{"id":296,"date":"2011-03-15T17:38:56","date_gmt":"2011-03-15T17:38:56","guid":{"rendered":"http:\/\/www.thebizsense.com\/views\/?p=296"},"modified":"2011-03-16T07:36:47","modified_gmt":"2011-03-16T07:36:47","slug":"a-surfeit-of-leading-edge-production-plants","status":"publish","type":"post","link":"https:\/\/www.thebizsense.com\/views\/featured\/a-surfeit-of-leading-edge-production-plants","title":{"rendered":"A surfeit of leading-edge production plants"},"content":{"rendered":"

A surfeit of leading-edge production plants<\/strong><\/p>\n

\"leading-edge<\/a>

leading-edge production plants<\/p><\/div>\n

The huge growth in global capacity to supply goods and services because of the heavy investment in modern factories, especially in the emerging economies, has not been matched by enough scrapping of obsolescent capacity in the developed economies.<\/p>\n

In fact in the latter, governments have gone to considerable lengths to retard such scrapping — to save jobs and the vested interests of capital and the political classes.<\/p>\n

The most obvious example is the motor industry, where growth in the East and contraction-prevention in the West means the world sits with the capacity to build 30 million vehicles a year more than are needed.<\/p>\n

The outcome of the above supply factors has been the emergence of major excess productive capacity in the global economy as a whole.<\/p>\n

Shilling says that in the US, despite the recent economic recovery, utilization of industrial capacity is still \u201cat very low levels\u201d and there\u2019s huge unemployment. It will be years before all the excess business and labour capacity will be absorbed. He wonders how China\u2019s huge new investment in steel, cement and power plants can be fully utilized.<\/p>\n

The other leg of the imbalance in the global economy is insufficient demand, which isn\u2019t growing fast enough to soak up the expansion in supply of goods and services.<\/p>\n

The collapse of the credit bubble has left the world with a huge weight of dodgy debt:<\/p>\n

\u2022 Banks are focused on strengthening their balance sheets rather than financing economic expansion;
\n\u2022 Consumers, frightened about the future, are tending to cut back on their spending and boost their saving where they can \u2013 except where need is dire, they don\u2019t want to borrow more;
\n\u2022 Companies are wary about investing in expanding their capacity, preferring to concentrate on cost-cutting, debt reduction and accumulation of the safety cushion of lots of cash.
\n\u2022 Even governments, although they would like to spend even more to stimulate economic growth, are being forced by the high level of their own debt, the nervousness of investors about the safety of sovereign bonds, and increasing voter disquiet about growing public debt, to adopt austerity policies.<\/p>\n

This whole process of seeking to reduce debt, or at least hold back its growth, is \u201cdeleveraging,\u201d as in the title of Shilling\u2019s book.<\/p>\n

He identifies some other reasons why he expects the world economy to grow more slowly:<\/p>\n

\u2022 The shift of American consumers from \u201ca 25-year borrowing-and-spending binge to a saving spree\u201d will hurt foreign economies, especially those that have based their development model on large and growing US demand for their exports.
\n\u2022 Rising protectionism will damage growth of international trade.
\n\u2022 Sluggish global growth and the evaporation of investment demand will mean lower prices of commodities, hitting producer countries.
\n\u2022 Increased regulation and government involvement will damage efficiency and stifle innovation.
\n\u2022 In the US, housing markets will be weak due to excess inventories and loss of the investment appeal of real estate.
\n\u2022 Deflation will dampen spending as buyers hold back in anticipation of being able to buy more cheaply.<\/p>\n

CopyRight \u2013 OnTarget March 2011 by Martin Spring<\/p>\n

Read the preceding article – Survive and Prosper in the Grim Decade<\/a><\/p>\n

the above article is followed by – Prediction: unemployment to continue rising<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

A surfeit of leading-edge production plants The huge growth in global capacity to supply goods and services because of the heavy investment in modern factories, especially in the emerging economies, has not been matched by enough scrapping of obsolescent capacity in the developed economies. In fact in the latter, governments have gone to considerable lengths to retard such scrapping — to save jobs and the vested interests of capital and the political classes. The most obvious example is the motor industry, where growth in the East and contraction-prevention in the West means the world sits with the capacity to build <\/p>\n","protected":false},"author":1,"featured_media":297,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"amazonpipp_noncename":"","amazon-product-isactive":"","amazon-product-single-asin":"","amazon-product-content-location":"","amazon-product-content-hook-override":"2","amazon-product-excerpt-hook-override":"3","amazon-product-singular-only":"","amazon-product-amazon-desc":"","amazon-product-show-gallery":"","amazon-product-show-features":"","amazon-product-newwindow":"2","amazon-product-show-list-price":"","amazon-product-show-used-price":"","amazon-product-show-saved-amt":"","amazon-product-timestamp":"","amazon-product-new-title":"","amazon-product-use-cartURL":"","amazon_featured_post_meta_key":"","_amazon_featured_alt":"","amazon-product-template":"","footnotes":""},"categories":[8,9],"tags":[72,70,73,71],"class_list":["post-296","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-featured","category-news","tag-developed-economies","tag-leading-edge","tag-motor-industry","tag-production-plants","has_thumb"],"yoast_head":"A surfeit of leading-edge production plants - TheBizSense Views<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.thebizsense.com\/views\/featured\/a-surfeit-of-leading-edge-production-plants\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"A surfeit of leading-edge production plants - TheBizSense Views\" \/>\n<meta property=\"og:description\" content=\"A surfeit of leading-edge production plants The huge growth in global capacity to supply goods and services because of the heavy investment in modern factories, especially in the emerging economies, has not been matched by enough scrapping of obsolescent capacity in the developed economies. 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