Global manufacturing overcapacity triggered the 1970s profitability crisis

Evidence

As its nearest competitors were devastated by the war, American manufacturing profited and was the powerhouse of the postwar era. Yet Japan and Germany had their own comparative advantages – notably relatively low labour costs, skilled labour forces, advantageous exchange rates, and, in Japan’s case, a highly supportive institutional structure between government, banks, and key firms. Furthermore, the American Marshall Plan laid the groundwork for expanding export markets and for rising investment levels across these countries. Between the 1950s and the 1960s Japanese and German manufacturing grew rapidly in terms of output and productivity. Most importantly, as the world market developed and global demand grew, Japanese and German firms began to cut into the share of American firms. Suddenly there were multiple major manufacturers that produced for the world market. The consequence was that global manufacturing reached a point of overcapacity and overproduction that put downward pressure on the prices of manufactured goods. By the mid-1960s, American manufacturing was being undercut in terms of prices by its Japanese and German competitors, which led to a crisis of profitability for domestic firms. The high, fixed costs of the United States were simply no longer able to beat the prices of its competitors. Through a series of exchange rate adaptations, this crisis of profitability was eventually transmitted to Japan and Germany, and the global crisis of the 1970s was underway. — Nick Srnicek, Platform Capitalism, 24

Categorization

• CANDY: The Marshall Plan, built to expand markets, ended up creating competitors whose overcapacity crushed US profits — a neat irony for conversation.
• XREF: connects to: International competition forced down profit rates ending the postwar boom — Perry Anderson, The Origins of Postmodernity, 237; Postwar boom industries concentrated in a few grand production regions — David Harvey, The Condition of Postmodernity: An…, 790; Loose monetary policy plus oil shocks triggered the 1973 economic crisis — David Harvey, The Condition of Postmodernity: An…, 861 (+1 more)

Related

• International competition forced down profit rates ending the postwar boom (similarity 0.83)

Broader Connections

• International competition forced down profit rates ending the postwar boom #corroborates (0.82) — Perry Anderson, The Origins of Postmodernity, 237
• Postwar boom industries concentrated in a few grand production regions #expands (0.72) — David Harvey, The Condition of Postmodernity, 790
• Loose monetary policy plus oil shocks triggered the 1973 economic crisis #qualifies (0.70) — David Harvey, The Condition of Postmodernity, 861