Stagnation (economic stagnation)
What is stagnation?
Stagnation (derived from Latin Stagnum - standing water) - a depressed state of the state economy, resulting in stagnation and slowdown or complete stoppage in industrial and agricultural production, trade. Usually precedes or accompanies a recession in a country.
Stagnation in simple terms is stagnation in the economy.
How do you determine the onset of stagnation?
Characteristic signs of stagnation are:
- Slowdown in economic growth
Production rates remain practically unchanged, which against the background of the development of external economic systems leads to underdevelopment;
- Degradation of the employment and employment market
Because of Inflation and other natural economic processes, the economy cannot maintain itself in an active state. There is an outflow of capital, the condition of enterprises deteriorates, unemployment increases;
- Decrease in the living standards of the population
It does not happen as sharply as in a crisis, but steadily and steadily - conventional measures are powerless. Often the population notices that the standard of living has deteriorated too late, when stagnation is already turning into a crisis.
Why does stagnation occur?
The prerequisites for the occurrence of stagnation are:
- Lack of tools to regulate and shift the ongoing financial processes in the necessary economic direction.
- Mistakes of the authorities and lack of attention to the prerequisites for the beginning of stagnation.
- Low level of qualification of management structures.
- High level of corruption.
- The instability of the global economy.
- Excessive complication and prolongation of clerical procedures, simply put, bureaucracy.
- Low resource extraction or devastation of the subsoil.
- Inattention to science - lack of support from the state.
- Excessive conservatism in management.
What types of stagnation are there?
Two types of stagnation are distinguished in economics:
- Monopolistic stagnation
Appears due to a large concentration of monopolistic unions within the national economy. Such monopolization leads to almost complete extermination of market competition, which is the cause of stagnation.
Exit from stagnation is possible with the help of state financial and regulatory support of enterprises that will compete with monopolists, introduction of innovations to improve the competitiveness of products and increase demand for them.
- Transitional stagnation
Emerges as a consequence of an economic paradigm shift, e.g. from administrative to transitional.
The way out of this type of stagnation is difficult and possible only in the long term - it is necessary to establish interconnections with other states, to finance the renewal of the fixed capital of companies, to support science and the development of human capital.
What are the consequences of stagnation?
The main consequences of stagnation are:
- decrease in production rates and trade turnover;
- decrease in business activity;
- investment outflow;
- inflation;
- rising unemployment;
- declining standard of living.
If we consider stagnation in general terms, it will be expressed in the form of zero GDP growth.