The concept, causes and types of crises

The life of a modern person is accompanied by various types of crises. We read about them in the newspapers, we encounter in everyday life. What are the types and causes of crises? How does modern science look at these phenomena? This and much more is described in this article.

The concept of "crisis". Types of Crisis

In modern science, the term "crisis" means an exacerbation of contradictions in the social, political or economic environment that threatens the integrity and viability of the system as a whole. Scientists divide the types of crises into different categories and try to identify signs of impending danger in advance. The impending process can be predicted to prevent negative consequences.

In modern science, on a large-scale manifestation, these phenomena can be local and general. Local ones act on any part of the socio-economic system, while the general ones affect the system as a whole.

The existing main types of crises can be divided into problems. Macro-crises are large volumes of problems that have arisen due to existing contradictions. Microcrisis covers only individual problems, without affecting the viability of the system as a whole.

These negative processes can be divided into social and natural. The first types of environmental crises arise as a result of human society, while the second reflects a change in nature caused by human intervention.

Crisis categories

According to the structural component, types of crises can be divided into:

• The economic process. All types of economic crises reflect the accumulated contradictions in the economy of an enterprise, region or the whole state.
• The financial destructive process is usually caused by a sharp collapse in the value of various financial instruments. Over the past two hundred years, all the main types of financial crises have been associated with the bankruptcy of financial institutions and the resulting confusion and panic.
• Social conflict. The process occurs when sharp contradictions appear between different social groups or classes. Different types of social crises cover problems in the mutual understanding of employers and workers, trade unions and trusts, the unemployed and the government.
• Organizational problems arise during uncoordinated, non-compiled work of individual departments of an enterprise or corporation. More globally, organizational crises span entire sectors of the economy.
• The technological crisis is associated with a lack of innovation, improved technologies and the use of an outdated production method.
• The psychological type of crisis is personal, it manifests itself in the form of stresses, fears, insecurity in oneself and one's abilities. Such crises are inherent in a collective, a separate group, or the entire socio-psychological climate in society.
• An environmental negative process occurs when environmental conditions change, most often in a negative direction. Various types of environmental crises are associated with massive pollution, changes in ecosystems and the gradual extinction of living organisms.

Features of economic crises

Economic theory distinguishes between these types of crises:

• Cyclical. Inherent in all sectors of the economy. A cyclical crisis occurs under conditions when existing equipment becomes obsolete, production costs increase, and the entire structure of the production sphere needs to be updated. The cyclic cycle usually becomes the beginning of the development of a new efficient production.
• An intermediate crisis is more local and transient than a cyclical one. It does not give rise to a new, high-quality development of production relations, but only interrupts the growth or decline of the existing economic process. Such types of economic crises as intermediate ones are sometimes artificially formed.
• A partial crisis covers a specific sector of production or the economy of a country.
• The industry crisis affects individual segments of the economy. For example, there are agrarian crises that arise when weather conditions worsen or an imperfect land use system.
• A structural crisis manifests itself in the absence of interaction between different segments of the economy. One of the largest structural crises occurred in 1973, when OPEC members raised oil prices 10 times, which greatly aggravated the economic downturn in the world economy.

Features of financial crises

Any economic crisis inevitably leads to a decrease in the effectiveness of the country's financial activities. Under certain conditions, financial crises may have serious consequences for domestic policy state, and for its external political realities. What financial processes are the most serious?

• A crisis in the banking sector, when banks cannot pay off their financial obligations.
• The crisis of overpriced asset prices, when the value of certain financial instruments is artificially high. This phenomenon is also called a soap bubble crisis. When the holder of assets cannot provide their liquidity, both he and his enterprises are declared bankrupt.
• The crisis of the foreign trade balance, also called the currency crisis. It occurs in a situation where the value of the domestic currency changes dramatically. Such a situation arises with the massive purchase or sale of foreign exchange reserves by domestic or foreign investors. A regulated currency crisis arises from the manual regulation of foreign exchange turnover by state institutions.
• Sovereign default is another type of financial crisis. The situation of state default arises when a country cannot pay its foreign borrowers. When a sovereign default is declared, investments cease to flow into the country, and the outflow of foreign capital increases.
• The liquidity crisis arises as a result of the other crises listed above. It occurs when the bank refuses to provide loans and borrowings, although it has all the necessary funds for this. Sometimes a liquidity crisis occurs when there is a shortage of cash in the country's domestic currency.

General features of the crisis

A feature of any crisis is that from a local or microeconomic crisis, it can quickly develop into a larger or even global one. This is because any system is synchronized and interacts with all its elements, and the problems of one segment cannot be solved without looking at the consequences for the system as a whole. But this problem arises in the absence of crisis management.

Pseudo-crises

There are times when a pseudo-crisis can be triggered - a hotbed of instability in a healthy system. This phenomenon can be triggered in order to cover up the active actions of market participants or to crowd out competitors.

Crisis diagnosis

Although crises are divided into expected and sudden, in most cases their occurrence can be calculated. To do this, there are techniques for recognizing such processes and identifying their causes.

At the first stage, it is established what types of crises can occur, and to which variety they will relate. In the scientific world, this stage is called the qualitative identification of the object of study. During this period, all known parameters of the observed phenomenon are determined that have common features with any studied set of objects.For example, the diagnosis of a macroeconomic crisis will be based on which type of economy developed in a given country - developed industrial or more suitable for a state in transition. If the pre-crisis situation is assessed on a smaller scale, the type of ownership of the object is determined - private, state, joint-stock and others.

The second stage is required to identify the differences of the inspected object from similar structures of its class. This is done by a detailed comparison of the basic parameters with the observed. Based on the deviations, the forecast development of the situation is formed.

Consequences of crises

For all their undesirable consequences, crises play the role of natural selection in the economic life of the region. This phenomenon performs three critical functions:

• Destructive function. Responsible for the qualitative transformation or radical elimination of all inefficient or outdated system elements.
• The creative function is responsible for creating the conditions for the development of weak and small elements of the future new cycle.
• The hereditary function assumes responsibility for the inheritance of those features of the old cycle that accumulate and move on to the next stage of development. Sometimes these features can be modified or acquired with new features or parameters.

findings

Consequently, various types of crises are a necessary element of progress and are an important step towards updating any development system.