Academic journal article UTMS Journal of Economics

Causes and Effects of the Global Decrease in Demand

Academic journal article UTMS Journal of Economics

Causes and Effects of the Global Decrease in Demand

Article excerpt

INTRODUCTION

In different economic papers, the 1929-1933 crisis is often referred to as the Great Economic Crisis or the Great Depression because the world had not seen a greater one before. It was certainly the greatest crisis since the onset of systematic monitoring of economic flows and since the economics as a science had started looking at such phenomena. It was the greatest one also because it affected almost the entire globe, leaving dire effects in its wake, primarily in the form of sluggish economic activity, while causing high unemployment rates over a prolonged period of time.

There have been a lot of discussions among economists on the Great Depression that hit the world and different opinions as to the ways of overcoming the resulting difficulties. There is no doubt that the most prominent among them was John Maynard Keynes. It seems that there is no dilemma that Keynes' views were key to overcoming the Great Depression; also, there is no doubt that his General Theory of Employment, Interest and Money introduced into economics a new direction and marked the entire 20th century (Vukmirica 2012). A lot of time has passed since Keynes' General Theory was first published, many new books in the area of economics have been written and since WWII to the beginning of the 21st century, the world has seen more or less dynamic economic development (with several small-scale episodes of economic stagnation). And then the current world economic crisis hit, the causes of which have been discussed in many paper, but only few options for its overcoming have been offered. As if the abundance of new books made the world forget the old books. In certain circles of politicians and economists, different interpretations can be heard, which do not find the causes of the crisis in the attempts of some market players to make high profits no matter what.2 However, we believe these to be merely attempts to put the blame on someone else and justify and preserve the privileged positions of individual powerful economic players.

Since the onset of the economic crisis in 2007 to date, during this period of depression, the global economy has seen cyclic movement. And just when it seemed that the crisis is a thing of the past, most of the world saw a new decline of economic growth rates, while the key global economies saw increasing unemployment rates. Although end-2011 and early 2012 saw positive economic growth indicators, the crisis was not over yet. If we look at 2012 Q4, we shall see that the GDP and industrial production rates in Japan dropped by 0.1 per cent and 7.9 per cent respectively; industrial production in the US fell by 0.1 per cent, while labour intensive industries saw dropped 0.4 per cent. The European Union's GDP dropped 0.6 per cent, where the decline was observed in the three key economies of the Union: Germany 0.6 per cent, France 0.3 per cent and Italy 0.9 per cent. In 2013 real GDP growth rate in the U.S. was 1.9%, Japan 1.5, but growth slowed. In the EU real GDP growth in 2013 was only 0.9%. In the Euro area was -0.4%.3

Some authors refer to this phenomenon as "a double-bottom crisis" or "a W-shaped crisis", although it is actually a euphemisms for a number of failed attempts at ensuring a more viable recovery. This is because the actual meaning of the double (or multiple) bottom should symbolise the strength and reassurance that there will be no further downward trends and that there exists a robust foundation for a safe suprastmcture. As the things stand now, it seems likely that the bottom of the crisis might be multifaceted and more in a "www" shape. Let us hope that the forecasts are wrong; however, by the look of it and given the therapy proposed, it seems that the prosperity of the global economy might see the 80th anniversary of the above mentioned Keynes' General Theory, which will come "as soon as" in two years' time from now. Very serious people, as Paul Krugman calls them sarcastically, will say that to compare this crisis with the Great Depressions it to lack good manners and that it is not the Great Depression that is on the stage now, at least not for the majority. …

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