Word: excessive
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Dates: during 2000-2009
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...that the recession is easing, there is considerable debate among economists about whether manufacturers will be rehiring workers and restarting assembly lines anytime soon. Despite aggressive downsizing by industries like auto manufacturing over the past 18 months, there are fears that the world remains stuck with so much excess production capacity that any recovery will be anemic, plagued by deflationary pressures, high unemployment and ailing bank-loan portfolios. "Unless we deal with the excess capacity situation, we will have a protracted crisis that will continue to wreak havoc on all countries," warned World Bank chief economist Justin...
...There's evidence that this dire scenario is uncomfortably possible. Although China's economy is growing relatively strongly, the government is so concerned about excess capacity that it recently banned investments in aluminum production and imposed stiffer conditions on new projects in the steel, coal and petrochemical sectors. Without such controls, "it will be hard to prevent vicious market competition and increase economic benefits, and this could result in facility closures, layoffs and increases in banks' bad assets," a government statement said...
...rest of the industrialized world may be in worse shape. To measure excess capacity, economists use a metric called the "output gap," defined as the difference between the potential output of a given economy and what is actually being produced (including services). The Organization for Economic Cooperation and Development (OECD) is projecting that, despite global production cutbacks, the situation is actually getting worse because the recovery will be weak. In 2010 the output gap among 24 OECD member nations is projected to widen to -5.7% - the widest gulf by far in the post-World War II era. (See 25 people...
...Minding the gap isn't merely an academic exercise. Excess capacity directly affects the biggest question facing policymakers today: when to exit from stimulus programs that were introduced to combat the recession. Everyone agrees the cure for excess capacity is increasing demand, whether it is generated through a fundamentally strengthening economy or through artificial means like "Cash for Clunkers" measures. Turn off the tap too quickly before normal demand recovers, and the downturn could persist. "The best way of reducing excess capacity is by not prematurely unwinding stimulus spending," Lin of the World Bank told TIME...
...that spending by wealthier consumers in countries like China and India can offset at least some of the decreased demand in the West. HSBC economist Frederic Neumann said in a September report that some Asian manufacturers have gained back the power to raise prices, implying that the impact of excess capacity in the region might not be as severe as some fear. "What was so scary about the recession were the unprecedented output gaps that conjured up images of endless industrial slack and competition so fierce that no one could ever hope to raise their prices again," Neumann wrote. "What...