What is stagnation? In Latin there is such a word "stagnatio" that in translation into Russian means "immobility". From it comes the name of such an economic term as “stagnation”. From the above translation it is clear that he describes a phenomenon of a negative nature. About what stagnation is, in simple terms, will be described in the article.
General concept of the term
If we talk about stagnation in simple words, this is such an economic situation, which is characterized by stagnation in the market, a halt in the development of production, and the weakening of trading activity. All this should happen over a long period.
Stagnation in the economy is literally inhibition, lack of renewal in production and in other types of business, including financial. At the same time, production of new types of products ceases, unemployment increases, and wages and salaries in the whole country are falling in all sectors of the economy.
Market stagnation is the lack of its susceptibility to innovation, to scientific and technological progress. He doesn’t let in any innovations, everything is going as it should, the structure of the economy “freezes”. There are two types of economic stagnation that differ from each other for the reasons why they appeared, the way they proceed, and the ways out of this situation.
First type of stagnation
The first type of stagnation is the monopolistic type. Its cause is an overabundance of monopolistic enterprises in the economic arena. They stifle competitors, thereby not giving opportunities for business development. Most of all, this type is inherent in the manufacturing sector, therefore, the protracted economic "waterlogging" begins here. The main characteristics of this process are as follows:
- A sharp reduction in investment packages.
- Underload and downtime.
- Unemployment on a massive scale.
To overcome such phenomena, American theoretical economists propose stimulating the growth of achievements in technology and science, exporting capital abroad and increasing the purchasing power of the country's population.
Second type of stagnation
The second type of stagnation is stagnation of the transition period. It is characterized by the peculiarities of the country's transition from one economic system to another - from a planned-command to a market one. It took place in the countries of the Soviet Union, at the end of the last century, when there was an unprecedented production and investment decline, an outflow of “brains” to Western countries was observed.
All business sectors were severely affected. Due to the lack of products that could withstand competition, the ex-Soviet republics were not able to smoothly integrate into the global economy.
As a conclusion from the second type of stagnation, economists suggest actions to stop the decline in production by attracting a range of goods and services from abroad. As well as further stabilization of the situation with access to growth processes.
About the reasons for stagnation in the country
Scientists are of the opinion that economic stagnation needs to be learned to predict, but this is a very difficult matter. Indeed, the causes of stagnation are always more than two or three. The causes of stagnation are a whole complex of factors. As a rule, they are easier to analyze after the fact. Among the most common causes are the following:
- increased bureaucratization of the structures of the state apparatus;
- corruption of managers and representatives of the business community in some sectors;
- backlog in science funding;
- deterioration of household equipment;
- weakening financial and trade relations with other states;
- mistakes in choosing a political course (with the second type of stagnation).
Local causes of stagnation
As for stagnation in a particular sector of the economy or at a particular enterprise, the reasons here may be somewhat different. For example, a stagnation in the work of a commercial company occurs when tired of continuous growth, from decreasing resources, from the stiffness of the structure and methods of carrying out activities, and the absence of new ideas and developments.
Stagnation within an individual business is easier to overcome than at the state level, however, if it coincides with the economic decline throughout the country, then the private structure is hit twice.
Theoretical Ways to Exit
For a country to emerge from a protracted crisis, its leaders must have a clear plan and take coordinated measures to restructure the economy.
An unequivocal recipe for exactly what these measures should be does not exist today. But nevertheless, there are proposals by theoretical scientists on this subject. They come down to the following actions aimed at eliminating the causes of stagnation:
- Strengthening anti-corruption measures at the highest power level.
- The fight against excessive bureaucratization of the administrative apparatus.
- Increasing the scale of investments in the development of scientific and technological progress, specific innovative developments (especially those related to the nanotechnology industry, medicine and space exploration).
- Updating the material and technical base in production.
- Optimization of economic relations with other states.
What do the practitioners advise
It would seem that economists-practitioners, like no one else, are capable of making their significant contribution to resolving issues of overcoming stagnation. But in reality the situation is not easy at all. Since the proposed paths are not always fully thought out, equipped with mechanisms for their implementation. Nevertheless, we will call them.
- The earliest introduction into production of the latest developments in the field of science and technology in all economic segments. (Question: how could these developments be created in conditions of a decrease in financial injections?)
- Increasing people's purchasing power. (Question: due to what resources and mechanisms should it be implemented?)
- Reducing the cost of the package in the production process. (Question: is it possible to reduce costs with outdated equipment and what else to save?)
- The increase in income and tax revenues due to the profits of monopolistic enterprises.
- Stimulating the development of output intended for export. (Question: how to turn the tide if relations with other states are low?)
The dangerous effects of stagnation
The results of stagnation are, in simple words, the loss of jobs, a decrease in the ability to purchase something meaningful for the family, the lack of decent goods on the shelves, the need to "tighten belts." This is a stop in the development of scientific thought and in its embodiment, a lag in healthcare, education and armament.
What threatens this situation? It is very dangerous and can lead to the emergence of revolutionary sentiments, to calls for the overthrow of the existing government, mass protests in the streets, and strikes at enterprises. Having become acquainted in detail with the meaning of the word “stagnation”, with its dangerous consequences and difficulties in overcoming, what conclusion can be made? How to get rid of it if neither theorists nor practitioners fully know this?
It seems that we need to conclude that, firstly, theoretically this negative phenomenon has been studied, and secondly, we are all witnesses to the fact that it can be overcome. For example, as it was in the USA after the 30s and in the territory of the former USSR after the 90s of the last century. This means that a specific government of a particular country that has fallen into a protracted economic crisis must and can find the only right solutions and ways to put them into practice.