Wanting to understand what stagnation is, we come to the conclusion that this concept hides the state of stillness that occurs in economic processes.
Signs
When the period of stagnation sets in, production stops, trade is not so vibrant anymore. The process may take a long time. There are more people who have lost jobs, and those who still have a way to earn a living get the wrong money for their work. The standard of living in the state is getting worse. Understanding what stagnation is, we see that this phenomenon is characterized by the presence of zero or scanty growth rates.
The structure on which the economy rests remains unchanged and does not progress. Even if changes occur around the world, a country that has plunged into such a process remains immovable and insensitive to them. Scientific and technological progress is also passing by.
Precedents
For the first time, confident to say what stagnation is, US economists were able in the 30s of the last century, when the country was covered by a veil of stagnation. Similar phenomena occurred in the 80s on the territory of the USSR, after which, according to economists, perestroika began.
The stagnation process can belong to one of two types, depending on its features and characteristics. It can be either monopolistic or transitional. Each of the options has a different origin and manifests itself in a peculiar way. Ways to combat them are also not the same.
Lack of competition
Understanding what stagnation of the first kind is, we can say that this phenomenon occurs due to the fact that monopoly associations occupy dominant positions in the market, thereby dulling the severity of the market struggle. Where there is no competition, there are no innovations or improvements, since there is no incentive either. Without such a powerful engine, the economy simply ceases to develop. Production suffer. Only monopolies produce a large number of products.
All the features of the depressive nature of the reproduction of goods and goods are observed. There is less and less investment, nothing is being invested in tomorrow. Satisfied with their position, the market owners do not see any reason to change anything. The state of stagnation is also characterized by the fact that the capacities of enterprises are not fully utilized. Jobs are empty.
Economists in America have created a whole theory of this process. Stendl, Baran, and Sweezy worked on it. They argued that ways to combat stagnation is the active use of all the achievements of science in practice. Production costs should be minimized. The law on monopoly profits should also be fully utilized.
Market stagnation can be overcome by applying a series of consistent targeted actions that eliminate the contradictions between the goal of obtaining the greatest possible income and the resulting lack of ways to introduce it into the work.
The way out of the situation is to promote all the latest technological progress, invest capital in enterprises of other countries, provide the population with such earnings that they can buy more and show greater solvency as a buyer. Indeed, in the economy, everything is very closely connected - if it is good for the consumer, good for the seller. And in the reverse order.
Time to heal the wounds
As for the stagnation of the transitional type, this phenomenon can occur when there is a desire to abandon the administrative-command scheme of management of a mixed type.Governments could have made mistakes and miscalculations, the consequence of which was a similar stagnation. This usually results in neglect of the laws of the economy and a desire to act to circumvent them.
A fairly vivid example of such a situation can be considered the situation prevailing in the states of the former Soviet Union, when the superpower collapsed in the 90s of the last century. Production fell sharply. Investments ceased to be invested. Many factories and enterprises were simply abandoned and out of order. The development of scientists was limited, one could notice signs of the degradation of science. And people did not have any incentives to work and invest forces or money. Crisis processes have begun, which the financial sphere and the money circulation order have not been able to avoid.
Effects
It has become much more difficult for people to make payments. Goods became less competitive and significantly lost in quality. Post-Soviet products were not quoted on the international market, where they were accustomed to a more stringent and active competition regime between individual manufacturers.
Seeing the destroyed factories on the outskirts of many cities of the former Soviet Union, you can get acquainted with living evidence of stagnation, which ruined the national economy of the states that left it. The structure staggered and froze, and left standing idle, covered in dust.
Stagnation is best prevented.
Economic life is like an eternal cycle. The most interesting thing is that her laws are well known to everyone. The ruling people study in an advanced educational environment, where they are likely to explain everything to the smallest detail. Nevertheless, human nature longs to be more cunning than the established order. Therefore, so many mistakes are made, the acquired property is destroyed.
The main thing in such situations is to immediately take corrective measures, as well as learn a lesson and not allow the greed of the monopolists to become a snake biting its own tail.