Can economic crisis be considered non merely as the harmful and destructive event but besides as the favourable base for the hereafter development of the whole economic system?

What is the mechanism of economic crisis and what is the function of investing fluctuations in the recovery procedure?

Can globalization as an external factor affect the stableness of national economic system and do fiscal crisis in peculiar?

The construct of “ crisis ” came into economic sciences merely at the beginning of 19th century. Originally it came from the same Greek word which literally means the sentence, the determination about any inquiry or being at any questionable state of affairs. Since the clip of Hippocrates this construct has been widely used in medicine whence it spread to other countries of societal activity including economic, political and military life.

It was the same 19th century that formed the most common definition of economic crisis, claiming that it is a important brake of equilibrium in the economic system that is frequently accompanied by breach or loss of normal connexions in production and market dealingss, which finally leads to misbalance of working economic system as a whole.

The outgrowth of the first economic crisis in 1825 in England led to the development of economic rhythms which is nil else like the motion of production from the beginning of one economic crisis to the beginning of the following 1. Therefore, crisis is a period of economic recession, which goes into a a period of depression, where the economic system reaches its lowest point but, however, the most stable one, which is, in bend, the starting point for a gradual recovery. This means the growing of economic power and this finally leads to the highest point of economic development in bing conditions: to the rise or the roar point. After the roar point the diminution starts once more and the rhythm repeats. What force the alteration from the roar to the diminution, in fact, are the grounds of economic crisis.

Each economic crisis matures in recovery and rise stages. This is the clip of steady enlargement of production. During this period the income of population additions that result in the growth of consumer ‘s overall demand. Such growing of consumer ‘s demand makes enterprisers spread out production capacity and addition investings. Therefore, this increases the demand for the factors of production. The rise in overall aggregative demand begins to surpass the growing of societal production. The circulation of single capital flows freely and the acuteness of competition is cut downing. For that ground the inducements for new inventions cut down. The re-creation goes on chiefly on the extended footing. Such development continues until the growing of production starts to surpass the growing of effectual demand. When this occurs the overrun of goods happens and this becomes the ground for the economic crisis. The economic crisis shows the overaccumulation of capital that can take three signifiers:

overrun of the trade good capital ( the addition of unfulfilled merchandises ) ;

overaccumulation of the productive capital ( the lessening of full-power burden of the production capacity, the rise of unemployment ) ;

overaccumulation of the fiscal capital ( the addition of money that are non invested in the production ) ;

The overall consequences of overaccumulation of capital are: the addition of production costs, the falling of monetary values and, hence, net incomes.

However, economic crisis causes non merely injury to the society but it besides has favourable economic effects. Regardless of the destructive effects economic crisis is an impulse in the development of economic system. During the crisis the exciting motivations emerge to cut down the costs of production and to increase the net incomes every bit good as to cut down the competition. Economic crisis leads to the moral impairment of agencies of production that are non capable to keep the profitable operating of the capital. It besides creates the motivations to regenerate capital on a new proficient footing. Therefore, the crisis gives start chiefly to the intensive economic development. It stimulates the passage to the higher technological degree of production.

What is more, the crisis is the most of import component of the self-regulation mechanism of the market economic system. By arousing mass moral impairment of productive capital, crisis clears the manner for mass investing on the advanced technological degree.

But the transmutation to the sweep of production and its recovery can non happen instantly. Therefore, the stage of depression alterations the stage of crisis. During the clip of crisis conditions for intensification of the economic system are created. While the depression, these conditions are fixed and a period of intensive development begins covering the whole following stage – recovery. At the terminal of the retrieving stage the stimulation of regenerating are exhausted and in the following stage of the rhythm, the rise, extended development begins once more.

Furthermore, economic crises make part to the development of the whole economic system. As an illustration I can advert the first economic crisis, the Great Depression of 1930s. It had A stimulated the development of ownership. Existing signifiers of ownership could n’t work effectual plenty to get the better of hard economic state of affairs. It is due to the crisis the first join-stock companies, a corporate signifier of capitalistic belongings, were developed. However, the development of belongings failed to maintain the gait with the graduated table and rate of socialisation of production and labour, which led to a new crisis and the start of a new economic rhythm, nowadays joint-stock companies are the most widespread signifiers of ownership.

The continuance and deepness of economic crisis are significantly affected by the fluctuations of investings. Crisis forms the footing for the new mass investings. This happens due to several grounds. First, the crisis depreciates fixed capital and thereby creates conditions for regenerating of the productive setup. Second, the crisis forces to reconstruct the capital to a new proficient base, which causes a lessening of production costs and recommence the net incomes to the before-crisis degree. Moral impairment of the fixed capital caused by crisis, forces all concerns to utilize new equipment in the production. Therefore, the crisis clears the manner for monolithic investings. This helps the economic system to travel into another stage. Therefore, Restoration of capital is a material base for cyclicity of crises and continuance of the economic rhythm.

During the full economic rhythm the kineticss of production is closely connected with the motion of capital and, really, it is based on it. The crisis finishes the period of the turnover of most single capitals and at the same clip gives rise to a new rhythm of turnover thereby making a new stuff base for the following economic rhythm.

To sum up I want to emphasis that any economic crisis is a complex procedure that has both positive and negative sides and it is a symbolic index of societal jobs that normally lie in the contradiction in the nature of bing signifiers of belongings. Regardless of the injury that is raised by the crisis it besides stimulates the economic development of any state. Rushing up the deceasing off of the old economic systems, it is besides a critical constituent that accelerates the proficient and technological reclamation of production every bit good as the restructuring of the economic system.

Economic crisis normally gives rise to other crises like, for illustration, fiscal. Fiscal crisis is a deep upset in the province fiscal system caused by economic and political factors. The economic factors are: the degree of material production in the state, the high cost of production of goods and providing of services, which is caused by the high ingestion of stuffs and energy of the production procedure and high labour costs. This reduces the sum of accretions in the signifier of net income in the whole economic system. This leads to a decrease in fiscal resources of most concerns every bit good as authorities grosss and therefore the buying power of population.

Fiscal crisis can besides be caused by the irrational construction of production, which is largely characterized by high specific gravitation of the military-industrial composite, province dependance on bringings under concerted dealingss of energy, natural stuffs and fuel. Crisis in finance can be caused by transmutation procedures in the economic system, which means the alteration theoretical account of economic development and loss of economic fight.

Political events have important influence on the fiscal system of the state. Such events are: inordinate military disbursements, inefficient and uneconomical disbursement of the province budget and presence of considerable sums of debt both internal and external.

Economic and political factors finally affect the gross domestic merchandise of the state and hence lead to a decrease of fiscal resources that serve the full generative procedure. Such misbalance needs the debut of tough policy to restrict the ingestion and disbursals at national, concern and family degree.

All these factors are internal as they arise from the state ‘s economic conditions. But nowadays modern economic systems are well affected by external influences. This happens due to the economic globalisation.

Tom G. Palmer of the Cato Institute gives such definition of globalisation as “ the decline or riddance of state-enforced limitations on exchanges across boundary lines and the progressively incorporate and complex planetary system of production and exchange that has emerged as a consequence. ”

In the conditions of globalisation universe ‘s national economic systems become dependent on each other as they are connected through trade, capital flows and foreign investings. It means that the outgrowth of crisis in one of the country-centers can take to the moving ridge of crisis state of affairss all over the universe. This, in bend, means that the crisis can obtain the planetary character.

Among the grounds of happening of the planetary fiscal crisis are: more rapid and extremist division of the states on rich and hapless, instability in planetary and national fiscal markets, a important accretion of big fiscal capital, the outgrowth of the crisis in the country-A centres.

To my head, the best illustration of planetary fiscal crises is modern fiscal crisis that had started in 2007 with the liquidness deficit of United States banking system. This event led to the slack in stock markets all over the universe and, in bend, to the global fiscal crisis. The procedure of recovery still takes topographic point and is really hard for some states to get the better of the effects raised by it.

So, the grounds for fiscal crisis can be both internal and external. In modern society the influence of external factors grows quickly. Globalization is one of the external factors that has an impact on the stableness of national economic system of every state. It is because of the globalisation the U. S. fiscal crisis of 2007th affected the economic systems of other counties so much. It means that globalisation together with other internal factors can truly go the ground of fiscal crisis.