The Age of Oversupply: Overcoming the Greatest Challenge to the Global Economy

by (Economist) Daniel Alpert

The invisible hand of capitalism is broken. Economic and political forces are preventing markets from correcting themselves, and we're now living in an unprecedented age of oversupply.Governments and central banks across the developed world have tried every policy tool imaginable, yet our economies remain sluggish or worse. Howdid we get here, and how can advanced nations compete and prosper once more?

In this bold call to arms, economic policy expert Daniel Alpert argues that a global labor glut, excess productive capacity, and a rising ocean of cheap capital have kept the economies of the first world, and notably the United States, mired in underemployment and anemic growth.

Distracted by a technology boom and a massive debt bubble in the 1990s and early 2000s, advanced nations failed to assess the ultimate impact of the torrent of labor and capital unleashed by formerly socialist economies. After the financial crisis of 2008, the United States and Europe joined an already sclerotic Japan in dire economic straits. Today, as the BRICs (Brazil, Russia, India, and China) and others poach jobs from Western Europe, the United States, and Japan, household incomes in the developed world continue to decline. Many policymakers believe in outdated supplyside economic remedies. They miss the connection between global oversupply and the lack of domestic investment and growth. But Alpert shows how they are We cannot understand the housing bubble and the financial crisis without appreciating how the rise of the emerging nations distorted the economies of rich countries. And we can’t chart a path for growth in the developed world without recognizing that many of these distorting forces are still at work.

The Age of Oversupply offers a bold, fresh approach to fixing the West’s economic woes through large-scale fiscal stimulus measures, investments in infrastructure, and an aggressive private debt reduction plan. It also delivers a vigorous challenge to proponents of austerity economics.

Genres: Economics, Nonfiction, Business, History, Politics

302 pages, Kindle Edition

First published September 26, 2013

Reviews

[Jim Fonseca · Rating 4 out of 5]

We are awash in cash. Well some folks are: the world’s billionaires, large high tech corporations, and some nations. Not surprisingly China is cash-rich, but who would think that countries like Brazil also have so much capital they can’t find a place to invest it. According to Alpert this situation guarantees continued low interest and inflation rates for the USA which is still the best place for countries like China and the billionaires to invest their surplus capital. Capitalism isn’t supposed to work this way, so what is happening? The author dissects the problems such as flat productivity and the US housing bubble that misled us into believing how wealthy we were allowing us to overspend on credit cards. Each major international player has different issues: China is different from Japan which is different from the UK and Ireland which are different from the southern European nations. And the US is unique too. In the author’s view, the obsessive concern about the US national debt is a strawman --- the debt is quite manageable as a percentage of GNP and it is almost criminal for the USA not to invest in its infrastructure when money is so cheap to borrow, thereby creating jobs and tax flow and increasing productivity.

[Athan Tolis · Rating 3 out of 5]

A better title for the book would have been "Everything Daniel Alpert understands about the world economy."

The author is educated, informed, open-minded and appears extremely well-read. Also, significantly, he comes with no ideological baggage and no axe to grind. This is really what he thinks. He is not advocating a bunch of solutions that would make him better off or advance his status in his field or anything like that.

He identifies "oversupply" as the biggest problem we face at the moment. In short, there's a good billion people in the world who have joined the world economy but they are prone to save rather than spend. The governments of their countries invest the proceeds of their sweat in providing credit to the west, which then spends the borrowed money on the goods they make.

This is not controversial. Bernanke discussed the global glut of savings in 2005, a full eight years before this book came out. What is controversial is that the author thinks this is the most important thing happening right now on the planet. Maybe he's right, but if he is he should discuss why in the book. The book's opening chapter goes a long way toward establishing this problem of oversupply, but that's it.

Then the book becomes a laundry list of often very interesting things the author has figured out for himself through reading books and papers and through discussing with people he knows.

In no particular order, the author (among many other things):

1. Does his own version of Krugman's "End this Depression Now"
2. Explains very persuasively that Quantitative Easing is past its sell-by date
3. Bravely criticizes the Rubin/Summers/Clinton success with the deficit as serendipitous and the conclusions that stem from it as misguided
4. Summarizes damn well what's wrong with the Eurozone
5. Obliterates the libertarian / tea party / plutocratic view as self-serving
6. Explains that printed dollars are far from worthless (the IRS won't take pesos)

Also, he provides a list of proposals to help the US economy:

1. The government should urgently invest borrowed money to upgrade the dilapidated infrastructure.
2. Medical care reform should focus on resolving the split between those who pay and those who benefit.
3. Education reform should tackle the mounting student debt.
4. The bankruptcy taboo should be broken when dealing with banks. We need more, controlled, Lehmans.

So there you have it. None of the solutions really relate to the alleged main theme of the book, which is oversupply.

I sympathize IMMENSELY with the author, because he spares no punches. Nobody who is remotely partisan in nature will finish this book feeling like he did not get attacked at some point. But the main thesis is not developed adequately. Here in the UK the manufacturing industry was hollowed out in the 1970's, in the US in the 1990's and everywhere else in the west somewhere in between. China did not do this. US debt has been rising for decades, in a process (and with consequences) outlined by economists from Fischer to Minsky with no help required from the developing nations. The problem of poor demand (the mirror image of oversupply) was first linked to capitalism more than a century ago by Hobson.

For this book to be a significant addition, it needs to go beyond what others have done, and this it fails to do. There is no "inventive step" here, no new addition to the body of knowledge.

More to the point, we refer to 2007- today as the "financial crisis." When I picked up a book with the title "The Age of Oversupply" I was expecting the author to tell me why this is not a financial crisis, why it was something else, and I would expect among his proposals a way to tackle oversupply.

I learned tons of things reading this book and I gained an appreciation of the author as a very intelligent and reasonable man, but I've found absolutely nothing here I did not already know about oversupply and how to deal with it. Indeed, I found the "anti-mercantilist" bits of the book to be the most poorly argued points made in these 255 pages.

Regardless, this was informational, entertaining and educational.

[Josh · Rating 1 out of 5]

Not what I was looking for. I wanted it to be about how globalization and technology are rapidly increasing supply faster than demand, leading to slow growth and inequality, and how what kind of policies would help fix those problems. Instead, it mostly felt like a padded centrist op-ed from someone who hadn't thought especially deeply about any of these issues. It doesn't even mention automation and technology once! In a book about oversupply! You'd learn a lot more by reading Krugman, Yglesias and Marginal Revolution for a week or two than you would from this. You might even learn more by reading David Brooks and Tom Friedman.
There were a lot of problems, but one of the biggest is it's background assumption that everything was functioning smoothly before the crisis, and if we could just fix a few things that went wrong, then we'd be back to stability. But the world hasn't been standing still and some things will never be the same again (nor should we want them to be). Sometimes it feels like people are drunk and bearded, yelling "we have to go back!" at an airport, but you can never really go back.
There was one really valuable point in here. I agree that oversupply is the biggest issue we face today, but most of what I have been reading lately has blamed that on "robots" - aka increased automation. I think he makes the useful point here that China and other emerging markets have done much more to increase global capacity than automation so far. People think of China has having been around forever now, but its really only been 15-20 years that they have had an impact and because they are growing so rapidly most of that has been backend weighted. Automation will continue to accelerate the supply issues, but for now it's largely about integrating labor.

[Dave Schoettinger · Rating 4 out of 5]

A consistent view of the economy and a justification for novel govt action to offset the limitations of the current economy.

[Ajay · Rating 1 out of 5]

This book had a promising idea -- one of global over supply of labor, money, and credit. But the analysis was wrought with failures. Namely, the author fails to fully consider the impacts of freedom of capital, suppression of labor rights & corruption in emerging countries, and the differences between demand and effective demand. I think there was a lot to be said on these topics - this is a book worth writing, but Daniel Alpert was not the man to do so.

I was particularly struck by his comments on the Japanese malaise and 1997 Asian Financial Crisis. His commentary completely misses the political aspects and financial speculation that were far larger drivers of these issues than fundamental trade balances. I also disliked his dismissal of the role in automation in the hollowing out of the Rust Belt. Yes, outsourcing has led to job losses in the United States, but robotics and other productivity improvements from automation in manufacturing are more to blame for the predicament of these specific areas and industries. It would have been great to see that kind of nuance in his treatment of the issue.

[Kelli · Rating 5 out of 5]

The Age of Oversupply is a powerful and incisive exploration of the economic imbalance defining our era. Daniel Alpert breaks down the structural challenges of global capitalism from labor gluts and excess capacity to the distortions caused by cheap capital with precision, courage, and clarity.

Rather than relying on recycled economic theories, Alpert offers an unflinching diagnosis of why growth in advanced economies has stalled and proposes practical, forward-thinking solutions grounded in large-scale investment and fiscal renewal. His argument dismantles the illusion of self-correcting markets and challenges policymakers to confront the realities of globalization’s long shadow.

Deeply relevant and thought-provoking, The Age of Oversupply stands as a wake-up call for leaders, economists, and citizens alike. It is not merely a critique but a roadmap one that demands bold thinking to restore balance and prosperity in a world that produces far more than it consumes.

[Yh Gian · Rating 4 out of 5]

Very interesting book explaining some of the grand forces surrounding globalization that have been quite overlooked or perhaps just not explained as well. It's not just global trade being more prevalent but also the changes in regimes in Russia, China and India bringing more so much more supply thus reducing pricing abilities. The remedies proposed are probably not realistic especially given the political climate.

[Kathy · Rating 4 out of 5]

From the point of view of an economic novice I found this book really helpful in understanding some fundamental economics. I listened to it on audiobook cause quite honestly, I could not actually read a book on economics 😊 my brain does not absorb that kind of material in print (I studied the humanities)...anyway, the narration is superb. I would recommend this book to people in a similar frame of mind.

[Howard · Rating 2 out of 5]

This book is bone dry, but explains some complex concepts in a way that's almost (not quite, though) approachable. If you believe everything that Mr. Alpert tells you, you'll need some serious Prozac.

[Tina · Rating 3 out of 5]

I enjoy macro economics and this was a relatively understandable read. It's a little dated in our current environment but further convinced me that the current tax proposals are a bad idea.

[Gabriel · Rating 4 out of 5]

Well, we're screwed, basically. Alpert has a very clear, concise, and highly logical diagnosis of the root causes of the current global economic miasma. If you read his book carefully, you can find support for whatever fundamental economic philosophy you subscribe to, but what Alpert argues is that all of those philosophies are ill-suited to face the rapid change in the global balance of trade that came after the fall of communism and the victory of democratic capitalism. A relatively shallow reading will anger a lot of political conservatives - Alpert is particularly hard on the economic policies of the modern Right - but I think it is important to look beyond one individual's assessment of blame and focus instead on the key insight:none of us really understood what it would mean for the global economy when the Cold War ended and capitalism swept the globe.

While his diagnosis is insightful and worth reading carefully, his recommended set of solutions is, politically speaking, fantasy. There is no way we will have the sort of massive government intervention in the economy he calls for without things becoming much, much worse first.

In the end this is a book worth reading and thinking about carefully. American political conservatives will be angry at a lot of it, but the central thesis is worth considering and evaluating, even if you disagree about the possible set of blame and responses.

[Connor · Rating 4 out of 5]

As I was reading, I couldn’t ignore the feeling that this book seemed to be written with a bit of an “us vs. them” mentality and did not equally consider the benefits created by the expansion of the emerging markets. Rather, the viewpoint seems to be exclusively through the eyes of an American and without any contrast of someone outside of the US whose standard of living may have increased immensely. Similarly, the book does not seem to address that while the lives of the lower class have not improved relative to the upper class, they have improved considerably when comparing the lower class in 1900 vs lower class today (life expectancy, child labor rates, infant mortality, etc.) So I would contend that the statement on Page 52 “easy credit helped create an illusion that a rising tide was lifting all boats” is inaccurate because it wasn't an illusion, the tide was actually rising

It also would have been interesting to include some analysis on why, as the author notes, people in the emerging “surplus” economies make less relative to American counterparts - but still save more. What drives this difference.

[Ariadna73 · Rating 5 out of 5]

The author says that his argument is that the central challenge of our current world is an oversupply of labor, productive capacity and capital relative to the demand of all three. He says that the book offers a road map for getting out of the mess we are in right now and avoiding a future crises. He proposes to do more investment -major investments- in infrastructure and try to clear out our private debts.

[Dzung Vuong · Rating 3 out of 5]

Reading this is like "The world is flat" some years ago. Very good perspective especially on the abundance of labor and capital worldwide.
Lots of numbers to digest.
Summary: the author calculated that US deb to other nations is $5.5 trillion as of begin 2013 and we actually need to borrow much more to get out of the current situation before reducing the deficits.

[Pamela · Rating 4 out of 5]

4.6; I learned a lot from this book. It is dense with information; much of the economic data was beyond my grasp, but when I finished the book I was much better informed. I was particularly intrigued with the way he laid out the problems involved in our economic woes nationally and globally, and then laid out some practical (although complex and hard to implement)suggestions for solutions.

[Dave · Rating 3 out of 5]

Interesting points on the effect former communist and other developing countries have had on the global economy. Good at identifying the problems, not so good at coming up with solutions.

Proposes increased government spending to generate demand. Very government is the answer. I did not really agree with the idea of so much additional spending.

Well written.

[Parke Troutman · Rating 4 out of 5]

This book explains a wide range of economic phenomena you might have experienced over the last fifteen years. It basically argues that India and China in particular have swamped the developed with cheap productive capacity, which has had wide ranging and in many cases highly destructive effects. This is one of those books that'll change how you think about current affairs.

[Richard Ash · Rating 5 out of 5]

Great book, Daniel Alpert is incredibly well-spoken and lays downs a persuasive argument for his thesis. While I may disagree with some of the details, Alpert gets the broad strokes spot on. It would be interesting to try and model his thesis (Oversupply of production, labor, capital) using economic models to see if the models agree/disagree with his diagnosis.

[Mike · Rating 3 out of 5]

Alpert distills the current world macroeconomy into "Oversupply" which I agree with. However, his solutions are not unique, enlightening, nor likely to accomplish the grand objective - increasing demand. Regardless, it is worthwhile reading.

[Yalman Onaran · Rating 4 out of 5]

Good ideas and a good explanation of why we're stuck in a rut five years after the crisis. Full review on Bloomberg web site: http://bloom.bg/159veZ9

[Carsten · Rating 5 out of 5]

This has probably been one if not the most insightful book about current ongoing economic crisis is have read. Should be a must read.

[Arief Wicaksono · Rating 2 out of 5]

No new perspectives offered. but it's okay book.

[Mohd Ashraf · Rating 5 out of 5]

This book addresses the reality of our time. A good read indeed.