Global economic crisis and its impact on Russian economy (стр. 2 из 3)
The first stage covers the beginning of XVIII century to the middle of 30-s years of XX century. During this period prevailed opinions that economical crisisses either impossible under conditions of capitalism (J. S. Mille, J-B. Seid, D. Ricardo) or they view this as a casual character and that system of free competition can overcome them itself (J-Sh. Siesmondy, R. Rodbertus, K. Kautskiy)[10].
The second stage covers period from the middle of 30-s to the middle of 60-s, XX century. Viewing of this period is connected to works of J. M. Keyns and, first of all, his conclusion that economical crisisses (more exactly stagnation) are inevitable under conditions of classical capitalism, they represent a result of nature of this market. Keyns was one of the first among western economists who declared that capitalist market includes different manifestations of monopolism and is combined with governmental regulations, therefore prices and salaries are inflexible.
As a principally needed mean of mitering the crisis’s problems and unemployment Kayns saw an idea about supply by governmental intervention to economy with the purpose of stimulating of effective total demand. To his merits in the research of cyclical factors we can refer his theory of multiplicator wich became popular for analyze the reasons of cyclicity.
The third stage in research the reasons of economical cycles is a period frpm the middle of 60-s till now. During this period it was paid more attention to differentiation of intern and exern reasons of cyclicity of market economy. Moreover to extern factors begun to pay more prevailed attention. The second, difined a position of specialists according to which government (in developed countries) not rushes to anticrisis regulation and mitering of cyclical vibrations and stabilizing of economical balance. But it draws a so called pro-cyclic policy, it means it provokes and supports cyclicity[11].
Detailed analyze of intern and extern approaches to explanation of cyclicity reasons is represented by so called multiplicity-accelerating mechanism of cycle. Models of a multiplicator and accelerator theoretically are viewed separately, but on a practice their mechanisms has a correlation: when begins to act one mechanism, begins its activity the second. If, for example, when a balanced state (not depending on economy system) an autonomous change of demand takes place and it is presented by growth of investments, a multiplicator begins its actions, it causes a number of changes in income structure.
Changes of income make act an accelerator and begin changes of productivity investments volumes. Changes of investments again make a multiplicator, as a result – change of income and new investments.
Deviations causing multiplicity-accelerating mechanism can be divided into three categories: going out, exploding and even. Going out are vibrations which amplitude gradually goes out to the moment where they end and income stabilizes on a definite level. In case with exploding vibrations an amplitude permanently growth. Even vibrations take place when an amplitude is constant.
The researches of a nature of production cyclucity under conditions of governmental regulation of economy bear a number of new opinions and conceptions regarding to this problem. They are conceptions of balanced business cycle and political business cycle. The first shows developing of monetary ideas. According to this conception government plays role of generator of financial shocks which destroy or disturb the balance of economic system. So, cyclic vibrations are supported within public production[12].
In 70s—80s this conception was actively worked out by representatives of rational expectations theory. If monetarists think that government can provoke cycle using insufficient awareness of population about real contant and purposes of different directions of governmental economy, representatives of rational expectation theory think about opposite.
They think that entrepreneurs and population have learned (due to current information revolution) to estimate and recognize the real motives of governmental decisions and they can react in time. As a result a governmental policy remains unrealized and lowering or growth becomes to be more expressive.
The second conception (of political business activity) is based on the idea that there is a dependence between the level of unemployment and level of inflation, that is defined by Fhilips’ curve. In other words there is an interdependence between these measures: if unemployment is low, prices are growing more rapidly.
Its representatives suppose that economical state in the country influences to popularity of the leading party. As the main economical indicators (to which population react) there are inflation rate and unemployment norm. If income is low, then there will be more voices for the party or president on the votes.
With the purpose to supply the win, government tries to support a special correlation of inflation rate and unemployment, that the is most appropriative for electors. Therefore administration after being elected tries to lower temps of price growing by artificial provocation of crisises and to the aend of its govering it tries to solve an opposite problem – to rise employment. It leads to prices growth, but the main goal is that to the moment of elections there will be growth of employment and inflation will not be so high yet.
Chapter 2. World crisis and its impact on economy of Russia
2.1 The main stages of the world crisis of 2008 — 2009 years.
Financial crisis came to Europe in three stages. The first stage of crisis is American hypothecary crisis. The second stage was only European. European banks tool mass positions in a bank system of Eastern Europe. For example, Czech banking system was almost completely foreign (Austrian and Italian owners). These banks wanted to give credits to population of Western Europe as buyers of a real estate in Euro or Yen as currency.
This helped to lower interest rates because risk of rippling was nearer to borrower. The payments for credits begun to grow. European center, headed by Germany rejected to help to borrowers and creditors, also creditors organized this crisis in European countries. Instead International Currency Fund (ICF) was appealed to solve this problem. Therefore in Western Europe appears a political question, what does it mean to be the part of European Union?[13]
The third wave is represented by governmental duty in European countries, but not included in a center of Europe – Greece and Portugal, possibly Spain. .In the case of Greece Germany decided not to interfere.
Naturally appear questions from peripheries: what does membership in ES means?
Appeared much more deep crisis of legitimacy. Germany recognized that some intervene to Greece was necessary. Social tension in its majority was against intervene, but policy under public pressure begun hard relations with finance elite. Similar crisis in Greece appeared between elite recognizing international regulations and nationalists[14].
So there was in Europe double crisis. As in USA there was crisis in relations between financial and political systems. This crisis was not so intensive as in USA because of traditional integration of these systems in Europe. But tension in relations between mass and elite is quite intensive .The second part of crisis is crisis of European Union and growing feeling that European Union is a problem and not a salvation.
As, for example, in USA grows distrust to national and international mechanisms[15].
United States of America and Europe are not only regions of the world, which face to legitimacy crisis. For example, in China growth of suppression of dissent comes from serious questions regarding financial expansion benefits for last 30 years.
It is interesting to mention that Russia suffers much more than China from this crisis, having its crisis earlier.
Global legitimacy crisis has many aspects and it could be viewed.
But to the moment more important is to understand that Europe and USA faced fundamental problems. Geopoliticalmeaningforthiscrisisisobvious. If Americans and Europeans think how enter the period when management by intern balance becomes a problem. Therefore there is a task to re-view possibilities and regional balances[16].
We see in USA a predictable process. A political elite tries to stabilize the situation entering the contractions to financial elite. It makes this to prove that political elite differs from financial. There is a precedent – a stronger control over financial system from governmental party and moral fairytales for population.
European process is less obvious. Andclear. Lack of clearance is a problem for Europe Union. This is not just a crisis in the national elite, but in international. If it leads to delegitimisation of EU we would enter unexplored territory.
The most important moment is that almost two years after normal financial panic government didn’t successfully absorbed results of this event.
According to Adam Smith, markets are not physical persons but as a result of political decision, appears political system distributing risks that helps markets to function.
To sum up, let’s consider the graph of economic cycle and stock market cycle, which one can be adjusted to any economy of any country. There are four phases: expansion (increase in production and prices, low interests rates); crisis (stock exchanges crash and multiple bankruptcies of firms occur); recession (drops in prices and in output, high interests rates); recovery (stocks recover because of the fall in prices and incomes). So, the world and Russian financial crisis were parts of this economic cycle, which is inevitably for any economy.
2.2 Impact on Russian economy
After 10 years of a strong rise of Russia, it felt an impact of global finance crisis that makes a new task in a sphere of macro-economical policy. After perfect results achieved by Russian economy during 1999 - 2007 years (7% a year) and higher temps in the first half of 2008 year (8%),there begun a gradual stagnation of economic growth[17].
In the first half of 2008 year there were still high temps of gross domestic product - about 8%, that partially reflected good fundamental macro-economical conditions (table. 1.1). These temps were higher than long-term potential of Russian economy (according to estimates, it reaches about 6—7%), signs of worsening are obvious.
Growth of inflation rate, shortening of unemployment and the fact that growth of a real salary if further more than productivity growth. All these signs show that we can see the worsening of situation with limits (mainly infrastructural), that stops offer.
Good fundamental macro-economical conditions of Russia, good budget policy and absence of American crisis’s effects protected partially Russian economy and limited impact of global finance crisis.
Therefore with low volume of governmental external duty, to a double proficite, good estimations of rating agencies a great number of international investors viewed Russia as a good place for investments till 2008. Making good budget and reserves in comparison to the other countries Russia could stop and limit coming of global finance crisis
One more important thing is that government had less time and resources, possible variants of economical policy and freedom to limit the crisis to a real sector[18].
Global crisis had a negative impact to Russia and was represented as four correlated shocks[19]:
1. Developing of a global crisis, that lead to sharp stop of income and later to outflow of capital as a result of investors’ flow. They begun to change the direction of their investments to more safe actives (not Russia and developing countries).
2. Global crisis of a credit system has an impact to Russian banking system. There appeared problems to liquidity during short-term offset of debts.
3. Sharp falling of prices for oil leads to loweriong of proficites in budget and lowering of a great gold and currency reserves of a country.
4. On the national stock market appeared a falling (it reflects loose of investors’ trust all over the world and expecting of sharp falling of oil prices). To the middle of November of 2008 it means less than for 5 months it has lost more than 2/3 of its cost.
These shocks limit an internal demand that is the main factor of growth in Russia, that makes new economical goals for Russian government in comparison to the situation of last months.
The main task of economical policy is to limit inevitable impact of crisis to the real sector, preserving macro-economical stability and especially stability of budget system.
From the July of 2008 growth of a global finance crisis and falling of prices to oil lead to sharp worsening of perspectives of world economical development that appealed to stagnation in Russian economy.
After the 3rd of July in 2008 when prices for oil reached its historical maximum — 144,04 dollars for Brent and 139,52 dollars for Urals, — appeared the first signs of worsening of economy. At the beginning it was caused by limited number of producers and growing of expenditures for producing (moreover real strengthening of a ruble). But falling of world demand and lowering of oil prices accelerated a process of growths’ slowdown (see. "Worseningofworldconjecture")[20].
From the point of view of an offer lowering of growth temps first, took place in trade branches however now we can see lowering in non-trade sectors where earlier were registered very high growth levels.
Sharp growth of salary going ahead of productivity growth and strengthening of a ruble lowered the competitive ability of trade sectors. In tote, there is a growth in a trade sectors in the second quarter of 2008 is about 3, 4 % to the first quarter was 5, 2%. Moreover in non-trade spheres in the first half of 2008 there was growth 9, 5%, it was caused by high consuming demand especially in construction and retail trade. However growth becomes slower even in a strong developing construction sphere, for example, in the second quarter of 2008 shortened from 28, 3% in the latest quarter to 18, 7 %.
If appeared the signs of growth that there will be further lowering in construction sphere, it is connected with long toughening of crediting. The latest data regarding growth of production in the main spheres shows that the third quarter of last year there was a sharp shortening of growing temps, it made only 9,5% (for similar period of 2007 there was 15,7%)[21].
The manufacturing is an engine of industrial growth in Russia. It showed good results till the end of 2008, however in the fourth quarter there will be a lowering of temps.
According to the latest information regarding production indicators, growth temps of manufacturing are about 8,2% (to September of 2007 year), it could be explained by growth of hydroturbines (97,3%), tractors (74%), automobiles (28,4%) and pipes (26,1%).
During the first three quarters of 2008 production volumes in manufacturing raised to 7,7% (for the same period of 2007 to 7,8%). High growing temps in manufacturing are caused partially by previous orders (mostly from governmental organizations).
However, according to toughening of crediting conditions in the fourth quarter, the manufacturing probably will face the falling of demand that will have negative result in growing production temps.
Looking into the future we could suppose that worsening of financial conditions in the world and sharp falling prices for oil in the third and fourth quarters of 2008 will lead to further lowering of economical growth in Russia. Financial shocks caused growth of borrowing costs and have negative impact on liquidity and crediting. As a result, total demand was limited, it influenced also negatively on consuming and investments level.
It is expected that in the fourth quarter all these processes will be accelerated especially in spheres more sensitive to financial changes like construction and retail trade.
Shortening of internal demand is one of the main factors of short-term growth in Russia.
Lowering of investments temps in the first half of 2008 was a beginning of gradual growth lowering of consuming growth. After boom in the first quarter of. 2008, when volumes of investments being (together with consuming) the main growth factor in a short=term perspective, it raised to 19,1%, in the second quarter there was a reduction to 13% and in the third - to 9,9%.
The same investments lowering was related to governmental corporations and mining industry where, according to information of research of the 2008, investments growth sharply felled to 6,2% (in comparison to the first half of the year 2007), in the same time in 2007 it was 19,1%.