Features of the modern crisis in the light of the theory of cycles

Gurbanov Tariyel Musallim oglu

Journal number 4 ∘ Gurbanov Tariyel Musallim oglu ∘
Features of the modern crisis in the light of the theory of cycles

Doi: 10.36172/EKONOMISTI.2021.XVII.04.Gurbanov.Tariyel.Musallim.Oglu

Summary

Modern society strives for constant improvement of the standard and living conditions, which can only be provided by sustainable economic growth. However, long-term economic growth is not uniform, but is constantly interrupted by periods of economic instability. The economic history of the past two centuries provides us with a myriad of examples of the instability of the market economy. Periods of successful industrial development and general economic prosperity have always been followed by periods of recession, accompanied by a drop in production and unemployment. In general, the market economy has a tendency to repeat economic phenomena, which makes it possible to identify the "cyclical" nature of its development. Since the economic crises of the first half of the 19th century, economists have been trying to find the reasons and explain why this happens at regular intervals with stubborn consistency. The problem was of such great importance that almost no economist of the 19th and 20th centuries avoided it. There are many works devoted to the problem of cyclical development, but there is a common opinion in them. Therefore, the issue of cyclical fluctuations is still relevant, the current crisis period with a large amount of new information and the possibility of comparing data adds an acuteness, all this determines the topic of this study. The relevance of this work is that the cyclical development of the economy is accompanied by a high level of economic activity for a long time, and then a decline in this activity to a level below the permissible level. The periodic recurrence of economic downturns leads to impoverishment, hunger, suffering, suicide of people, which cannot but worry a developed civilized society [1.p.245]. Therefore, the problem of cyclicality has always attracted the attention of economists and today remains one of the central problems of economic theory. After the Second World War, significant changes took place in the mechanism of cyclical fluctuations of the market. In the period of the post-war relative isolation of national economies, when the victorious states for some time severed economic ties with the defeated states, a certain asynchrony of cycles manifested itself in the world. While some countries, whose economies were not much affected by the war, were naturally drawn into the crisis phase, others - in need of restoration of the destroyed economy - entered a period of many years of economic growth. For two decades, this asynchrony allowed large private firms to maneuver their production resources between countries, which helped smooth out cyclical booms and bumps in the global economy - and the subsequent restoration of the synchronicity of cyclical fluctuations [2.p.425]. Currently, this synchronization is relative. Thus, in 2020, inflation rates in different countries of the European Union differ markedly: from 6.7% in Latvia, 4.2% in Greece and Estonia, to minus 0.2% in Finland.

Keywords: cycles, economic crisis, sustainable development, finance, monetary relations, economic growth, economic policy.

Introduction. The financial and economic crisis that began in the United States at the end of 2008 has become global. Its socio-economic consequences: a drop in production, an increase in unemployment, a decrease in real incomes of the population. The current financial crisis can rightfully be considered the most profound and dramatic over the past few decades of the development of the world economy. The main global cause of the crisis is the peculiarities of the cyclical development of the world economy. Most economically developed countries, primarily the United States and Western Europe, after the peak of technological and economic development at the end of the 20th century, are entering a new cycle - a cycle of slowing economic growth [3.p.9]. The problem of cyclical development in the context of the current crisis can be confidently characterized as a structural transformation of the world economy in anticipation of new growth due to a new technological order that is coming in the near future. If we talk about subjective reasons, the main one is the US economy, its importance in world economic processes and its current state. The economic system that existed for decades was practically mono-currency, with one dominant component - the US dollar, which had the status of the main reserve currency. This caused an almost unlimited need for its emission, the printing press worked without stopping. As the world economy grew, the demand increased, the machine worked more and more actively. At the same time, a large (dominant) dollar component in the foreign exchange reserves of leading economic powers (including Russia) made these countries hostage to the processes taking place in the US economy [4,p.355].

The basic innovations of the fourth cycle are nuclear power; quantum electronics and laser technologies; computer and production automation; satellite communications and television. There was a rapid development of the automobile - and aircraft construction. Microelectronics, personal computers, informatics and biotechnology, the emergence of ATMs and plastic cards, which led to a drop in demand for cash and a change in the speed of money circulation, the globalization of financial markets, which removed many boundaries on the path of capital movement, became the core of the fifth technological order [5,p.655].

First of all, these are nanotechnology, biotechnology, information and communication technologies, quantum computers, alternative energy sources, technologies of new materials.

Chart 1

Trade turnover of Republic of Azerbaijan (mln.USA dollar)

If we look at the foreign trade turnover of the Republic of Azerbaijan in recent years, we can see that if in 2015 the total trade turnover amounted to 25809.0 mln. USD, in 2019 this figure will increase to 33138.5 mln.USD. Compared to 2015, the import and export indicators of the Republic of Azerbaijan in 2019 increased and amounted to 13667.2 mln. USD and 19471.3 mln. US dollars (Chart 1). How long will the descending phase be, and what significant events will characterize the beginning of the sixth cycle? Most modern researchers agree that the next large-scale global crisis, which will mark the birth of the sixth Kondratieff cycle, will occur in the 10s of our century. This forecast assumes the contraction of long cycles - if it is realized in the second decade, then the duration of the fifth cycle will be 36-46 years. Why is loop compression happening? - a question, in our opinion, which does not have an unambiguous answer today. It can be assumed that the reasons lie in the sphere of money circulation, namely the increase in the speed of circulation of money. Indeed, if we consider Kondratyev's hypothesis as basic (the main reason for long cycles lies in the mechanism of accumulation, accumulation and dispersal of capital ), then changes in the conditions of monetary circulation, of course, could not but affect the details of this mechanism - the processes of accumulation / dispersal began to occur more swiftly. What technological changes will precede the emergence of the sixth cycle? [6,p.311]

In the field of technology, the main hopes are now pinned on the advent of quantum computers (semiconductor technologies have already come to a natural limit - nanotechnology), the invention of which (the development of principles) was announced by IBM in 1998, but the creation of which will certainly take at least a decade. Breakthroughs in the communications industry are in high demand today (the introduction of 3rd generation communications is the prospects for the next few years). It is difficult to say so far what role biotechnology will play in the upward wave of the sixth Kondratieff cycle. In particular, it is difficult to assess the demand for cloning technologies that have developed in recent years. But the demand for genetic engineering from the pharmaceutical industry and medicine is beyond doubt. The third area of possible technological breakthroughs is research in the field of high energies and the creation of alternative energy sources. However, the required volume of investments in these technologies casts doubt on the possibility of a breakthrough in this direction in the coming years (it is obvious that all these technological breakthroughs should occur in the next decade). Thus, it can be assumed that the next long wave will be the cycle of quantum computers and biotechnology [7,p.115].

Expansion of markets. Today, the most attractive directions for the expansion of world trade are China and Islamic countries, gravitating towards fundamentalism. Today, the efforts of developed countries to involve both China and traditional Islamic countries into the orbit of the world economy are quite obvious. Obviously, in the downward phase of the big cycle, in which we are now, this "operation" is likely to not be crowned with success (it is the analysis of the Kondratieff cycles that casts doubt on the fact that "Shock and Awe" will allow America to achieve its goals; at least At least, the post-war arrangement of Iraq will be very ambiguous), however, by the middle of the upward wave of the sixth cycle (i.e. approximately 2025/30) the need for new markets will become more acute than ever. It is these terms that are determined as the most probable for the change of many radical regimes in the Middle East [8,p.311]. The sixth cycle, as mentioned above, should be preceded by some significant changes in the sphere of monetary circulation (obviously, already in the current decade). However, it is possible that they have already happened. We are talking about the introduction of a single European currency. The positive impact of this factor has yet to be fully felt in the global economy. Another important change in the monetary sector is related to the intensification of online settlements, i.e. payment for services and goods via the Internet. These technologies appeared along with the Internet in the 90s. of the last century, but it is obvious that they are not yet fully ready for commercial use and so far allow only a limited range of operations to be performed. More active use of the worldwide network for settlements will undoubtedly change the basic parameters of monetary circulation.

Result. The condition for sustainability and stable economic development is balance, balance between social production and consumption, aggregate demand and aggregate supply. However, in reality it is practically unattainable. In a market economy, the state of equilibrium is periodically disturbed. There is a certain cyclicality, repetition in the functioning of the national economy, when periods of economic recovery are replaced by periods of recession and stagnation. Economic growth is manifested through cyclicality: the movement does not occur in a circle, but in a spiral, reflecting both long-term and medium-term fluctuations in the market situation. We come to the conclusion that the economy is characterized by fluctuations in the volume of the national product and the level of prices. Economic cycles always have the same phases: peak, decline, recovery and recovery, but the cycles differ from each other in intensity and duration. As you can see, it is very difficult to name the only reason for the cyclical movement of the market economy. Therefore, many modern economists limit themselves to a general indication that the cause of cyclical movement lies in the complex and contradictory nature of the diverse forces and factors that influence the movement of the market economy. All sectors of the economy are affected in different ways and to varying degrees by the economic cycle. The cycle has a stronger impact on output and employment in investment and durable goods industries than in non-durable goods industries.

In conclusion, we note that the phenomenon of cyclicality is a natural property of the economy, a way of its movement. The well-known economist P. Samuelson in his book "Economics" notes that the cycle is an objective phenomenon inherent in all countries with a market economy, and is associated with internal and external factors. Thus, the cycle testifies to the viability of the system, its right to exist and is a regularity in the development of a market economy [9,p.114].

References

1. Aliev A.A. World economy: problems of the present / A.A. Aliev, A. Sh. Shakaraliev, I. Dadashov - Baku, 2003 .-- 455 p.

2. Mamedov S.M. Finance / S.M. Mamedov. - Baku: Azerneshr, - 1997, - 428 p.

3. Abbasov A.F. The role of financial policy in ensuring the economic security of the state // - Baku: magazine "Finance and accounting", - 2002. № 5, - p. 9-15.

4. Abbasov A.Kh. Formation of the financial market in Azerbaijan and the problems of the financial and credit system in a market economy / A.Kh. Abbasov. - Baku, 2003 .-- 364 p.

5. Atashov B.Kh. Financial theory. / B.Kh. Atashov, N.A. Novruzov, E.A. Ibrahimov - Baku: Cooperation, - 2014 .-- 648 p.

6. Guliev F.T. Nation and state incomes / F.T. Guliev. - Baku, 2004 .-- 328 p.

7. Atakishiev M.S. Azerbaijan on the way of socio-economic progress / M. Atakishiev. - Baku, 2005 .-- 262 p.

8. Aliev Y.K. Problems of the formation of a market mechanism in the economy of Azerbaijan / U.G. Aliev. - Baku, 2000 .-- 345 p.

9. Sadygov M.M. Problems of Determining the Main Directions of the State Debt Policy in the Formation of Financial Potential / M.M. Sadigov. - Baku, 2003 .-- 150 p.

EKONOMISTI The international scientific and analytical, reviewed, printing and electronic journal of Paata Gugushvili Institute of Economics of Ivane Javakhishvili Tbilisi State University

DOI: 10.36172/EKONOMISTI E ISSN 2346-8432 Print ISSN 1987-6890	Journal number 4 ∘ Gurbanov Tariyel Musallim oglu ∘ Features of the modern crisis in the light of the theory of cycles Doi: 10.36172/EKONOMISTI.2021.XVII.04.Gurbanov.Tariyel.Musallim.Oglu Summary Modern society strives for constant improvement of the standard and living conditions, which can only be provided by sustainable economic growth. However, long-term economic growth is not uniform, but is constantly interrupted by periods of economic instability. The economic history of the past two centuries provides us with a myriad of examples of the instability of the market economy. Periods of successful industrial development and general economic prosperity have always been followed by periods of recession, accompanied by a drop in production and unemployment. In general, the market economy has a tendency to repeat economic phenomena, which makes it possible to identify the "cyclical" nature of its development. Since the economic crises of the first half of the 19th century, economists have been trying to find the reasons and explain why this happens at regular intervals with stubborn consistency. The problem was of such great importance that almost no economist of the 19th and 20th centuries avoided it. There are many works devoted to the problem of cyclical development, but there is a common opinion in them. Therefore, the issue of cyclical fluctuations is still relevant, the current crisis period with a large amount of new information and the possibility of comparing data adds an acuteness, all this determines the topic of this study. The relevance of this work is that the cyclical development of the economy is accompanied by a high level of economic activity for a long time, and then a decline in this activity to a level below the permissible level. The periodic recurrence of economic downturns leads to impoverishment, hunger, suffering, suicide of people, which cannot but worry a developed civilized society [1.p.245]. Therefore, the problem of cyclicality has always attracted the attention of economists and today remains one of the central problems of economic theory. After the Second World War, significant changes took place in the mechanism of cyclical fluctuations of the market. In the period of the post-war relative isolation of national economies, when the victorious states for some time severed economic ties with the defeated states, a certain asynchrony of cycles manifested itself in the world. While some countries, whose economies were not much affected by the war, were naturally drawn into the crisis phase, others - in need of restoration of the destroyed economy - entered a period of many years of economic growth. For two decades, this asynchrony allowed large private firms to maneuver their production resources between countries, which helped smooth out cyclical booms and bumps in the global economy - and the subsequent restoration of the synchronicity of cyclical fluctuations [2.p.425]. Currently, this synchronization is relative. Thus, in 2020, inflation rates in different countries of the European Union differ markedly: from 6.7% in Latvia, 4.2% in Greece and Estonia, to minus 0.2% in Finland. Keywords: cycles, economic crisis, sustainable development, finance, monetary relations, economic growth, economic policy. Introduction. The financial and economic crisis that began in the United States at the end of 2008 has become global. Its socio-economic consequences: a drop in production, an increase in unemployment, a decrease in real incomes of the population. The current financial crisis can rightfully be considered the most profound and dramatic over the past few decades of the development of the world economy. The main global cause of the crisis is the peculiarities of the cyclical development of the world economy. Most economically developed countries, primarily the United States and Western Europe, after the peak of technological and economic development at the end of the 20th century, are entering a new cycle - a cycle of slowing economic growth [3.p.9]. The problem of cyclical development in the context of the current crisis can be confidently characterized as a structural transformation of the world economy in anticipation of new growth due to a new technological order that is coming in the near future. If we talk about subjective reasons, the main one is the US economy, its importance in world economic processes and its current state. The economic system that existed for decades was practically mono-currency, with one dominant component - the US dollar, which had the status of the main reserve currency. This caused an almost unlimited need for its emission, the printing press worked without stopping. As the world economy grew, the demand increased, the machine worked more and more actively. At the same time, a large (dominant) dollar component in the foreign exchange reserves of leading economic powers (including Russia) made these countries hostage to the processes taking place in the US economy [4,p.355]. The basic innovations of the fourth cycle are nuclear power; quantum electronics and laser technologies; computer and production automation; satellite communications and television. There was a rapid development of the automobile - and aircraft construction. Microelectronics, personal computers, informatics and biotechnology, the emergence of ATMs and plastic cards, which led to a drop in demand for cash and a change in the speed of money circulation, the globalization of financial markets, which removed many boundaries on the path of capital movement, became the core of the fifth technological order [5,p.655]. First of all, these are nanotechnology, biotechnology, information and communication technologies, quantum computers, alternative energy sources, technologies of new materials. Chart 1 Trade turnover of Republic of Azerbaijan (mln.USA dollar) If we look at the foreign trade turnover of the Republic of Azerbaijan in recent years, we can see that if in 2015 the total trade turnover amounted to 25809.0 mln. USD, in 2019 this figure will increase to 33138.5 mln.USD. Compared to 2015, the import and export indicators of the Republic of Azerbaijan in 2019 increased and amounted to 13667.2 mln. USD and 19471.3 mln. US dollars (Chart 1). How long will the descending phase be, and what significant events will characterize the beginning of the sixth cycle? Most modern researchers agree that the next large-scale global crisis, which will mark the birth of the sixth Kondratieff cycle, will occur in the 10s of our century. This forecast assumes the contraction of long cycles - if it is realized in the second decade, then the duration of the fifth cycle will be 36-46 years. Why is loop compression happening? - a question, in our opinion, which does not have an unambiguous answer today. It can be assumed that the reasons lie in the sphere of money circulation, namely the increase in the speed of circulation of money. Indeed, if we consider Kondratyev's hypothesis as basic (the main reason for long cycles lies in the mechanism of accumulation, accumulation and dispersal of capital ), then changes in the conditions of monetary circulation, of course, could not but affect the details of this mechanism - the processes of accumulation / dispersal began to occur more swiftly. What technological changes will precede the emergence of the sixth cycle? [6,p.311] In the field of technology, the main hopes are now pinned on the advent of quantum computers (semiconductor technologies have already come to a natural limit - nanotechnology), the invention of which (the development of principles) was announced by IBM in 1998, but the creation of which will certainly take at least a decade. Breakthroughs in the communications industry are in high demand today (the introduction of 3rd generation communications is the prospects for the next few years). It is difficult to say so far what role biotechnology will play in the upward wave of the sixth Kondratieff cycle. In particular, it is difficult to assess the demand for cloning technologies that have developed in recent years. But the demand for genetic engineering from the pharmaceutical industry and medicine is beyond doubt. The third area of possible technological breakthroughs is research in the field of high energies and the creation of alternative energy sources. However, the required volume of investments in these technologies casts doubt on the possibility of a breakthrough in this direction in the coming years (it is obvious that all these technological breakthroughs should occur in the next decade). Thus, it can be assumed that the next long wave will be the cycle of quantum computers and biotechnology [7,p.115]. Expansion of markets. Today, the most attractive directions for the expansion of world trade are China and Islamic countries, gravitating towards fundamentalism. Today, the efforts of developed countries to involve both China and traditional Islamic countries into the orbit of the world economy are quite obvious. Obviously, in the downward phase of the big cycle, in which we are now, this "operation" is likely to not be crowned with success (it is the analysis of the Kondratieff cycles that casts doubt on the fact that "Shock and Awe" will allow America to achieve its goals; at least At least, the post-war arrangement of Iraq will be very ambiguous), however, by the middle of the upward wave of the sixth cycle (i.e. approximately 2025/30) the need for new markets will become more acute than ever. It is these terms that are determined as the most probable for the change of many radical regimes in the Middle East [8,p.311]. The sixth cycle, as mentioned above, should be preceded by some significant changes in the sphere of monetary circulation (obviously, already in the current decade). However, it is possible that they have already happened. We are talking about the introduction of a single European currency. The positive impact of this factor has yet to be fully felt in the global economy. Another important change in the monetary sector is related to the intensification of online settlements, i.e. payment for services and goods via the Internet. These technologies appeared along with the Internet in the 90s. of the last century, but it is obvious that they are not yet fully ready for commercial use and so far allow only a limited range of operations to be performed. More active use of the worldwide network for settlements will undoubtedly change the basic parameters of monetary circulation. Result. The condition for sustainability and stable economic development is balance, balance between social production and consumption, aggregate demand and aggregate supply. However, in reality it is practically unattainable. In a market economy, the state of equilibrium is periodically disturbed. There is a certain cyclicality, repetition in the functioning of the national economy, when periods of economic recovery are replaced by periods of recession and stagnation. Economic growth is manifested through cyclicality: the movement does not occur in a circle, but in a spiral, reflecting both long-term and medium-term fluctuations in the market situation. We come to the conclusion that the economy is characterized by fluctuations in the volume of the national product and the level of prices. Economic cycles always have the same phases: peak, decline, recovery and recovery, but the cycles differ from each other in intensity and duration. As you can see, it is very difficult to name the only reason for the cyclical movement of the market economy. Therefore, many modern economists limit themselves to a general indication that the cause of cyclical movement lies in the complex and contradictory nature of the diverse forces and factors that influence the movement of the market economy. All sectors of the economy are affected in different ways and to varying degrees by the economic cycle. The cycle has a stronger impact on output and employment in investment and durable goods industries than in non-durable goods industries. In conclusion, we note that the phenomenon of cyclicality is a natural property of the economy, a way of its movement. The well-known economist P. Samuelson in his book "Economics" notes that the cycle is an objective phenomenon inherent in all countries with a market economy, and is associated with internal and external factors. Thus, the cycle testifies to the viability of the system, its right to exist and is a regularity in the development of a market economy [9,p.114]. References 1. Aliev A.A. World economy: problems of the present / A.A. Aliev, A. Sh. Shakaraliev, I. Dadashov - Baku, 2003 .-- 455 p. 2. Mamedov S.M. Finance / S.M. Mamedov. - Baku: Azerneshr, - 1997, - 428 p. 3. Abbasov A.F. The role of financial policy in ensuring the economic security of the state // - Baku: magazine "Finance and accounting", - 2002. № 5, - p. 9-15. 4. Abbasov A.Kh. Formation of the financial market in Azerbaijan and the problems of the financial and credit system in a market economy / A.Kh. Abbasov. - Baku, 2003 .-- 364 p. 5. Atashov B.Kh. Financial theory. / B.Kh. Atashov, N.A. Novruzov, E.A. Ibrahimov - Baku: Cooperation, - 2014 .-- 648 p. 6. Guliev F.T. Nation and state incomes / F.T. Guliev. - Baku, 2004 .-- 328 p. 7. Atakishiev M.S. Azerbaijan on the way of socio-economic progress / M. Atakishiev. - Baku, 2005 .-- 262 p. 8. Aliev Y.K. Problems of the formation of a market mechanism in the economy of Azerbaijan / U.G. Aliev. - Baku, 2000 .-- 345 p. 9. Sadygov M.M. Problems of Determining the Main Directions of the State Debt Policy in the Formation of Financial Potential / M.M. Sadigov. - Baku, 2003 .-- 150 p.