Networker: Crisis free production?
Can the “new economy” escape the problem of the old capitalist economy,
the boom-and-bust cycle? (“New economy” is a term applied to a range of
corporations and activities with some connection to new technologies, often
internet and information technology related businesses.) Two years ago
that was a serious question. The past few months have seen the question
answered conclusively.
For nearly 12 months the internet “dotcom” companies have been in trouble,
with many failing. Massive amounts of investment have disappeared. Many
of the new breed of stock market gamblers have lost everything they own
and could borrow. But in most cases the capitalist press has explained
this as examples of incompetence and excess. Companies with no reason for
existence gained hundreds of millions of dollars investment, but still
had no reason for existence because they had no way of getting an income,
let alone making a profit. So it was only a matter of time, the story goes,
until they failed.
At the same time long-established telecommunications corporations worth
many billions of dollars have engaged in heavy gambles. Many of them have
spent billions of dollars in government “spectrum” auctions around the
world. This gave them the opportunity to plan new telephone data services
(such as text messaging), expected to be the gold mine of the next decade.
It only took a hint of consumer disinterest to send shudders of financial
instability through these companies. Once again the astute capitalist press
had warned of this.
The most dramatic case has been the flotation of France Telecom's Orange
mobile phone subsidiary. Current value today is less than a third of the
$200 billion expected last year when the float was first planned. Even
with the massive growth in capitalist corporations in the past few years,
for a company to lose $140 billion in anticipated value is not a small
thing. This has driven down the value of other phone companies across Europe
as well, with British Telecom giving up plans to float its yellow pages
service which had been supposed to help reduce its mountainous $80 billion
debt.
Since the beginning of 2001, however, something else has started to
happen: major job cuts and profit reductions in companies previously held
up as the stars of capitalist production. Most recent was last week's announcement
of 1700 job cuts by Dell Computer, largest US (and second largest worldwide)
personal computer manufacturer. These are the first job cuts in the company's
16-year history.
Praise for Dell's radical manufacturing approach fills a library of
management textbooks. These include reduction by more than half in the
number of manufacturing processes required, only a week's stock of parts,
and building and shipping of most computers within eight hours of the order
being received. Combined with direct sales to customers (rather than through
shops) and pre-payment of the computers when ordered, this appeared to
mean that Dell had solved the problem of overproduction.
However, the real problem for Dell was its success. Dell's sales of
around US$50 billion last year, plus production by other manufacturers,
has saturated the profitable market for personal computers. Even without
massive stocks clogging shops and warehouses the whole industry is slowing
down.
So ends another chapter of hype about the “new economy”.
BY GREG HARRIS (gregharris_greenleft@hotmail.com)
