2014 - World on the Verge of Global Changes

In a world that surrounds a human the economy takes, perhaps, the most significant place. The world of production of goods, the world of machines and industrial relations. The world of conflict of material interests of individuals, groups and entire classes. The world of integration, globalization and international division of labor. The world of taxes, tariffs, protective duties, devaluations, inflation, crises and defaults. This is a huge system with an incredibly complex structure. For at least the last three centuries, thousands of scientists have made attempts to study this system and learn how to manage it or at least predict its behavior. This science has its own language, its own concepts. It operates a variety of the identified laws. This science attempts to formulate various forecasts, to regulate inflation and population employment, to stimulate the business world activity and protect it from "overheating." However, economic crises are still a necessary evil, and they always come unexpectedly. Admittedly, many scientists may not agree to this. Well, as they may say, “We have long discovered the cycle of production and, if the economy is booming, then one may expect an imminent crisis followed by stagnation and a new upsurge thereafter.” Everything is very simple. This is how it happens. Once the economy is delayed, even for a little while, at the point of growth, some economists begin predicting a forthcoming crisis. Is it any wonder that some of them become the prophets? However, I have already pointed out once that many scientists interpret the term “cyclicality” quite loosely. It is not each recurrence of the phenomena of nature or social life that may be called cyclical. First, recurrence should possess a relatively verified temporal character, such as, for instance, seasons. Deviations in one way or the other are possible as long as they are within the explainable limits. Second, to identify recurrence of the phenomena does not in itself mean to determine the cyclical processes until one will have identified the source causing such recurrence. For example, there lies the rotation of Earth around its axis at the heart of alternation of day and night, and there lies the rotation of Earth around the Sun at the heart of the changing seasons. In contrast, at the heart of economic cycles, as they are viewed by the science of Economics today, there lies nothing more but fixation of the economic ups and downs, and identification of the sufficiently broad spectrum of underlying causes of their origin. For instance, what invaluable truths may be drawn from these findings? "The duration of long cycles, from the initial to ultimate depression varies between the minimum of 6 years and the maximum of 13 years. If one calculates all small peaks and depressions along with the major cycles, then 18 cycles that occurred from 1865 to 1938 (if calculated this way) range from the minimum of 2 years to the maximum of 9 years in duration from depression to depression. The average duration is 3 years. 13 cycles out of 18 are within the range covering the period from three to five years." Wherein, the cycle is intended to mean a temporal period of the “phase of upsurge and recession.” The authors have thoroughly questioned what the source of these cycles is. Here is their answer. "... The only real factor that can set the rhythm of fluctuations of this duration for the Kondratieff Waves and their phases is the Juglar Cycles." By the way, what is the source of the Juglar Cycles? The answer is as follows. "There is no clear explanation for the duration of the Juglar Cycles of 7-10 years." Now the circle is complete. Nevertheless, the study of economic history and all of human history in general from the perspective of recurrence of processes is unambiguously important. Ultimately, it is necessary to identify the patterns of such recurrences. A group of authors are examining the history of Russia in the 400-year cycles, breaking them down into five 80-year cycles. However, here one may see the opposite extreme. Whatever the source of the human life cycles might be, these cycles cannot be rigidly fixed by certain numbers, especially within such significant time period While investigating the issue of economic time, I make attempts to understand what the source of economic cycles is. In the meantime, let’s note that the economy has two main intertwined cycles: the cycle of reproduction and the investment cycle. The latter may be divided into the innovation cycle and the actual investment cycle. Inability to manage them and control their interaction brings forth the crises. Third, the cyclical recurrence of processes suggests comparability of the phenomena and consistent chain of interrelated events. Every economic crisis has its own causes of origin, depth of shocks, duration and history of overcoming. In this sense, recurrence of crises is highly relative and is based on fairly general criteria. Moreover, if one considers the causal relationships and the essence of the crisis phenomena, they differ as either the crises of overproduction, financial crises (defaults and devaluations), bank crises (chain of bank failures), stock market crises (the peak of the bubble) or as a result of speculation in land and real estate. Presently, the global economy is experiencing a debt crisis. Fourth, I am absolutely not convinced the crises are indeed the significant milestone for justification of the cyclical economic processes. Science may truly consider itself science from the moment it is able to predict with some certainty the most important events for itself. In this sense, the scientific nature of Economics has become a byword. Economists are compared with the generals who are always preparing for the war gone by. The only difference is that they are always preparing for a crisis gone by. As they do so, there appears the entire layer of scientists who consider this mission impossible, thus meaningless. This is, in a sense, true. It is difficult to look for a black cat in a dark room, especially if it is not there. After all, the question is what level of predictability is at issue. In the event you are waiting for forecasts in the dynamics of the stock market prices for the decades to come, I am not the right person for you. There are experts and specialists in certain types of commodities. It is your business to believe them or not. Personally, I’d be careful if I were you. There exist many parameters, the fluctuation of which does not disturb stability of the system within certain limits. It is necessary to study these fluctuations. It is possible and necessary to predict them from the short-term perspective. This is also an important element of predictable economy. However, what economic system may be called sustainable? What is sustainability? Could it be at all possible for a developing system to be sustainable? Is it possible to set a direction for this dynamic as well as for its parameters? Or, should we rely solely on the "hidden role of the market" and instead entrust the task of crises prediction to fortunetellers who make predictions on coffee grounds? Are all crises really crises? What should be considered as crises? What is the depth of our understanding of economic processes? How far in terms of time will this depth allow us to see into the future? In general, is it not the high time for us to build (organize) the economic relations (processes) so that we understand they are moving from point A to point B based on the specified and clear route (path)? Or, should we instead prove it is utopia and put an end to this? Attempting to answer these questions is the goal of this study. How well I can do this is up to my readers to judge.