Stagnation and recession are different. Stagnation - what is it in simple words and what to expect from it? What does the word "recession" mean? The meaning of the word from the point of view of economists and ordinary people

Recession Translated from Latin, Recessus means retreat. The phase of the economic cycle that occurs during a recovery and is a precursor to a depression and a crisis state of the economy is called a recession. A recession, as a phenomenon, slows down the rate of national economic growth, its manifestations are observed in a moderate decline in production or negative and zero dynamics of GDP growth.

The concept of recession in economics and macroeconomics is interpreted as a moderate decline in production, which is not critical for reducing the rate of economic growth. When production growth falls for six months, the size of GDP stands at zero or falls to a negative value.

Dear reader! Our articles talk about typical ways to resolve legal issues, but each case is unique.

If you want to know how to solve exactly your problem - contact the online consultant form on the right or call by phone.

It's fast and free!

It is almost impossible to predict a recession, but with the right government measures it can be reduced. The development of a recession can become the source of a serious economic crisis.

The business cycle represents regular changes in the level of production, including employment and profits. The duration of one business cycle ranges from 2 to 10 years. The economic cycle is a single process that sequentially passes through periods of economic activity; they differ in direction and level of activity.

There are the following phases of the economic cycle:

Crisis, aka recession

Subsequently, economic equilibrium is disrupted. A crisis occurs after a recession—production growth is accompanied by a decline. A crisis state occurs after a decrease or decrease in the volume of manufactured products; in particularly difficult situations, a reduction in work entails the destruction of productive forces.

In a market economy, a production crisis most often occurs; it negatively affects the sale of goods, a fall in prices and production volume. A decrease in production volume and subsequently the balance of unsold inventories, a reduction in production, a drop in demand for labor, a decrease in profits, a decrease in creditworthiness and a slowdown in the growth of prices for manufactured goods and services are factors of recession.

A production crisis due to the insolvency of an enterprise leads to bankruptcy.

Depression

Follows the crisis. During a depression, surplus products are gradually sold off, product sales resume and production volumes increase. The economy is stagnant and GDP has stopped falling.

The resulting free capital is integrated into banks, which expands the possibilities for providing loans. Gradual economic growth during the depression stage precedes economic recovery. At this phase, organizations face the main task of increasing profits; during the crisis, costs were reduced.

Revival

Is the latest level of economic recession. During the recovery phase, there is a gradual expansion of reproduction and a return to the level of the pre-crisis state.

Rise or expansion is accompanied by active economic development. Expansion implies exceeding production volumes that were before the crisis. The rise is accompanied by an increase in the price level, a decrease in unemployment, an increase in loan capital and the attraction of investment.

The main phase of the economic cycle is crisis (recession). A crisis accompanies the end of one period of development and precedes the emergence of a new cycle, thus cyclicality arises. During a crisis, the entire established reproduction pattern is destroyed and a new, more developed system is created. The mechanism of falling prices during a recession leads to falling stock prices, falling interest rates, declining profits, and bankruptcy.

The crisis eliminates the overaccumulation of capital through the depreciation of funds, which stimulates the renewal of production and improvement of technology.

Causes and types

An economic crisis can arise for many reasons, some of which are the following factors:

1. A recession can occur due to unplanned global changes in market conditions. Events that influence changes in the global economy can be wars, natural disasters and sharp fluctuations in the cost of natural resources (gold, oil, coal, etc.).
2. A sharp drop in sectoral industrial production leads to a recession.
3. A recession may arise from a decrease in the purchasing power of the population. A decrease in income levels leads to a decrease in sales volumes, which results in a decrease in production volumes.
4. A recession can be caused by a decline in the national economy. The majority of public capital consists of investments made by private entrepreneurs. Accordingly, a decrease in the level of investment leads to a state crisis.

Depending on the causes of occurrence, there are three types of recession:

1. Influenced by changes in market conditions- with very sharp changes in global economic conditions, the preconditions of which are wars and a decrease in the pricing policy for natural resources, there is a risk of a recession. Such conditions are very dangerous, since they are not typical and cannot be analyzed or predicted.
2. Political and social aspects, as the cause of a recession, are less dangerous for the economy, since they can be regulated and eliminated. Such reasons include a decrease in consumer confidence, a decrease in investment and a decrease in business activity.
3. Loss of economic balance, during which debt obligations increase and there is a rapid drop in market prices also leads to a crisis.

Consequences

The main consequences of a recession in the economy include:

• decline in production volumes;
• collapse of financial markets;
• decreased creditworthiness;
• increase in unemployment;
• reduction in the level of income of the population;
• fall in GDP;

The most critical consequence of a recession is the economic crisis. A production decline entails job cuts. Lack of money and unemployment leads to a decrease in demand for manufactured products. Unsold goods generate unnecessary costs for maintaining inventory.

When a surplus of products occurs, an enterprise reduces production volumes. Citizens have debt on loans, as a result of which the policy of lending to legal entities and individuals is becoming harsher, and investment in the research and development industry is being reduced. The securities market collapses and stocks become significantly cheaper.

Next comes inflation and a decrease in the purchasing power of the population. The state, trying to deal with the situation, increases its external debt by taking out loans. In general, the national level of reproduction and GDP are declining.

Economic stability is achieved only after many years of work; the main criterion for avoiding a crisis is forecasting and regulating recessions.

Historical example

History knows several examples of recessions that affected entire groups of countries around the world. Thus, in the 1990s, the global financial crisis affected the economies of the countries of the European Union, Latin America, Southeast Asia and Russia. A clear example of a financial and economic recession that has affected almost the entire world economy is the global crisis that began in 2008.

In 2006, the US mortgage system collapsed. Over time, the crisis engulfed the banking and financial system of the state. By the beginning of 2008, the crisis had become global. The impact of the crisis was reflected in a decrease in the scale of production, a decrease in the level of GDP, and an increase in unemployment. Some countries, including Russia, have reduced lending to a minimum. In Russia, the global crisis led to the bankruptcy of many banking organizations, large firms and a decline in the living standards of the population.

The global financial crisis has affected the economies of developed and developing countries. World practice has shown that the most important task of any state is to ensure financial stability and prevent recession.

The life cycle of the economy and business activity of both any enterprise and the state as a whole consists of 4 stages: rise, peak, economic decline (recession) and complete decline (crisis).

A recession is a predetermining stage for the entire economic cycle, because there are two ways out of it: the complete decline of the country with all the negative consequences, and the search for ways to solve problems with entering a new phase of economic growth.

Dear reader! Our articles talk about typical ways to resolve legal issues, but each case is unique.

If you want to know how to solve exactly your problem - contact the online consultant form on the right or call by phone.

Recession concept

The state of the state's economy, which often occurs after a phase of economic growth and has a non-critical decline in production, is called a recession.

During this period, the main economic indicators affecting macroeconomic indicators deteriorate:

• Fall in GDP indicators.
• Decrease in industrial production volumes.
• Decrease in income of the population.
• Decrease in investment attractiveness.
• Decline in consumer activity.

In other words, a recession is an unfavorable period for a country, during which enterprises reduce their turnover, produce fewer products, the population receives lower wages and begins to save. Due to the fact that production volumes are falling, the budget receives less funds, which leads to its deficit.

Causes of recession

The main reasons that lead to recession in the form of a crisis and economic downturn on a global scale are:

• The collapse of oil and gas prices, leading to economic decline in countries in which these natural resources are the main strategic product.
• Active growth in the cost of raw materials, which is provoked by excitement and increased consumer demand.
• Issuance of mortgage loans in unacceptable quantities and with a high percentage of risk.
• Decrease in production volumes in all industrial sectors.
• A decrease in wages and other incomes of the country's population, which entails a decrease in purchasing power.

The consequence of a recession inevitably becomes a crisis or a state of depression, and according to all the laws of economics, it cannot be avoided. But thanks to the work of specialists, analysts, economists and other top minds of the state, this process can be significantly reduced, as a result of which the consequences of the recession will not be so large-scale and negative.

What does a recession lead to?

A recession entails negative consequences not only for the state in which the economy is declining, but also for the entire world community. Quite often, the economy of one state is so interconnected with the economies of other developed countries that a crisis in it can lead to a global crisis and even a collapse on world markets.

In international relations, a recession inevitably leads to a fall in stock market indices. The consequence of this is the depreciation of the state currency, and there is a risk of non-repayment of the existing external debt.

On a national scale, enterprises that are primarily affected are those that are forced to reduce production volumes due to inefficient consumption of products.

Late payments for delivered goods result in arrears in wages and taxes. The result of the activities of companies unprepared for a crisis is recognition of insolvency and bankruptcy.

The private consumer is also feeling the impact of the recession. It is expressed in wage cuts, consumer insolvency, the inability to make loan payments and the emergence of debt traps.

Types

Recession, depending on the reasons that led to the decline in the economy, is of 3 types and has different manifestations:

• An unplanned recession that occurs as a result of such unfavorable factors as the outbreak of war, an unpredictable collapse in world prices for strategic natural resources (gas and oil). The consequence of these processes is the formation of a budget deficit in the country and a drop in gross indicators. This type of recession is recognized by leading economists as the most dangerous for the state’s economy, since it can rarely be predicted in a timely manner and responded with appropriate measures.
• A recession that is political or psychological in nature. The reasons for the decline in production and the economy are the emerging distrust of private consumers, local businessmen and foreign investors. This is expressed in a decrease in consumer activity, a decrease in the volume of financial flows from investors and a fall in stock prices, bonds, vouchers and other securities. A phenomenon of this nature can be easily overcome by regaining consumer trust through methods of psychological and financial influence.
• A recession that occurs against the backdrop of deteriorating macroeconomic indicators and rising external debt. The consequences of this dangerous process may be a fall in stock prices, an outflow of funds and a protracted multi-year period.

Period

A recession is recognized when the period of decline in production and decline in economic indicators exceeds six months and becomes protracted. The length of the period of economic growth decline directly depends on the type of recession.

For example, if we are talking about an economic downturn of a psychological or political nature, then it is not difficult to shorten the negative period - it is enough to regain the trust of business and the population using loyal principles in the field of lending and social programs.

The period of an unplanned recession is quite difficult to predict, since it directly depends on global negative factors, which the state, which has a decline in production, cannot influence. In this case, the country’s analysts can only develop measures to mitigate the resulting consequences as much as possible.

What is a recession in Russia and what does it threaten?

The Russian economy is directly dependent on the performance of the gas and oil markets, and the rapid decline in prices for strategic natural resources entails the following negative consequences for it:

• Reduction of financial flows that are sent to the budget due to the sale of a strategic product.
• Against the backdrop of falling stock indices, the ruble is weakening.
• Personal incomes are declining as a result of the decline in production.
• Consumer activity is declining due to low incomes and rising prices for goods and services.

In addition to these obvious signs of recession, the decline in the Russian economy in 2015 is influenced by such external factors as sanctions from the United States and some European countries.

The severance of relations between Russian businessmen and international companies jeopardizes the existence and development of the country's leading enterprises, and has an extremely negative impact on the GDP indicator.

According to the forecasts of the country's leading experts, the recession in Russia will last until 2017, unless it is possible to make a strategic resuscitation decision at the level of heads of several exporting states: a reduction in oil production, and, as a consequence, a significant jump in the price per barrel.

What is a money recession?

The process of decline in production and decline in economic indicators has a direct impact on the state currency. In Russia, a money recession is the weakening of the ruble against generally accepted international currencies, which occurred due to fluctuations in world oil prices and a decrease in stock prices of Russian companies.

A further decline in prices for the strategic natural resource over the coming months could significantly depreciate the Russian ruble, and will require an urgent review of monetary policy by the Bank of Russia.

However, there are positive aspects to the depreciation of the Russian ruble. Export revenue is received in foreign currency, but is transferred to budget treasury accounts in rubles, which makes it possible to increase the revenue side of the state budget.

Differences between recession and stagnation

If a recession is defined as a moderate decline in the economy and production, then stagnation characterizes the complete stop of important strategic areas of the economy.

The period of stagnation has the following negative consequences for the country:

• Manufacturing and trading enterprises stop operations.
• There is massive unemployment.
• The income and standard of living of individuals is declining.

If during a recession the process of reformatting the country’s economy begins and the implementation of plans for the further development and re-equipment of the main industries of the state, then stagnation does not provide for positive changes and adaptations to new realities.

According to the old unpromising model, the country reaches the last phase of its life cycle and falls into a deep crisis.

If we compare both phenomena, then a recession has less negative consequences, since it provides for a certain progress in economic growth.

Despite the fact that a recession has a negative impact on the activities of macro- and microeconomic entities of the country, it is a barrier, after which the state’s economy gets a growth trend, and the surviving companies will enter an active stage of development.

In the modern world, economic issues come under the close attention of society. After all, the well-being of each individual or legal entity depends on the state of the organization of the national economy. Therefore, even without being economists, many people are interested in what stagnation and recession are.

There are also many other categories worth considering. Each person will be able to understand their differences and navigate the economic reality surrounding them.

What is stagnation?

To understand the difference between recession and stagnation, you should consider each of these economic categories in more detail. Each of them has its own characteristics.

Stagnation is the phase of the economic cycle in which there is a slight increase in GDP (from 0 to 3%). This creates unemployment. The standard of living of the population is declining. There are no significant changes in the structure of economic organization.

At the same time, scientific developments and new technologies are not being introduced, and modern industries are not developing. During stagnation, there is no significant decline or growth.

Types of stagnation

There are several types of stagnation. If it is accompanied by a significant depreciation of the money supply in circulation (inflation), this condition is called stagflation. Often, the lack of GDP growth is not characterized by such processes. Therefore, it is necessary to distinguish between concepts such as recession, stagnation and stagflation.

There are two main types of phase of slight economic growth (stagnation). Stagnation can be transitional or monopolistic. The first type arises as a result of a change in management organization (for example, from an administrative system to a transitional system).

Stagnation of the second type appears due to the high concentration of monopoly unions in sectors of the national economy. The type of stagnation depends on the reasons that caused it. They influence the ways out of such a situation.

Reasons for stagnation

When studying the question of what stagnation and recession are in the economy, one should understand the reasons for their occurrence. This allows you to understand the main differences. Stagnation can be caused by a number of factors.

These include an inappropriate system of political organization and management style, as well as an increase in bureaucracy. At the same time, the nature of production becomes extensive. The lack of innovation leads to significant wear and tear of equipment. Regulatory standards have also not been established.

To get out of such a situation will require significant efforts on the part of the state government. Often, outside help from other countries is needed. An action plan to increase economic growth must take into account all the features of organizing economic activity.

What is a recession?

Delving deeper into the topic of what stagnation and recession are, we should consider the main characteristics and stages of recession. It also has a number of features. A recession is a stage of the economic cycle in which there is a decline in GDP and other indicators.

It happens slowly. The decline lasts for several months. At the same time, there is significant unemployment and the standard of living of the population is deteriorating. Investment injections are stopped. Without targeted action from the government, the process will be gradual and lengthy. Production is declining, fixed assets are wearing out.

Causes and consequences of recession

Many internal and external factors lead to the development of such a situation. When wondering what stagnation and recession are, a person must understand their development mechanism. If GDP not only does not grow, but also declines steadily, the economy may be entering a recession.

The reason for this may be a sharp increase in production in the previous period. Having exhausted its capabilities, the economic system will inevitably come to the need to reduce production. Sometimes this situation is caused by external factors, wars, international conflicts.

An increase in prices for raw materials on the world market can also reduce GDP growth. A recession can be caused by uncertain, weak investments or a high level of distrust of buyers and capital owners in the industry and production products. If the government does not take any action to improve the situation, an economic depression and crisis will occur.

Types of recession

Focusing on the concepts of stagnation, inflation, recession, one cannot help but pay attention to the variety of the latter. Its types are distinguished depending on the type of chart.

A V-shaped recession is characterized by a sharp decline in output. However, it does not reach the level of depression. The fall is characterized by one point. Then the indicators return to their previous level.

A U-shaped recession differs from the first type by a long-term unsatisfactory state of the economy. The type of graph in which the GDP level curve forms a W has two critical points. After the main fall there is a slight improvement. Then the numbers drop again. Then the graph reaches its previous level.

A type L recession has a sharp fall and a long recovery period. Many factors influence the type of graph. It strongly depends on the set of measures that the country's leadership is taking to increase production rates.

The difference between recession and stagnation

There is a significant difference between the considered states of economic development. Stagnation and recession, the differences of which emerge from their definitions, should be understood somewhat more deeply. The recession, although characterized by more negative manifestations, indicates the beginning of the search for a new economic system. It adapts to currently existing conditions. This process begins with a reduction in production.

Stagnation does not imply any development. The economy is mired in closed, unpromising production. Therefore, although both processes are considered negative, a recession is still better. It precedes development.

Stagnation does not imply any improvement. In this case, no development is observed. Manufacturing simply unwisely consumes existing resources to the point of exhaustion. That is why this state of the economy is dangerous and irrational.

What does recession and stagnation indicate?

To deeply study the question of what stagnation and recession are, we should also note the general probability of the state of the economy. If the government does not take any action to improve the situation, a phase of depression and crisis begins. Therefore, both of these processes cannot be left to chance.

The government is obliged to clearly monitor the main indicators of the country's economy and immediately take a set of actions to increase production levels. Also, both of these states of the economic cycle indicate mistakes made on the part of the governing bodies (for example, incorrect budget allocation).

Existing constraints require immediate identification and elimination. In this case, all details of the organization of economic activities of the state are taken into account. Only a comprehensive solution to pressing problems and competent production planning gives a positive result. Scientific developments and progress should not be hampered by any factors. This should be monitored by the relevant control authorities.

A recession is a crisis phenomenon at the macroeconomic level, characteristic of national economies. The phenomenon is characterized as cyclical, more or less inevitable for most states and economic systems.

World recession

At the turn of 2015-2016, many major players in the international financial market started talking about an approaching global recession. Every month, more and more managers, business owners, investors, analysts and experts share pessimistic forecasts.

The famous Japanese brokerage house Daiwa was one of the first to speak about the impending global financial crisis. Before official statements from representatives of this organization, no one dared to be the first to express their opinion. Among the possible reasons, the unstable situation in the Chinese economy was named.

Daiwa representatives also believe that the looming global recession will be the largest in the history of world economies.

Recession period

If we talk about the Russian economy, the first alarming signals came back at the end of 2013. It is too early to talk about the end of the recession. Moreover, the crisis that has broken out has already been called the largest in the history of the state’s economy. The only exceptions are the so-called transformation shocks associated with the transition from a planned to a market economy.

The main factors destabilizing the Russian economy today are considered to be the global recession, sanctions from the United States and Western European countries, as well as the financing of military campaigns.

Causes of recession

Today, the Russian Federation remains a state with a resource-based economy. For this reason, the fall in the export price of gas, oil and other minerals becomes the main cause of recession and a sharp decline in economic growth. Even a slight decrease in the cost of resources affects budget revenues. The deficit is growing, requiring additional spending to cover it. To solve this problem, the state is resorting to unpopular measures: cutting funding for social programs, cutting costs for medicine, education and culture. Often such temporary measures further enhance the negative effect.

Recession in Russia

Many foreign and domestic experts are inclined to believe that the recession in the Russian economy will last almost the entire year of 2016. There are fewer optimistic forecasts every month. Managers of one of the largest banks in the Russian Federation generally believe that the internal crisis will not end in the next three years.

The influx of investment and growth in industrial production rates are easy to predict - according to these indicators, positive dynamics are not expected either in the short or long term. According to the most conservative estimates, the Russian economy will lose about $250 billion over the next three years.

Production recession

Industrial production has become a sore subject for Russia in recent years. In addition to the raw materials industries, only minor attempts have been made to revive other areas, including the production of equipment, agricultural machinery, and unit assembly of automobiles.

In the last one and a half to two years, these insignificant rates of development have completely stopped. At the beginning of this year 2016, some economists predicted the beginning of economic recovery. At the same time, another group of analysts believes that the production recession continues in the Russian Federation. Official statistics confirm the pessimistic forecast. It is noteworthy that against the backdrop of the crisis, the production of oil and other export raw materials continues to grow.

Market recession

In fact, the concept of a market recession is appropriate to apply when the rate of decline in GDP is fixed for two or more quarters. To put it even more simply, during a recession, industrial enterprises produce fewer products, retail chains sell less goods, and consumers reduce their expenses.

For example, the recession in the US mortgage market followed a similar scenario. Banks issued too many unconfirmed loans, after which they tried to write off part of the assets. In fact, financial institutions ended up with orders of magnitude less money than they expected to borrow from borrowers. As a result, the procedure for issuing new ones has sharply tightened, thousands of workers have been laid off, and budgets for investments and purchases have been significantly cut.

Financial recession

When a financial recession begins in a country, business representatives experience an acute lack of financial resources. As a result, it is necessary to reduce production rates, stop it completely, or optimize costs. One of the most popular ways is to fire some of the ineffective employees. If a recession lasts long enough, the unemployment rate in a country begins to increase. The purchasing power of the population is falling, followed by a decline in the income of businesses, which provide fewer services and sell fewer goods. This is how another economic recession begins to spiral.

What is a money recession?

The phrase “money recession” should be understood as a decrease in the value of the national currency. The consequence of this is a decrease in the purchasing power of the population. For countries with developed production, a moderate depreciation of the exchange rate has a positive effect. Most export goods become cheaper and therefore more competitive in foreign markets. Unfortunately, the level of production development in the Russian Federation is not sufficient for such trends to have a beneficial impact on the state’s economy.

The acute shortage of money in the economy is often compensated by the active efforts of the state. Impressive amounts of money are being brought into the market, which inevitably leads to increased inflation.

What is the difference between recession and stagnation?

The key difference between recession and stagnation is the period of growth and decline. During stagnation, almost absolute economic stagnation is recorded, which lasts for quite a long time. The quality of life of citizens is noticeably deteriorating, the number of unemployed is growing, and the size of GDP is tending to minimum levels. When inflation is too high, stagnation turns into stagflation.

During a recession, the economy experiences a rapid decline, but there is no stagnation as such. For this reason, there are clear differences between stagnation and recession in the duration of the period of decline in GDP and future consequences.

Consequences of the recession

The economic crisis is the first on the list of consequences of a recession. This factor is considered the most dangerous and powerful. The decline in production leads to a reduction in the number of working citizens. The need for active labor resources is noticeably reduced. Mass layoffs are causing an increase in the number of unemployed. The pace of consumption is slowing down, and as a result, the decline in production is becoming even greater. The debt of citizens, individuals and legal entities to banking institutions is growing, and the conditions for issuing loans are becoming more stringent. Against the backdrop of a reduction in lending rates, the flow of investment in science and industry is falling. Scientific and technological development is slowing down.

Recession is, definition

Recession is a decline in productivity that characterizes a zero or negative core GDP indicator - gross domestic product lasting for six months or more.

This is a relatively moderate, non-critical decline in business activity, production, and a slowdown in economic growth, usually defined as a consistent decrease in real gross national product.

- This in economics, this term refers to a slowdown or fall in the growth rate of gross production.

Recession is one of the phases of the economic cycle that always follows a period of economic expansion, accompanied by the achievement of a peak point in business activity, and precedes the phase of economic crisis and depression.

Recession is reduction GDP for two or more quarters, that is, roughly speaking, a situation in which all factories began to produce less goods than before, stores sold less, and consumers bought less.

Recession is a significant reduction in business activity, which may be accompanied by a number of negative factors for the economy.

Recession is transition period between boom and depression, and if we rely on the classic definition of recession, then this is zero economic growth (zero GDP growth) for six months.

Recession (from Latin recessus - retreat) is such period in the economy, when the main indicators (especially GDP - ed.) have been falling for two quarters, but this decline is not critical.

Recession concept

The concept of recession is intended to accompany the logical wave of decline on the graph of economic growth of the territory.

A recession is one of the phases of the economic cycle (), following a boom and followed by a depression.

A recession most often leads to massive drops in stock market indices. Typically, the economy of one country depends on the economies of other countries, so an economic downturn in one country or another can lead to a downturn in the economies of other countries and even a crash on world markets. Recessions are also characterized by many other signs of cyclical crises, for example, rising unemployment.

A recession may occur under the influence of the transformation of the economies of industrialized countries at a new stage of scientific, technological and socio-economic progress, or due to an increase in prices for, in particular.

“This is a failure of the existing financial system, the result of low quality regulation, which is why huge risks were not properly taken into account. These are colossal imbalances that have accumulated over recent years. First of all, between the scale of financial transactions and fundamental cost assets, between the increased demand for credit resources and sources of its collateral. The system of global economic growth itself has suffered a serious breakdown, in which one center prints and consumes goods with virtually no restrictions and uncontrollably, while another produces inexpensive goods. goods and saves those issued by other states money. I would add that in such a system, entire regions of the world, including partly even prosperous Europe, found themselves on the periphery of global economic processes, and therefore outside the framework of making key economic and financial decisions. In addition, the generated wealth was distributed very unevenly both within countries, between segments of the population, and this applies even to highly developed countries, and between different countries and regions of the world. For a significant part of humanity, comfortable housing, education, and quality medicine still remain inaccessible. And the global upsurge of recent years has not radically changed this situation. Finally, this one is also a product of inflated expectations. The appetites of corporations regarding the ever-growing demand were unjustifiably inflated. The race of stock indices and capitalization has obviously begun to dominate the increase in productivity and real efficiency of companies. Unfortunately, high expectations existed not only in the business environment. They set the rapid growth of personal consumption standards, primarily in developed countries. Growth, which - and this must be directly admitted - was not supported by real opportunities. This was not earned prosperity, but prosperity on loan, at the expense of future generations. This whole “pyramid of expectations” had to collapse sooner or later, which, in fact, is happening before our eyes." V. Putin, from a speech in Davos, January 2009.

Recession is

About the terms “recession”, “economic collapse”, “depression” and “ financial crisis»

A successful interpretation of terms that are similar in essence was given by the famous mid-20th century economist Murray Rothbard:

In the old days, we suffered from periodic economic crises, the sudden onset of which was called a “panic”, and the prolonged period after the panic was called a “depression”. The most famous depression of modern times is, of course, the one that began in 1929 with a typical financial panic and continued until the outbreak of World War II.

Src="/pictures/investments/img1980620_Velikaya_depressiya_SSHA_1929-1933_godov.jpg" style="width: 800px; height: 674px;" title="US Great Depression 1929-1933">!}

After the 1929 disaster, economists and politicians decided that this should never happen again. In order to cope with this task successfully and without much hassle, it was only necessary to eliminate the word “depression” from use. From that moment on, America never had to experience depression again. For when another severe depression occurred in 1937-1938, economists simply refused to use this terrible name and introduced a new, more euphonious concept - recession.

Since then, we have already experienced many recessions, but not a single depression. However, pretty soon the word “recession” also turned out to be quite harsh for the refined feelings of the American public. Apparently, our last recession was in 1957-1958. Since that time, we have had “downturns”, or even better “slowdowns”, or even “deviations”.

US economic recession

The head of the Federal Reserve System (Ben S. Bernanke) said that there will be no recession in 2008. At the same time, according to him, risk The economic downturn continues, and therefore the country's authorities will consider measures to prevent it. Immediately after the April meeting Fed noted that the rate of economic decline has slowed, although it continues. But they didn’t dare tell the whole truth then.

In turn, economists at the American investment bank Merrill Lynch note that indicators such as the worsening situation with unemployment, which reached 5% in the United States in December 2007, as well as decline sales volumes of retail chains clearly indicate the beginning of a recession. It turned out that the fall in USA will be deeper, and the rise in unemployment may be stronger. The worsening forecast is a sad fact for the entire world community, since it is the economy of the United States of America that is considered the locomotive that will pull it out of the swamp crisis all other countries.

Largest in USA The investment bank also expects the US economy to fall into recession in 2008.

Impact of recession on large organizations

It is important to understand that a recession affects some groups of businesses differently, and may affect others completely differently. Naturally, all types of businesses will feel the negative effect - from small to joint-stock companies - but only companies the recession will simply erase it, and will affect others only slightly.

So let's consider a scenario with an imaginary organization K, which is a large industrial structure, and which is trying to conduct business and carry profit during a recession.

All processes, naturally, are much more profitable than described in the article. Everything is confusing and very complicated; This article shows all the negative effects of the recession only schematically.

When a recession begins, the company's volumes fall sales.

The management of the organization will try to find ways to return to the previous profit. They will start to stop hiring new workers, or hiring may simply decline.

To reduce costs, the organization will spend less on advertising, research and the purchase of new equipment. The production of new products that do not yet bring the desired profit may also stop. All of these actions, in turn, will affect Company K's partners, such as advertising firms, equipment manufacturers, and the like, as their .

How a recession affects dividends and stocks

When the time comes to release the financial report, it will show that the organization's profits are falling. Such news will immediately affect the price of the company's shares, and profits will immediately begin to fall. As a result of a decrease in profit, it may reduce the payment of dividends or stop paying them altogether.

The organization's board of directors and shareholders may appoint a new executive team (i.e., directors). It is also likely that the advertising department will be reorganized to adapt to the new economic situation.

An important aspect of a falling share price is that institutional investors will sell shares of Firm K when they see it falling in value. They will simply choose a more promising organization and transfer money into her. But we must understand that institutional investors (banks, state institutions) operate large blocks of shares, and therefore selling their blocks of shares to Company K will push the stock even lower.

Non-payments, debt, .

Accounts receivable is a very important item in a company's balance sheet that describes the total debt from clients, partners, etc. During a recession, accounts receivable will increase because... the organization's debtors will pay their loans late, incomplete, or not paid at all.

Growing accounts receivable will, in turn, affect the company's ability to repay its debts to creditors. As a result of this, the attractiveness of the organization in the loan market will decrease, i.e. its bonds will become unattractive and risky, and large creditors (banks) will not lend to the company due to lack of confidence in repaying debts.

But not only can a small business cease to bring profit to its owners, it can also affect the well-being of the community or area in which the profit operates. Grocery and household stores Goods, beauty salons, dentistry, personal services (ateliers, workshops, etc.) - all these small enterprises provide residential areas with essential goods and services. If they disappear, things will not be easy for the residents of the area.

It should also be noted that the spirit of entrepreneurs, which motivated young specialists to take various actions to start and develop a business, will begin to disappear. When potential startups see that business is a risky endeavor during a recession, they will shy away, which in turn will lead to uncreated amenities for the area, unrealized jobs, money not received, etc., which contributes to the development and aggravation of the recession.

After the recession there will be development.

A recession is a temporary phenomenon. After each recession, a new stage of economic development follows, i.e. development. This is the stage at which the smartest, most arrogant, and enterprising become millionaires.

A recession negatively impacts all types of businesses. Despite the fact that there are a number of methods to combat a recession, it will still have a bad impact on both large companies and small businesses. But it is important to remember that after a recession comes a development stage during which you can work hard and become rich.

Recession in the Russian Federation

Ministry of Economic Development of the Russian Federation To the Ministry of Economic Development announced the beginning of a recession in Russia. By data MAYOR, there is a big decline industrial production index and economy, and GDP growth at the end of the year will be lower than the planned 6.8%.

Deputy Head of the Ministry of Economic Development of the Russian Federation Andrei Klepach announced the beginning of a recession in the country. According to him, there will be a serious drop in the fourth quarter industrial production and the economy as a whole. “The big decline began in October and will be in November-December,” Klepach said, noting that there is no data yet on the November industrial production index.

And at the end of this year, GDP growth will be lower than the expected 6.8%, and industrial production will grow by only 1.9% instead of the previously predicted 4.7%. “The numbers are being clarified now, but it will be somewhere around (1.9%) due to the very large decline in production in November-December,” the deputy minister confirmed.

Forecasts Ministry of GDP Growth and Industry, as well as inflation the following year, Klepach refused to voice it, noting only that the calculations were still being clarified.

Ministry of Economic Development of Russia Russian Federation of Russia at the end of November decreased forecast GDP growth in 2008 to 6.8-7% percent. According to statistics from the Ministry of Economic Development, growth in the first ten months of this year was 7.5%, but in October the spread of crisis phenomena to the real sector of the economy already became noticeable, the ministry’s document stated.

The main source of the slowdown in growth was the fall in metallurgical and chemical production, the production of electrical equipment, electronic and optical equipment, the production of building materials and a number of others.

According to forecasts of the Ministry of Economic Development of the Russian Federation of the Russian Federation, inflation in the Russian Federation at the end of 2008 may exceed 13%.