The economy is never at rest. Prosperity is being replaced by crisis or panic. National income, employment and production are falling. Workers find themselves on the street, profits are significantly reduced. When the whole process, in the end, reaches a critical point, recovery begins. Updating can be either slow or fast, as well as incomplete and complete. A new wave of prosperity entails a steady level of vibrant demand, a large number of free jobs, higher prices and living standards. Or, conversely, rapid inflation, speculation and a new crisis may occur.
This is a general picture representing the cyclical nature of economic development. It is characteristic of the national economy of the industrially developed countries of the world over the past seventy years.
The reasons for the cyclical development of the economy should be sought primarily in the transition of society from a relatively subsistence economy to a monetary economy, accompanied by a close interconnection of its chains.
Each subsequent round of development is not an exact copy of the previous one. However, they are very similar, how similar are the members of the same family. The cyclical nature of economic development cannot be fully foreseen through calculations and some formulas. Its manifestations are so swift and unbalanced that they resemble weather changes or waves of epidemics.
All of the above suggests that the cyclical development of the economy is just one of the sides of the problem of achieving and maintaining a high level of employment and production, stable progress of the country's economy.
In the past, when there was not enough statistical information, when considering this issue, too much attention was paid to crises, panic, bankruptcy. Later, discussing the cyclical nature of economic development, two phases were already singled out: prosperity and depression. Or they clarified that the boom and crisis have peaks and points of incidence, which are turning points between these phases. Now it is generally accepted that not every period of improvement in economic activity entails full employment of the population in production. For example, after the well-known crisis in America in the early 30s of the 20th century, over the next few years, there was an update and a fall to a lower level, that is, there can be no talk of a period of prosperity. Therefore, the scientist Welsey C. Mitchell, analyzing what is happening, divided the cyclical nature of economic development into four phases. The most important are periods of expansion and contraction. The first phase (expansion), reaching the peak, goes into the compression phase. In the same way, the compression phase reaches the lower point of recovery and again goes into the expansion phase. That is, all four phases sequentially pass one into the other. An important issue for modern economists is to consider not the periods of increase and decline, but precisely the dynamics of economic development. The business cycle, like a calendar year, consists of four seasons. Pivot points separate periods of expansion and contraction. Moreover, not every peak means prosperity in terms of low unemployment. As well as not every lower point means crisis.
Each phase has its own economic conditions and a special approach is needed. The duration of the business cycle depends on which cycle is taken into account. Some researchers, considering the process from a historical point of view, speak of very long waves. Their full cycle spans about fifty years. But not all economists consider it necessary to single out short cycles (when only weak recessions are felt) that are part of one big one.