China s excess capacity problem reveals a serious defect in its socialist market economy.

Given the high levels of excess capacity and unemployment in Europe and America, quantitative easing is unlikely to trigger a bout of inflation.

If there is unused capacity in the economy, part of any increase in the quantity of money will be spent on increasing output rather than just buying existing output.

Although oil accounts for a smaller part of the energy mix nowadays and spare capacity is currently well ensured, chiefly by Saudi Arabia, a price shock would still have global effects as such shocks have had in the past.

Programme Component E.5 Rural Energy for Productive Use

Traditional morality faded away as technology multiplied productive power.

He expressed appreciation for the theme of the upcoming Least Developed Countries Report (productive capacity and poverty reduction) and described productive capacity building as a paramount condition for overcoming the adverse impact of preference erosion.

They might be causing an increase in energy prices, amplified by the aging and soon decommissioned production capacity.

The liver mitochondria could not keep up with the energy onslaught, and had no choice but to employ a little used escape valve called de novo lipogenesis (new fat making) to turn excess energy substrate into liver fat.

The second, more profound challenge relates to the real economy how to redeploy workers and capital from the industrial sectors facing overcapacity and the most overbuilt cities.

Given the collapse of commodity prices and excess production capacities, there is no short term inflation danger, even if part of the stimulus is financed directly by central banks.

But, as John Maynard Keynes never stopped pointing out, the Quantity Theory of Money is true only at full employment. If there is unused capacity in the economy, part of any increase in the quantity of money will be spent on increasing output rather than just buying existing output.

However, while the capacity forecast is more likely to be below the mark than above it, the reverse is true for the demand forecasts.

China s Excess Capacity Nightmare

Efficient use of energy reduces pollution, reduces energy intensity, and improves productivity and competitiveness.

The government, well aware of the overcapacity problem, focused the country s stimulus package on investment in infrastructure, rather than new factories.

This is due not only to the higher concentration of metabolizable energy in grain than in roughages, but also to the higher ratio of net energy of gain to net energy of maintenance where metabolizable energy intake is higher.

The ultimate irony is that there are simultaneously excess capacity and vast unmet needs and policies that could restore growth by using the former to address the latter.

Excess capacity has been a priority for the State Council since 2005, when it issued industry by industry restrictions on new projects and targets for shutting down inefficient production.

With high and volatile oil prices, businesses will focus their investments less on boosting productivity and more on maintaining flexible energy usage.

With a new round of stimulus, China s excess production capacity and underused outlays (for example, built up real estate assets) could be mobilized immediately, restoring 9 annual GDP growth.

This means that in order to compete successfully with China, Latin American countries will need to increase productivity growth.

This was particularly relevant in view of the lack of productive capacity in most LDCs to take advantage of new trade opportunities.

Politics aside, property bubbles leave in their wake a legacy of debt and excess capacity in real estate that is not easily rectified especially when politically connected banks resist restructuring mortgages.

The gap between actual and potential GDP is thus a gauge of an economy s spare capacity. The distinction is also useful for policy purposes weak potential growth cannot be addressed by demand side initiatives supply side measures are needed.

America s high rate of unemployment and the low rates of capacity utilization imply that there is little upward pressure on wages and prices in the US.

Other parts of Asia have also experienced growth, with 20 Mt. of expansion, while South American capacity has risen by 8 Mt. and Middle East capacity by over 10 Mt., which is a notable increase for the region.

There are still a few million surplus workers in Central Asia.

A given pace of accumulation can of course generate different growth rates, depending on its nature and composition, as well as the efficiency with which production capacity is utilized.

Human capital not natural resources, production capacity, or financial reserves should constitute the foundation of Russian and European development policies.

And, with growing over capacity, investment in goods production may fall even further, with serious implications for GDP.

Finally, Spaniards could borrow excess German savings and increase consumption and investment.

In normal times, there are valid reasons for paying interest on excess reserves.

NATO has been involved in the destruction of a number of surplus stockpiles.

Or, as Saunders puts it, energy efficiency may be a net positive in increasing economic productivity and growth, but should not be relied upon as a way to reduce energy consumption and thus greenhouse gas emissions.

Paying for Productivity

Rather, the focus of policy should be on reducing poverty, while nurturing productive capacity, eliminating occupation related distortions and laying the ground for the economy's sustained recovery. The question should then be what are the policies required for reducing poverty and how trade can play a supportive role therein.

China s investment rate is extremely high in comparison with other major economies, and has been increasing steadily since 2001, creating first overheating and then overcapacity. Until the global financial economic crisis that began in 2008, however, strong export performance concealed China s overcapacity problem, which, thanks to the stimulus package, is now set to become more serious.

As a result, China now faces the problem of short term excess capacity.

Investors might choose other places for their excess cash, like banks.

In a document approved by the State Council on September 26, the National Development and Reform Commission (NDRC) warned of serious excess capacity in a wide variety of sectors.

In addition, UNIDO is actively promoting business partnerships to support energy efficiency and clean technologies for enhancing productivity and competitiveness of selected industries in several countries.

The overall impact of this economic attrition is erosion of the Palestinian production capacity and degradation of people's ability to feed themselves, and therefore increased dependence on imports, especially from Israel.

The Coming Productivity Revolution

Today s Productivity Paradox