Excess Capacity Harming U.S. Workers

by Seth Sandronsky

Dissident Voice
January 17, 2003



Excess capacity (unsold goods and services) is now running a red line through the U.S. economy, from airline seats to fiber-optic cable. Consequently, long-term joblessness is rising.


“The number of persons unemployed 15 weeks or more rose to 3.2 million in December, an increase of 815,000 over the year,” the Labor Department recently reported. The devil’s in these details.


I mean the household turmoil caused by this trend. It is less easy to measure, though no less real for those living it.


Most people know that being out of work for a prolonged period is not the key to domestic tranquility. Joblessness means a struggle to pay your bills, which places stress on personal and social relations generally.


Returning to excess capacity in the economy, it doesn’t fall from the sky. Rather, it is a part of the capitalist system itself, dynamically productive and destructive.


When private investment grows, jobs are easier to find. This was the case in the late 1990s and some of 2000 for the U.S. economy.


Then, employers hired new employees. They, in turn, increased production in many industries.


One example was the telecommunications industry last decade. Such job growth also made investors more capital.


The official jobless rate was lower then. And workers’ productivity (output per hour of work) was rising as the economy grew.


Fed Chief Greenspan frequently noted workers’ increasing productivity. Wall Street cheered.


Some of the productivity benefits flowed to Main Street. But not as much as went to big investors in the suites.


Eventually, a situation arose in which production exceeded consumption. The ability of consumers to buy what was for sale on the market was limited by their incomes.


Meanwhile, investors didn’t halt their quest to accumulate more capital. But they did begin to pull back on their investment in equipment and workers.


Suddenly, the “new” economy of high productivity and wondrous technology wasn’t looking so wonderful. Neither was the job market.


Just ask former dot-com workers in the San Francisco Bay Area. Much has changed for them since those halcyon days.


The official U.S. unemployment rate for Nov. and Dec. 2002 was six percent. Black workers are more than twice as likely than whites to be out of work.


Last Dec., there were 398,000 discouraged workers nationwide who stopped seeking paid work. They think that there are none to be had, and who can argue?


You don’t have to be an economist to see that job hiring is slowing. Unprofitable capital is being idled to reduce excess capacity in the U.S. economy.


Consider Kmart Corp.  The mass retailer will fire 35,000 workers and idle 326 more stores by April 30, as it works off excess capacity to leave bankruptcy protection.


Businesses are trying to restore profitability by reducing their backlog of unsold goods and services.  To this end, businesses are also seeking to cut the price of labor-power.


Government typically backs business’ efforts. Case in point is the federal government’s refusal to bail out United Airlines, resulting partly in a bankruptcy judge ordering the reduction of union wages for some workers after the carrier filed for Chapter 11 bankruptcy reorganization.


Lowering the wages of unionized workers is one way for businesses to reduce excess capacity.  Later, new hiring at lower wages can begin.


The bottom line for the working majority and their families in the U.S. is that the nation’s economy is becoming leaner and meaner as excess capacity bears down on businesses around the country.  The leaders of Iraq and North Korea aren’t to be blamed for this situation.


Much patriotic rhetoric from politicians and pundits serves to obscure such a basic fact.  They much prefer to back a national unity that seeks to keep the class system of the few determining the lives of the many firmly in place.


What a way to run an economy!


Seth Sandronsky is an editor with Because People Matter, Sacramento's progressive newspaper. Email: ssandron@hotmail.com