MACROECONOMIC INSTABILITY
AND INFLATION
1. Introduction
In an ideal economy, the real Gross National Product would grow at a fast, steady pace. In addition, the price level, as measured by the consumer price index, would remain unchanged, or rise very slowly. As a result, unemployment and inflation would be negligible. But experience shows clearly that full employment and price stability are not achieved automatically. The purpose of this paper is to study the sustainable level of prices and inflation in the context of macroeconomic instability.
2. Inflation, its definition and measurement.
What is "inflation"? Inflation is an increase in the general price level. This, of course, does not mean that all prices are necessarily raised. Even during periods of fairly rapid inflation, some prices may remain relatively stable while others fall. For example, although in 1970-1980. inflation was fairly high in the West, the prices of goods such as VCRs, digital watches, and personal computers were actually reduced. Indeed, one of the main sore spots of inflation is that prices tend to rise very unevenly. Some bounce, others rise at a more moderate pace, and still others don't rise at all.
Inflation is measured using a price index. The price index defines them general level relative to the base period.
For example, in the price index for consumer goods 1982-1984 are used as a base period for which a price level of 100 is set. In 1988, the price index was approximately 118. This means that in 1988 prices were 18% higher than in 1982-1984, or, more simply In other words, this set of goods, which cost $100 in 1982, cost $118 in 1998.
The inflation rate for a given year can be calculated in the following way: subtract last year's (1987) price index from this year's (1988) index, divide this difference by last year's index, and then multiply by 100. For example, in 1987 the consumer price index was 113.6, and in 1998 year -188.3. Therefore, the inflation rate for 1988 is calculated as follows:
inflation rate = ------------------ x 100 = 4.1%
The so-called “rule of magnitude 70” gives us another way to quantify inflation. More precisely, it allows you to quickly calculate the number of years required for the price level to double. All you have to do is divide the number 70 by the annual inflation rate.
For example, at an annual inflation rate of 3%, the price level would double in about 23 (70/3) years. At 8% inflation, the price level will double in about nine (70/8) years. It should be noted that the “rule of 70” is usually applied when, for example, you need to establish how long it will take for real GNP or your personal savings to double.
3. Causes of inflation. Factors of development of inflation and commodity deficit. Inflation based on growth in demand. Inflation based on the growth of cash costs of production.
Economists distinguish between two types of inflation.
1. Demand inflation. Traditionally, changes in the price level are explained by excess aggregate demand. The economy may be trying to spend more than it can produce; it may tend to some point outside its production possibilities curve. The manufacturing sector is not able to respond to this excess demand by increasing the real volume of production, because all available resources have already been fully used. Therefore, this excess demand leads to inflated prices for a constant real volume of production and causes demand inflation. The essence of demand inflation is sometimes explained in one phrase: "Too much money to hunt for too little goods."
The rise in demand-pull inflation can be divided into three stages,
On the first stage total expenditure, that is, the sum of consumption, investment, government spending, and net exports, is so low that the volume of national product falls far short of its maximum level at full employment. In other words, there is a significant lag in real GNP. Unemployment is high and most of the productive capacity of enterprises is idle. Now suppose that aggregate demand has risen. Then the output will increase, the unemployment rate will fall, and the price level will rise little or not at all. This is because there is a huge amount of idle labor and material resources that can be put into action when existing on their prices. The unemployed does not ask for an increase wages when taken to work. As a result, the volume of production increases significantly, and prices do not rise.
As demand continues to grow, the economy enters into second phase, approaching full employment and fuller use of available resources. It should be noted that the price level may begin to rise before full employment is achieved. Why? Because as production expands, stocks of idle resources do not disappear simultaneously in all sectors of the economy and in all industries. Bottlenecks are starting to form in some industries, although most industries have overcapacity. Some industries use their production capacity earlier than others and cannot respond to a further increase in demand for their goods with an increase in supply. Therefore, their prices are rising. As demand increases in the labor market, some categories of part-time workers begin to be fully employed and their wages in monetary terms increase. As a result, there is an increase production costs and firms are forced to raise prices. Shrinking labor markets give unions greater bargaining power and help them secure significant wage increases. Firms are willing to give in to union demands for higher wages because they don't want strikes, especially at a time when the economy is on the path to more and more prosperity. In addition, if overall costs increase, higher costs can easily be passed on to the consumer by raising prices. Finally, when full employment is reached, firms are forced to hire less skilled (less productive) workers, which drives up costs and prices. The inflation that occurs in the second stage is sometimes called "premature" because it starts before full employment in the country.
When the total costs reach third stage, full employment extends to all sectors of the economy. All branches of industry can no longer respond to increased demand with more output. The real volume of the national product has reached its maximum, and a further increase in demand leads to inflation. Aggregate demand that exceeds the productive capacity of society causes an increase in the price level.
If we relate these three stages of demand inflation to nominal and real GNP, we can draw the following conclusions:
At a constant price level (first stage), nominal and real GNP increase to the same extent,
With premature inflation (second stage), nominal GNP needs to be “deflated” to determine changes in the volume of output in physical terms.
Under “pure inflation” (the third stage), nominal GNP will rise, sometimes at a rapid pace, while real GNP will remain unchanged.
2. Inflation caused by an increase in production costs, or a decrease in aggregate supply.
Inflation can also result from changes and supply in the market. In recent years, there have been several periods when the price level has risen, despite the fact that aggregate demand has not been excessive. We have had periods when both the volume of production and the price level decreased while the general price level rose at the same time.
inflation theory, driven by rising costs, explains the rise in prices by such factors that lead to an increase in unit costs. The cost per unit of output is the average cost for a given volume of production. Such costs can be obtained by dividing the total cost of resources by the amount of output produced.
An increase in unit costs in the economy reduces profits and the amount of output that firms are willing to offer at the current price level. As a result, the supply of goods and services decreases throughout the economy. This decrease in supply, in turn, raises the price level. Therefore, in this scheme, it is cost, not demand, that drives up prices, as happens with demand-pull inflation.
The two most important sources of cost-driven inflation are increases in nominal wages and prices for raw materials and energy.
Wage inflation.
Wage inflation is a type of cost inflation. Under certain circumstances, trade unions can become a source of inflation. This is because they exercise some control over nominal wages through collective agreements. Let's assume that the big unions demand and get bigger wage increases. Moreover, suppose that with this raise they set a new wage standard for non-union workers. If the nationwide wage increase is not balanced by some counteracting factor, such as an increase in output per hour, then unit costs will increase. Producers will respond by reducing the production of goods and services thrown onto the market. With the same demand, this decrease will lead to an increase in the price level. Because excessive wage increases are the culprit, this type of inflation is called wage inflation, which is a type of cost inflation.
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Ural socio-economic institute
academy of labor and social relations
Department of Economic Theory and Statistics
course work
according to "Economic theory"
Macroeconomic instability. unemployment and inflation
Completed: 1st year student
FSV-101 group, correspondence department
specialty "Finance and credit"
Supervisor:
Chelyabinsk
Input enenie
1. Cyclicity as a form of macroeconomic instability
1.1 The concept of a cycle
1.2 Economic growth curve
1.3 Typology of cycles
1.4 Reasons for cyclicity
1.5 The impact of cycles on the production of goods and industries
2. Unemployment as a form of manifestation of macroeconomic instability in the phase of decline in production
2.1 Definition of unemployment
2.2 Forms (types) of unemployment and measures to smooth them
2.3 The concept of the natural rate of unemployment
2.4 Causes of unemployment
2.5 Consequences of unemployment
2.6 Unemployment in Russia
3. inflation as a form of manifestation of macroeconomic instability in the phase of production growth
3.1 Essence of inflation
3.2 Measuring inflation
3.3 Types of inflation
3.4 Causes of inflation
3.5 Mechanism of inflation
3.6 Consequences of inflation
3.7 Anti-inflation policy
3.8 Inflation in Russia
4. Relationship between inflation and unemployment
Conclusion
Bibliography
Introduction
Macroeconomics - industry economics, studying the behavior of the economy as a whole in terms of ensuring conditions for sustainable economic growth, full employment of resources, minimizing inflation and balance of payments.
Economic growth is the result of relatively stable factors such as population growth and technological progress. The dynamics of these factors in long term determines the dynamics of the potential volume of production. In the short run, however, the economy deviates from this main trajectory of uniform forward movement. There is macroeconomic instability here, i.e. violations of macroeconomic balance, which are manifested in unemployment, inflation, cyclicality economic development, sustainable balance of payments deficits.
Macroeconomic instability in many areas reduces the efficiency of the economy. For example, unemployment means a shortfall in production, and an increase in unemployment by 1% means a reduction in economic growth by 2-3%.
Unemployment is a socio-economic situation in which part of the active, able-bodied population cannot find work that these people are able to perform. Unemployment is due to the excess of the number of people who want to find a job over the number of available jobs that correspond to the profile and qualifications of applicants for these places. According to most economists, unemployment is the central problem of advanced economies.
Inflation is an overflow of the circulation channels of the money supply in excess of the needs of trade, which causes depreciation monetary unit and rising prices. Inflation has significant economic and social consequences for all business entities. As inflation deepens, it turns into a serious obstacle to reproduction, exacerbates economic and social tension in society.
Thus, the problem of macroeconomic instability is one of the most urgent problems of the emerging Russian economy.
Target term paper: deepening and consolidating knowledge on the topic.
Objectives of the work: to understand the concepts of cyclicality, unemployment, inflation, their causes, types, consequences and relationships.
1. Cyclicity as a form of macroeconomic instability
1.1 The concept of a cycle
The market economy of all countries of the world is characterized by cyclical development - after growth, there is always a recession. Governments of all states strive to achieve permanent economic growth, but so far no one has succeeded.
Practical studies confirm that in any market economy there are oscillatory processes, undulating movements. At the same time, fluctuations in market activity in different countries vary quite a lot in terms of regularity, duration, and causes.
Over a period of several years (or even decades), economic growth and the rise in business activity are replaced by a decline macroeconomic indicators growth. There is an economic recession, supply and demand are reduced, entrepreneurial activity fades out.
The term "economic cycle" (business cycle, business cycle, economic cycle) is the time interval between two qualitatively identical states of the economic situation (Fig. 1)
The economic conjuncture is formed by the direction and degree of change in the set of indicators characterizing the equilibrium development of the economy.
Rice. 1 Cycle graphic
The business cycle can also be defined as successive ups and downs in economic activity over a period of several years.
The business cycle is a common feature in almost all fields economic life and for all market economies.
1.2 Economic growth curve
AT modern theory economic cycle, it is customary to single out two- and four-phase models of the economic cycle.
The two-phase model has upward (rise, expansion) and downward (recession, recession) phases, as well as high and low turning points of the cycle. Cycle duration is defined as the transition between two adjacent high or low turning points.
The four-phase model contains phases of expansion, ending with a boom, followed by a crisis (recession), turning into a depression, and a subsequent revival. The revival, in turn, ends with a rise after a certain time. Let's look at these phases.
1) Crisis (recession, recession), i.e. a sharp decline in business activity is manifested primarily in the overproduction of goods, sometimes the direct destruction of part of useful products, the reduction of loans, the increase loan interest, falling prices. Unemployment is growing, however, with some delay in comparison with the fall in GNP.
In a crisis, enterprises with large capital and large financial capabilities retain the possibility of making a profit by reducing production costs. Medium and small enterprises, especially those that do not have high-performance equipment and technology, cannot stabilize the deteriorating economic situation and often go bankrupt. The ruin of technically weak enterprises has its advantages for industry as a whole, since it leads to an increase in the general level of productive forces.
The consequence of an increase in the general level of labor productivity is a decrease in the cost of goods and, as a result, a weakening of the fall in the rate of profit.
In a recession, there is a general pursuit of money. Financial obligations violated, the anchor chain of credit is broken.
Actually, the recession usually does not last long, the crisis looks longer when it is combined with the subsequent period of depression.
2) The phase of depression (stagnation) can be very long. Production is no longer declining, but it is not growing either. Unemployment remains high, prices are halting, interest rates are falling to a minimum, inventories are stabilizing, but trade is sluggish.
Depression is a phase (more or less long - from six months to 3 years) of adapting economic life to new conditions and needs, a phase of finding a new balance.
At the level of microeconomics, depression is presented as a picture of uncertainty, disorderly actions. Particularly affected are commercial intermediaries, stock agents, to whom the general situation seems worse than it really is.
So, the decline has stopped, but the upward trend has not yet been outlined. Production is carried out on a narrow base. Entrepreneur's confidence in the market situation is restored with difficulty, he looks around, not yet risking investing significant funds in business, although prices and economic conditions are stabilizing. Gradually, “points of growth” appear in the national economy and a transition to revival takes place.
3) Recovery (recovery phase): enterprises start investing in equipment and buildings, prices (for raw materials, goods and services, stocks), production levels, employment are rising, there is a slight increase in consumer demand, and loan interest is growing. Enterprises that have adapted to the new market conditions increase the output of goods, the rate of profit and the level of wages rise. The revival covers, first of all, the industries that supply the means of production. Encouraged by the success of others, new businesses are created and pure growth begins.
4) Rise (boom): the acceleration of economic development is manifested in waves of innovation, the emergence of a mass of new goods and new enterprises, in the rapid growth of capital investments, stock prices and other securities, interest rates, price levels and wages. Everything is produced and traded at a profit. The GNP level exceeds the highest pre-crisis point, employment and commodity demand are growing. The volume of production again goes beyond effective demand, the market is overflowing with unsold goods, and the tension of bank balance sheets is growing.
So, I looked at the classic business cycle. Now consider a two-phase economic growth curve: here the main phases are recession and recovery, during which there is a deviation from the average economic dynamics(Fig. 2). Real GNP deviates from the nominal - these fluctuations are fixed by the GNP deflator. Fluctuations in actual output around potential GNP are characterized by the indicator
gap GNP= , where
Y - actual production volume, Y* - potential production volume.
Potential GNP (or economic potential) - the volume of production at full employment of resources.
Full employment of resources implies maintaining the share of unloaded production capacities at the level of 10-20% of their total volume and the natural unemployment rate of 5.5-6.5% of the total labor force. These figures may vary from country to country, but in all cases full employment of resources precludes their 100% utilization.
The levels of employment, unemployment, inflation, interest rates, exchange rate and the volume of the money supply. However, the main indicators of the phase of the cycle are usually the levels of employment, unemployment and output, since the dynamics of inflation rates, interest rate and the exchange rate may be different depending on the factors that caused the recession.
The decline in employment and output, caused by a reduction in aggregate spending, is often accompanied by a decrease in the average price level and inflation. Conversely, a decline caused by a contraction in aggregate supply is often accompanied by an increase in the price level and inflation. In both cases, the dynamics of interest rates will be determined by the policy of the Central Bank to regulate the money supply, which, in turn, will cause corresponding changes in the level of the exchange rate.
Diagnostics of the phase of the economic cycle is one of the most difficult tasks of macroeconomic forecasting, the solution of which is associated with the need to improve the collection and processing of statistical information, the construction of complex indices (like the index of leading indicators), as well as the development of economic and mathematical modeling methods. In a transitional economy, including the Russian one, these problems are of particular relevance due to the lack of an adequate statistical database and the necessary experience in using macroeconomic management tools.
1. 3 Typology of cycles
All cycles in reality are not similar to each other, each has its own specific features, interweaving. At the same time, each crisis arises as if unexpectedly and is caused by some exceptional circumstances. In the period between crises, unrest in the form of partial, small and intermediate recessions is possible, which gave grounds to talk about different types of economic crises.
More than 1380 types of cyclicity are known to modern social science. The economy operates mainly with four of them: J. Kitchin, K. Zhuglar cycles, S. Kuznets cycles, N.D. Kondratiev.
Kitchin cycles (short cycles, inventory cycles). In a work published in 1926, Kitchin focused his attention on the study of short waves with a length of 2 to 4 years based on the study of financial accounts and sales prices in the movement of inventories.
Juglar cycles (7 - 12 years). These cycles have other names: "business cycle", "industrial cycle", "medium cycle", "big cycle". The first industrial crisis broke out in England in 1825, when machine production occupied a dominant position in metallurgy, engineering and other leading industries. The crisis of 1847 - 1848, which broke out in the USA and a number of European countries, was in essence the first world industrial crisis. It was followed by the crises of 1857 and 1866. The most profound was the crisis of 1873. In the nineteenth century. industrial cycle was 10 - 12 years, in the twentieth century. its duration was reduced to 7 - 9 years or less. The crisis of 1929-1933 was distinguished by a particularly deep and prolonged decline in production. - "The Great Depression".
After World War II, the most devastating industrial crisis was that of the mid-1970s.
The cycle of 7 - 12 years was named after K. Jouglar for his great contribution to the study of the nature of industrial fluctuations in France, Great Britain and the USA on the basis of fundamental analysis fluctuations in interest rates and prices.
Blacksmith cycles (16 - 25 years). In the 1930s, studies of the so-called "building cycle" appeared in the United States. J. Riggolman, V. Newman and some other analysts built the first statistical indices of the total annual volume housing construction and found in them successive long intervals of rapid growth and deep recessions or stagnation. Then the term "construction cycle" appeared, which defines these twenty-year fluctuations. In 1946, S. Kuznets in his work "National Income" came to the conclusion that the indicators of national income, consumer spending, gross investment in industrial equipment, as well as in buildings and structures, exhibit interrelated twenty-year fluctuations. At the same time, he noted that in construction these vibrations have the largest relative amplitude.
After the publication of Kuznets' work, the term "building cycle" practically ceased to be used, giving way to the term "long swings" (long swings) in contrast to Kondratiev's "long waves". In 1955, in recognition of the merits of the American researcher, it was decided to call the "construction cycle" the "Blacksmith's cycle".
Kondratiev cycles (40 - 60 years). The first attempts in the field of creating an economic theory of long waves were made at the dawn of the twentieth century. And Gelfand (Parvus), J. Van Gelderen and S. De Wolf. However, the greatest contribution was made by the Russian scientist N.D. Kondratiev, who published several fundamental works in this field. He presented the results of his research on the dynamics of commodity price indices, interest rates, rents, wages, the production of key products, and so on. for a number of developed countries from 1770 to 1926
Kondratiev associated the beginning of the “big” rise with the massive introduction of new technologies into production, with the involvement of new countries in world economy, with changes in gold production volumes.
Kondratiev associated the rise of the first large cycle with the industrial revolution in England, the second - with the development of railway transport, the third - with the introduction of electricity, telephone and radio, the fourth - with the automotive industry. Modern researchers associate the fifth cycle with the development of electronics and genetic engineering.
As already noted, at present there is no single theory of the cycle. Moreover, many economists deny the existence of a strictly periodic cyclical development of the economy in principle. As a rule, they include mainly supporters of the neoclassical and monetary schools. These economists prefer not to talk about cyclicality (the cycle implies a more or less constant periodicity), but about market fluctuations caused by a combination of arbitrary economic factors.
1.4 Reasons for cyclicity
Despite the abundance of works on the problem of cyclicity, there is still no single concept about the reason for the existence of this phenomenon.
The question of the reasons for the cyclicity of modern national economies, depending on the types of cyclicality, is interpreted by different economic schools with an unequal degree of equivalence. Thus, in assessing the causes of "long waves" and structural crises approaches of various economists are now largely. The causes of the "classical", i.e., industrial (economic) cycles are defined in different ways.
This explanation of the business cycle is purely monetary. The cycle is considered most widely and consistently as a purely monetary phenomenon in the works of Hawtrey. He argued that the study of cash flow is the only reason for the change in economic activity, the alternation of periods of prosperity and depression, buoyant and sluggish trade. When the flow of money (or the demand for goods, expressed in money) increases, then trade becomes more lively, production expands, prices rise. When the cash flow decreases, trade weakens, production decreases, prices fall.
The demand for goods, expressed in money terms, is directly determined by consumer costs or consumer costs. This means that such a state as general depression is caused by monetary factors. An exception can only be those cases where non-monetary factors lead to a drop in consumer costs. The amount of consumer spending changes due to changes in the amount of money. A sudden reduction in quantity, that is, outright deflation, has a depressing effect on economic activity. So, according to this theory, the process of contraction or recession occurs as follows. Reducing the amount of money entails an inevitable reduction in demand. Producers who have made products based on ordinary demand are faced with the fact that they cannot sell these products at the expected prices. Inventories will begin to accumulate, losses will arise, production will decline, unemployment will spread, and the process of reducing wages and other incomes will inevitably begin. The process of reducing business activity is cumulative. When prices fall, wholesalers tend to assume that it will continue in the future. In line with these assumptions, they seek to reduce inventory and reduce or eliminate orders to manufacturers. But the expenditures of the consumers, as well as the incomes, are diminishing, the demand is waning, and stocks, in spite of all the efforts of the merchants to reduce them, are piling up; credit continues to decline. Thus, the movement occurs in a spiral.
The upswing phase of the business cycle is a copy of the down spiral of depression, but the spiral in this case will be upward. The revival of business activity is caused by the expansion of credit and lasts as long as this expansion continues. The reason for the expansion of credit is that banks facilitate the conditions for granting loans to their customers, that is, they reduce the discount rate. If the rate of interest has fallen, this induces wholesalers to increase their inventory. Merchants increase orders to manufacturers of goods. But this does not entail such an increase in inventories as during a recession, but rather, on the contrary, leads to their reduction, since the expansion of production entails an increase in income and costs for consumers. This means an increase in demand for goods, and this, in turn, leads to an inevitable reduction in stocks in trade. The result will be new orders, further increases in consumer income, spending and demand, and further decreases in inventories. Thus, the cumulative extension is installed production activities, which is supported by the continuous expansion of credit. The expansion of business activity, once started, continues due to its own driving forces, and further encouragement from banks is no longer required. On the contrary, banks must now be cautious enough not to let the process of expansion of business activity get out of control and degenerate into violent inflation.
Another view of the problem: state support and state regulation - public procurement, differentiated taxation of various industries and sectors of the economy, manipulation of subsidies and interest rates. Using budgetary funds, the state can support economic growth, prolong the phases of recovery and recovery; raise interest rates on loans during the boom.
There are also psychological explanations for cycles that link business activity with mood swings, transitions from mass optimism to pessimism. Psychological theory occupied a large place in the works of Pigou. By psychological causes, Pigou understands "changes in human thoughts that occur in addition to those changes in expectations that are caused by changes in the active factors on which the judgment is based."
Pigou bases his analysis on the role that cost-return expectations play in industry. With the onset of each of the phases of the cycle, a corresponding change in people's expectations occurs simultaneously, and from cycle to cycle these changes are the same. With the introduction of such an element as “expectations” or “calculations for the future”, the problem of the uncertainty of these expectations arises. As a rule, the forecast of future events cannot be absolutely correct, and the more events are distant in time, the less accurate the forecast and the greater the likelihood of violations. And since each economic solution- part of an economic plan that extends into a more or less distant future, then in each economic activity there is an element of uncertainty. In this regard, it is necessary to introduce such terms as optimism and pessimism. Psychological theories mean something more than that people are more optimistic during an upswing and more pessimistic during a downturn, only that people invest more freely during an upswing and do so reluctantly during a downswing. Optimism and pessimism are considered in these theories as factors that tend to cause or increase the growth or fall of investments. It should be noted that it is impossible to predict with what force entrepreneurs will react to changes in the economy, or to what extent they will increase or decrease the amount of investments.
Each economic phenomenon has its own psychological aspect. Psychological factors are put forward as additional to others economic factors. A number of economists attribute the economic cycle to external causes: the occurrence of sunspots that lead to crop failures and a general economic downturn; wars, revolutions and other political upheavals; the development of new territories and the associated migration of the population, fluctuations in the population the globe; powerful breakthroughs in technology that make it possible to radically change the structure of social production, and other reasons. The explanation of economic fluctuations reduces the matter to technical innovations and improvement, to the involvement in the exploitation of new resources and the development of new territories. This point of view is inherent in such economists as Wixel, Spitthoff, Schumpeter.
1.5
The impact of cycles on the production of goods and
industriesaboutsti
The volumes of production and employment react most strongly to the change in the phases of the economic cycle in industries that produce capital goods, consumer durables, the construction of residential buildings and industrial buildings, the heavy engineering industry, the production of agricultural implements, automobiles, refrigerators, and gas equipment. In industries producing non-durable consumer goods, fluctuations in employment and output will be less significant (to some extent, the quantity of these purchases will decrease, their quality will deteriorate). The reasons for this are related to two circumstances.
First, the renewal of equipment and the purchase of new durable goods can be postponed for a certain period of time. Therefore, during periods of downturns in business activity, the demand for these goods is reduced especially significantly - manufacturers often stop acquiring more modern equipment and building new factories. In such a conjuncture, it simply does not make sense to increase stocks of investment goods. In all cases, the firm can still use available facilities and buildings. In favorable periods, the means of production are usually replaced before they are completely worn out. However, when the recession hits, firms repair their obsolete equipment and put it to work. Therefore, investment in the means of production is sharply reduced. It is possible that some firms with excess production capacity do not even seek to recover all the capital they are currently consuming. In this case, their net investment may become negative. Therefore, employment in these industries is rapidly declining, output is falling, and unemployment is rising.
Second, it is in these industries that production tends to be highly concentrated, with a small number of firms dominating the market. The oligopolistic structure of the market allows firms to rapidly reduce employment and output levels during a downturn in order to relatively stabilize the price level. In non-durable goods industries, markets are more competitive, and therefore firms cannot counter the downward trend in prices by reducing employment and output. Accordingly, in these industries, prices fluctuate more significantly than employment and output.
For overall assessment the state of the economy and the effectiveness of economic policies, the so-called “poverty index” is often used, which is the sum of unemployment and inflation rates, two main indicators of macroeconomic instability.
2. bunemployment as a form of manifestationmacroeconomistphase instability
decline in production
2.1 Definition of unemployment
By definition international organization Labor (ILO), unemployment is the presence of a contingent of people over a certain age who do not have a job, are currently fit for work and are looking for work in the period under review.
At any given time, the size and structure of the working-age population (R) is a definite quantity and is divided into the labor force (N) and the non-labor force (H). These three variables (R, N, H) are stocks in nature. The ratio N/R=n is called the norm of the labor force. Such a rate can be calculated for any subgroup of the working-age population.
n t = or N t = n t R t .
At any given moment in time, the labor force (N) can be divided into employed (E) and unemployed (U), i.e.:
N t = E t + U t or U t = N t - E t .
Considering the flow of unemployment during two successive times t and t-1, we get:
U t - U t-1 = (n t R t - n t-1 R t-1) - (E t - E t-1).
Thus, changes in unemployment flows between periods t and t-1 will depend on changes in the age of the working-age population and the degree of its participation in the labor process, as well as changes in the flow of employment. If the degree of participation of the working-age population in the labor process is constant for a population of a certain size, the unemployment rate will reflect changes in the level of employment.
Naturally, any change in the flow of unemployment U t - U t -1 will lead to the emergence of flows in the labor market.
Thus, unemployment can be defined as the remainder after the removal of the employed from the total labor force. However, there is some uncertainty in the definition of the category "labor force". This uncertainty arises from the vagueness surrounding the concept of labor force participation. For example, in Britain "self-employed" does not refer to the labor force, but in Russia and the US it does.
2.2 Forms (types) of unemployment and measures to smooth them
To date, researchers have counted at least seventy different forms of unemployment and a great many of their classifications. The main forms of unemployment are: frictional, seasonal, structural, cyclical unemployment.
Frictional unemployment occurs as a result of the constant movement of people between jobs, as well as their movement in and out of employment, due to imperfect information in the labor market, and also because it takes a certain time for unemployed and vacant employers to find each other . Even when there is an equilibrium between supply and demand, there is always some unemployment in the labor market, as workers and firms seek best conditions employment. Under ideal conditions (perfect information and no cost transfers) this process could take place instantly and there would be no unemployment. However, reality is far from such an ideal. Frictional unemployment is an inevitable product of labor market dynamism. Its value depends on the frequency of movement of labor and vacancies, as well as the speed and efficiency with which people looking for work and vacancies find each other.
Thus, frictional unemployment is associated with looking for and waiting for work. This is unemployment among people for whom the search for a job that matches their qualifications and individual preferences requires a certain amount of time.
Frictional unemployment has some characteristic features. First, it covers a fairly large number of people in all demographic groups, industries and regions. Second, it lasts for a relatively short period of time. Thirdly, a certain amount frictional unemployment inevitable under any conditions.
The very nature of frictional unemployment suggests ways for government policy to reduce it: this is, first of all, the improvement of information on employment in the labor market. In addition, frictional unemployment can be reduced by limiting some of the undesirable causes of labor movement.
Seasonal unemployment is usually identified with frictional unemployment and occurs as a result of seasonal fluctuations in the demand and supply of labor. An increase in the demand for labor causes seasonal changes in the level of production and employment and is often associated with climate fluctuations, construction, and tourist seasons. The level of labor supply may change due to the influx of school and university graduates. educational institutions during the summer months, which directly causes an increase in unemployment. Seasonal unemployment is a serious problem for the country's economy as a whole, but it can create very unpleasant and sensitive problems for some regions and societies that are closely associated with seasonal business.
Structural unemployment occurs as a result of a mismatch between the types of jobs available and the types of labor force seeking vacancies. This discrepancy can be caused by the peculiarities of education, specialties, geographical location, age characteristics of the labor force. For example, structural unemployment can occur when high-skilled jobs are created in the economy, while the existing labor force does not have such a characteristic. Structural unemployment can also form if new jobs do not arise in areas where the main labor force is concentrated. So, structural unemployment does not arise as a result of imperfect information, but because of the unemployed that deprive the labor market of mobility and impede the possibility of finding a job.
Structural unemployment has the following features. Unlike frictional unemployment, it affects certain groups of the workforce as a result of technological shifts, the decline of key industries, or regional shifts of jobs. In addition, structural unemployment, as a rule, is of a long-term nature.
Nature structural unemployment It also dictates certain methods of economic policy to limit this unemployment: first, these are programs for the development of certain areas and regions of the economy, as well as measures to retrain the workforce; secondly, the displacement of the unemployed from the depressed regions of the country; thirdly, providing the unemployed with employment in the public sector of the economy.
The combination of frictional and structural unemployment forms the natural rate of unemployment (or the unemployment rate at full employment) corresponding to potential GNP.
Cyclical unemployment (sometimes referred to as insufficient-demand or Keynesian unemployment) results from the failure of aggregate demand in an economy to create enough jobs for everyone who wants to work. Unlike frictional and structural unemployment, where the problem lies in the mismatch of jobs with the available labor force, cyclical unemployment arises from a lack of jobs in general. Cyclical unemployment is closely related to the movement of the economic cycle: in the upswing phase, the unemployment rate decreases, and in the depression phase it increases. Due to cyclical economic development, but also as a result of chronic economic stagnation, which is commonly called "long-term stagnation".
Features of cyclical unemployment (in comparison with frictional and structural unemployment) are reduced, firstly, to the presence of significant annual fluctuations in employment associated with the general economic cycle. Second, like frictional unemployment, cyclical unemployment is also widespread throughout the economy. Thirdly, the duration of cyclical unemployment, as a rule (but not necessarily) exceeds the duration of frictional unemployment, but is inferior to the duration of structural unemployment.
To combat cyclical unemployment, it is necessary to adhere to certain public policy programs that ensure stable and healthy economic growth. In addition, it is possible to implement national projects, such as the construction of highways, the development and modernization of the urban economy during periods of depression, leading to an increase in aggregate demand.
2.3 The concept of the natural rate of unemployment
As already mentioned, the combination of frictional and structural unemployment forms the natural rate of unemployment (or the rate of unemployment at full employment) corresponding to potential GNP. A number of economists consider it unacceptable to use the term "natural" in relation to unemployment caused by structural changes. Therefore, in the macroeconomic literature, the term NAIRU (Non-Accelerating-Inflation Rate of Unemployment), which focuses attention on the fact that this steady unemployment rate stabilizes inflation.
Calculations of the actual and natural levels of unemployment are complicated by the fact that the criteria for classifying individuals as employed or unemployed are quite flexible. Generally, the unemployed are those who do not have a job at the time of the statistical survey, but are actively looking for one and are ready to start working immediately. People who have a job, as well as all part-time or weekly workers, are classified as employed.
The combination of employed and unemployed forms the labor force. Persons who are unemployed and not actively looking for one are considered to have left the labor force. These include people of working age who potentially have the opportunity to work, but for some reason do not work: students, pensioners, the homeless, housewives, those who have despaired of finding a job and stopped looking for it, etc. The labor force also excludes persons who spend a long time in institutional institutions (psychiatric hospitals, prisons, etc.).
The unemployment rate is defined as the ratio of the number of unemployed to the labor force, or as the ratio of the share of the employed who lose their jobs every month and the sum of this share with the share of the unemployed who find work every month.
The natural rate of unemployment (NAIRU) is determined by averaging the actual unemployment rate in the country over the previous 10 years (or a longer period) and the next 10 years (forecast estimates are used, taking into account the probabilistic dynamics of the expected inflation rate).
2.4 Causes of unemployment
Representatives of modern neoclassicism do not deny the existence of a connection between inflation and unemployment, but they raise the question: is full employment of the able-bodied population possible at all? Under the most favorable conditions, there arises (as a result of structural changes in the economy) the need to retrain some of the workers, since certain professions simply die off. People are forced to change their place of residence for one reason or another. Known issues with temporary dropouts production process and subsequent adaptation to changed working conditions, experienced by women at the birth of a child, young people who returned from the army, etc.
At the same time, the reserve in the labor market creates an opportunity to relatively quickly increase employment in the face of an upturn, make fuller use of production capacities, and promptly increase the product offer. Experts believe that unemployment in the range of 4-5% can be considered economically acceptable, "natural", and its social security is not a problem. Some authors call the “natural” rate of unemployment corresponding to the appropriate level of employment in the given conditions. It means that natural unemployment rigidly determined by the demand for labor. If politicians try to increase employment beyond its natural limits in the given specific conditions, then the first response is to increase prices.
Perhaps the neoclassicists forget about the humanistic aspect of the problem of unemployment. Even in the presence of good benefits, people feel thrown out of their usual rhythm of life, among the unemployed there is an increase in morbidity and mortality, drug addiction and alcoholism.
The specific attitude of the neoclassical to the hardships associated with unemployment can be explained by two positions.
First, they deny the forced nature of unemployment due, according to the Keynesian model, to the lack of effective demand. Unemployment, in their opinion, is most often voluntary. It arises as a result of "free choice": laid-off people do not want to change their profession, place of residence, do not agree to reduced wages.
Secondly, they do not accept anti-poverty programs. The critique is that government funding for housing and food aid for the poor falls short. It is more rational to guarantee the low-income additional income so that they can solve their own affairs on their own. It is proposed in this regard to introduce "negative" taxes, to raise the bar above which progress in taxation begins. At the same time, it is proposed to lower the state-guaranteed minimum wage, as this would increase employment. Sometimes they advocate cutting unemployment benefits.
Monetarists tend to be suspicious of trade unions. They are equated with monopolies in the labor market, which are responsible for increasing the unemployment rate. Demanding a constant increase in wages, trade unions act as initiators of new inflationary waves.
So, I have considered the causes of unemployment on the part of the neoclassical and monetarists. Next, consider the main reasons for the existence of a natural (sustainable) level of unemployment.
Firstly, it is an increase in the time for finding a job in the conditions of the unemployment insurance system.
The payment of unemployment benefits relatively reduces incentives for quick employment - it increases the time to look for a suitable job, to retrain, etc. In the long term, this contributes to achieving a greater balance between the structure of jobs and the structure of the labor force. At the same time, the increase in unemployment benefits and the period of their payment contributes to the growth of the number of unemployed and the unemployment rate. The tool for solving this problem is public investment in the infrastructure of the labor market (deployment various systems retraining of personnel, increasing their professional and geographical mobility, improving information about vacancies, etc.). In the short term, financing employment management programs may increase the burden on the state budget, but in the medium term, this will help reduce the natural rate of unemployment.
Secondly, it is the stability (rigidity) of wages.
Fig.3 Graphic representation of unemployment waiting
It generates "waiting unemployment", which occurs as a result of the excess of the level of real wages over its equilibrium value (Fig. 3).
Wage rigidity leads to a relative shortage of jobs: workers become unemployed because, at a given wage level, the supply of labor L2 exceeds the demand for labor L1 and people simply “wait” to get a job at a fixed rate of pay.
The “freezing” of the labor market in a non-equilibrium state is associated with: 1) the legislative establishment of a minimum wage, which limits its free fluctuations. The limiting effect of the minimum wage is the more significant, the higher the proportion of young people, women, low-skilled workers in the labor force, since for these categories of employees the equilibrium wage rate is below the legally established minimum; 2) fixing the level of wages in collective agreements with trade unions and individual labor agreements; 3) the disinterest of firms in lowering wages due to the risk of losing skilled labor, increasing overall staff turnover, reducing labor productivity, labor discipline and profits.
Unemployment rates vary across demographic groups. In particular, the youth unemployment rate is significantly higher than in other age groups.
The trend towards an increase in the natural rate of unemployment in the long run is associated with factors such as an increase in the share of young people in the labor force, an increase in the share of women in the labor force, and more frequent structural changes in the economy.
2.5 Consequences of unemployment
Unemployment has its detrimental effect on every person, regardless of whether he is unemployed or is in a state of potential threat of becoming one. The consequences of unemployment are very severe. These are not only material deprivations, transition to the category of “poor”, sometimes poverty, but also serious socio-psychological consequences: personality degradation, alcoholism, suicide, crime, destruction of the family, traditional moral and ethical values, mental disorders.
The way of life of a person who does not have a job changes radically: the normal rhythm of life is disrupted - the periodic alternation of work, rest, sleep, physiological needs change. Major health changes are taking place.
There are changes in personal life- the authority of the father falls in the eyes of the wife and other family members. It is also possible to redistribute responsibility in the family, with the wife or someone else becoming the main breadwinner.
Unemployment hits families with low incomes more, especially those with one breadwinner. And vice versa, the higher the average per capita income in the family, the smaller the share of the breadwinner (the main earner), the lower the material losses from unemployment, and the moral and psychological losses are higher. Social assistance provided to the unemployed, at best, can only delay the exacerbation of socio-psychological consequences, but cannot avoid them.
Unemployment has an indirect psychological impact on the employed: competition among workers changes the psychological climate in the team, divides workers, and hinders the trade union movement.
In Russia, along with the traditional, there is another, qualitatively different unemployment. Among the unemployed there are many people with higher education and high qualifications, developed system needs, high social expectations and high political activity.
Marginalization deepens; loss of objective belonging to a given social community without subsequent entry into another social community and the resulting loss of subjective identification of oneself with a certain group, blurring of the norms and values of the original subculture, without a corresponding introduction to a new one.
Indifference and humility are not characteristic of young people. Anger is the most common reaction to job loss, and young people also often display maximalism and a high degree of social and political mobility. Unemployment, especially among young people, serves as a breeding ground for political agitation and reaction.
In fact, the complete absence of regulators of social processes, the constant emergence of spontaneous, non-institutionalized forms and alternative structures can become the basis for organizing social conflicts. Marginalization can be a source of degradation, demoralization of both individual social strata and society as a whole, a source of conflicts in extremely polarized forms.
2. 6 Unemployment in Russia
Today Russia is experiencing a decline in production. Production volumes are reduced as a result of structural changes. It would seem that the decline in production should be accompanied by an increase in registered unemployment and an adequate redistribution of the labor force by industry.
However, the expected processes do not occur. Enterprises located in crisis conditions, trying to maneuver and save their team. The system of long administrative leaves and the use of part-time employment are practiced. Qualified workers leave such enterprises, which leads to a decrease in the qualification level of production teams. In fact, hidden unemployment has formed (in a market economy, this is the presence of people who want to work, but are not registered as unemployed; in part, hidden unemployment is represented by people who have stopped looking for work). Its scale increases as production is curtailed.
In this regard, the course of reforms faces the problem of the price that society pays for them. And it speaks about itself right away, because the first steps in the transition to the market have significantly reduced the level of consumption of the population. Moving forward with reforms poses another comparability problem: what does it cost to support inefficient jobs and how much does open unemployment cost compared to funding the maintenance of the unemployed, their retraining and job assistance.
According to the report of the Federal State Statistics Service, the total number of unemployed in Russia, calculated according to the ILO methodology, in September 2007 increased by 4.2% compared to August and amounted to 4.481 million people. This is 6% of the total economically active population of the country.
At the same time, the number of officially registered unemployed in September 2007 decreased by 2.8% compared to previous month and amounted to 1.414 million people.
The number of economically active population in Russia as of the end of September 2007 was estimated by Rosstat at 75 million people - approximately 52% of the total population of the country. 54.2% of all employees in August 2007 worked at large and medium enterprises.
Let us consider in more detail the situation that developed in 2005-2006.
According to the Federal Service for Labor and Employment, at the end of October 2006 there were 1.6 million officially unemployed people. Compared with November 2005, the number of registered unemployed people decreased by 62 thousand people, or by 3.6%, which practically coincides with the data of the previous study. In November 2006, the total number of unemployed in a comparable circle of people, that is, of working age, without students, pupils and pensioners classified as unemployed, exceeded the number of registered unemployed by 2.7 times. The August figure was 2.9, which reflects the upward trend in unemployment.
This almost 3-fold discrepancy is the main feature and problem of the national labor market. In Russia, people who have lost their jobs do not like to look for them officially, and the state, in turn, has practically withdrawn itself from real assistance in retraining the workforce. True, since January 2007, the Russian labor market has somewhat "cleared up" due to the intensification of the fight against illegal migration and, since April 1, a ban on retail trade for foreigners.
So, in November 2006, the economically active population, according to Rosstat, aged 15 to 72 in Russia amounted to 74.2 million people, or 66.2% of the total population of this age. Among them, 69.2 million people are employed, and 5 million people are unemployed. The unemployment rate in November 2006 was 6.7%. Compared to November 2005, the number of employed people in November 2006 increased by 0.7%, while the number of unemployed decreased by 8.8%.
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INTRODUCTION
"The ideas of economists ... are of much greater importance than is commonly thought.
In fact, they alone rule the world."
John Maynard Keynes
Every science has its object of knowledge. This fully applies to economics. A characteristic feature of the latter is that it is one of the oldest sciences. The origins of economic science go back centuries, to where the cradle of world civilization was born - to the countries of the Ancient East of the 5th-3rd centuries. BC. Later economic thought developed in ancient Greece and ancient Rome. Aristotle introduced the term "economy" (from Gr. Oikonomia - household management), from which came later - "economy". In the earlier Middle Ages, Christianity declared simple labor to be a holy deed, and the most important principle began to be affirmed: who does not work, he does not eat.
As a science, economics arose in the 16th-17th centuries. Her first theoretical direction was mercantilism, who saw the substance of the wealth of society and the individual in money, and reduced money to gold. In the 17th century a new name for economics has emerged - political Economy, (interaction of economics and politics), which lasted more than three centuries. A new direction was given to this science physiocrats(A. Turgot, F. Quesnay and others), who argued that the source of wealth is not exchange, but agricultural labor. The founder of classical political economy was the Scottish economist Adam Smith (1723-1790), who published his famous book Inquiry into the Nature and Causes of the Wealth of Nations in 1776. His concept is based on the idea of "non-equalitarian equality", which gave decisive importance to the division of labor and, as a result, laid the foundations of the labor theory of value and the market economy as a whole ( macroeconomics). A. Smith's teaching was further developed in the works of the German philosopher and economist Karl Marx (1818-1883), who created the theory of scientific socialism in his multi-volume work Capital.
Modern economics today has received a more common name - economic theory, and in Anglo-American literature - " economics". The term "economics", which was first introduced by the English economist Alfred Marshall (1842-1924) in his book "Principles of Economics", refers to the analytical science of using the limited resources of the family, enterprise and society as a whole for the production of various goods, their distribution and exchange between members of society for the purpose of consumption, i.e. in order to meet human needs.It is A. Marshall who is considered the "ancestor" of microanalysis, microeconomics- a direction of economic science that studies and analyzes the activities of individual economic entities and the system of decisions they make.
The Great Depression of 1929-1933 returned the world community to the consideration of the functioning National economy as a whole, from the standpoint of macroeconomics. There is a new understanding of the possibilities of a market economy, it became clear: it is necessary to introduce a corrective, controlling function of the state, government, the concept of "economic policy" arises. Economic policy - "... a set of measures aimed at streamlining the course of economic processes, influencing them or directly predetermining their course" - Hirsch. The fundamental task is to ensure general equilibrium, i.e. balance economic and social.
It should be noted that macroeconomic disequilibrium is a normal, common and even necessary phenomenon, since economic processes always develop with certain fluctuations and are implemented according to indicators: supply and demand, price movements, unemployment, etc. This paper will consider macroeconomic indicators of economic theory, namely economic cycles, unemployment, inflation, their prerequisites, consequences, relationships.
1. ECONOMIC CYCLES
"Throughout the history of literature on economic cycles various economists over and over again the opinion has been expressed that the origin of cyclical fluctuations remains an unsolvable riddle.
Alvin Hansen
The term "business cycle" refers to successive ups and downs in the levels of economic activity represented by real GDP.
Rice. 1. Trend and cyclical fluctuations of real GDP:
The graph (Fig. 1) shows trend(trend) by connecting the points of real GDP (at the potential level) of the beginning of the study period t1 and the end of the period t n and a wavy line (F) reflecting fluctuations in the level of GDP caused by the existence of economic cycles. Distance between "peak" points bf and bottom points dh stands for duration cycle. The vertical distance from the breakpoints to the trend line is bb" and dd", measures amplitude cyclic fluctuations.
It is customary to distinguish four phases of the economic cycle: crisis - segment bc; depression - cd; revival - de; climb - ef. It is often possible to meet with a simpler classification of the phases of the cycle, highlighting the downward - recession bd and upward - revival df.
It should be noted that a recession does not always entail serious and prolonged unemployment, and the peak of the cycle is full employment. Despite the phases common to all cycles, individual economic cycles differ significantly from each other in duration and intensity. Therefore, some economists prefer to distinguish three main types of cycles:
· " Short term economic cycles"- regularity 3-4 years. Clearly expressed in cycles by D. Kitchin(1861-1932) and W. Mitchell's cycles (1874-1948);
· " medium-term economic cycles"- regularity, approximately 8-12 years. These cycles are easier to observe than others in a historical context due to their relative regularity and accompanied by significant shocks to the economy, in contrast to short-term cycles. It is generally accepted that the reason for the existence of medium-term cycles is the terms of physical depreciation of fixed assets , but there are other theories, for example, cycles of K. Juglyar(1819-1908), in which the reason is interpreted as a set of specific features in the field of banking.
· " Long economic cycles"- regularity of 40-50 years. Reasons for cyclicity in long waves N.D. Kondratiev(1892-1938) - the accumulation of capital to replace long-existing means of production. Also, there is no doubt that developments in the field of scientific and technological progress are directly involved in them and, as a result, a radical restructuring of production to a qualitatively different level.
Although causal factors such as technological innovation, political events, and the accumulation of money have been used to explain the cyclical development of an economy, it is generally assumed that total spending is the direct determinant of national output and employment.
In a predominantly market-oriented economy, businesses produce goods and services only if they can be sold profitably, if the total cost is low, many businesses are not profitable to produce goods and services in large volumes. Hence the low level of production, employment and income. A higher level of total spending means that output growth is profitable, so production, employment, and incomes will also increase. When the economy is at full employment, real output becomes constant, and additional spending simply raises the price level.
All sectors of the economy are affected in different ways and to varying degrees by the economic cycle. The cycle has a stronger effect on output and employment in industries producing capital goods and durable goods than in industries producing non-durable goods. When the economy begins to struggle, manufacturers often stop buying modern equipment and building new factories. In such a situation, it simply does not make sense to increase stocks of investment goods. When family budget have to be reduced, first of all, fees for the purchase of durable goods, such as household appliances and cars, are collapsing. People don't buy new models. The situation is different with food and clothing, that is, non-durable consumer goods. The family must eat, and these purchases will decrease and their quality will deteriorate, but not to the same extent as for durable goods.
Most capital goods and durables industries are highly concentrated with relatively few large firms dominating the market. As a result, such firms have sufficient monopoly power to counteract the fall in prices for a certain period by limiting output due to falling demand. Therefore, the decrease in demand has an impact mainly on production and employment. We see the opposite picture in industries that produce non-durable goods ("soft goods"). These industries are mostly quite competitive and are characterized by low concentration. They cannot resist rising prices, and falling demand is more reflected in prices than in output.
2. UNEMPLOYMENT
"Unemployment as such, whether secured or flooded with private or public subsidies, humiliates a person and makes him miserable."
Ivan Ilyin
A socio-economic phenomenon in which those who want to work cannot find work at the usual wage rate, i.e. part of the working population is not employed in the production of goods.
Concept " full employment"is difficult to define. At first glance, it can be interpreted in the sense that the entire active population, that is, 100% of the labor force, has a job. But this is not so. A certain level of unemployment is considered normal, or justified.
Unemployment rate- the percentage of the unemployed in the labor force, which does not include students, pensioners, prisoners, as well as boys and girls under 16 years of age.
General unemployment rate- the percentage of the unemployed to the total labor force, including persons employed in active military service.
There are several types of unemployment:
· frictional unemployment
If a person is given the freedom to choose the type of activity and place of work, at any given moment some workers find themselves in a position "between jobs". Some voluntarily change jobs. Others are looking for a new job due to being laid off. Still others temporarily lose seasonal jobs (for example, in the construction industry due to bad weather or in the automotive industry due to model changes). And there is a category of workers, especially young people who are looking for work for the first time. When all these people find a job or return to their old job after being temporarily laid off, other "seekers" of work and temporarily laid off workers replace them in the "general unemployed fund". Therefore, although specific people who are left without work for one reason or another replace each other from month to month, this type of unemployment remains.
Economists use the term frictional unemployment in relation to employees who are looking for a job or who are waiting to get a job in the near future. The definition of "frictional" accurately reflects the essence of the phenomenon: the labor market functions clumsily, with a creak, not bringing the number of jobs and jobs into line.
Frictional unemployment is considered inevitable and to some extent desirable. Why desirable? Because many workers who voluntarily find themselves "between jobs" move from low-paid, low-productivity jobs to higher-paying, more productive jobs. This means higher incomes for workers and a more rational distribution labor resources and, consequently, a larger real volume of the national product.
· Structural unemployment.
Frictional unemployment quietly moves into the second category, which is called structural unemployment. Economists use the term "structural" to mean "composite". Over time, important changes occur in the structure of consumer demand and in technology, which, in turn, change the structure of general demand for the labor force. Due to such changes, the demand for some types of professions is reduced or even stops. The demand for other professions, including new ones that did not exist before, is increasing. Unemployment occurs due to the fact that the labor force reacts slowly and its structure is completely unresponsive new structure work places. The result is that some workers do not have skills that can be quickly sold, their skills and experience have become obsolete and unnecessary due to changes in technology and the nature of consumer demand. In addition, the geographical distribution of jobs is constantly changing. This is evidenced by the migration in industry from the "snow belt" to the "sun belt" over the past decades.
Examples: 1. Many years ago, highly skilled glassblowers lost their jobs due to the invention of bottle-making machines. 2. More recently, in the southern states, unskilled and insufficiently educated Negroes have been ousted from agriculture as a result of its mechanization. Many lost their jobs due to lack of qualifications. 3. An American shoemaker, left without a job due to competition from imported products, cannot become, for example, a computer programmer without undergoing serious retraining, and perhaps without changing his place of residence.
The difference between frictional and structural unemployment is quite vague. The essential difference is that the "frictional" unemployed have skills that they can sell, while the "structural" unemployed cannot immediately get a job without retraining, additional training, and even a change of residence; frictional unemployment is more short-term, while structural unemployment is more long-term and therefore considered more severe.
· Cyclical unemployment
By cyclical unemployment, we mean unemployment caused by a recession, that is, that phase of the economic cycle, which is characterized by an inadequacy of general, or aggregate, spending. When aggregate demand for goods and services decreases, employment falls and unemployment rises. For this reason, cyclical unemployment is sometimes referred to as demand-deficit unemployment. For example, in the United States, during the recession of 1982. the unemployment rate rose to 9.7%. At the height of the Great Depression in 1933. cyclical unemployment has reached about 25%. Bankruptcies of enterprises in various fields of economic activity are becoming massive, and during this period, many millions of people, quite unexpectedly and suddenly for them, become unemployed. The problem is exacerbated by the fact that in conditions of cyclical unemployment, neither reorientation nor training for some new qualification helps people. A change of residence does not always save, because the crisis can cover the entire national economy and even reach the global level.
Cyclical unemployment is also dangerous because, in addition to social disasters, it also brings obvious losses in real GDP. The well-known American economist Arthur Oken (1928-1979) drew attention to this. He formulated the law that a country loses 2 to 3% of its actual GDP relative to its potential GDP when the actual unemployment rate rises by 1% over its natural rate. In economic literature, this law is known as Okun's law :
(Y – Y*) /Y* = - l (U-Un) ,
where Y- actual GDP, Y*- potential GDP, U - actual unemployment rate, U n - the natural rate of unemployment, l (in absolute terms) is the empirical coefficient of sensitivity of GDP to changes in cyclical unemployment (the Okun coefficient).
Suppose the natural rate of unemployment is 5% and its actual rate is 8%. Let's say Okun's ratio is -2.5. Then the gap between actual GDP and potential GDP will be (8%-5%) x -2.5 = -7.5%: the country "has not received" 7.5% of potential GDP.
Now consider the concept full time"population and start with what we call" employment rate", namely, the percentage of employed to the adult population not on social security, in shelters, nursing homes, etc.
Full employment does not mean the absolute absence of unemployment. Economists consider frictional and structural unemployment absolutely inevitable: therefore, the unemployment rate at full employment is equal to the sum of frictional and structural unemployment rates. In other words, the full-time unemployment rate is reached when cyclical unemployment is zero. The unemployment rate at full employment is also called natural rate of unemployment. The real volume of the national product, which is related to the natural rate of unemployment, is called the production potential of the economy. This is the real volume of output that the economy is able to produce with the "full use" of labor resources.
Full, or natural, unemployment occurs when labor markets are balanced, that is, when the number of job seekers is equal to the number of available jobs. The natural rate of unemployment is to some extent a positive phenomenon. After all, the "frictional" unemployed need time to find appropriate vacancies. "Structural" unemployed people also need time to acquire skills or move to another place when it is necessary to get a job. If the number of job seekers exceeds the available vacancies, then labor markets are not balanced; at the same time, there is a shortage of aggregate demand and cyclical unemployment. On the other hand, with excess aggregate demand, there is a "scarcity" of labor, that is, the number of available jobs exceeds the number of workers looking for work. In such a situation, the actual unemployment rate is below the natural rate. The unusually "tense" situation in the labor markets is also connected with inflation.
The concept of "natural rate of unemployment" requires clarification in two aspects.
First, this term does not mean that the economy always operates at a natural rate of unemployment and thus realizes its productive potential. The unemployment rate often exceeds the natural rate. On the other hand, in rare cases, the economy may experience a level of unemployment that is below the natural rate. For example, during the Second World War, when the natural rate was on the order of 3-4%, the needs of war production led to an almost unlimited demand for labor. Overtime work, as well as part-time work, has become commonplace. Moreover, the government did not allow workers in "essential" industries to quit, artificially reducing frictional unemployment. The actual unemployment rate during the entire period from 1943 to 1945 was less than 2%, and in 1944 fell to 1.2%. The economy exceeded its production capacity, but exerted significant inflationary pressure on production.
Secondly, the natural rate of unemployment in itself is not necessarily constant, it is subject to revision due to institutional changes (changes in the laws and customs of society). For example, in the 1960s, many believed that this inevitable minimum of frictional and structural unemployment was 4% of the labor force. In other words, it was recognized that full employment is achieved when 96% of the labor force is employed. And now economists believe that the natural rate of unemployment is about 5-6%.
Why is the natural rate of unemployment higher today than it was in the 1960s? First, the demographic composition of the labor force has changed. In particular, women and young workers, who traditionally have a high unemployment rate, have become a relatively more important component of the labor force. Secondly, there have been institutional changes. For example, the unemployment compensation program has been expanded both in terms of the number of workers it covers and the amount of benefits. This is important because unemployment compensation, by reducing its impact on the economy, allows the unemployed to more easily seek work and thereby increases frictional unemployment and overall unemployment.
Controversy over the determination of the unemployment rate at full employment is exacerbated by the fact that in practice it is difficult to establish the actual unemployment rate. The entire population is divided into three large groups. The first includes persons under the age of 16, as well as persons in specialized institutions - i.e. individuals who are not considered potential components of the labor force. The second group consists of adults who potentially have the opportunity to work, but for some reason do not work and are not looking for work. The third group is the labor force, this group includes persons who can and want to work. The labor force is considered to be made up of employed and unemployed people who are actively looking for work.
The unemployment rate is the percentage of the unemployed part of the labor force.
The Labor Department's statistics office is trying to figure out the number of employed and unemployed by conducting nationwide monthly sample surveys of some 60,000 families.
An accurate estimate of the unemployment rate is complicated by the following factors:
1. Part-time employment. In official statistics, all part-time workers are included in the category of full-time workers. Considering them fully employed, official statistics underestimate the unemployment rate.
2. Workers who lost hope of getting a job. By not including workers who have lost hope of getting a job as unemployed, official statistics underestimate the unemployment rate.
3. Fake information. Unemployment may be inflated when some unemployed claim to be looking for work, although this is not true, and shadow economy contributes to an increase in the official unemployment rate.
Conclusion : although the unemployment rate is one of the most important indicators economic situation country, it cannot be considered an infallible barometer of the health of our economy.
There is a huge difference in unemployment and inflation rates in different countries. Unemployment rates differ because countries have different natural unemployment rates and are often in different phases of the economic cycle. Over the past few years, inflation and unemployment rates in the United States have been low compared to a number of other industrial countries.
Average unemployment and inflation rates in nine countries over a five-year period:
Source: Department of Labor Statistics, Organization for Economic Co-operation and Development.
3. INFLATION
“It was during the inflation. I received 200 billion marks a month.
The money was given out twice a day and they immediately took a break for half an hour - in order to have time to go shopping and buy at least something before the new dollar rate was announced, after which the money depreciated by half.
Erich M. Remarque "Three Comrades"
Inflation is a continuous rise in the average price level for all goods and services. Measuring the price level is important for two reasons. First, it is important for us to know how the price level has changed over a certain period of time. Second, since GNP is the market value, or otherwise the monetary value, of all final goods and services produced during the year, monetary indicators are used as the most common indicators when reducing to a single basis the heterogeneous components of the total output.
The price level is expressed as an index. Price index is a measure of the ratio between the aggregate price of a certain set of goods and services, called " market or consumer basket"(The law "On the consumer basket as a whole in the Russian Federation" was adopted by the State Duma on October 27, 1999, approved by the Federation Council on November 11, 1999, entered into force on November 23, 1999, valid until December 31, 2000), for this time period and the aggregate price of an identical or similar group of goods and services in base period. This benchmark, or starting point, is called the "base year". If we represent what was said in the form of a formula, then we get:
The best known among these indices is consumer price index (CPI), calculated for a group of goods and services included in the consumer basket of an average city dweller . In the US, the consumer price index is calculated based on the prices of 265 goods and services in 85 cities across the country. AT general view The consumer price index can be represented as the ratio of the consumer basket of the base year, estimated at current prices, to the consumer basket of the base year, estimated at the prices of the base year.
If we conditionally designate the three blocks included in the consumer basket as: "Food" - food; "Non-food products" - clothing; "Services" - housing, then the calculation of the consumer price index will look like it is presented in the table.
| Number (1982) |
Production volume 1982 in 1982 prices |
1982 output at 1992 prices |
|||
CPI = 4100/1950 * 100% = 210.3%
The consumer price index is the most widely used price index. He plays essential role in the economy, since it is the basis for recalculating wages, government payments and many other payments, and therefore, the economy needs a unified method for calculating it, which at the same time would objectively reflect changes in the price level.
As an example, let's consider a method for calculating the PPI, which is correct from a mathematical point of view and is recommended for PPI calculations, but gives a slightly different result than in the previous case. The original formula is the following:
CPI = (price of food 1992 / price of food 1982) * 100 * food share +
+ (price of clothes 1992 / price of clothes 1982) * 100 * share of clothes +
+ (price of housing 1992 / price of housing 1982) * 100 * share of housing.
By determining the share of each group in the consumer basket and substituting prices, we get:
CPI = 5/2 * 100 * 0.47 + 10/5 * 100 * 0.35 + 20/10 * 100 * 0.18 = 117.5 + 70 + 36 = 223.5
Statistical accuracy requires a single base when calculating indices, and in this regard, the consumer price index is based on a single base - the volume of production of the base year in the first case, or single shares of individual goods in the consumer basket in the second case. In this regard, the consumer price index does not reflect how price changes affect the change in the share of consumption of a particular product. In addition, the price index is not able to assess what proportion of the price increase is occupied by qualitative improvements of the goods. For example, a 1950 model car and a 1992 car differ significantly in quality characteristics. The CPI differs from the GNP deflator in that the GNP deflator estimates the value of current output at current prices. In addition, the GNP deflator is associated with the goods and services that make up the GNP, while the CPI is associated only with those goods and services that are included in the consumer basket.
The price index is one of the main parameters in measuring inflation. For example, in 1987 the consumer price index was equal to 113.6, and in 1988. - 118.3. The inflation rate for 1988 is calculated as follows:
The so-called "rule of magnitude 70" allows you to quickly calculate the approximate number of years required for the price level to double. All you have to do is divide the number 70 by the annual inflation rate:
Economists distinguish between two types of inflation.
· Demand inflation. Traditionally, changes in the price level are explained by excess aggregate demand. The economy may try to spend more than it can produce; it may tend to some point outside its production possibilities curve. The manufacturing sector is unable to respond to this excess demand by increasing real output because all available resources have already been fully utilized. Therefore, this excess demand leads to inflated prices for a constant, real volume of production and causes demand-pull inflation. The essence of demand inflation is sometimes explained in one phrase: "Too much money hunting for too few goods."
· Inflation caused by an increase in production costs, or a decrease in aggregate supply . Inflation can also result from changes in costs and supply in the market. There have been several periods in recent years when the price level has risen, despite the fact that aggregate demand has not been excessive. There were periods when both output and employment (evidence of insufficient aggregate demand) decreased while the general price level increased at the same time.
The theory of cost-driven inflation explains price increases by factors that increase costs per unit of output. Unit cost is the average cost for a given volume of production. Such costs can be obtained by dividing the total cost of resources by the amount of output produced, that is:
An increase in unit costs in the economy reduces profits and the amount of output that firms are willing to offer at the current price level. As a result, the supply of goods and services decreases throughout the economy. This decrease in supply, in turn, raises the price level. Therefore, in this scheme, it is cost, not demand, that inflates prices, as happens with demand-pull inflation.
The two most important sources of cost-driven inflation are increases in nominal wages and prices for raw materials and energy.
Wage inflation is a type of cost inflation. Under certain circumstances, trade unions can become a source of inflation. This is because they exercise some control over nominal wages through collective agreements. Let us assume that the big unions demand and obtain large wage increases. Moreover, suppose that with this increase they set a new wage standard for non-union workers. If the nationwide wage increase is not balanced by some counteracting factor, such as an increase in output per hour, then unit costs will increase. Producers will respond by reducing the production of goods and services thrown onto the market. With demand unchanged, this decrease in supply will lead to an increase in the price level.
Supply-side inflation is the other major form of cost-push inflation. It is a consequence of the increase in production costs, and hence prices, which is associated with a sudden, unforeseen increase in the cost of raw materials or energy costs. A convincing example is the significant increase in prices for imported oil in 1973-1974. and in 1979 - 1980. As energy prices have increased during this time, so have the costs of producing and transporting all products in the economy. This led to a rapid increase in cost-driven inflation.
In the real world, the situation is much more complicated than the proposed simple division of inflation into two types - demand-driven inflation and cost-driven inflation. In practice, it is difficult to distinguish between the two types. For example, suppose that military spending has risen sharply, and therefore the incentives to increase demand in product and resource markets have increased, some firms find that their spending on wages, material resources, and fuel is rising. In their own interests, they are forced to raise prices, because the cost of production has increased. While there is clearly demand-pull inflation in this case, for many businesses it looks like cost-push inflation. It is difficult to determine the type of inflation without knowing the primary source, that is, the real cause of rising prices and wages.
Most economists believe that cost-push inflation and demand-pull inflation differ in another important way. Demand-pull inflation continues as long as there is excessive general spending. On the other hand, cost-driven inflation automatically limits itself, that is, it either gradually disappears or heals itself. This is explained by the fact that, due to the decrease in supply, the real volume of the national product and employment is reduced, and this limits the further increase in costs. In other words, cost-driven inflation generates a recession, and the recession, in turn, restrains additional cost increases.
It is also necessary to note the negative consequences associated with a long-term increase in the average price level. One of the main negative phenomena is the effect of redistribution of income and wealth. This process is possible, first of all, in those conditions when incomes are not indexed, and loans are provided without taking into account the expected level of inflation. Another serious consequence of inflation is the impossibility of making absolutely correct decisions when developing investment projects, which reduces the interest in financing them. The damage from inflation is directly related to its size. moderate inflation does no harm, moreover, the reduction in inflation is associated with an increase in unemployment and a reduction in the real national product. Hyperinflation brings the greatest harm, the appearance of which is associated with social cataclysms, the coming to power of totalitarian regimes.
The relationship between the price level and the volume of national production allows for two interpretations. Usually real national output and the price level rose or fell at the same time. However, over the past 20 years or so, there have been several cases where real national output has declined while prices have continued to rise. Forget about that for a moment and assume that real national output is constant at full employment. Assuming the real volume of national production and incomes to be constant, it is easier to isolate the effect of inflation on the distribution of these incomes. If the size of the pie - the national income - is constant, how does inflation affect the size of the pieces that go to different segments of the population.
It is essential to understand the difference between monetary, or nominal income and real income. Monetary or nominal income is the number of units national currency that a person receives in the form of wages, rent, interest, or profits. Real income is determined by the amount of goods and services that can be bought with the amount of nominal income. If your nominal income increases at a faster rate than the price level, then your real income will rise and vice versa. The measurement of real income can be approximated by the following formula:
The very fact of inflation is a decrease purchasing power national currency, that is, a decrease in the number of goods and services that can be bought per unit - does not necessarily lead to a decrease in personal, real income, or standard of living. Inflation reduces the purchasing power of a currency; however, your real income, or standard of living, will only fall if your nominal income keeps pace with inflation.
It should be noted that inflation affects redistribution differently depending on whether it is expected or unforeseen. In the event of expected inflation, the recipient of the income can take steps to prevent or reduce the negative effects of inflation that would otherwise be reflected in his real income.
Inflation punishes:
People who receive relatively fixed nominal incomes. Congress introduced indexation of Social Security benefits; Social security payments take into account the consumer price index to prevent the damaging effects of inflation.
Some hired workers. Those who work in unprofitable industries and lack the support of strong, militant trade unions.
Savings owners. As prices rise, the real value, or purchasing power, of savings set aside for a rainy day will decrease. Of course, almost all forms of savings earn interest, but the value of savings will still fall if the rate of inflation exceeds the interest rate.
Benefits from inflation can be received by:
People living on non-fixed incomes. The nominal incomes of such families may outstrip the price level, or the cost of living, causing their real incomes to rise.
Managers of firms, other recipients of profits. If the prices of finished products rise faster than the prices of inputs, then cash receipts firms will grow faster than costs. Therefore, some earnings in the form of profits will overtake the rising wave of inflation.
Inflation also redistributes income between debtors and creditors. In particular, unanticipated inflation benefits debtors at the expense of creditors.
The distributional effects of inflation would be less severe, and even avoidable, if people could 1) anticipate inflation and 2) be able to adjust their nominal incomes to anticipate changes in the price level. For example, prolonged inflation that began in the late 1960s led many unions into the 1970s to insist that labor contracts be amended for rising costs of living, automatically adjusting workers' incomes for inflation. If you foresee the onset of inflation, then you can also make changes in the distribution of income between creditor and debtor. For this reason, savings and loan institutions have introduced variable rate mortgages to protect themselves from the negative effects of inflation. There is a difference between the real interest rate, on the one hand, and the money or nominal interest rate, on the other.
Real interest rate is the percentage increase in purchasing power that the lender receives from the borrower.
Nominal interest rate is the increase in the amount of money that the lender receives, expressed as a percentage.
So, for example, in order for a lender to receive 5% of the real profit on a loan with an estimated inflation of 6%, he should assign a nominal interest rate of 11%. In other words, the nominal interest rate is equal to the sum of the real interest rate and the premium paid to compensate for the expected rate of inflation.
The impact of inflation on the volume of the national product can be considered on three models, in the first of which inflation is accompanied by an increase in the volume of national production, and in the other two - by a decrease.
· Demand inflation concept suggests that if the economy is to achieve high levels of output and employment, then moderate (or creeping) inflation is necessary. moderate inflation – this is inflation, in which prices rise by no more than 10% annually, and does not cause serious concern to the population and entrepreneurs, since the interest rate in the capital markets is quite high, which allows contracts to be concluded in nominal terms.
Rice. 2. Phillips curve in the short term:
An inverse relationship between inflation and unemployment was discovered by Alban Phillips, a professor at the London School of Economics. After examining British statistics for almost a hundred years (from 1861 to 1957), he came to the conclusion that the rate of growth of prices and wages began to decline if unemployment exceeded the 3% level, and vice versa. In 1958, Phillips published his observations and calculated the inverse relationship between the employment rate and the nominal wage rate. The graphic representation of this dependence is called Phillips curve , which is described as
(w t - w t-1) / w t-1 \u003d - b (N * - Nt) / N *,
where w - nominal wage rate b- a parameter that reflects the sensitivity of the nominal wage level to changes in the unemployment rate, N* - full employment rate (corresponding to the natural rate of unemployment).
Phillips' calculations were backed up theoretical developments American economist R. Lipsey. Later, P. Samuelson and R. Solow replaced the growth rate of nominal wages with the inflation rate in the Phillips model p. In this form, the Phillips model, which reflects the relationship between inflation and unemployment, is shown in Fig. 2.
The Phillips curve shows the inverse relationship between inflation and unemployment in the short term: if at inflation rates p 1 unemployment is at U 1 , then the suppression of inflation to p 2 accompanied by rising unemployment U 2.
The graph (Fig. 2) shows that the inflation rate p, plotted on the y-axis, and the unemployment rate U, marked on the x-axis, are inversely related. In the short term, inflationary increases in prices and wages stimulate the supply of labor and the expansion of production.
· Cost-driven inflation and unemployment. Consider the circumstances under which inflation can cause a contraction in both output and employment. Assume that, from the outset, spending is such that there is full employment and a stable price level in the economy. If cost-driven inflation begins, then at the current level of aggregate demand, real output will decrease. This means that an increase in costs will cause a sharp increase in prices and given general expenses it will be possible to buy on the market only a part of the real product. Consequently, real output will fall and unemployment will rise.
· Galloping inflation limited to 10 to 100% per year. Money depreciates quite quickly, so prices for transactions are denominated in stable currency, are tied to it, or the prices take into account the expected inflation rate at the time of payment.
· Hyperinflation in countries with developed market economies is determined by rates of over 100%. For countries with unstable, developing or transitional economies, the criterion for the onset of hyperinflation is much higher, for example, in Russia in 1992, inflation rates reached 1353% per year, but were officially recognized only close to hyperinflation. Proponents of the concept of cost-driven inflation argue that moderate, creeping inflation, which may initially accompany the recovery of the economy, then, growing like a snowball, will turn into more severe hyperinflation. It leads to the destruction of the well-being of the nation and is often the basis for a change in the regime of power, usually of a totalitarian persuasion.
So that unused savings and current incomes do not depreciate, that is, in order to get ahead of the expected price increase, people are forced to "spend money now." Businesses do the same when buying investment goods. Actions dictated by "inflationary psychosis" increase the pressure on prices, and inflation begins to "reproach itself."
Hyperinflation can accelerate economic collapse. Severe inflation contributes to the fact that efforts are directed not to production, but to speculative activities. Prices can be recalculated daily and even several times a day, there is a "flight from money". It is becoming more and more profitable for the population and enterprises to accumulate raw materials and finished products in anticipation of future price increases. But the discrepancy between the quantity of raw materials and finished products and the demand for them leads to increased inflationary pressure. Instead of investing in capital goods, producers and individuals, in order to protect themselves from inflation, buy unproductive material values– jewelry, gold and other precious metals, real estate, etc.
In an emergency, when prices jump sharply and unevenly, normal economic relations are destroyed, the banking system is collapsing, not only production is paralyzed, but also the mechanism of the market itself. Money actually loses its value and ceases to fulfill its function as a measure of value and medium of exchange. Production and exchange come to a halt, and economic, social, and very possibly political chaos may eventually ensue. Hyperinflation accelerates financial collapse, depression and social and political unrest. Catastrophic hyperinflation is almost always the result of reckless government expansion of the money supply.
CONCLUSION
"Like it or not, the main problems of modern politics are really purely economic and cannot be understood without a knowledge of economic theory. Only a person who understands the basic issues of economic theory is able to develop an independent opinion on the problems under consideration."
Ludwig von Mises
Looking at models of demand-pull inflation and cost-push inflation, we saw that demand-pull inflation in the short run can temporarily increase real output by stimulating labor supply. Inflation of costs, on the contrary, leads to a fall in real production and a decrease in the demand for labor. Thus, there is a close relationship between the level of employment and the rate of inflation. Hyperinflation, which is usually associated with unwise government policies, can undermine financial system and accelerate the collapse.
The state, as a controlling body, is necessary for carrying out stabilization policy - a set of macroeconomic policy measures aimed at stabilizing the economy at the level of full employment, or potential output. There are a lot of recipes for state intervention in the economy in conditions of macroeconomic instability. However general principles the impact on the level of business activity is reduced to the following provisions: in the context of recessions, the government should pursue a stimulating policy, and in the context of an upturn, a contractionary macroeconomic policy, trying to prevent a strong "overheating" of the economy (an inflationary gap). In other words, the government should smooth out the amplitude of fluctuations in actual GDP around the trend line (see again Chart 1).
One can compare the stabilization policy to shooting at a moving target: the object of government influence (the "target" - the country's economy) is always in motion. And there is a great danger of missing and not making an accurate shot. And if so, then all measures of stabilization policy will be useless or even harmful. Discussions on this subject are being conducted by economists up to the present time.
The "wild" economic cycle that shook the foundations of capitalism in the 19th and early 20th centuries, as Samuelson so aptly put it, has been reined in. And therefore, summing up, we can say that, despite all the difficulties of the stabilization policy, it is carried out in all countries of the market economy, while, of course, having its own differences related to what is commonly called " national model economy". American capitalism is different from Japanese capitalism, and Japanese capitalism is different from transition economy Russia. Therefore, there can be no absolutely universal recipes for pursuing a stabilization policy. However, knowledge of the basic patterns of the cyclical development of the economy is an absolutely necessary prerequisite for an effective macroeconomic policy of the government in any country.
In conclusion, I cannot deny myself the citation of the main socio-economic indicators of Russia for September 1999 compared with previous periods:
The main socio-economic indicators of Russia.
| September
|
January-September 1999 |
For reference |
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| September |
August
|
September 1998 VC |
January-September 1998 in % to January-September 1997 |
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| September |
August |
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| Gross domestic product, billion rubles 1) |
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| Output of products and services of basic industries 2) |
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| Volume industrial products, billion rubles |
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| Investments in fixed assets |
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| Agricultural products, billion rubles |
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| Commercial freight turnover of transport enterprises, billion tkm |
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| including railway |
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| Volume of communication services, billion rubles |
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| Retail trade turnover, billion rubles |
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| The volume of paid services to the population, billion rubles |
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| Foreign trade turnover 3), billion US dollars |
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| including: |
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| export of goods |
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| import of goods |
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| Real disposable cash income |
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| Accrued average wage per employee: |
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| nominal, rubles |
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| real |
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| Total number of unemployed, million people |
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| Number of officially registered unemployed, million people |
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| Consumer price index |
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| Producer price index |
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| 1) Assessment for the first half of 1999; dynamics for the first half of the year compared to the corresponding period of the previous year. 2) The index of output of products and services of basic industries (BSI) is calculated on the basis of data on changes in the physical volume of output of industry, agriculture, construction, transport, and retail trade. 3) Data are given for August 1999, relative indicators are given in % for August and January-August at current prices. |
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Changes in the main indicators of the production of goods and services
in January-September 1998 and 1999
(in % to the corresponding period of the previous year)
BIBLIOGRAPHY:
· V.M.Sokolinsky. State and economy. M., 1997
· V.M.Sokolinsky, M.N.Isalova. Macroeconomic policy in the transition period. M., 1994
· V.M.Sokolinsky. Psychological foundations of economics. M., 1999
· C. McConnell, S. Brew. Economics, principles, problems and politics. M., 1995
· Course of economic theory. Tutorial(edited by M.N. Chepurin and E.A. Kiseleva). Kirov, 1999
· P. Samuelson. Economy. M., 1994
· S. Fischer, R. Dornbusch, R. Schmalenzi. Economy. M., 1993
· Textbook on the fundamentals of economic theory (edited by VD Kamaev). M., 1994
· Economy. Textbook (edited by A.S. Bulatov). M., 1997
· Economic theory (political economy). Tutorial. M., 1997 (Financial Academy under the Government of the Russian Federation).
Sincerely, A.A. Grigorov
The previous topics have dealt with macroeconomic equilibrium, but macroequilibrium is the exception rather than the rule. Macroeconomic instability is more common. The economy develops cyclically.
Under business cycle refers to periodic fluctuations in the level of business activity that are reflected in the change real GNP(GDP). The classical (business) cycle includes the following phases:
crisis (recession) characterized by a decline in production, unemployment, the formation of inventories, a fall in prices and an increase in the bank interest rate;
depression– a high level of unemployment remains, but the fall in prices stops, the loan interest decreases, commodity stocks stabilize, investment begins;
revival accompanied by an increase in the level of production, some reduction in unemployment and an increase in consumer demand, an intensification of the investment process;
climb- this is an excess of the pre-crisis level of production, full employment, an increase in the price level and the creation of conditions for the emergence of a new crisis.
There is no unequivocal reason for the appearance of cyclicality and crises in the economy.
Allocate endogenous and exogenous causes, the former include shortcomings in the organization of production, management, internal conflicts, etc., the latter include trends and strategies for macroeconomic development, global competition and the global economic environment. Cyclicity and crises can be provoked objective(cyclical needs for modernization and restructuring) and subjective reasons(mistakes, voluntarism in management, natural changes).
Cyclicity can be characterized by such properties as the multidimensionality of forms, development in a spiral, the search for new forms of smoothing, renewal and growth.
The following are known varieties of economic cycles :
– Kondratieff cycles ( long waves), lasting 40-60 years, the main driving force of which is structural adjustment;
- Blacksmith cycles (construction cycles) are caused by shifts in the reproductive structure of production; duration about 20 years;
- Jaglyar (Zhuglyar) cycles are associated with a variety of monetary factors (7-11 years);
- Kitchin cycles (short-term cycles) are due to fluctuations in inventories and values at enterprises; may last 3-5 years;
- private business cycles (from 1 to 12 years) are caused by fluctuations in investment activity.
The consequences of macroeconomic instability are a decline in production, unemployment and inflation
Unemployment is a complex and multifaceted phenomenon of the labor market and the economy as a whole. It is characterized by the fact that adult population of working age currently does not have a job, enters the market and actively searches for it.
Working-age population These are all those who, due to their age and health conditions, are able to work. There is a division of the population:
1) for those employed in the market or non-market sectors of the economy;
2) the institutional population, oriented towards non-market structures (on such state institutions as the army, police, state apparatus) and non-institutional population (the rest of the adult population).
Part employed population include those who are oriented to the market structures of the economy - these are people who have a job, as well as people who work part-time or weekly.
To labor force include both employed and unemployed; for the latter, the main criterion is the requirement to find a job. Those who are unemployed and do not meet job search requirements are classified as people outside the labor force .
The state of employment and unemployment is characterized by the following indicators:
– non-institutional population (N NN);
– number of employees (N W);
– number of unemployed (BW)
– number of persons not in the labor force (N LDCs).
In Western practice, the unemployment rate is specified by indicators of its spread and duration. Index the spread of unemployment characterizes the unemployment coverage of the labor force. Index duration of unemployment characterizes the average duration of one case of unemployment. Thus, in the US, short-term unemployment is less than five weeks, and long-term unemployment is more than six months.
There are the following types of unemployment :
1. Friction Unemployment is associated with a certain amount of time spent looking for a new job. At the same time, the frictional unemployed does not lose his professional skills, and at any time they can be in demand. The duration of such unemployment is from 1 to 3 months. Reducing the level of frictional unemployment is possible and effective as a result of well-organized work to inform the population about available vacancies in the labor market.
2. Structural unemployment is associated with technological changes and shifts in production, which entail a change in the structure of demand for labor. There is a professional and qualification discrepancy between existing and newly created jobs and workers. This requires either territorial and sectoral movement of labor, or training and retraining of personnel.
In terms of duration, structural unemployment is usually more than six months in a row, and affects workers with low qualifications or outdated professions, as well as the population of economically backward regions. Therefore, structural unemployment is closely related to regional and technological unemployment, the latter can be considered as a kind of structural unemployment, since it arises as a result of the introduction of new equipment and technology and leads to the replacement of people by machines.
3. Seasonal Unemployment is due to seasonal fluctuations in the production of certain industries, such as agriculture, construction, crafts, in which there are sharp changes in the demand for labor during the year. This unemployment is not dangerous for the economy, it is natural, predictable and manageable.
4. Regional unemployment is the result of a mismatch between the demand and supply of labor in a given region. The reason for such unemployment is the uneven socio-economic development of the territories. Occurs, as a rule, in "labor-surplus" regions, resolution is possible through the implementation of federal and regional projects to create new jobs in such regions, as well as through the migration of the able-bodied population. An example is the Ivanovo region, where a certain part of the able-bodied population works in Moscow and St. Petersburg.
5. cyclic unemployment is caused by cyclical fluctuations in output and employment, occurs during economic downturns, is associated with a decrease in real GNP and the release of part of the labor force. Unemployment is the most dangerous for society.
In addition to the above types of unemployment in the labor market, there are the following forms of unemployment :
– valid unemployment, characteristic features which are the ability to work and the desire of the employee to work, but for certain reasons not having a job;
– fictitious unemployment, which is characterized by unwillingness to engage in labor activity for one reason or another;
– voluntary unemployment, when people themselves voluntarily enter the labor market and become unemployed for one reason or another;
– forced unemployment (the concept was introduced by J.M. Keynes) arises as a result of a lack of effective aggregate demand;
– repeated (periodically recurring unemployment) and " stagnant" unemployment, which takes into account people who are desperate to find work and who have finally left the labor force.
If the actual unemployment rate exceeds its natural rate, then the country loses part of its GDP. For information: the concept of the natural level of unemployment was introduced by the neoclassicists (in particular, M. Friedman), who considered unemployment a necessary sign of a mobile and flexible labor market. Natural rate of unemployment corresponds to the state of full employment in the economy (potential GNP) and in total is equal to frictional and structural unemployment (4-6%).
The American economist A. Ouken formulated a law that makes it possible to calculate the loss of goods and services as a result of rising unemployment.
According to Okun's law , the excess of the actual unemployment rate by 1% over its natural level leads to a decrease in actual GDP compared to the potential (at full employment) GDP by an average of 3%.
In macroeconomics, under inflation refers to an increase in the general price level. Although you can find other definitions of inflation, related to a large extent to microeconomic analysis: a decrease in the purchasing power of money; an excessive increase in paper money in circulation; and others. Along with inflation, the concepts disinflation– a slowdown in price growth, and deflation is a process inverse to inflation.
The causes of inflation are extremely diverse:
– ill-conceived emission policy central bank;
- militarization of the economy;
- monopolization of society;
– unreasonable tax policy;
– rising prices on world markets;
– adaptive inflation expectations; and etc.
Inflation is measured using price indices.
Price index(Ỉ) is the price ratio t year (P t) to the price of the base year (P b), i.e.
Ỉ = (P t / P b) * 100%
There are the following types of price indices: consumer price index, wholesale price index, export and import price index, agricultural producer price index, construction price index, freight transportation tariff index, etc.
Macroeconomic theory, when determining the rate of inflation, gives preference to the consumer price index - this is the ratio of the price of the consumer basket to t – m year to its price in the base year. The consumer basket of households includes basic food products, a set of basic non-food products (clothing, footwear, household goods) and basic services (medical, transport services, communication, recreation, culture, personal hygiene).
Taking into account the rate of inflation, the following types of the latter are distinguished:
1) normal inflation - with an inflation rate of 3-3.5% per year;
2) moderate (creeping) inflation - at a rate of up to 10% per year;
3) galloping inflation – at a rate of 20–200% per year;
4) hyperinflation - at a rate of 50% per month or more for more than six months. With such inflation, the value of money falls so quickly that they no longer fulfill their main functions, and barter grows.
From the point of view of the ratio of price increases for various product groups (according to the degree of their balance), there are balanced and unbalanced inflation. With balanced - the prices of various goods are unchanged in relation to each other, with unbalanced - the prices of various goods are constantly changing in relation to each other, and in different proportions.
In terms of predictability of inflation, there are expected and unexpected inflation. The first can be predicted and predicted in advance; the second - occurs spontaneously, sporadically, the forecast is impossible.
There are two types of inflation: open and depressed.
Open inflation is inherent in markets where free prices operate; it deforms but does not destroy the market mechanism. Open inflation can take the following forms:
1) demand inflation;
2) cost inflation;
3) structural inflation.
Demand inflation arises as a result of the fact that aggregate demand significantly exceeds the current production capacity of the economy. AT general sense Demand-pull inflation means an imbalance between aggregate demand and aggregate supply. Graphically, it can be represented as a shift of the aggregate demand curve to the right.
Cost inflation (supply inflation) arises as a result of an increase in the volume of costs, for example, due to an increase in wages that is disproportionate to an increase in labor productivity. Graphically, this type of open inflation corresponds to a shift in the aggregate supply curve to the left, which can lead to such phenomena as stagflation ( economic stagnation with simultaneous inflation) or slampflation (a combination of inflation and a sharp economic downturn).
Structural inflation It is caused by the intersectoral imbalance of the economy, when the goods of some industries are washed out of the market, which leads to the formation of chronic unsatisfied demand. At the same time, the resulting voids are filled with goods of not very high quality, but expensive for the bulk of consumers. There is an asymmetry in the assortment structure, accompanied by an increase in prices.
At suppressed inflation the state, concerned about rising prices, comes to grips with this phenomenon. It establishes strict administrative control over prices and incomes, freezing them for certain period. At the same time, the state directs its efforts not to eliminate the causes, but to combat the consequences - rising prices.
Socio-economic consequences of inflation:
- falling living standards of the population (decrease in current real incomes, depreciation of personal savings);
- a decline in social production (the incentives to work disappear, the market mechanism of self-regulation and the movement of capital is disrupted, the outflow of capital from industries with high costs, the formation of a shortage and deferred demand among consumers, the emergence of black markets, the criminalization of the economy);
- redistribution of income and wealth;
- price lag state enterprises from market;
– hidden state confiscation of funds through taxes;
– accelerated materialization of funds;
– instability of economic information;
- falling real interest, etc.
3.7 Macroeconomic instability: inflation and unemployment
Inflation: causes, forms, types
Inflation is a multifactorial phenomenon that manifests itself in the growth of the general price level and the depreciation of banknotes in relation to real assets.
The increase in labor costs for the production of goods, the excess of demand over supply were considered non-inflationary factors, and the rise in prices associated with the disorder monetary circulation, was declared inflationary.
There are a number of inflation theories:
1) The quantitative theory of inflation. It follows from this theory that the price level is directly proportional to the money supply. Since the inflation rate is the change in the price level, expressed as a percentage, it can be concluded that the central bank, by controlling the money supply, completely controls the inflation rate. Thus, maintaining the money supply at a constant level will mean a stable price level, an increase in the money supply central bank lead to a rapid rise in prices;
2) Theories of adaptive and rational expectations. They are based on the assumption that people imagine their future in a similar way to the recent past, and form their plans accordingly. If a we are talking about recessionary inflation, firms assume that the inflation rate relative to factors of production will be the same as last year.
The theory of adaptive expectations considers the aggregate supply curve, which has a positive slope in the short run and moves up in the long run.
The theory of rational expectations states that, when forming his future plans, a rationally thinking subject must analyze not only the past, but also the future, take into account the impact of present and future economic policy;
3) The theory of accelerating inflation. The theory of accelerated inflation is based on the idea that the development economic system during periods of change in the rate of inflation occurs differently than during periods of stability;
4) Monetarist theory inflation. Demand-pull inflation occurs when resource utilization is above optimal. When demand exceeds supply at full employment, prices rise. Demand-pull inflation is a monetarist version of this process. Monetarists believe that the price is determined by the amount of money in circulation (24):
Р = f(M), (24)
where P - price; M - money; f is a function.
If the price depends on the amount of money in circulation, then the fight against inflation of demand requires limiting the amount of money, effective demand. Under these conditions, a policy of expensive money is being pursued - interest rates are rising, limited credit expansion, cut government spending.
5) Keynesian theory of inflation. Cost-push inflation is a Keynesian explanation of inflation. According to J. Keynes, the price depends on the ratio of wage growth and labor productivity (25):
P \u003d K * W / A, (25)
where P is the price; W - salary; A - labor productivity; K is the share of wages in production costs.
Inflation is one of the most important macroeconomic problems. It appears as a long-term process, which is manifested in the growth of the general price level. As a result, monetary aggregates depreciate in relation to real assets. This is the essence of this phenomenon, which depends on many factors. The latter appear in the form of inflationary shocks or impulses that feed and intensify the inflationary process. However, not any change in prices for individual goods, aggregate demand or supply necessarily develop into inflation or is it. The economy can absorb an inflationary shock. In contrast to inflation, deflation refers to a general fall in prices and costs. A slowdown in the average rate of price growth is called disinflation.
Inflation can proceed in an open (explicit) or hidden (suppressed) form. It depends on the nature of state intervention in the economy and anti-inflationary policy instruments. The process of inflation in an open form takes place in the conditions of free movement of prices, mainly indirect methods of regulating the economy. It is measured by the growth rate of the price level, depreciation of the national currency, etc. Suppressed inflation takes place in an economic system with strict administrative control over prices, salary, production at both the micro and macro levels. It manifests itself in an increase in the deficit in the economy and its transformation into a destructive one, a decrease in the quality of products, a change in the structure of the assortment, an increase in queues, time spent on searching for the necessary goods and the volume of pent-up demand, an increase in the gap between the prices of free (shadow) ) market and state.
Inflation has a destabilizing effect on the economy. The higher its level, the usually stronger its negative consequences. The inflation rate corresponds to the growth rate of the price index, expressed as a percentage. Various price indices are used to assess the rate of inflation. If the price growth rate is up to 10% per year, moderate, or creeping, inflation is noted, with an increase in prices up to 200% per year, a galloping, or “Latin”, over 200% hyperinflation is noted (according to the American economist F .Kagan, over 50% per month).
This division criterion is rather formal. In order to determine the type of inflation actually taking place - moderate, galloping or hyperinflation, it is necessary to find out how much the existing price growth rates change the parameters of social reproduction. Usually, creeping inflation does not have a serious negative impact on the economic system. The presence of galloping inflation indicates the emergence of disproportions in the structure of the economy, the crisis state of the financial system. Hyperinflation occurs during periods of serious disruption of the proportions of reproduction, when the economy is close to collapse. At the same time, an analysis of the development of world inflation shows that the country's economy can adapt to very high (up to 1000%) rates of price growth. An example is the countries of Latin America in the 70-90s and Russia in the 90s.
Depending on the object of study, national, regional and world inflation are distinguished. On the scale of an individual country, the object of analysis is the dynamics of wholesale, retail and consumer prices, the GNP deflator. Similar indicators are analyzed at the level of association of countries (for example, the EU) and the world economy as a whole.
Inflationary shocks can arise both within the economic system itself and outside it. Depending on the nature of inflationary impulses in relation to the system, imported and exported inflation are distinguished. If the country maintains a firm exchange rate, any increase in the price of imported goods will import inflation into the country. The significance of this factor in the development of the inflationary process in the country depends on the share foreign trade in total GDP. The higher it is, the greater the effect of "importing" inflation. The export of inflation is easier for countries whose currency is used as a reserve or whose goods, which are not substitutes, occupy a significant share in the imports of other countries.
As inflation develops, economic agents begin to gradually adapt to it. Depending on how successfully the economy adapts to the rate of price growth, inflation is divided into balanced and unbalanced. In the first case, prices rise moderately and steadily. All other macroeconomic indicators are changing almost adequately. With unbalanced inflation, commodity prices jump up at different times, and the economy does not have time to adapt to changing conditions. Galloping inflation, as well as deep deflation, are considered undesirable phenomena of economic life. Therefore, governments are trying to control the dynamics of commodity prices. Depending on the ability of the state to influence the inflationary process, it is divided into controlled and unmanaged. In the first case, the state, with the help of various anti-inflationary policy instruments, can slow down or accelerate the rate of price growth in the medium term. In the second case, the use of anti-inflationary measures is impossible or does not give a positive effect. When inflation gets out of control, there are no real sources to correct the inflation rate in the short run.
An increase in demand in the economy leads to an increase in real GNP or nominal GNP. There can be various relationships between rising prices and increasing production. In accordance with the change in these indicators, true and imaginary inflation are distinguished. If the economy was in equilibrium, then the growth of aggregate demand initially leads to an increase in real output that outstrips price growth (growth in real GNP), and inflation is considered imaginary. In the future, as demand is pumped up, the economy experiences an increase in costs and the nominal volume of GNP, while maintaining the real volume of production at a natural level. Inflation from imaginary becomes genuine.
Economic agents try to anticipate changes in the main macroeconomic indicators. Predictions of economic entities about the rate of price growth, or inflationary expectations, are the result and factor in the development of inflation. Depending on the degree of accuracy of inflation expectations, predictable and unpredictable inflation are distinguished. Usually inflation is predictable if inflation expectations are rational and there are no unexpected internal and external shocks. Otherwise, it is quite difficult to predict a change in the price level.
Depending on the factors that generate and feed the inflationary process, there are various sources of inflation: "demand" and "costs", credit, social, structural, "bottlenecks", profits, taxes.
Analysis of modern inflation is impossible without a brief historical look at the development of this phenomenon. Over a long period of time (approximately from 1820 to 1933) in almost all developed countries there was a long-term downward trend in the general price level. During this period, the gold standard was in effect. Prices grew relatively quickly after the discovery of new gold deposits, as well as during periods of crisis upheavals - wars, revolutions, etc., when paper money was used. After the refusal to exchange signs of value for gold and the displacement of the latter from money circulation, the sharp expansion of credit operations, the possibility of a constant rise in prices became a reality.
Features of the flow of modern inflation are: continuity, universality, unevenness. Over the past 50 years, price increases have been constant, covering all industries, markets, countries and regions, developing asynchronously. inflation is distinctive feature commodity production with developed means of circulation in violation of the balance between various areas reproduction process and the loss of "elasticity" by prices as a result of the oligopolistic structure of the economy.
Supporters of monetary concepts of inflation consider it purely a monetary phenomenon. It is known that the natural increase in the total production capacity and real GNP is about 4% per year. Therefore, any increase in the amount of money and / or the rate of their turnover in excess of this amount will cause inflation.
The growth of the money supply in circulation, which entails an increase in aggregate demand, can be caused by various reasons: the expansionary financial policy of the state, covering the budget deficit with the help of a "printing press", a sharp expansion of credit, an increase in the use of debt obligations of the population in as means of payment. In this case, the cause of inflation is credit and banking system, exercising ineffective control over monetary aggregates. This way of development of the inflationary process is typical for the "classical" inflation of the era of pre-monopoly capitalism. Schematically, this process can be represented as follows: rejection of gold circulation -> a sharp increase in government spending in the state budget deficit -> additional fiduciary issue of banknotes -> price increase (inflation) -> a new increase in government spending and so on round. The restoration of the gold standard stopped inflation.
Another channel for the development of inflation is associated with the growth of the velocity of money circulation, which exceeds the growth in production. The rate of circulation of money may increase as a result of technical innovations in banking, changes in legislation or the use of securities as a means of accumulation.
Rapid price increases also reduce real cash balances. This is due to the fact that the opportunity costs of maintaining the real cash at the same level become very high. The population and firms tend to make additional purchases faster, there is a “flight” from money. The velocity of circulation of money tends to increase periodically.
In non-monetary concepts, inflation is viewed as a multifactorial phenomenon. The reasons for the inflationary rise in prices may lie on the side of both monetary circulation and the production sphere. The latter include factors that cause an increase in production costs, changes in the structure of demand, redistribution of national income, and inflationary expectations. Inflation may result from an increase in wages, profits, or taxes in excess of growth in labor productivity and/or real income. In this case, the struggle for the redistribution of the national income between the workers (employed), entrepreneurs and the state is unfolding. Economic entities carry out income growth by increasing prices. The development of this process takes place according to the principle of "race for the leader": as soon as an economic entity detects a decrease in its real income due to an increase in the income of other entities, it raises the price, trying to compensate for the decrease in income.
The rise in prices is caused by two reasons - the excess of demand over supply (demand inflation) and an increase in production costs (cost inflation).
The Swedish economist B. Hansen introduced the concept of open and suppressed (hidden) inflation. Open inflation is expressed in rising prices. Suppressed inflation is characterized by the fact that prices and wages are under strict state control, and the main form of its expression is a general shortage of goods.
Inflation is closely related to unemployment. In the late 1950s, the English economist Phillips discovered the relationship between the unemployment rate and wage growth, depicting this as a curve
(Fig. 25).
Rice. 25. Phillips curve: W- growth rate of nominal wages; P- level
inflation; U- unemployment rate in %
Methods of fighting inflation
The fight against inflation takes place within the framework of the anti-inflationary policy of the state.
Anti-inflationary policy is a set of state regulation instruments aimed at reducing inflation. Since the mid-1960s, measures for direct and indirect price regulation, common to the entire economy, have been applied.
There are two methods of fighting inflation:
1) Active Methods fight against inflation, consisting in an attempt to eliminate inflation by anti-inflationary measures. Anti-inflationary measures as a variant of state policy in conditions of inflation are reduced to minimizing state intervention in the play of market forces when using anti-inflationary measures.
The orthodox program of a purely monetarist nature provides for a wide field of activity for market regulators along with the curtailment of the economic activity of the state.
2) Adaptation policy. This policy is based on the fact that all subjects of the market economy take inflation into account in their actions - primarily through taking into account losses from a decrease in the purchasing power of money. The most common indexation of the interest rate. This operation boils down to increasing the interest rate by the amount of the inflation premium.
Another method of compensating for inflation is the indexation of the initial investment amount, which is periodically adjusted according to the movement of a certain, predetermined index.
Direct regulation was carried out within the framework of income policy. It is conditionally possible to single out two areas of income policy: setting benchmarks for the growth of wages, prices and direct control over them. With their help, they tried to reduce the growth of real incomes and prices. Landmarks are a set of rules that must be followed voluntarily. Control has the force of legislative acts. As benchmarks, the maximum limits for the growth of prices and wage rates were used. Changes in the latter are usually tied to the growth rate of labor productivity in the entire economy; prices could change in such a way as to compensate for changes in labor costs. The essence of this approach lies in the fact that the income of employees is regulated directly, and profit - indirectly through prices.
Control was usually applied by passing laws on the simultaneous "freezing" for a certain period of prices and wages. In relation to employees, income policy is more discriminatory in nature, since government agencies and manufacturers are more willing to control wages than prices. In practice, it is much more difficult to exercise control over prices than over wages, since there are many commodity groups. In addition, an increase in labor productivity in the economy automatically leads to a relative and absolute reduction in the share of workers in the national income.
One option for income policy is the social contract. Trying to reach a stable compromise between rising prices and wages, the government organizes negotiations between the administration of large enterprises and trade unions. The effectiveness of revenue policy has always been an arena for debate. Its opponents believe that entrepreneurs and trade union leaders cannot give up their target function - obtaining maximum profit, therefore they will not voluntarily comply with the guidelines set by the government.
Consequences and measurement of inflation
Most people consider inflation to be a negative phenomenon. However, the costs of inflation, unlike the costs of unemployment, are not always sufficiently obvious. On the surface are rising prices for goods and services, a decrease in the purchasing power of money. The consequences of inflation are diverse, contradictory and depend on the type of inflationary process. In addition, the ability of economic agents to predict the future rate of inflation is of great importance. If all people can accurately predict the parameters of the development of the economy, then it seems that inflation is not a serious problem. However, in real life, the majority of the population is not able to make accurate forecasts. Unforeseen inflation distorts the plans of economic entities and leads to the redistribution of national income and wealth between different classes, groups of society; economic and social institutions.
We begin our analysis of the consequences of inflation with fully predictable inflation. This case seems to be one pole of the theoretical model, at the other end of which there is a completely unpredictable inflation.
Inflation, even if fully expected, is an unauthorized government tax paid by the private sector. It is paid by all holders of real cash balances. It is paid automatically because money capital depreciates during inflation. Funds are redistributed from the private sector (firms, households) to the state. The inflationary tax shows decrease in cost of real th monetary balances. It is usually regressive - poorer people bear the brunt of the inflation tax than richer people.
Another channel for the redistribution of income in favor of the state arises from the monopoly right to print money. The difference between the sum of denominations of additionally issued banknotes and the cost of printing them is called seigniorage. It is equal to the amount of real resources that the state can receive in return for printed money. Seigniorage is equal to the inflation tax when the population maintains a constant real value of their money balances.
In addition, projected inflation reduces the economic well-being of individuals. Keeping cash leads to lost profits in the form of interest, which can be charged at the bank. The expectation of high price growth leads to an increase in the nominal interest rate and hence the opportunity cost of holding money. As a result, the demand for money falls - the population reduces its average cash balances, visits banks more often and seeks to spend cash on goods and services faster, invest them in non-depreciable assets. These costs are called the "shoe" costs of inflation. When creeping inflation their size is insignificant. However, with hyper-inflation, they reach significant sizes and can contribute to the destruction of the payment system.
The flow of inflation in an open form leads to "menu costs". The constant rise in prices makes it necessary to bear the cost of changing price lists, catalogs, price tags, setting up telephone, vending and other similar machines. Firms, trying to reduce "menu costs", designate prices in hard currency or conventional units, use tokens, etc. In general, these costs are small for the entire economy, but can be quite significant in certain industries.
In addition to the inflation tax, the state can receive additional revenue from the private sector due to the impact of inflation on taxation. With a progressive system of taxation of nominal incomes, inflation contributes to an increased withdrawal of funds from households. An increase in prices usually leads to an increase in the nominal income of individuals. They fall into a group with a higher tax rate. As a result, with a constant or decreasing real income, tax payments increase. The disposable income of households decreases due to the interaction of inflation and the tax system.
Since the bulk of the income tax is paid by the population with minimum and average incomes, the poorer people bear the greatest costs. Since budget revenues come from past period, then inflation changes the structure and reduces the real revenues of the state budget. Possibilities of the state to carry out expansionary fiscal and monetary policy are narrowing. The budget deficit and public debt are rising. The mechanism of their reproduction is launched.
The net economic losses from expected inflation seem insignificant compared to the public's aversion to even moderate inflation. This is due to the fact that inflationary inertia arises in the economy. It manifests itself in the slow reaction of the inflation rate to changes in state regulation. In addition, maintaining inflation in a balanced form is quite problematic. Any inflationary impulse can increase inflation, taking it out of control.
One of the features of the flow of modern inflation is uneven. Fluctuations in the price level become quite frequent and significant. This complicates the forecasting of future inflation rates. Inflation that is not fully foreseen increases the redistribution of national income between different segments of the population.
At a constant interest rate, as a result of an unexpected increase in inflation, lenders always lose and borrowers win, and, conversely, unforeseen deflation redistributes property in the opposite direction. Let's assume that the bank provided the household with a loan of 1 million rubles. for a period of one year at a nominal rate of 100% per annum. The banker assumes that the annual inflation rate will be 90% and the real interest rate 10%. If for the past period the inflation rate is 100%, then the real interest rate will be equal to zero and the debtor used the money for free. The lender will get back the real amount of the loan. If the inflation rate is above 100%, then the initial real cost of the loan will decrease.
In an attempt to reduce losses, banks raise or index the nominal interest rate. This, in turn, reduces the volume of investment in production. If this situation persists in the long term, it will lead to a reduction in the real volume of GNP and an acceleration of inflation.
Unforeseen inflation redistributes not only bank capital, but all other financial assets and income. Assets whose income is calculated in nominal prices will depreciate as a result of unexpected price increases. These include various promotions, bonds, including government bonds, with a fixed monetary value and income. It is believed that with the help of inflation, the government can reduce the real value of the unpaid part of the public debt. With low interest rates and high inflation, government debt pays negative real interest rates.
Persons with fixed incomes suffer losses from inflation as a result of a decrease in real incomes. The proportion of recipients is declining fixed income in the national income. People who receive indexed incomes are protected from inflation to the extent that the income indexation system allows them to keep real earnings. In general, wage adjustments for most workers occur after price increases. If the worker manages to keep the average real wage at the same level, then the amplitude of its fluctuations will be very strong. As a result, the share of labor in the national income will constantly change.
Different segments of the population have different net asset positions. It has been found that older people tend to hold more nominal assets and act as creditors. Since inflation leads to the depreciation of savings in monetary form, the redistribution of accumulated income from old to young members of society is carried out. Sellers of goods and resources that occupy a monopoly position in the market can increase their real income.
In real assets, there is a mechanism for automatically maintaining value and interest income depending on the rate of inflation. Owners of real assets (real estate, antiques, works of art, jewelry, etc.) are the most protected from inflation, since the rise in prices for these goods overtakes the general level of inflation in the country. Since the real value of savings accumulated in monetary form, then the demand for real assets increases. The acceleration of inflation spurs the growth of demand in the economy, leads to a flight from money. Firms and households have to carry out additional costs for the purchase of real assets.
The constant rise in prices in the economy leads not only to the redistribution of national income. Unexpected high rates of inflation and sharp changes in the price structure complicate the planning (especially long-term) of firms and households. As a result, the uncertainty and risk of doing business increase. The payoff for this is an increase in interest rates and profits. Investments begin to have a short-term character, the share of capital construction in the total volume of investments and the proportion of speculative operations increases. In the future, this may lead to a decrease in the welfare of the nation and employment.
Inflation has an impact on the competitiveness of domestic goods. On the one hand, relatively higher rates of price growth in the "open" sector of the economy lead to a decrease in the competitiveness of national goods. The result will be an increase in imports and a decrease in exports, an increase in unemployment and the ruin of commodity producers. On the other hand, rising prices cause a depreciation of the national currency exchange rate. With fixed prices for some goods within the country, it becomes more profitable to export them abroad. This leads to a shortage of these products.
Economic agents try to insure their cash from inflation. In the context of the underdevelopment of financial instruments with an adjustable rate, the demand for a more stable foreign currency increases. The outflow of capital abroad is increasing, speculation on foreign exchange market which in turn will drive up prices.
Several indicators are used to measure inflation:
1) Pasha index. It is calculated by formula (26):
h = ∑ (Рi1 * qi1) / ∑ (P0i* q1i), (26)
where h is the price growth index for one year; Pi1, P0i are prices for the same products in the base and current years; q1i is the volume of output of this product in the current year.
2) Consumer price index (27):
CPI = (Wi/W0) * 100%, (27)
where W0 is the value of the basket consumer goods in the base year; Wi is the cost of a basket of consumer goods in the year under study.
3) Fisher index (28):
,
(28)
where IpL - price index in the planning period; IpP - price index in the billing period.
4) GDP deflator.
Unemployment: essence, types, consequences
Unemployment is an integral element of the labor market. It is a complex, multifaceted phenomenon. The adult population with a labor force is divided into several main categories depending on the position that it occupies in relation to the labor market.
The able-bodied population is all those who, by age and health, are able to work. delimitation certain categories population is carried out in accordance with employment in the market or non-market sectors of the economy. From the composition of the adult population, an institutional population stands out, focused on non-market structures, that is, on such state institutions as the army, police, state apparatus. The rest of the adult population is non-institutional. The composition of the employed population includes those who are focused on the market structures of the economy.
The unemployed are those people of working age who currently do not have a job, enter the labor market and are actively looking for it. Persons who have a job, as well as persons employed part-time or weekly, are classified as employed.
The labor force includes both the employed and the unemployed. Thus, in the United States, a person is considered unemployed if, on a certain date, firstly, during the previous week he did not have a job, and secondly, during the previous four weeks he made efforts to find it. The last condition is called the “job search requirement” and is intended to determine the presence or absence of a market orientation of an employee and limit the composition of the unemployed to those who are actively looking for work, that is, register with the employment authorities, collect information about vacancies, advertise looking for work. The exceptions are temporarily dismissed and those who are temporarily not working, but are ready to start new job and expect it no more than 30 days. Both of these categories of persons are considered unemployed, regardless of whether they are actively looking for work or not.
Persons who are not part of the labor force are allocated to a special category. These include those who are unemployed but do not meet the job search requirement. It is assumed that these people do not have a job search orientation in the labor market. There is also a category of people who really would like to work, but for one reason or another have refused to search, these are the so-called desperate to find a job.
Unemployment- this is the lack of opportunities for workers who are able and willing to work, to have a job that gives the right to receive income.
The unemployed do not include persons who are unable to work (by age, state of health). Able-bodied, but for one reason or another who do not apply for a job (housewives), are also not taken into account in unemployment statistics.
The following forms of unemployment are distinguished: frictional, structural (technological), cyclical, hidden, seasonal.
Friction caused by imperfection in the technical functioning of the labor market, lack of information about the availability of jobs and other technical reasons.
Structural (technological) unemployment is associated with a lack of one or another material resource, with the inability to find a job due to gender and age characteristics, nationality, qualifications and other personal characteristics. In a rapidly changing division of labor, the structure of supply may not match the structure of demand for labor.
cyclic associated with fluctuations in GDP. Production periodically experiences recessions (recessions), respectively, the level of employment falls. Periods of revival and recovery increase employment.
Hidden unemployment is typical for agriculture, where redundant workers are used in production that actually requires a smaller amount of labor.
Seasonal due to fluctuations in the volume of production of certain industries depending on the season: some types of construction, agricultural work, crafts, etc. provide employment only during certain seasons.
Unemployment is a characteristic feature of a market economy. Therefore, full employment is nonsense, incompatible with the idea of a developed market economy. But still, unemployment must be put within certain limits, within which an effective growth regime and a state of economic stability are achieved.
Unemployment corresponding to this ideal level is called natural.
The combination of frictional and structural unemployment produces a natural rate of unemployment (or full employment rate) corresponding to potential GDP.
The natural rate of unemployment is another name for full employment. When the natural rate of unemployment, or full employment, is reached, the labor market experiences neither a surplus nor a shortage of labor. For the economy to function normally, a reserve of labor is needed.
The natural rate of unemployment reflects the actual structural characteristics of labor and product markets, including market imperfections, stochastic fluctuations in supply and demand, the cost of information about job vacancies and available labor, mobility costs, etc.
The natural rate of employment reflects employment at a natural rate of unemployment.
Unemployment leads to an increase in socially negative processes, an increase in tension, and social pathology in society.
Measurement of unemployment. Okun's Law
In Keynesian theory, full employment is a state in which aggregate employment is inelastic, that is, it does not respond to an increase in effective demand.
The state of employment and unemployment is characterized by the following indicators:
1) non-institutional population of Chnn;
2) the number of employed
3) the number of unemployed Chb;
4) the number of persons who are not part of the labor force of the CNRS.
There are the following relationships between these indicators:
1) the number of labor force (28):
Chrs \u003d Chz + Bb, (28)
2) non-institutional population (29):
Chnn \u003d Chz + Bb + Chnrs, (29)
3) the level of employment of the population (30):
Uz \u003d Chz / Chn, (30)
4) unemployment rate (31):
Nb \u003d (Bb / (Bh + Bb)) * 100, (31)
5) the unemployment rate of the population (32):
Ub \u003d Bb / (Chz + Bb), (32)
6) the level of involvement of the population in the labor force (33):
Uvrs \u003d (Chz + Bb) / Chn, (33)
The calculation of potential losses of products and services as a result of rising unemployment is carried out on the basis of the law formulated American economist A. Okun (34):
(Qpz-Qf) / Qf = a * (Uf-Upz), (34)
where Qpz is the level of output at full employment of the population; Qf - actual output; Uf - actual unemployment rate; Upz - unemployment rate at full employment; a - coefficient calculated empirically.
According to Okun's law, the excess of the actual unemployment rate by 1% over the natural level leads to a decrease in the actual GNP compared to the potential by an average of 2.5%. society. An unemployed person not only cannot use his knowledge and skills, loses income and livelihood, but also loses his status and significance in society, becomes psychologically unstable, uncertain about the future. American scientist
M.H. Brener, based on an analysis of data on the US population in 1970, noted that over 30 years, an increase in unemployment by 1% while maintaining it for a six-year period leads to an increase in indicators of "social pathology": overall mortality - by 2%, the number of suicides - by 4.1%, the number of murders - by 5.7%, the number of prisoners in prisons - by 4%, the number of patients as a result of mental illness - by 4%. In general, the total costs of society associated with the growth of public spending on overcoming social negative consequences unemployment are quite significant.
Mass unemployment is one of the most acute socio-economic problems and is a real threat to the existence of society and civilized forms of relations between people. Therefore, the most serious attention has always been paid to the fight against mass unemployment in the most developed countries of the West. In the practical policy of the governments of these countries, the employment improvement program has always occupied and occupies one of the central places.
State policy of employment and regulation of unemployment
In modern Western economic theory, there are different approaches to the regulation of employment. Traditionally, there are two main directions: neoclassical and Keynesian. The methods and tools developed within the framework of these schools for regulating the labor market are proposed to be widely used by countries not only with developed market economies, but also with economies in transition.
The neoclassical direction proceeds from the fact that the labor market is capable of automatic self-regulation and remains stable and balanced in the long run under full employment conditions. Therefore, the government should pursue a policy of non-intervention in the self-adjusting mechanism of the labor market.
Representatives of the neo-Keynesian direction believe that the labor market can reach an equilibrium state even with a high level of unemployment, but this requires government intervention and macroregulation of the labor market. The essence of their recommendations was that if the main cause of unemployment is a decrease in total spending in the economy, then the state, by stimulating the expansion of effective demand in the market for goods and services, can significantly reduce unemployment. This should be facilitated by the state's encouragement of business investment activity, an increase in government orders, a reduction in income tax rates, the expansion of the nationalized sector, an increase in the manageability of the economy, and increased control over the spending of budget funds. The implementation of such a policy should lead to an increase in production and employment. However, this raises the problem of an increase in the state budget deficit and rising inflation.
An attempt to solve this problem was made by the English economist A. Phillips in the 50s. In his study "Relationship between Unemployment and Rates of Change 1861-1957" he showed that during the period under study in England, the growth rate of average money wages and the unemployment rate were inversely related, that is, the higher the wage growth rate, the lower unemployment, and vice versa. Because wage growth is one of the critical factors inflation, then in a modified form, the Phillips curve was presented as an inverse relationship between rising prices P (inflation) and the unemployment rate.
The regularities Phillips derived for a long time formed the basis for the macroeconomic policies of most governments in the West: in order to reduce inflation, the government allowed an increase in the unemployment rate, and, conversely, the growth of employment required a weakening of the control over inflation. However, the continued rise in unemployment in the 1970s and 1980s, with a simultaneous increase in inflation, showed that these methods of combating unemployment became ineffective. There was a need to develop a new approach to the problem of labor market regulation.
Such an alternative concept was the theory of the "natural" level of unemployment, proposed by the American economist M. Friedman. It has become a theoretical justification for conducting a practical policy of labor market deregulation.
Unlike the Keynesians, monetarists believe that the inverse relationship between unemployment and inflation is possible only in the short term, when the rise in inflation caused by the state stabilization policy to achieve full employment is completely unexpected for wage workers and entrepreneurs. Since the working population underestimates the price growth factor, and the rate of real inflation turns out to be higher than expected, nominal wages lag behind inflation growth. In such a situation, entrepreneurs expand production and employment because production costs rise more slowly than prices.
In the short term, when it is difficult for business entities to foresee the macroeconomic changes that arise when the government takes measures to regulate aggregate demand, the inverse relationship between inflation and unemployment is fully confirmed. But in the long term, with the repeated implementation of such a policy by the state, the adaptive expectations of market actors change towards the most complete and objective assessment of upcoming changes in the economy based on past knowledge. In such a situation, workers, anticipating a rise in prices due to an increase in aggregate demand, can foresee wage indexation when concluding employment contracts with the administration of firms. Entrepreneurs, in turn, can change their behavior in the labor market and adjust the demand for labor.
Therefore, under conditions of adaptive expectations, no matter how much the government strives to reduce the “natural” level of unemployment by actively stimulating aggregate demand, this can only lead to short-term stabilization of employment below its natural level. Under the influence of the market mechanism, when the economy reaches long-term equilibrium, unemployment will rise. In the long run, the Phillips curve is absolutely inelastic to price changes when full employment is reached.
Western economists believe that the patterns expressed in the nature of the Phillips curve were also confirmed in Russia in the 1990s. During this period, the rise in prices many times exceeded the rise in unemployment. The government's active anti-inflationary policy over the past three years to limit the money supply and aggregate demand has led to some reduction in inflation rates, but at the same time to an increase in unemployment rates. Some economists believe that such a policy should continue in the future.
In the domestic economic literature, there is another point of view, according to which the implementation of an employment policy based on monetary recipes in the framework of solving the dilemma of choosing between high inflation or high unemployment will not benefit the Russian economy, will not help reduce tensions and stabilize the situation on the Russian market labor. Strategic goal there is only one for Russia in the short and medium term - slowing down inflation and minimizing it while at the same time ensuring, albeit small, but stable growth production and employment (decrease in unemployment), and in the future - a gradual transition to a long-term strategy for achieving sustainable economic growth.
At the same time, one feature characteristic of Russia should be noted. Unemployment in the 1990s in Russia grew at a much slower rate than the rate of decline in production volumes. This indicates the accumulation of an excess number of employees in enterprises that are not provided with real work and an increase in hidden unemployment. According to the Federal Employment Service, every month more than 4 million people work part-time and are on administrative leave. This is due to the deliberately carried out by the government through Federal Service employment with a policy of preventing mass layoffs of workers in order to prevent destabilization of the situation in the country.
Current situation It is also characterized by the existence of significant disproportions in the structure of employment, wage rates in the labor market and the deformation of the motivational mechanism of labor activity. The minimum wage in Russia is several dozen times lower than in the United States, and average salary in terms of its purchasing power, it has become minimal and allows the reproduction of only low-skilled workers.
There is practically no incentive for highly skilled labor.
All this is accompanied by a significant decrease in labor productivity.
Birth rates and average life expectancy have dropped sharply. In Russia, the average life expectancy is currently only 59 years.
In the 1990s, there was a tendency for an absolute and relative reduction in the number and share of people employed in industry, construction, and the military-industrial complex. Average headcount employed in large enterprises in most industries is declining from year to year. According to official statistics, in St. Petersburg in 1996, almost 60% of enterprises worked in a reduced mode (part-time work week, month), 31% stopped individual production for more than one shift.
A slight increase in employment in the private sector and in market structures does not compensate for the decline in employment in traditional sectors of the economy (industry, construction). At the same time, employment in science and in industries related to advanced technologies is declining.
Huge damage to the country's economy is caused by immigration abroad of scientific and highly qualified personnel. The recession in the economy leads to underutilization and degradation of jobs, which will limit the demand for labor in the future.
If we take such a segment of the labor market, which includes those employed in the public sector and public sector workers, we can identify the following features. In Russia, in the context of the crisis, employees of the public sector and sectors traditionally public sector, are ready to work more at the expense of free time and increase the supply of labor with the slightest increase in wages or even while maintaining it at the same level in order to have at least some means of subsistence in the future.
In countries with market economies, there are special unemployment insurance systems, that is, protecting workers from financial losses caused by unemployment. For example, in the United States, compulsory unemployment insurance is applied on a national scale through deductions from firms and state transfer payments for most categories of workers. Unemployment benefits are provided primarily by the states. The weekly unemployment benefit is 36% of weekly earnings. The duration of this benefit is approximately 14 weeks. Long-term unemployed (more than 15 weeks) in 1991 in the United States amounted to 2323 thousand people out of 6932 thousand of all unemployed. The bulk of the unemployed lost their jobs for a short period - up to 15 weeks.
If a worker has exhausted the possibilities of receiving unemployment benefits, he may in some cases receive a poverty benefit from public charity funds, exist on odd jobs or be dependent on other family members.
England, Ireland and Denmark are the countries with the most liberal rules for closing businesses and laying off workers. In Portugal, Spain, Italy and Greece, such regulations are rigid and costly.
For example, in England, a firm notifies an employee of dismissal 90 days in advance, after consulting with the trade union. The size of the severance pay is quite small: for most of those laid off, it is calculated based on the weekly wage for the last year of work at the enterprise.
In Spain, the company is forced to pay a dismissed employee one and a half months' wages for each year worked. The fact of dismissal must be approved by the Ministry of Labor.
In Portugal, laws have made layoffs almost impossible, except in cases of serious misconduct. An employer who dismisses an employee against his will must pay a monthly wage for each year worked.
