CC BY
37
♦
♦
production of public goods, there is a strong and irresistible tendency for excessive costs, or, in other words, the X-inefficiency. Nonmarket production is executed in the framework of numerous production possibilities. If there are technological opportunities to reduce costs, increase productivity, or apply economy of scale effect, then these opportunities will be ignored or, at best, not utilized to the fullest. Changes bring the extra trouble, costs of inaction are absent or extremely small, and the possible gain from implementation of changes is very uncertain. At the same time in non-market production there is also a tendency for increasing excessive costs over time. Those who make decisions in a market economy, have incentives to reduce costs over time due to actual or potential competition or because of opportunities to gain additional profit. In contrast, those responsible for non-market production may have incentives to increase costs (eg, state officials) or to increase output, despite the fact that marginal costs are higher than marginal revenue. Cost function in non-market production is not only higher than the minimum possible, but tends to move up over time. It shows not only the X-inefficiency, but also dynamic inefficiency of non-market production.
We believe that one of the major failures of state is permanently reproducible monopoly of the state institutions on the production of public goods such as defense, maintaining law and order, free education and healthcare, control of environmental pollution, etc., which ensures privileges and accessibility to these benefits for members of the state apparatus, asymmetry (polarization) in the consumption of these goods in comparison with other eco-
nomic entities. The state as an institutionalized entity on capacity behalf of the state apparatus has advantages in the transformation of public goods in private, such as services of state institutions, the results of functioning of social infrastructure (availability of special medical care), access to various resources (information, intellectual).
Thus, the failures of the state are manifested in various spheres (political, legislative, economic, sociocultural, etc.). The failures of the state are inseparable from all activities of the state. Failures of states as business entities and economic institutions involved in a specific area of operation are a part of a bigger set of state failures. It is necessary to distinguish causes of the failures of the state and state failures themselves, their manifestations, which is essential for the development of the ways to neutralize them.
1. Архипова О.В. Анализ провалов государства и провалов рынка в сравнительной форме // Вестник Челябинского государственного университета. 2010. № 27 (208).Экономика. Вып. 29.
2. Бьюкенен Дж. Сочинения /пер. с англ.; гл.ред.кол. P.M. Нуреев . M., 1997.
3. Мертон P.K. Социальная теория и социальная структура. M., 2006.
4. Степанова B.C. Роль государства в экономике современного общества // Сборник научных трудов Северо-Кавказского государственного технического университета. Сер. «Экономика». Ставрополь, 2002.
б. Хасанова Л.В. Провалы государства и проблема эффективности государственного регулирования // Вестник КРСУ. 2008. Т. 8. № 1.
6. URL: http://www.academy35.ru/answers.php?id=9006.
удк 330.33.01 S.Ye. Hodorov
FINANCIAL CRISIS OF 2008 - 2010 AS A PHASE OF THE GLOBAL ECONOMIC CYCLE
The paper considers modern financial and economic crisis in a global aspect. Global character of the economic crisis is manifested in all levels of the world economic system - cross-border, country specific, regional, municipal, corporate, households and personal. In the context of globalisation international financial stability becomes the major public good which is beyond the national goals and interests. Therefore, it is necessary to put joint efforts in developing common understanding of advantages and dangers of integration.
Key words: financial and economic crisis, globalisation, integration, financial bubbles.
C.E. Xodopoe
ФИНАНСОВЫЙ КРИЗИС 2008 - 2010 годов КАК ФАЗА ГЛОБАЛЬНОГО НИКЛА
В статье рассматривается современный финансово-экономический кризис в глобальном аспекте. Глобальность экономического кризиса указывает на его охват всех уровней мирохозяйственной системы - межстрано-вый, страновый, региональный, муниципальный, корпоративный, домохозяйств и непосредственно человека. В условиях глобализации международная финансовая стабильность становится важнейшим общественным благом, выходящим за рамки национальных целей и интересов. Поэтому необходимо совместными усилиями выработать общее понимание достоинств и опасностей интеграции.
Ключевые слова: финансово-экономический кризис, глобализация, интеграция, финансовые пузыри.
Modern economic and financial crisis is linked to the bal character of the economic crisis is manifested in all
transition from resource-based economy to knowledge- levels of the world economic system - cross-border, counbased economy Researchers describe it as global as it try specific, regional, municipal, corporate, households
is caused by the globalization of world economy The glo- and personal.
The global economic crisis is intensified by other global in scope crises - environmental, energy, demographic and food - requiring some actions on both global and national levels.
In 2008, the situation in global financial markets reflected the adverse systemic effects of subprime crisis in the U.S. Not only in the U.S. but also in other countries, financial institutions suffered significant losses from credit operations and operations on the markets of mortgage-backed financial instruments. The problems of the financial sector corporations, coupled with macroeconomic risks (the probability of a cyclical downturn in the U.S. and fears of global recession) caused a significant decline in stock prices on stock markets around the world. The international currency markets see the trend of weakening U.S. dollar against other major currencies.
Financial institutions have encountered difficulties in borrowing secured by their own assets due to more stringent requirements for collateral loans, and because of the continuing deterioration and depreciation of securities portfolios with mortgage collateral.
Let us identify the three most important features of the financial crisis of 2008.
1. Having begun in the context of globalization, the crisis is unprecedented in scope, encompasses virtually all developing countries and regions, and has more impact on those countries that were most successful in recent years, and stagnant countries and regions were affected by it to a lesser extent.
2. The modern crisis is structural in nature, i.e. involves a major upgrade of the architecture of the world economy and its technological base.
3. The crisis is innovative in nature. Financial innovations emerged and quickly spread in financial and economic sphere, i.e. new financial market institutions, which seemed to be able to create conditions for infinite growth. However, financial innovations have caused a twofold effect: on the one hand, they significantly transformed commodity markets, and, on the other hand, during innovation financial boom economic and political elite lost control over the movement of financial instruments. Therefore, the current crisis can be defined as a rebellion of financial innovation.
The starting point for the financial crisis of 2008 was the sub-prime crisis in America (i.e. mortgages for borrowers with low credit rating). It certainly contributed to the emergence and development of the crisis in the real economy, financial and social sphere. The crisis itself originated from the fact that in the U.S. (and other countries) mortgages were issued to unreliable borrowers with questionable ability to pay. But as mortgage is in effect a loan secured by real estate, the market became “fed up” with liquid real estate, prices began to fall, which eventually led to the collapse of the mortgage market in the U.S. and bankruptcy of many banks. Money, lent on collateral, significantly exceeded the price of the mortgaged property. Policy aimed at stable growth of property value was untenable, and attempts to raise interest rates on mortgages were to no avail, since the proportion of insolvent borrowers in the total number of mortgage loans was simply enormous.
But despite the fact that mortgage is an important part of the real economy, it should be noted that mortgage is backed by real value, and even serious adverse events in
this area can hardly lead to a collapse of the global monetary system. World currency market deserves greater attention as daily volume of transactions accounts for almost one sixth of all U.S. mortgage debt. In fact, virtually every economy directly or indirectly depends on this monster. This dependence was exacerbated by the new configuration of currency exchange relations, which came to replace the “gold standard of money” when fixed gold content of paper money ensured stable exchange rates. Today money has virtually lost its commodity correlation and have become virtual (which is consistent with the processes of globalization and acceleration of economic development), and exchange rates have moved from fixed rates to “floating” and changing every day rates. This created fertile ground for making money from money, in other words, profiting from speculative trading. This affected the qualitative content of the foreign exchange market transactions very quickly.
Banks, forced to maintain the liquidity of their assets, have stopped lending, and a lot of companies that are unable to refinance and ensure their production started staff reductions, and in many cases, they simply close. The number of lay- off had daunting global scope, increase in unemployment and, of course, decreasing solvency of the population hit the same financial institutions.
While some economists argue that the crisis is just another stage of the natural course of economic development, other analysts believe that there is nothing natural in the current crisis and certain people are to blame rather than general laws of the world economy development.
In the U.S., the threat of a deep recession forced government agencies to resort to incentive monetary policy and stimulating budget measures. Starting from September 2007 the Federal Reserve has repeatedly lowered the refinancing rate bringing to 2% by the end of 2008. Trying to stabilize the mortgage market, the reserve ratio for large mortgage companies was reduced. At the same time the government decided to subsidize consumer demand: of the 168 billion stimulus package 100 billion dollars was allocated for increasing income of the middle class in order to improve consumer demand, the rest was spent to help small and medium-sized businesses.
Nevertheless, the crisis became a global financial and economic crisis of unprecedented scale. The economic recovery that followed the crisis of 2001 - 2003 in the U.S. pushed mortgage lenders to expand risky mortgage loans for unreliable, “problematic” borrowers. The purpose of this step was the expansion of markets for the rapidly growing construction companies. If in 2001 the share of subprime loans was 9% of total loans, while the proportion of normal loans was 57%, by 2005 the situation changed: the proportion of first increased to 20%, and the second went down to 35 %. And based on those mortgages trillion-dollar pyramid of secondary assets (derivatives) emerged, which were acquired banks of other countries that have invested a lot of money in these seemingly highly profitable securities. As a result, the mortgage crisis in the United States spawned a chain of defaults and bankruptcies not only throughout the country, but also beyond it. Liquidity crisis (i.e., an acute shortage of money means of payment for debt repayment and servicing of the normal functioning of the economy) spread to more and more banks and countries. In the USA 3 out of 5 leading investment banks went bankrupt including the largest of them
♦
♦
«Lehman Brothers». Two largest mortgage companies «Fannie Mae» and «Freddie Mac” were on the brink of bankruptcy, they accounted for half of all mortgages in the country. The U.S. government was forced to take them under their control, and virtually nationalized. The top management of bankrupt companies had to resign. The cost of this operation, according to experts' estimates ranged from 25 to 100 billion dollars. The mortgage crisis has cost investors and consumers hundreds of billions of dollars.
Further, the Congress passed a law on allocating $ 700 billion to the Treasury to buy mortgage-backed securities and other problematic toxic assets from major banks and other financial institutions, including non-resident banks, which have substantial operations in the U.S. The amount of money was huge: after all, 700 billion dollars is 5% of the U.S. GDP and it exceeds the defense budget by 1.5 times. It also means an increase of national debt to 82% of GDP
In September 2008 the financial crisis hit Europe and Japan. Serious problems emerged in the real sector of economy. World GDP fell in 2009 by nearly half a percent, a decline in GDP in the U.S. reached 2.6% in Japan - 5.8%. The EU economy shrunk by 2.1%. Virtually all countries suffered a dramatic fall of income and increased unemployment. Positive growth rates remained only in India and China, but even there they fell almost twofold compared to previous years. In Russia, GDP also fell by more than 8%. Attention should be paid to the fact that all other BRIC countries virtually avoided cyclical drop in GDP. According to N.G. Barashov, this is due to the presence of both quantitative and qualitative resources of development including positive dynamics of progressive structural and technological shifts in the national economies of these countries [2].
The UK government was forced to nationalize after bankruptcy the largest bank in the country - «Bradford & Bing-ley». Benelux countries combined their efforts in order to save major Belgian bank - «Fortis». The same problems arose in Germany, where one of the country's largest lenders «Hypo Real Estate» faced liquidity crisis, in order to save «Hypo Real Estate» the German government in conjunction with a consortium of major banks allocated a significant amount of money.
To ease the liquidity problem, a group of central banks (European Central Bank, Bank of England, Canada, Japan, Switzerland and the U.S. Federal Reserve) decided to allocate over 640 billion dollars. The next major step was one-time reduction in refinancing rates by 0.5%: in the USA - from 2 to 1.5%, in the euro zone from 4.25 to 3.75%, in UK from 5 to 4.5% .
One of American researchers, M. Spellman notes that the crisis of 2008 was the first that originated not in the developing but in the developed countries. This is totally different from the crises that occurred in the fast-growing newly industrialized counties in the 90s of the XX century (Mexican crisis of 1994 - 1995., Brazilian of 1998 - 1999's., a series of Asian crises of 1997 - 1998's that engulfed Thailand, Indonesia, Philippines, South Korea as well as the 1998 default in Russia.). Then post-industrial Western countries together with international organizations, notably the IMF, helped these countries through financial investments of tens of billions of dollars. Now, the crisis affected countries with post-industrial economies.
What are the similarities and differences between these crises? The common thing is that they all developed in the context of globalization and sharp increase in financial interdependence among countries. However, financial crises in rapidly developing countries were largely due to the weakness of their financial systems. Disadvantages of economic development, lack of strict financial discipline, budget deficit, huge debt and, consequently growth of national debt - all of this eventually caused a collapse of confidence, massive sale of public and private securities, capital flight. These were the growth crises related to underdeveloped financial infrastructure of the economy as a whole.
In our opinion, the crisis of 2008, to the contrary oc-cured due to the fact that the financial infrastructure of developed countries (primarily in the U.S.), absorbed in the construction of financial pyramids and inflating speculative “bubbles” (i.e., artificially accelerating economic growth through speculation and price increases), exceeded the actual development of its economy. The consequences were the same as in the countries with rapid growth: loss of confidence in global financial markets, panic on the stock exchange, capital flight, runs on banks and collapses of the largest of them. The crisis has forced the U.S. government and other postindustrial countries to use many unconventional measures for saving the economy including nationalization and buying out bankrupt companies, and not simply resort to the tried and tested measures of macroeconomic policy, but to build truly effective methods of international cooperation between governments and central banks.
According to the hypothesis of J. Attali, any crisis is the result of lack of information [1]. Between the present and the future there is always information asymmetry which creates economic crises. Information is distributed unevenly across the planet. Those, who possess information, always come up with financial innovations and find beneficial use for them. Limited access to information causes oversupply, compensated by the debt of those, who do not possess information. This leads to increased consumption and an increase in debt. When people become aware of the whole situation, panic starts in the financial markets. As a result, there is a crisis that is beginning to spread on a global scale.
The crisis has revealed the downside of integration of economies and financial systems around the world: problems that arise in one country rapidly spread around the world. In the context of globalization international financial stability becomes an important public good that transcends national goals and interests. Therefore, it is necessary to work together and develop a common understanding of the merits and risks of integration.
The modern global crisis clearly demonstrated the close relationship of all hierarchical levels of economy. Crises in microeconomics and macroeconomics, affecting each other, resonate and form a loop of positive and negative bond, dramatically increasing systemic crisis of the economy The factors of inducing macroeconomic crisis by microeconomics include the following:
1. Reorientation of company development from improving productivity and other resources to the growth of capitalization. The latter is achieved through mergers and acquisitions, preservation of old non-economic production, supporting speculative rise in share prices of companies [4].
♦---------------------------------------------------------------
2. Deteriorating quality of corporate governance which was manifested in the reorientation of top managers for getting personal rewards disproportionate to the achieved results [5]. In this regard, it is necessary to change the paradigm of corporate governance, focusing managers on improving the efficiency of business processes in the longer term, liability for damages to the company and inaccurate risk assessment. It is necessary to limit the size of fixed reward and share of profits from managed assets paid to the managers.
3. Many of Russia's large semi stat-owned companies using the scheme of “privatization of profits and nationalization of losses” resort to loan schemes and increase external corporate borrowing. In a crisis, the government has to redeem debts of these companies in order not to allow foreign holders of collateral to gain control over a significant share of Russian assets [3].
Thus, a number of microeconomic factors and crisis situations at the corporate level accumulate and multiply creating systemic macroeconomic crises. And in order to solve the problem of crisis “on the top floor” of macroeconomics, it is necessary to eliminate the factors of crisis “on the ground floor” of microeconomics.
Macroeconomic policies must create favorable environment for addressing all identified problems by ensuring profitability of all highly productive activities, good investment and innovation climate. The combination of macroeconomic, institutional, scientific, technological and other components of public policy in the economic sphere is necessary in order to overcome crisis.
At microeconomic level it is necessary to restore the link between creative and socially useful activity, business profits, motivating entrepreneurial activity to enhance production efficiency and introduction of progressive innovations. The development strategy includes identification of priorities of long-term socio-economic and technological development, preservation and development of scientific and industrial potential of the country, forming innovation basis and other components of economic policy, all which is possible on the basis of national economic forecasting and macroeconomic planning.
According to experts, the reason of the global scope of the crisis is the weakness of financial models and globalization. In particular, weak financial sector regulation, transformation of credit into one of the elements of speculative economy, loss of contact between the financial sector and
the real economy, investing in American securities by countries accumulating foreign exchange reserves and oil funds, special position of dollar in the world currency and financial system.
The modern global crisis is a crisis of all modern institutions, management systems, including state. State must become the center for national economic strategy, regulator of national markets and architect of regulatory systems of international markets.
Countries are looking for new resources that will ensure their safe position or leadership in the world. Many researchers have attributed the economic success of the future to the transition to the so-called sixth technological structure. The basic technologies of a new technological structure will be biotechnology, nanotechnology, materials technology and information technology. The boundaries between these technologies over time become blurred due to the interpenetration of different fields of knowledge. Recently, a very large role has been played by nanotechnology, which can take computer science, molecular biology, genetic engineering, and medicine on a fundamentally new level of quality.
In our opinion, the main factor of the global economic crisis is people. The current economic crisis is unnatural as it is caused by people. Irrational economic policy, material and economic activity in all its forms leads to various kinds of shocks in economy. The modern global crisis will help understand the priority of production areas, take a fresh look at the prestige of labor in material production sectors, and revise approaches to the quality of service and their price.
1. Аттали Ж. Мировой экономический кризис... А что дальше? СПб., 2009.
2. Барашов Н.Г. Циклическая динамика экономики в условиях глобализации // Вестник Поволжской академии государственной службы. 2010. № 2 (23).
3. Институт современного развития. Экономический кризис в России - экспертный взгляд // Вопросы экономики. 2009. №4.
4. Мау В. Драма 2008 года: от экономического чуда к экономическому кризису // Вопросы экономики. 2009. № 2.
5. Фетисов Г. О мерах по преодолению мирового кризиса и формированию устойчивой финансово-экономической системы (предложения для «Группы двадцатки» по финансовым рынкам и мировой экономике // Вопросы экономики. 2009. № 4.
УДК 330.342 A.G. Poteyenko
INTERACTION OF INSTITUTIONS OF INVESTMENT AND INNOVATIVE ECONOMIC SYSTEMS DEVELOPMENT
The paper deals with the essential characteristics of interactions between institutions of investment and innovation development. The author provides an overview of institutional-evolutionary trends and gives a classification of types of investment and innovation institutions.
Key words: investment and innovation institutions, institutional and evolutionary direction macro innovation cycle, meso innovation cycle, micro innovation cycle, NIS (National Innovation System).
