Economic instability and unemployment
Economic situation. As you know, the economy of any country develops cyclically; growth does not occur evenly, but is interrupted by periods of economic instability (rising unemployment, inflation, falling GNP, etc.). Experts identify four phases of the economic cycle peak - the economy is at full employment, and production is operating at full capacity, the price level tends to increase, and the growth of business activity stops, then a recession follows - production and employment are reduced, but prices do not succumb to the downward trend the point of decline is characterized by the fact that production and employment, having reached the lowest level, begin to climb out again from the bottom, finally, in the recovery phase, the level of production rises, and employment increases. Despite the phases common to all, individual economic
The neoclassical system was a logically connected and detailed theoretical concept, but economic instability (crises, unemployment) did not fit well into it. She was unable to explain the reasons and
In each specific case, these problems will be solved in their own way. For example, in the Republic of Belarus, the labor market is characterized by the presence of a large number of inefficient jobs and their slow renewal, insufficient investment in the creation of new jobs, which further aggravates the imbalance in the supply and demand of labor in the labor market. These problems can only be resolved by harmonizing the needs of the labor market in the labor force with the structure of jobs in the economy and the system of professional training. And this requires certain steps on the part of the state to intensify innovation and investment activities, create favorable conditions for the development of small businesses and entrepreneurship, update and improve the structure of jobs, create new jobs by improving the development of the service sector. The sustainable development of small business contributes to the creation of new jobs, and also reduces the dependence of employment on large economically unstable and unpromising enterprises, and reduces the risk of unemployment. The share of people employed in the manufacturing sector is declining from year to year, while in the service sector it is increasing. For
The relevance of the problems of employment and unemployment is explained by the fact that, firstly, ensuring full employment is one of the most important goals of the national economy, and secondly, unemployment is a form of manifestation of the instability of economic development. Unemployment has negative economic and social consequences. The study of the problems of employment and unemployment contributes to the identification of the causes of unemployment, the development of an effective employment policy. 84
From the previous chapter we learned about aggregate demand and aggregate supply, and in it we also got acquainted with models of macroeconomic equilibrium. But macroeconomic equilibrium in practice is rather a surprising contingency, the exception that proves the rule that the market economy is unstable. Economic history The last two centuries provide us with a great many examples of this instability. Periods of successful industrial development and general economic prosperity have always been followed by periods of recession, accompanied by a fall in output and unemployment.
For the high performance of the market mechanism, in addition to clearly delineating the boundaries of state intervention in its functioning, it is necessary to solve many other problems. First of all, it is necessary to neutralize the effect of such factors destabilizing the economy as inflation, monopoly and involuntary unemployment. Their emergence is directly related to the functioning of the market, which itself, without the help of the state, is not able to fight them. The activity of the state to strengthen the market mechanism is not limited only to the fight against these factors of economic instability. It should also include state incentives for free enterprise, denationalization of property and privatization, the formation of an optimal tax policy, and much more that is under the jurisdiction of the state and without which the competitive market system cannot work normally.
In the fourth basic section, devoted to determining the volume of output (chaps. 12-18), we return to the problem of economic fluctuations and the role of the state in economic stabilization. We will give a description of Keynesian output theory, with particular emphasis on the case of an open economy. Here we will talk about a possible compromise between unemployment and inflation, as well as about the role in the formation of the macroeconomic situation and various shocks - in the emergence of instability in the economy.
In Russia, during the period of the course of reforms, the unemployment rate (including part-time workers and those on leave at the initiative of the administration) reached more than 20% of the active population. The critical, threshold value of the unemployment rate in international practice (with a normal system of social protection of the unemployed) is 10%. During the period of reforms, as the experience of a number of countries shows, its growth to 15-20% is possible, but for a period not exceeding 3-5 years. In the current situation in Russia, the growth of unemployment, which is a factor in deepening poverty and social instability in society, is turning into one of the most significant threats to economic security and social stability. On the one hand, the narrowing of families with rising unemployment, causing the degradation of consumption, cannot but become a factor in the impoverishment of the population, and, consequently, a slowdown in economic growth. On the other hand, an increase in the unemployment rate leads to an increase in crime and the number of suicides.
In a sense, the requirement for the government to balance the budget over a period equal to a calendar year is arbitrary. However, the alternation of the seasons and well-established accounting practice give strong reasons for such a requirement, and business practice, in which income and expenses are regularly balanced with known deviations, further supports it. If large economic fluctuations can be prevented by other measures, then such balancing is best done during the traditional budgeting year. Assuming that the regulation of the money supply by competition between private currencies should indeed ensure not only the stability of the value of money, but also the stability of the economic environment, the argument that government deficits are necessary to reduce unemployment is reduced to the assertion that government control of money is needed to cure the disease, which he called. It is not clear why in general, in conditions of stable money, the government should have the right to spend more money than it has. And, of course, it is far more important that government spending does not cause general instability than it is to engage an unwieldy government apparatus (assuming it is unlikely to work in time) to counteract any weakening in economic activity.
The thesis about the supposedly voluntary nature of unemployment is also put forward. However, if unemployment is of such a nature, then why does it fluctuate depending on the phase of the economic cycle of the workplace, employees are very picky and strive for the most profitable work. However, even in this case it is not clear why such workers are sometimes 4-5%, sometimes all 15%. main question, to which the supporters of the neoclassical approach cannot answer - why do not all employees, if their supply exceeds demand, offer their labor at a lower price
The growing gap between the demand for food and the possibilities of its sustainable production in the world, accompanied by price instability and competition in the world market, can significantly destabilize the world economy as a whole. The situation may be exacerbated by the interconnectedness of economic, environmental, social and political problems, which leads to an increase in unemployment, a reduction in incomes of the population, malnutrition, an increase in morbidity and a decrease in the quality of life of the population. For example, the annual catch of fish in the world is about 83 million tons. However, according to the Food and Agriculture Organization of the United Nations, about 70% of the world's fish stocks are depleted as a result of their intensive exploitation, the recovery process is extremely slow.
The thesis about the supposedly voluntary nature of unemployment is also put forward. However, if unemployment is voluntary, then why does it fluctuate depending on the phase of the economic cycle? The thesis is also put forward about finding a job as a phenomenon that causes market instability. Its essence lies in the fact that employees are very picky and strive for the most profitable work. However, even in this case it is not clear why such workers are sometimes 4-5%, sometimes all 15%. But the main question that cannot be answered
For economic risk protection, as well as security, it is not the indicators themselves that are important, but their threshold values. Threshold values are limiting values, non-compliance with which prevents the normal course of development of various elements of reproduction, leads to the formation of negative destructive tendencies. As an example (in relation to internal threats), we can name the unemployment rate, the gap in income between the most and least wealthy groups of the population, inflation rates. Approaching their maximum permissible value indicates an increase in the threat socio-economic the stability of society, and exceeding the limit, or threshold values - about the entry of society into a zone of instability and social conflicts, that is, about a real undermining of economic development. From the point of view of external threats, indicators can be the maximum permissible level of public debt, maintaining or losing a position in the world market, dependence of the national economy and its most important sectors (including the defense industry) on imports of foreign equipment, components, products or raw materials.
The indicator is the number of recorded crimes per 100,000 inhabitants. Why this indicator is important A low standard of living and unemployment entail a low level of culture, a decline in morals and morals. As the standard of living falls, the crime rate rises proportionally. The lack of funding for the maintenance of law enforcement agencies entails a reduction in the number of patrol officers, which in turn increases the risk of every city resident becoming a victim of a crime. The increase in crime is the result of many unresolved economic, political and social problems of society. The indicator of the number of crimes shows the level of social tension and instability in the territory. It is used to assess the state and trends in the dynamics of crime in the region and, accordingly, activities to combat crime and reduce crime in society. This indicator shows the number of all reported crimes per 100,000 population. The negative dynamics of the indicator characterizes the sustainable development of the region.
Let's start by looking at three well-known facts about the growth of Latin American countries over the past 20 years. The first fact is that the economies of many of these countries were extremely dynamic, showing a high rate of industrial growth, but that this high rate of growth was highly unstable, systematically exacerbating inequality in income distribution. The best example is given by Brazil, where the average annual growth rate of GNP in the period 1965-1980. amounted to 8.5%, but in 1980-1982. dropped to minus 0.3%. The share of income of the richest 20% of the country's population increased from 54% in 1960 to 62% in 1970 and 63% in 1980. The second fact is that, despite significant vertical mobility, the level real wages unskilled workers for a long time did not manage to rise significantly, and industrial growth, even during economic booms, could not accept the excess
1The article says that an analysis of instability in the financial market was carried out, the causes and forms of instability in the market were identified. The article also contains a study of the efficient market theory. The problems of its use in modern conditions are revealed. The reasons for the instability of financial instruments are considered. The hypothesis of rational behavior of traders in the market, which has a direct impact on the emergence of an unstable situation in the market, has been studied. As a result, it was concluded that the chaotic change in prices in the market appears to be the result of a "random walk" of cost characteristics. The paper reveals that random walk is a special stochastic process that can show both completely unpredictable results and be completely predictable. This feature of the financial series presented on the financial market is only indirectly indicated in modern scientific literature. The article determines that this is a special phenomenon. This phenomenon is partly described only by the Gauss theory.
financial market
instability in the financial market
financial instruments
efficient market theory
risk of financial instruments
1. Mantegna R.N. Introduction to econophysics: correlation and complexity in finance / N.R. Mantegna, S.G. Eugene: per. from English. V.Ya. Gabeskiria. - M.: LIBROKOM, 2009. - 192 p.
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The reasons for the emergence of economic instability are seen in the very structure of the formation and functioning of the financial market. As V. N. Yakimkin notes, financial markets, in fact, are “a huge clearing house, where mutual offset mechanisms operate through appropriate price ratios in order to meet the needs of the subjects acting on them” . Therefore, we can assume that all markets included in the financial market as some sub-sectors are systems in which the mass of participants interact with each other and react to external information in order to determine the best market condition for entering or exiting from economic system. In particular, instruments in the financial market may be of a different nature: they may be securities, differing in types (shares, bonds), currency, monetary assets or financial derivatives of these basic instruments. Having considered the pricing procedure in the financial market, we can make an assumption about its unpredictability. This necessitates a more detailed study of the structural features of the functioning of the financial market.
Suppose that the financial market is represented by a variety of financial instruments with which market participants constantly conduct all kinds of transactions. We can represent this set as a time series. Further study of such a time series will lead us to another number series, which consists of a set of numbers representing changes in the prices of financial assets over a certain period. The study of this series allows us to conclude that the prices of financial assets behave more unpredictably. As noted by R.N. Mantegna and G.Yu. Stanley, “At first glance, an amazing paradox is revealed: the dynamic characteristics of a time series, for example, reflecting the price of a financial instrument, are essentially indistinguishable from the characteristics of a stochastic process” . One of the main reasons for this behavior of prices is that the pricing mechanism in the financial market implies a significant influence of the risk component. Almost all financial assets in any markets subject to the laws of the financial market are subject to the laws of the functioning of the arbitrage model. This model involves the purchase and sale of the same financial asset in order to profit from the difference in different financial markets. Such transactions can take place both in one market and in different ones, and these markets can be located in different countries, which indicates internationalization and globalization processes in the financial market. Such behavior of market participants leads its participants to the temporary establishment of an effective price.
Thus, the financial market at a certain time was considered a super-efficient market system. However, it should immediately be noted that the efficiency of the market in modern conditions and with existing financial markets is a fantasy area. Despite the fact that markets are very complex systems that accumulate information about a given asset in the form of time series of prices, the most widely accepted concept among economists is that markets are highly efficient in determining the most rational prices for tradable assets. This hypothesis (the efficient market hypothesis) was introduced in the mid-1960s. Theoretical basis for the theory of the efficient market was the work of L. Bachelier. Later this topic was studied by P. Samuelson. In 1965, he formulated the efficient market hypothesis applicable to market conditions and proved mathematically that expected prices change randomly. Using the hypothesis of rational behavior of traders and taking into account market efficiency, Samuelson was able to demonstrate that Yt + 1 is directly related to the price sizes Y0, Y1, Yt, and the relationship of these quantities can be described by the following stochastic process:
where E is the yield.
However, despite the fact that equation (1) assumes following the probabilistic condition, the prices in the financial market are also influenced by the intuitive probabilistic fair game model. This leads to unstable changes in the prices of financial assets. So, in the understanding of the player (investor), the game seems to be fair when the gains and losses are mutually compensated and balance each other. For example, an investor's expected savings are equal to his current assets. Hence, the conclusion from this formula seems to be such that any price changes cannot be predicted from a similar historical series of price changes over past periods. In the middle of the 20th century, a sufficient number of studies were conducted on the process of price changes in the financial market, which showed that the price correlation in this perspective is very small.
In the 1980s it has been proven that using the information presented in the time series can predict profits in the short term. Even a time series study of profit/price or dividends cannot give accurate data on the return of an asset.
Thus, empirical observations and research results, theoretical developments show with certainty that price changes in the financial market are difficult to predict, based only on the data of the time series of price changes. In other words, the theory of efficient markets did not bring the expected result.
Any financial time series looks unpredictable and, in fact, its future values are impossible to predict. This does not mean that the financial series does not react to anything, that its prices can never change. Quite the contrary - the time series of prices in the financial market and, as a result, the prices of financial assets carry a very large amount of so-called "incompressible" information. In this regard, the existing time series has some features:
Due to the huge amount of information in this series, it is very difficult, almost impossible, to single out the influence of fundamental economic factors on the price (for example, we can assume that the price of a financial instrument to a greater extent depends only on internal market factors, external factors are of little importance);
The complexity of predicting the price of an asset is not due to a lack of information, but rather, on the contrary, to its excess;
The whole structure of the financial market does not imply at least some linkage to the real sector of the economy or correlation with it, which may be the reason for the creation of price bubbles in the market.
The only exception to this series may be the hoarding market, which consists of assets that increase in value due to market conditions that are created in the respective markets (gold, diamonds, emeralds), i.e. markets for precious metals and precious stones. Although recently the dynamics of growth in the cost of gold indicates a very large share of "hot" capital in this market.
Returning to the peculiarities of the pricing of financial assets, we can state that asset prices are formed taking into account the laws of random walk, as well as on the basis of stochastic Levy processes.
For example, the financial market strives for its efficiency, while it strives to take the position of an efficient market. An efficient market is an idealized system. Real financial markets are only approximately efficient. We can only assume "ideal" conditions, i.e. the existence of a perfectly efficient market, and within this paradigm only develop theories and conduct their empirical testing. The reliability of the data obtained will directly depend on the validity of the assumptions made.
For example, the concept of an efficient market as applied to financial markets would be of value in modeling financial markets. Having accepted these conditions as basic, we can proceed to the study of random processes observed in financial markets.
For example, financial instruments are characterized by the emergence of various risks associated with exchange operations. A number of researchers regard this as a kind of risky situation.
First of all, we should consider the mathematical features of the economic tools of the financial market. Consider the sum of n independent variables of identically distributed random variables Xi:
Sn ≡ x1 + x2 + ... + xn. (2)
In this case, Sn ≡ x(n∆t) should be considered as the sum of n random variables or as the position of wandering particles at time t = n∆t , where n is the number of single steps taken; ∆t - time interval between adjacent steps. Thus, similarly distributed random variables xi can be characterized by certain moments . Such quantities will not depend in any way on i.
The simplest example of a random walk can be a distribution carried out using random steps of size s. In this case, xi can randomly take on the values +s or -s.
In particular, both the first and second cases for such a process can be described as follows:
E(xi) = 0 and (3)
Carrying out further research, we will come to the conclusion that for such a random walk, the value of return E can be calculated as follows:
From equality (4) it follows that if we apply the formulas for the passage to the limit, then the yield can be written in the above form.
Thus, instability in the financial market arises as a result of a self-increasing process. A similar feature of the behavior of prices in the financial market is typical for any segment of the financial market. In particular, we observe a situation of random walk of prices for financial assets in the market. Depending on the procedure for determining the price of a financial asset (in particular, this applies to the risk model that affects pricing), prices in the financial market are subject to chaotic movement, which is far from being dependent on market factors.
In modern theory, there are well-known methods for determining risk:
3) VaRe = VaRα(X - E(X));
4) CVaRe = CVaRα(X - E(X)) .
These methods are used to calculate both the risk of individual financial assets and the risk of investing in portfolios made up of assets traded on the financial market. We again return to the features of financial assets, which consist in the asymmetric behavior of assets in the market, and to the definition of a wandering value of profitability in the financial market. From equality (4) we can obtain the passage to the limit formula:
Now we can conclude that for a random walk, the variance of any process is represented as a kind of linear process that increases with the number of steps. Thus, the behavior of prices can be considered as a certain passage to the limit of a random walk.
The limit transition of a random walk in the financial market can be written as a kind of stochastic inertial process, which, under the condition n - ∞ and Δt nΔt, will tend to a finite value. In this case, we can do the following transformation:
(7)
In this case we have convergence as n - ∞ and ∆t - 0 as s2 = D∆t , and in this case the formula will be represented as follows:
E(x2(t)) = Dt. (eight)
Such a linear dependence of the dispersion s2(t) on t seems to be one of the typical characteristics of price behavior in the financial market. Almost all known market systems, where prices are subject to random walk. The financial market is no exception. This dependence is one of the types of diffusion process characterized by the possibility of price changes in financial markets. We can classify this stochastic process with full confidence in the category of Wiener processes.
For example, this random walk of prices in the market can be described as a Gaussian process, i.e. the following statement is applicable in the financial market: a random walk is equivalent to a Gaussian process, i.e. chaotic wandering of particles. We can represent such price wandering as a certain trend process.
In different markets included in the financial market, we see uneven changes, i.e. the actual wandering of the prices of financial assets, all these changes appear to be one of the constituent parts of the Gaussian process.
In conclusion, it should be noted that the peculiarity of the formation of prices in the financial market is that the assets circulating in this market change prices in a stochastic order, which seems to be characteristic of the functioning of the Gaussian process. This feature is typical for the pricing procedure in any financial market and is the main reason for the instability of prices for financial assets.
Reviewers:
Ivanitsky V.P., Doctor of Economics, Professor at the Department of Financial Markets and Banking, Ural State Economic University, Yekaterinburg;
Maramygin M.S., Doctor of Economics, Professor, Head of the Department of Financial Markets and Banking, Ural State University of Economics, Yekaterinburg.
The work was received by the editors on January 16, 2013.
Bibliographic link
Strelnikov E.V. REASONS FOR ECONOMIC INSTABILITY IN THE FINANCIAL MARKET // Fundamental Research. - 2013. - No. 6-1. - P. 141-144;URL: http://fundamental-research.ru/ru/article/view?id=31431 (date of access: 03/18/2020). We bring to your attention the journals published by the publishing house "Academy of Natural History"
On February 15, the HSE hosted a master class “What the global economic crisis means for Russia”, which was held by the head of the Permanent Mission of the International Monetary Fund in Russia, Mr. Odd Per Brekk.
The chief representative of the IMF in the Russian Federation devoted his master class to the peculiarities of the pre-crisis development of the Russian economy and how they influenced the current situation in the country. He began his speech by identifying the main problem of the Russian economy, which turned out to be not a raw material orientation, as the students previously interviewed in the audience assumed, but instability. Moreover, according to Brekk, the Russian economy entered a period of instability long before the 2008 crisis itself.
Thus, dependence on raw materials, a primitive structure of exports, and high inflation are just prerequisites that allow us to talk about the most important problem - instability. Even during the rapid economic growth of the last decade, which averaged 5% per year, the volatility of this growth was quite high. It is clear that it largely repeated the behavior of oil prices and international conjuncture. The bad thing is that it introduced an element of instability into the entire system, and this affected investments.
Over the past 10 years, the average annual investment in Russia has been about 20% of GDP, which is almost two times less than in China, and one and a half times less than in India - also the BRIC countries. With high volatility in oil prices and double-digit inflation, investors do not want to take risks and invest a lot of money in the country, said Odd Per Brekk.
Even in the so-called fat years, the economic policy states. In particular, if we turn to fiscal policy and look at the dynamics of increasing government spending and increasing the budget, we can conclude that fiscal policy was and still is pro-cyclical. Wherein economic theory teaches that fiscal policy is one of the main tools for smoothing fluctuations, the IMF representative noted.
From 2002 to 2007, when oil prices were very high and the Russian economy needed no stimulus, government spending also rose, fueling the economy further. During the crisis, when the Russian GDP began to fall, the authorities, fearing a budget deficit, seriously cut spending, depriving the economy of assistance. This is a typical example of an ineffective pro-cyclical policy, says Brekk.
Another trouble for Russia is weak institutions and corruption, and coupled with instability, this seriously worsens its competitive position in the world market. The main recommendations for the country in the near future are the transition to a countercyclical fiscal and monetary policy, fighting inflation, strengthening independence Central Bank as an institution, the fight against corruption. All this will help create a more favorable investment climate in the country.
In this regard, accession to the WTO can be considered as a serious measure to improve the institutional environment. For Russia, more open access to markets or lowering some tariffs is not so important. Much more important for the country is the import of high-quality international institutions, the IMF representative is sure.
Anna Stasova, especially for the news service of the HSE portal
Photo by Vasily Begal
Our country has relatively recently moved into a market economy, and many still think that the series of economic crises that accompanied this was caused solely by the mistakes of state administration, the intrigues of foreign enemies, the costs of the transition period, etc. All this may be the case, but the truth is that the market economy is unstable in itself even in the absence of all these factors. As, by the way, and a planned economy, or any combination of them. With this text, I'm going to open a series of posts to discuss the domestic economic factors that determine this instability. In it, I will also share with you a decision that has recently dawned on me about what is needed in order to ensure economic stability.
The economy is largely determined by what forms of ownership it is based on. In modern Russian economy the main forms of ownership are private and state. Let's take a closer look at them.
Private property belongs to one person who makes all decisions regarding it - about buying and selling, exchanging, donating, using and even destroying it. An economy built ONLY on private property can NEVER be sustainable and predictable. The behavior of many people, each of whom makes his own decisions, is a priori unpredictable. Yes, such an economy will change faster than all other possible ones, but this cannot be identified with development, since not every change is development. A pure market economy is more of a Brownian motion economy than a development economy. Some of its supporters pass off precisely this property as stability, because this is how it can look on generalized graphs, but this is incorrect. Does it make any difference to a person who has lost his house, whether he lost his house because his personal business collapsed, or because the entire economy of the country collapsed? There may be different nuances in both cases, but in general it is the same situation: a lost house. In a pure market economy, some people constantly win and some lose, and the probability that an individual taken at random (or each!) will one day suffer major economic losses for him tends to one (i.e., almost certainly). In fact, it can be seen as a continuous crisis, stretching over time.
Since the mass of people prefer development rather than marking time, there is no pure market economy anywhere, and private property is in many cases regulated and protected by the state. At the same time, the powers to make decisions regarding the object of ownership are partially transferred to the state. If all such powers are transferred to the state, then the property becomes state. Decisions regarding such ownership are made collegially - by universal suffrage, or at least by the vote of plenipotentiaries, for whom everyone voted. In this case, decisions are made in such a way as to improve the "average temperature in the hospital", i.e. there is development at first, but simultaneously and equally for all, which means that everyone moves forward at the speed of the slowest, while those who develop the economy faster than others may be subject to either artificial slowdown or collective exploitation, i.e. all “excess” growth is redistributed to those who are lagging behind. This reduces their motivation for efficiency and incentives to work. Such development tends to slow down to stagnation, after which, over time, a crisis still sets in - even more concentrated in time and space, more massive and obvious than the market one. Actually, those crises that are usually spoken about are of this nature, i.e. in one way or another are the result of state intervention, but most often this intervention was carried out to deal with small local crises arising from private management, so that the state is simply extremely to blame. It is important to note that stagnation is not stability, but a situation where some monitored statistical parameters are kept at an acceptable level at the cost of a decline in others, equally important and significant, but not officially monitored statistically. Those. beautiful picture in a bad state of affairs. The decisions made by the unqualified majority are almost as unpredictable as the decisions of individuals, and are highly dependent on the quality of the statistical information supplied, on the honesty of the media.
The main benefit of this form of ownership is the alignment of property differences in order to achieve social stability, even at the cost of reducing economic efficiency and increasing the risk of economic instability. The decrease in economic efficiency occurs, firstly, because maximizing this efficiency is not the main goal, since decisions are strongly influenced by social factors, and secondly, because decisions are very large-scale, and fine adjustment is impossible. Leveling inevitably means that someone will get more support than he really needs (but he, of course, does not admit, because the private trader seeks to maximize individual utility, for him there is no concept of “too much”), and someone will receive too much. few. Whether to issue maternal capital wealthy families? Yes, all the same! Should pensions be paid to working and wealthy pensioners? Yes, all the same! "Manual control" can allow solving some of the most pressing issues, but always at the cost of social stability, because. collegiality and equality are sacrificed.
In practice, these forms of ownership are often mixed or legally modified. For example, public funds can be distributed collectively only at the stage of formation of the annual budget, and then decisions are made individually, for example, by ministers. This duality is state property, and decisions on it are made individually, as if it were private - and creates opportunities for corruption. The seemingly absurd term has already become widespread "private-public" property as applied to public corporations. They are state-owned in terms of acquisition and de jure, but in terms of management and de facto they are private. In fact, almost all state real estate is just such a “private-public” one, which allows one-man decisions to carry out its privatization and turn it into a completely private one. The problem is that the reason is not only in legal laws, as Navalny seems to see it, but also economic. This becomes possible because, in fact, the state form of ownership is really not very suitable for managing such objects in the current conditions. To be a de facto state, it must be governed by universal decisions, and this is the slowest and most unskilled way to make decisions. In this way, you can make rules, for example: in each city there should be so many lanterns per square meter. km., giving such and such a degree of illumination at such and such a time of day. We decided once, and then we only look at the execution statistics. This method is applicable to the management of the planned mass production of the same type of standardized goods of guaranteed demand: "... so many tons of iron and steel per capita per year ...", the quality is prescribed in such and such GOST. But if the population needs more varieties of goods of a certain category, then public administration will not be effective for such an industry, because either drown in a huge number of GOSTs, or will not produce a sufficient range of goods. Also, this method is weak when trading in market conditions. The private trader can change prices flexibly, while the state sets them centrally once a year or at some other period, which means that it will almost always lose. Actually, it is precisely this circumstance that is most likely the underlying economic reason for the transformation of state property into “private-state”. State administration can ensure the production of oil and gas in accordance with GOSTs, but individual decisions are needed to set prices for them in market conditions. And if the property is managed by individual decisions, then this is de facto not state property.
To solve this dilemma, a mechanism has been developed in which the state receives fixed payments, and the corporation - everything else, if any, i.e. The private owner takes the risk. There is a mechanism of state contracts that can work on the principle of an auction: who will offer the best price. Perhaps corruption could be combated by making the corporation entirely public, governed only by open collegiate decisions, and selling products at a fixed price set for the year, while private intermediaries would resell at their peril and risk at market prices, thus avoiding undue exposure on the state corporation of sole decisions. But at the same time, of course, the state would have to come to terms with the fact that such private traders would work at a profit, i.e. would resell its products for more than they bought. Now this looks like a crime for the state, although in fact it is probably the only sustainable solution to the problem.
The state will never be able to trade in a market economy as efficiently as a private trader, if only because of the slower decision-making speed. The reservation about the market economy is made here to eliminate cases like wars, when a private trader cannot trade because it is life-threatening, and the state has an army and can trade, i.e. there is a powerful factor of influence of non-economic nature. State administration is the lowest profit of all economically possible, otherwise all the others simply would not be needed and would not arise. It is impossible to come up with some kind of magic rules so that everyone can act in the same way and at the same time get rich faster and evenly faster than if they united in groups of professionals using the effects of team synergy, or if everyone would work for themselves to the maximum of their efforts in that area. where they have the best ability. Different forms of ownership are better suited for different types of tasks. Where local profit maximization is needed, private property is better suited. State ownership works better where there is a need for redistribution among the many, for property equalization, rather than an exchange between two parties to maximize mutual benefit. There is an opinion that public economic management can be more efficient due to scale, which is not true for all industries, due to what was said above about inefficiency due to leveling and small assortment.
This is not the only mechanism for turning state property into de facto private property. Electoral fraud, political blocs, bribes, lobbying, etc. are also forms of private influence on government decisions for personal selfish purposes. In recent years, the public has begun to pay more attention to this and control compliance with laws, which is very useful for the country. As far as one can judge, these phenomena are mainly not of an economic nature, but of a political one, therefore we do not consider them here, although, of course, it is important to keep them in mind as well.
Rubino, John - Founder of DollarCollapse.com, co-author with James Turk of The Collapse of the Dollar, Doubleday, and author of Clean Money: Picking Winners in the Green-Tech Boom, Wiley). He writes for CFA Magazine and edits DollarCollapse.com and GreenStockInvesting.com.
It is now clear that the actions taken by governments to counter the Great Recession may have delayed a systemic collapse, but have not resurrected the old normality. Growth around the world is very sluggish - that is, debt continues to grow faster than the productive capacity to service it, and inflation (another way to reduce debt) remains below target.
Now “sluggish” growth is turning into “absent”. In the US, mini-loan bubbles like auto loans, mortgages and student loans are bursting, forcing economists to rethink their optimistic scenarios for 2016. The Federal Bank of Atlanta, for example, predicted strong GDP growth of 3.8% in August, and now it is less than 2%, and the forecast continues to decline.
Forecast GDP growth USA (in green)
No wonder panic sets in. It is assumed that after the decision to leave the EU in the UK, a unique situation has developed:
(Telegraph) - Official data on Friday showed that housing, public facilities and infrastructure construction declined in August, pointing to a rapid downturn in the UK construction industry and even a possible recession.
Construction volumes fell 1.5% MoM, which is unexpected after rising 0.6% in July, according to the UK Statistics Office. Separate indicators from the Bank of England show a significant drop in demand from banks in the months following the vote to leave the EU, as fewer Britons were ready to make serious financial decisions. Demand for mortgages has fallen sharply - the balance of 44% of banks reflects the decline in customer interest, and this is the most negative result in almost two years.
Governor of the Bank of England Mark Carney told an audience in Nottingham that current low-inflation conditions "will be changing", the value of the pound will fall to push prices up in the economy. He said food prices would be affected first, saying the situation would "become difficult" for those with the lowest incomes as the UK moves from no inflation to some inflation.
Inflation, which stood at 0.6% in the year to September, is forecast to rise to 3% by the end of the year. This is a whole percentage point higher than the 2% target set by the Bank of England.
Here in the US - where our problems best reflect those of the developed world as a whole - the Fed has stopped even mentioning its price stability function:
(Reuters) - The Fed may need a "high-pressure economy" to reverse the negative effects of the 2008-2009 crisis - lower output and reduced employment. There is a risk they will remain like a scar, the Federal Reserve Chair said Friday Janet Yellen ( JanetYellen) , considering those sectors of the economy where recovery may not be sufficient.
without mentioning interest rates and pressing policy issues, Yellen said there is growing concern within the Federal Reserve about the declining economic potential of the US, and that strong action may be required to restore it.
In her lunchtime address to a meeting of decision makers and scientists in Boston, Yellen said the question is whether this damage can be repaired by "temporarily introducing a high-pressure 'economy' with high aggregate demand and a tough labor market.
“Of course, you can identify possible ways to do this,” she said. Finding policies that can lower unemployment and stimulate consumption, even at the risk of high inflation, can encourage businesses to invest, boost confidence, and bring new workers into the economy.
Chapterdouble lineCapitalGeoffrey Gundlach ( Jeffrey Gundlach ) said he took it this way: "You don't have to tighten policy just because inflation is over 2%...Inflation could go up to 3% if the Fed thinks it's temporary."
“Strong economic conditions may partially offset the likely damage on the supply side, then during periods of recovery, decision makers may want more easing than the traditional notion of a lack of strong supply-demand dependence suggests,” Yellen said. This makes it all the more important that decision makers quickly and vigorously respond to the economic downturn in order to reduce its duration and depth.”
Buzzwords and distractions aside, it's understandable that a bunch of economists whose models have stopped working because they don't see an alternative (because they've been working on these models all their lives) are going to turn the knob "off scale" and see what happens.
Individual countries have tried "temporarily elevated rates of inflation" in the past, and the result has always and everywhere been like a hijacked train that either derails or crashes into some immovable object, with very bad consequences. In other words, the higher consumption and investment initially generated by rising inflation were more than offset by more volatility than such a policy could guarantee.
But never before has a money panic swept the whole world at once, and this means that little of what is to come can be said with certainty. At the very least, it is likely that the combination of huge spending with a budget deficit, as well as essentially unlimited money creation, will indeed provide some kind of "growth". But it is also likely that once started, this process will quickly get out of hand - after all, everyone understands that if governments actively generate inflation (thereby actively depreciating their money), it makes sense to borrow as much as possible and spend this money on any real thing. at any price. Whether the result is called "boom and bust" or whether economists come up with some other term to shift the blame, the chaos will be gigantic.
And it looks like it will start soon.
