----- Original Message ----- From: Barry Stoller <[EMAIL PROTECTED]> To: <[EMAIL PROTECTED]> Sent: Friday, March 30, 2001 8:20 PM Subject: [downwithcapitalism] FW: Epidemic of Overproduction Business Week. 9 April 2001. Too Much of Everything: Overcapacity is so widespread in the U.S. that it could jeopardize a recovery. Excerpts. Much of the problem is centered on the core manufacturing sector. The Federal Reserve estimates that manufacturing was at 78.1% of capacity in February, the lowest level in nine years. Technology manufacturers have been particularly hard hit. As recently as last summer, semiconductor makers were running their plants at close to 100% capacity. Now they've plunged to 80%, and falling. Ditto for computer companies, whose operating rates have fallen to their lowest levels in three years. The auto industry, where factories were running at nearly 90% a year ago, is now wavering at around 70%. Those declines, however, tell only part of the story. Huge swaths of the service economy added to a different kind of excess capacity during the boom years. From New Economy rockets like the dot-coms and Net consulting firms to traditional stalwarts such as financial services or advertising, many went into overdrive to staff up and build the infrastructure needed to ride the wave of the economic boom. Now, with sizzling growth rates gone, many find they have too much capacity for sharply low demand. Excess capacity, of course, doesn't pose a problem just for individual companies. It risks prolonging the economic downturn and blunting the Fed's interest rate cuts. That's because the current slowdown--driven by sagging investment rather than a drop in consumer spending--is much less susceptible to the quick fix of lower interest rates. Companies saddled with too much factory capacity or computer equipment are not going to go out and spend more on investment, no matter how low rates fall. In a sign of the dangers that may lie ahead, the Commerce Dept. on Mar. 27 said that capital-goods orders, a reliable proxy for future investment, fell 4% in February. Even if the economy manages to dodge a recession, growth still will be held back by the need for Corporate America to work its way through the late- 1990s excesses of investment and hiring. Experts say it will take months, and in some cases years, to undo the damage. "It's going to be a significant retarding force on the economy for some time," says veteran Wall Street analyst Henry Kaufman. ['Excesses of hiring'; don't you just love that vernacular?] ... [E]xcess factories and equipment relative to current demand is only part of the problem. Many companies are also going to be forced to further trim staff. For proof, look no further than dot-com land. In California's Bay Area, 80% of the remaining dot-coms are expected to go under by year's end, according to a study by Cushman & Wakefield Inc. and Rosen Consulting Group in Berkeley, Calif. That could cost about 30,000 jobs. Sickly dot-coms have plenty of company. Convinced that the boom was here to stay, securities firms, retailers, ad agencies, and consulting firms all ramped up hiring in the late 1990s. Now they're laying off staff or cutting back on contract or other temporary workers to bring staffing more in line with reality... Retailers too have been guilty of wildly overexpanding. Confident that the U.S. economy and consumer spending was on a roll, they've been opening store after store. In the last eight years, square footage growth among retailers has grown five times as fast as the population, says Therese Byrne, who tracks retail square footage for MAX-SI, an industry publication in New York. Now companies are being forced to cope with the overbuilding. "We were too undisciplined in the size of stores and the number of stores," says Millard S. Drexler, president and CEO of Gap Inc. (GPS ) "We are in the process of doing a very tough review of all outstanding deals." Even onetime e-tail star Amazon.com Inc. (AMZN ) now says it went overboard. It opened up too many warehouses in anticipation of tremendous growth that never materialized. On Jan. 30, Amazon announced it was closing one of the five snazzy new distribution centers it had recently opened. Concedes Jeffrey P. Bezos, CEO of the Seattle-based company: "We overbuilt a little." By a little or a lot, there's no getting away from the fact that a host of companies spent too much, built too much, and hired too many people during the boom times. It was a giddy ride while it lasted. Now the economy is having to deal with the inevitable hangover. And the headaches aren't likely to subside anytime soon. <>--<>--<>--<>--<>--<>--<>--<>--<>--<>--<>--<>--<>--<>--<>--<> Marx & Engels: 'Modern bourgeois society, with its relations of production, of exchange and of property, a society that has conjured up such gigantic means of production and of exchange, is like the sorcerer who is no longer able to control the powers of the nether world whom he has called up by his spells. For many a decade past, the history of industry and commerce is but the history of the revolt of modern productive forces against modern conditions of production, against the property relations that are the conditions for the existence of the bourgeois and of its rule. It is enough to mention the commercial crises that, by their periodical return, put the existence of the entire bourgeois society on its trial, each time more threateningly. In these crises, a great part not only of the existing products, but also of the previously created productive forces, are periodically destroyed. In these crises, there breaks out an epidemic that, in all earlier epochs, would have seemed an absurdity the epidemic of over-production. 'Society suddenly finds itself put back into a state of momentary barbarism; it appears as if a famine, a universal war of devastation, had cut off the supply of every means of subsistence; industry and commerce seem to be destroyed. And why? Because there is too much civilization, too much means of subsistence, too much industry, too much commerce. The productive forces at the disposal of society no longer tend to further the development of the conditions of bourgeois property; on the contrary, they have become too powerful for these conditions, by which they are fettered, and so soon as they overcome these fetters, they bring disorder into the whole of bourgeois society, endanger the existence of bourgeois property. The conditions of bourgeois society are too narrow to comprise the wealth created by them. And how does the bourgeoisie get over these crises? On the one hand, by enforced destruction of a mass of productive forces; on the other, by the conquest of new markets, and by the more thorough exploitation of the old ones. That is to say, by paving the way for more extensive and more destructive crises, and by diminishing the means whereby crises are prevented.' Communist Manifesto (International 1948, pp. 14-15. PLEASE DISREGARD ANY SPAM THAT MAY FOLLOW THIS LINE ------------------------ Yahoo! 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