) or at least in many societies (the later Pareto constraint) is something constant and uniform and can be expressed logically mathematical formula. It looks something like this: let X represent a given income, and the number of people with income greater than X. If we draw a curve whose ordinates are the logarithm of X and the abscissa is the logarithm of Y, then the curve for all the countries studied by Pareto will be approximately a straight line line. Moreover, in all countries surveyed, the curvature of the straight line with respect to the x-axis is approximately at an angle of 56 degrees. Deviations do not exceed three or four degrees. Since the tangent of 56 degrees is 1.5, then from here: if the number of incomes exceeding X is equal to Y, then the number is greater than mx \u003d 1 / m 16, whatever the value of m. This means that the shape of the distribution frequency curve income on a double logarithmic scale is the same for all countries and at all times. "We get something that looks like a large number of crystals of the same chemical composition. It can be large, medium and small crystals, but they all have the same crystal structure" 1 . Later, he limited the operation of this law, arguing that his "empirical law", like all "empirical laws, has little or no value outside the limits for which it was experimentally discovered" 2 . It is not my intention to present all the arguments against the Pareto law. Suffice it to say that many competent critics have shown that Pareto's figures reveal significant deviations from his curve; they also found that Pareto, in order to prove the validity of his law, made logical changes in the terms used, and that the frequency distribution of income in, say, the United States or other countries at different times actually exhibits significant deviations from his law. In other words, as Pareto himself admits, with radical changes in social conditions, for example, with the displacement of private property by collective property, with metamorphoses of the institution of inheritance, with a radical change in education, the shape of the curve is transformed 3 . Here, in particular, is the conclusion of a thorough mathematical analysis of the Pareto law, performed by F. Macauley with the participation of E. Benjamin. Their conclusion: I. The Pareto law is completely unacceptable as a mathematical generalization for the following reasons: a) the final phases of the distribution on a double logarithmic scale are not sufficiently linear; b) they could be more linear without a special condition, since many distributions of various kinds have final phases approaching linear; c) straight lines corresponding to the final phases do not show even an approximate constancy of curvature from year to year, from country to country; d) the final phases are not only straight lines of constant steepness, but also of unequal shape from year to year, from one country to another. It seems incredible that any valid mathematical law can be formulated to describe all distributions 4 . It suffices to show that the height and profile of economic stratification (the income distribution curve) vary by countrycountry and over time. Economic stratification canstretch or shorten, become less or more steep. This is the conclusion from the previous discussion. 1 Pareto V. Cours cfeconomie politique. Vol. 2. P. 306-308.2 Pareto V. Manuele di economia politica. P. 371 - 372. Later in the "Treatise on General Sociology" he introduces even wider restrictions. 3 See the analysis and criticism of the Pareto law in the book: The Personal Distribution of Income in the United States // Income in the United States. N.Y.. 1922. Vol. 2. P. 341-394; Pigou A.C. The Economics of Welfare. Cambridge. 1920. P. 693-700. 4 Macaulay F. R., Benjamin E. G. The Personal... P. 393-394 If fluctuations occur, can they continue indefinitely, and can the economic cone become excessively steep or, conversely, completely flat? Analyzing these problems, we inevitably
we come to the hypothesis of Karl Marx and to many modern socialist and communist theories of economic equality. Hypothesis of Karl Marx. Its essence lies in the assertion that a process of deepening economic differentiation is taking place in European countries. There are fewer and fewer middle economic strata, and they are gradually becoming poorer; the economic situation of the proletariat is deteriorating, and at the same time wealth is concentrated in ever fewer people. A narrow stratum of middle classes, an impoverished proletariat at the bottom, and a small group of capital magnates at the top of the pyramid—such is the profile of economic stratification consistent with the Marxist theory of society: The rich get richer and the poor get even more needy. Once such a situation is established, adds Marx, it is enough to nationalize the wealth of a minority and socialism would be established. Such is the essence of the theory of the catastrophic advance of socialism. To use the words of Marx, it goes like this: small merchants, shopkeepers and former shopkeepers, artisans and peasants, all become proletarians ... at the same time, the centralization of industry continues ... one capitalist destroys many ... poverty is growing faster than population and wealth are growing. Thus, the theory put forward in the middle of the 19th century argues that the change in the height and profile of economic stratification can be practically unlimited and therefore completely violates not only the Pareto curve, but also any other form of economic stratification. At the same time, Marx believed that the above-mentioned tendency to pour is temporary and should be replaced by the opposite, aimed at destroying the eco-comic stratification itself, by expropriating the expropriators and implementing the principles of socialism. This means that Marx allowed not only the possibility, but even the necessity of an unlimited change in the economic form of social organization from an extremely prominent profile to an absolutely “flat” form of a society of economic egalitarianism. At the present time there is no need to insist on the fallacy of Marx's theory and on the fallacy of his predictions. The 75 years that have flown by since the release of the Communist Manifesto did not live up to Marx's expectations and did not confirm his prophecy. First, in all European countries and in the United States, from the second half of the 19th century until the outbreak of the World War, the economic conditions of the working class improved, and did not get worse, as Marx predicted. in England since the 1850s. before the beginning of the 20th century, the coefficient of real wages of the working class rose from 100 to approximately 170 (between the 1790s and 1900 from 37 to 102). In the US, the purchasing power of the average wage per employee increased from 147 to 401 between the 1850s and 1910; between the 1820s and 1923 real wages increased from 41 to 129 2 . A similar situation is observed in France, Italy, Japan and some other countries 3 . 1 Wood G, H. Real Wages and the Standard of Comfort Since 1850 // Journal of the Royal Statistical Society. 1909. P. 102-103; Bowley A.L. Wages in the United Kingdom in the Nineteenth Century. L., 1900; Bowley A.L. The Change in the Distribution of the National Income. P. 15, 18; Giffen. The Progress of the Working Classes // Essays in Finances. L., 1890. 2 King W.I. The Wealth... P. 168; Harrison A. Factors Affecting the Trend of Real Wages // American Economics Review. Vol. 15. No. 1. P. 32. 3 Levasseur E. Histoire des classes ouvrieres. P., 1904. Vol. 2. P. 795-904; Cauderlicr. L "evolution economique du XIX siecle. Stuttgart, 1903. P. 73 ff .; Aschley W.J. The Progress of the German Working Classes in the Last Quarter of a Century. 1904; Sombart W. Der Proletarische Socialism. Jena, 1924. Bd. 1-2; Simkhovitch W.G. Marxism versus Socialism. N.Y., 1913. Ch. 6-7; Moore H.L. Laws of Wages. N.Y., 1911; Schmoller G. Grundriss der Ahgemeinen Volkswirtschaftslehre. Vol. 2. P. 523 ff.; King W.I. The Wealth Ch. 7. On the other hand, the number of the poor, according to poverty statistics, in Sweden, Prussia, England, Holland and some other countries did not increase, but decreased in the second half of the 19th century. In short, this part of the Marxist theory was refuted by the whole course history. Nor was that part of Marx's theory which foreshadowed the impoverishment and disappearance of the new economic classes and the concentration of wealth in the hands of a few. Among the data that I refute! these predictions, only a few of the most revealing examples should be cited. In Germany from 1853 to 1902 middle-class incomes and the number of rich people and millionaires increased both absolutely and relatively (in relation to population growth), while the relative number of poor economic strata decreased.For example, among the population of Prussia, the percentage of people with low income in 1866 it was 70.7%, in 1906 - 61.7%, in 1910 - 42.8% 2. The following table 3 gives a visual representation of this process.
| years | Number, population, (in thousands) | Average annual income per 1 thousand population (in marks) | |||||
| 9003000 | 30006000 | 60009500 | 9 50030 500 | over 100 thousand |
|||
| 1853 1902 | 16 87035 551 | 8253310 | 32,0 291,3 | 7,2 77,6 | 4,4 64,7 | ||
Business cycle- periodic fluctuations in economic activity, alternation of recessions and upswings in the economy; the period of time from one crisis to another, including four phases - crisis, depression, recovery and recovery (Figure 1).
Picture 1 - Phases of the business cycle
recession- sharp changes in the main parameters of the economy; significant in volume and long in terms of time; production cuts and mass unemployment.
The following negative changes are taking place in the economy: revenues, demand, and investments are declining; lower interest rates and prices; there is a fall in the level of production and rising unemployment. In the phase of recession: factors of production are redistributed from the former spheres of application to new ones; uncompetitive enterprises go bankrupt; production costs are reduced.
Depression(depressive bottom) - a particularly deep and prolonged recession, accompanied by significant devastating consequences for the economy (panic, collapse of the credit system, mass bankruptcies). The bottom of the cycle - the real volume of production reaches its minimum.
revival- the real volume of production rises relative to the bottom of the cycle and reaches its pre-crisis level. Inventories are renewed, the process of renewal of fixed capital begins, depreciation deductions are spent on more productive and technically advanced equipment.
Climb(boom) - the economy exceeds the maximum level of production in the previous cycle and strives to achieve the potential volumes of real gross domestic product and full employment at this stage.
Cyclicity can be seen as one of the ways self-regulation of the market economy, including changes in its sectoral structure. A characteristic feature of cyclicity is movement not in a circle, but in a spiral, so we can say that it is a form of progressive development.
What are the reasons that, having reached the highest point of the cycle - the peak (or boom), the economy again passes to the crisis phase?
When the economy reaches the highest point of the cycle, it works at the limit of its capabilities: all economic resources are used as efficiently as possible, there is full employment of the population, investments and expenses of buyers are very high. Under these conditions, the economy produces the maximum amount of GNP, the demand for goods and services is fully satisfied.
However, due to inertia, enterprises continue to supply the market with more and more batches of goods, for the production of which they have to buy resources at higher prices, which causes an increase in the general price level. The supply of goods outstrips demand, there are serious difficulties with the sale of goods. There is a crisis of overproduction. Enterprises suffer losses, and production cuts begin.
All theoretical economists agree that crises of overproduction are due to a profound violation of the necessary balance between consumer demand and the supply of goods and services.
Economic crises of overproduction have two sides: destructive and healing.
Destructive side The crisis is associated with a breaking, decisive elimination of the established normal proportions in the national economy. There are many cases in history when large surpluses of products were barbarously destroyed.
wellness side crisis is manifested in the fact that during the depression, the fall in prices makes production unprofitable: it does not give the usual average profit. The way out of this impasse is the renewal of fixed capital (machinery, equipment). This makes it possible to reduce the cost of production, make it quite profitable and reach new levels of production.
Consequently, under classical capitalism, a spontaneous mechanism of cyclical development of macroeconomics operated. It could not only enter the phase of a decline in production, but also return to an economic upswing without state intervention.
However, such spontaneous self-regulation ended in the 1920s. The mechanism of spontaneous self-regulation did not work for the first time during the global economic crisis, called the Great Depression (1929–1933). Since then, qualitatively new features of the cyclical development of the economy have emerged, which are associated with the action of two factors of a macroeconomic scale.
First factor- scientific and technological revolution. On the one hand, it contributed to the creation of new science-intensive industries that are most resistant to crisis phenomena (microelectronics, robotics, etc.). On the other hand, scientific and technological revolution has created structural crises in traditional industries dominated by simple technology. In addition, the scientific and technological revolution contributed to a significant acceleration in the turnover of fixed capital, its rapid replacement by more advanced technology. As a result, crises began to occur more frequently: not after 10–12 years, but after 5–6.
Second factor- active state intervention in the course of macroeconomic growth in order to reduce the destructive impact of crises and achieve greater stabilization of economic development.
The first attempt to mitigate the contradictions caused by the Great Depression was made by US President Franklin Roosevelt as part of his New Deal. At its nadir in 1933, America's unemployment rate was 25%, meaning one in four able-bodied citizens were unemployed. American incomes fell by 30%, the decline in industrial production reached a record high.
Under these conditions, it became obvious that without outside intervention, the market system would not be able to overcome this crisis. Based on the recommendations of John. M. Keynes on state regulation of the economy, Roosevelt was able to lead the US economy out of the most destructive crisis in world history. In the future, the West has accumulated significant experience in the conduct of anti-cyclical and anti-crisis policies.
Since 1933, the governments of countries with a market economy have been pursuing an economic policy aimed at regulating the rate of economic growth, reducing inflation and combating unemployment.
US national income (as a share of labor, capital investment, rent, and net income)
|
Qualification year |
Wage |
Capital investment |
Rent |
Net profit |
Outcome |
|
1850 |
35.8 |
12.5 |
7.7 |
44.0 |
100.0 |
|
1860 |
37.2 |
14.7 |
8.8 |
39.3 |
100.0 |
|
1870 |
48.6 |
12.9 |
6.9 |
31.6 |
100.0 |
|
1880 |
51.5 |
18.6 |
8.7 |
21.3 |
100.0 |
|
1890 |
53.5 |
14.4 |
7.6 |
24.6 |
100.0 |
|
1900 |
47.3 |
15.0 |
7.8 |
30.0 |
100.0 |
|
1910 |
46.9 |
16.8 |
8.8 |
27.5 |
100.0 |
As we can see, the share of profit rather decreases, and the share of investment rather increases, although the amount of profit and investment taken together remains constant. In any case, the figures do not support any tendency for the concentration of capital in the hands of a few and, as we have seen, do not support the theory of the permanent impoverishment of the lower classes. A comparison of wages and profits over 60 years shows that wages and profits have moved up at about the same rate. This can be seen from the following table 3 .
|
Qualification year |
Average salary per employee Average profit per employee |
|
|
entrepreneurial employees |
||
|
(to the purchasing power of the dollar) |
||
|
1850 |
147 |
318 |
|
1860 |
188 |
231 |
|
1870 |
179 |
224 |
|
1880 |
244 |
212 |
|
1890 |
350 |
368 |
|
1900 |
410 |
607 |
|
1910 |
401 |
711 |
Analysis of the distribution of income between families gives almost the same result. It shows a slight increase in the concentration of wealth in the hands of a few very wealthy families. But at the same time, the pronounced stability in the distribution of wealth over the past 70 years makes us doubt that the fluctuations in the relative share of income among different groups of the population have been so great as to seem staggering *.
To what has been said, we must add a relatively new phenomenon, which, however, has already attracted the attention of American economists, namely the "diffusion of property" in the United States and European countries, which has assumed enormous proportions over the past few decades. Let me give you a few examples to illustrate the situation. According to R. Binkerd, from 1918 to 1925 the number of shareholders in some industries (railroads, road construction, gas, light, electricity, telephone, part of oil companies and metallurgical corporations, a dozen mixed manufacturing companies) almost doubled and reached the number 5,051,499. About half of them were replenished at the expense of employees, workers and members of companies, the other half - at the expense of the rest of the public 2 . The number of farmers materially interested in cooperative buying and selling increased from 650,000 in 1916 to 2.5 million in 1925. The number of depositors and the amount of their deposits rose respectively from 10.5 million and a sum of more than 11 billion in 1918 to 9 million with a sum of 21 billion in 1925. In addition, the conservative increase in the number of stock and bond holders was at least 2.5 million 3 These figures show only part of the vast process of property diffusion that has been taking place in the US since the war 4 . It is too loud to call this process a revolution, but it will not be an exaggeration if we say that the diffusion of property completely refutes the theory of K. Marx. The concentration of industry does not at all mean the concentration of wealth in the hands of a few, as Marx thought.
Other countries provide similar data. The general increase in the national income in Saxony, Prussia, and Denmark, and, moreover, the share of this increase in the five economic strata of the population, from the richest to the poorest, is evident from after blowing table 6 .