Cyclical Interrelation of National Economies and Origins of Global Economic Crisis
D.N. Hakhverdyan,
д-р экон. наук, доцент, доцент кафедры международных экономических отношений, Государственный экономический университет Армении (0025, Армения, г. Ереван, ул. Налбандяна, 128; e-mail: dhakhverdyan@yahoo.com)
Аннотация. Основной вывод статьи заключается в том, что в перспективе мир станет более многополюсным и взаимосвязанным, мировые рынки откроют реальные возможности для резкого научно-технического прегресса. Открытость внешней торговли явлается компонентом долгосрочной политики Армении, поэтому необходимо продолжать многостороннюю разработку ее теоретических основ. Обобщая опыт внешнеэкономической и внешнеторговой деятельности, нужно четко установить взаимную связь между внешнеторговой открытостью и экономическим развитием. Это позволит с помощью внешнеторговой открытости решить структурные проблемы экономики.
Abstract. The interrelation in case of which the cycles of business activity are getting out of the countries' borders is retained in the global economy. The main conclusion of this article is that in future the world will become even more multipolar and interdependent, global markets create a real opportunity for rapid economic progress. Realization of this potential greatly depends on the ability of international cooperation to enhance the efficiency of income macroeconomic policy. The openness of external trade is considered as one of the components of long-term policy in Armenia, so multifaceted elaboration of its theoretical basis shall be continued. Summing up the practice of external economic and commercial activities a detailed notion of interrelation between external trade openness and economic development shall be determined. This will provide an opportunity to solve some structural issues of the economy by means of external commerce openness.
Ключевые слова: цикличная взаимосвязь, многополюсность мировой экономики, реструктуризация мировой экономической системы, структурные проблемы национальных экономик, открытость внешней торговли.
Keywords: cyclical relationship, multipolarity of the world economy, restructuring of the world economic system, structural problems of national economies, openness to external trade.
Economy of any country has always been significantly affected by international situation. In current century, at least during last decade, this phenomenon is described by a set of peculiarities:
Multipolarity. ''The surface'' of multipolar world which is going to improve in future has been drafted since late 1980s and early 1990s. It is obvious, that the dominance of the superpowers is soon to finally end. Indeed, the United States, as a global benchmark, used to represent the favorable for it system and to impose it across other countries.
However, the times when the US was setting its rules in IMF, WB, WTO and even in the UN, thus governing the world, have irrevocably gone.
Probably the USA, China, Russia and Japan will become the new poles of the world. One would consider these are the countries to have decisive role in solving international economic problems by the middle of the century. Balancing between the poles, thus global welfare, can be reached through co-systemization of the poles. So, peaceful coexistence, mutual dependence, mutual benefiting and favoring might be seen as principal moments[4].
After introduction of Euro (January 1, 1999) two poles were formed in international monetary system. Euro, by its importance, became the second currency after the US dollar. These two currencies are alike in their purchasing power, relations to external economic affairs and trade, promotion in financial markets. Most probably, they will play identical important role in development of global economy.
Indeed, 11 countries of Eurozone have exceeded the USA by their ratio in global trade. By the way, the trade balance in those countries is positive as opposed to the US. Some specialists predict that Europe's technical development level will be equal to that of the US in 10 years. In addition, complicated problems still exist between Eurozone countries. Moreover, one of the leading countries of EU, Great Britain, is not a member of Eurozone. Generally speaking, contradictions between the United States, Europe and Japan in spheres such as finance, economy and trade cannot be eliminated forever.
Global financial system has deep roots and it is changing not easily, but in 21st century international financial system seems to undergo structural transformations. These will affect the composition and structure of currency reserves, external trade turnover and investments[4].
In this context it is hard to neglect such an important trend of the global economy as cyclical interconnection. In spite of long-term development trends of developing countries or their disruption from developed countries, changes in cyclical variations didn't take place when it comes to the trend trajectory.
Defining periods of changes of great economic cycle phases.
Modelling based on "stylized" facts is widely used in economic studies. In other words the situation is being simplified by abstraction of ''troublesome'' historical facts, which enables to
Journal of Economy and entrepreneurship, Vol. 8, Nom. 12
separate the important from dynamics of economic development.
C. Juglar's statement, that great cycle involves 6 mid-term cycles can be classified as one of the examples of ''stylized'' facts. Duration of this kind of industrial cycles in practice (this is a ''stylized'' fact too) lasts between 7 to 11 years period. Respectively, the duration of great cycle may vary 4266 years, which approximately coincides with studies carried out in Great Britain during early times of industrial revolution, as well as with the statement, that the average length of a large-scale wave is 50 years.
It is also confirmed that the great cycle consists of almost equal half: upstream and downstream waves of economic conjuncture. Each half includes Juglar's 3 cycles, respectively.
Within the mid-term cycle the long period of the global economic conjuncture deterioration began with the 1974-1975 recession and became even more complicated because of the second half of the 1970s and early 1980s energy, resource and environmental crisis. Calculation for the minimum term (21 years) shows that the downstream wave of the great cycle and the cycle itself could be completed in mid-1990, and in case of the maximum term (33 years) in the second half of 2000s. In fact, the mid-1990s can be considered as the beginning of the cycle started in US in the first half of 21 centu-ry[1].
Economic results of other developed countries registered until 2005 were generally in line with stagnation stage of the great cycle. The second half of the 20th century and the first half of the 21st century (33 years) can be applied as the maximum term of the cycle completion. In other words, the change of the long-term trends of economic development dynamics could be expected in the mid-2000s.
Firstly, in spite of economic development recession in all developed countries since 1974, in the second half of 1970s, the majority of this group of countries registered greater growth than the US.
Secondly, the social market economy model was not flexible enough to ensure the speed of the economy reconstruction comparable with the US, that corresponds to the opportunities due to a new cycle of scientific and technological progress. By the way, the large-scale production and usage of personal computers in US affected the pace of economic development in about 20 years. The long absence of economic impacts to the rapid speed of scientific and technological progress encouraged Nobel laureate R. Solow to put forward the following paradox later named after him: "Computers can be seen everywhere, except labor productivity dynam-ics"[11].
Thirdly, in the second half of 2000s, indeed, signs of the pace of economic development acceleration occurred in Western Europe and Japan. Sustainability of this trend will depend on the implementation of the reforms to be carried out by the leaders of these countries. At the same time, there is a strong opposition against the reforms in these countries, because large groups of workers do not want to lose the social market economy benefits.
Based on the methodology described, it can be assumed that the upstream wave of the great cycle, begun in the first half of the 21th century, will end for US in 2020s. Correspondingly, the end of the great cycle of the first half of the century and the beginning of the second half cycle will happen in 2045 for the countries leading in scientific and technological progress.
The mid-30s of the 21th century is the most realistic date for the end of the upstream wave of the great cycle in developed European countries and Japan. Taking into account the negative impact of the end of the upstream wave in US to economy conjuncture, it can hardly happen at a later date. However, economic development pace in these countries will be faster than in US until the beginning of 50s of the 21st century. The midst of the 6th decade, most likely 2055, is the more realistic date of the cycle beginning in the second half of the 21th century in Japan and Western Europe[1].
The aforementioned is the basis to ensure that, indeed, every country has particular trajectory of development - that is the cycle. Are these cycles interrelated?
The picture at the beginning of the global economic crisis (2007-2008) was that the growth rates in developing countries, especially in Asia, will remain high, regardless of the events taking place in the US and Europe. However, after the bankruptcy of Lehman Brothers investment bank in 2008 panic began. All over the world, even in China, recession of the economic growth rates caused concerns that the Wall Street crisis will lead to economic growth rates decline in developing count
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