Justastory

This nicely written story by Lyndsey Layton appeared in the Washington Post this week. Americans have been disguising food as something more upmarket and selling it at vastly inflated prices. “Sturgeon caviar” was, in fact, Mississippi paddlefish. I bet it happens in the UK.

The expensive “sheep’s milk” cheese in a Manhattan market was really made from cow’s milk. And a jar of “Sturgeon caviar” was, in fact, Mississippi paddlefish.
Some honey makers dilute their honey with sugar beets or corn syrup, their competitors say, but still market it as 100 percent pure at a premium price.
And last year, a Fairfax man was convicted of selling 10 million pounds of cheap, frozen catfish fillets from Vietnam as much more expensive grouper, red snapper and flounder. The fish was bought by national chain retailers, wholesalers and food service companies, and ended up on dinner plates across the country.
“Food fraud” has been documented in fruit juice, olive oil, spices, vinegar, wine, spirits and maple syrup, and appears to pose a significant problem in the seafood industry. Victims range from the shopper at the local supermarket to multimillion companies, including E&J Gallo and Heinz USA.
Such deception has been happening since Roman times, but it is getting new attention as more products are imported and a tight economy heightens competition. And the U.S. food industry says federal regulators are not doing enough to combat it.
“It’s growing very rapidly, and there’s more of it than you might think,” said James Morehouse, a senior partner at A.T. Kearney Inc., which is studying the issue for the Grocery Manufacturers Association, which represents the food and beverage industry.
John Spink, an expert on food and packaging fraud at Michigan State University, estimates that 5 to 7 percent of the U.S. food supply is affected but acknowledges the number could be greater. “We know what we seized at the border, but we have no idea what we didn’t seize,” he said.
The job of ensuring that food is accurately labeled largely rests with the Food and Drug Administration. But it has been overwhelmed in trying to prevent food contamination, and fraud has remained on a back burner.
The recent development of high-tech tools — including DNA testing — has made it easier to detect fraud that might have gone unnoticed a decade ago. DNA can be extracted from cells of fish and meat and from other foods, such as rice and even coffee. Technicians then identify the species by comparing the DNA to a database of samples.
Another tool, isotope ratio analysis, can determine subtle differences between food — whether a fish was farmed or wild, for example, or whether caviar came from Finland or a U.S. stream.
The techniques have become so accessible that two New York City high school students, working with scientists at the Rockefeller University and the American Museum of Natural History last year, discovered after analyzing DNA in 11 of 66 foods — including the sheep’s milk cheese and caviar — bought randomly at markets in Manhattan were mislabeled.
“We put so much emphasis on food and purity of ingredients and where they come from,” said Mark Stoeckle, a physician and DNA expert at Rockefeller University who advised the students. “But then there are things selling that are not what they say on the label. There’s an important issue here in terms of economics and consumer safety.”
It is not clear how many food manufacturers, importers and retailers are testing products, but large companies with valuable brands to protect have been increasingly using the new technology, said Vincent Paez, director of food safety business development at Thermo Fisher Scientific, (more…)

This article is from the New York Times – for the first time in many years workers have failed to return from the (Chinese) New Year break – no longer drawn from the agricultural fields by the lure of industrial readies, instead the signing bonus is being introduced for factory workers…whatever next for the Chinese economy – now virtually the only source for cheap Western consumer goods…

GUANGZHOU, China — Just a year after laying off millions of factory workers, China is facing an increasingly acute labor shortage.

As American workers struggle with near double-digit unemployment, unskilled factory workers here in China’s industrial heartland are being offered signing bonuses.

Factory wages have risen as much as 20 percent in recent months.

Telemarketers are turning away potential customers because recruiters have fully booked them to cold-call people and offer them jobs.

Some manufacturers, already weeks behind schedule because they can’t find enough workers, are closing down production lines and considering raising prices. Such increases would most likely drive up the prices American consumers pay for all sorts of Chinese-made goods.

Rising wages could also lead to greater inflation in China. In the past, inflation has sown social unrest.

The immediate cause of the shortage is that millions of migrant workers who traveled home for the long lunar New Year earlier this month are not returning to the coast. Thanks to a half-trillion-dollar government stimulus program, jobs are being created in the interior.

But many economists say the recent global downturn also obscured a longer-term trend: China has drained its once vast reserves of unemployed workers in rural areas and is running out of fresh laborers for its factories.

Since China does not release reliable, timely statistics on employment, wages are considered the best barometer of labor shortages. And temp agencies here in Guangzhou raised their rate for factory workers this week to $1.17 an hour, from 95 cents an hour before the new year holiday.

The rate was 80 cents an hour two years ago, before the global financial crisis (more…)

My week has been disrupted by health issues – so apologies to regular readers for the non-appearance of stories in the past fourteen days. I may well post a separate story about this – as it is interesting – still under consideration.

This story in the Independent  caught my interest. Road traffic levels – ie the number of cars and lorries actually using the road has dropped for the first time in nearly forty years. Some commentators have said that this points to real problems in the road haulage business – there’s no doubt that’s true. However, one of the dads watching school sports with me the other week told me that his car (a vintage Mercedes) had been stolen from outside his house a couple of weeks ago and after much discussion they had decided not to replace it. My kids have been pressing me for a year now on the vehicle issue. I wonder how much of the current decline is due to impulses like this – as well as the obvious economic pressures?

Traffic on Britain’s roads is decreasing significantly for the first time since the three-day week of the early 1970s, suggesting the car economy is heading for a crash, official figures revealed yesterday.

In a sign that the country is already in recession, fewer car and lorry journeys on motorways, rural and urban roads were made over the last six months compared to the same period a year ago.

The Department for Transport (DfT) recorded two consecutive quarters where road traffic has decreased year on year – the first time for more than 30 years. If the trend continues to the end of the year, it will hugely undermine the “great car economy” championed by Margaret Thatcher.

At the same time, sales of new cars have fallen by 23 per cent and are at their lowest since 1996. The motor industry is suffering across the world, with Volvo, the Swedish giant, selling just 115 heavy trucks over the past few months, compared to 41,970 during the same period last year – a 99.7 per cent fall.

And the jobs of 3,700 people at two UK car plants are at risk after General Motors warned it would be bankrupt within months unless it received a bailout from the US government.

The new traffic figures emerged as the Government prepares to announce car-related tax cuts as part of Gordon Brown’s strategy to get Britain through the recession. Planned vehicle excise duty increases for older cars are expected to be scrapped, while ministers are examining plans by the German government for tax reductions on green vehicles. On Friday the Prime Minister said he would work with other EU leaders on fiscal policy to support economic growth – a signal that tax cuts to reinvigorate the economy are being considered.

As Mr Brown and the Conservative leader, David Cameron, battle it out over the economy, a poll today puts the Conservatives 13 points ahead of Labour. The ICM survey for The Sunday Telegraph suggests that despite Labour’s surprise win in the Glenrothes by-election, the “Brown bounce” could be short-lived.

Besides the three-day week in 1973 and two world wars, traffic has steadily increased since the beginning of mass production of the motor car more than a century ago. But the new DfT figures show a 2.2 per cent decrease between July and September this year. This followed a 0.5 per cent decrease between April and June. The decline runs against the official predicted trend of an increase in traffic of 1-2 per cent a year.

Traffic congestion has also decreased on motorways and A-roads. The average vehicle delay on the slowest 10 per cent of journeys was 3.67 minutes, down from 3.95 minutes for the year ending September 2008.

Britain is in the early stages of a recession, with unemployment rising and industry shrinking, leading to fewer cars and HGVs on the roads. But during the recession of the 1990s, traffic remained static, suggesting there are other reasons for the decline.

It would appear thousands of motorists are giving up driving, either because of soaring fuel costs, rising parking and car taxes or because of the environmental cost.

Neil Greig, director of policy and research at the Institute of Advanced Motorists, said: “It is too early to say there is a definite long-term trend here, but there is no doubt these are the best figures we have to go on suggesting a decline in traffic.”

Tony Bosworth of Friends of the Earth said: “The Government must help people to use their cars less – and tackle climate change – by giving them better public transport alternatives, and making it safer and easier to cycle and walk.”

Adrian Ramsay, deputy leader of the Green Party, said: “It’s good to see that people are making better use of other travel options as they feel the pinch of the rising cost of using the car. There will be a limit to how many people can make this choice. Too many towns and cities have such poor and expensive public transport that people are stuck using the car.”

When she was Prime Minister, Margaret Thatcher hailed the car-based economy as the ultimate expression of the individual over the state. In the 1980s and 1990s, road traffic rose substantially from 215 billion vehicle kilometres in the year 1980 to 378.7 billion in 2000. Last year traffic reached 513 billion vehicle kilometres.

Car ownership has steadily increased over the past decade, with the proportion of households in Britain without access to a car falling from 30 per cent in 1997 to 25 per cent in 2007. Homes with two or more cars outnumber those with no cars, increasing from 25 per cent to 32 per cent.

Road transport produces around a quarter of carbon dioxide emissions. Nearly 60 per cent of this is from cars. This summer petrol reached 118p a litre, but many retailers have since lowered this to below £1 a litre after criticism from the Prime Minister.

Gary Mahoney, 50, from Liverpool, works for the council’s environmental protection department. He gave up his Toyota Corolla seven months ago.

“The car was something of a family heirloom and I used it for the five-mile trip to work, as well as to take my mum round for her shopping. The car died about seven months ago and I decided to scrap it. I was sentimentally attached to it but it was the right time to get rid of it. I was increasingly uncomfortable with having the car because of my job. I am aware of the damage cars can do, particularly in terms of air pollution.

“Now I cycle to work, car-share with a colleague, or I take the bus and I walk a lot more than I did before. I feel a lot fitter physically and I get to work feeling a lot more alert than I used to. I also feel better about myself and better about the environment. I would encourage people to think about doing the same as me, if their circumstances allow it. I don’t miss having a car at all.”

Ian Griggs

This is a nicely written story by Jyoti Thottam from Pune in India published in Time magazine – about the world’s cheapest car, retailing for under 100,000 rupees or about £1,300. The makers have plans to sell the car in kit form which would be assembled by dealers….hmmm. It’s clearly one way forward.  But where’s that really high performance electric battery car I’ve been looking for….

In New Delhi in the early 1970s, my family traveled by scooter in the classic, death-defying Indian fashion. My father would drive, with me, a toddler, standing in front gripping the handlebars and my mother seated pillion, my infant sister in her arms. My father was a civil engineer and my mother a nurse, and in India at that time, cars for a young family were far out of reach.

More than 30 years later, I recently listened to Ratan Tata, chairman of one of India’s largest companies, describe a family just like mine as the inspiration for the Nano, the ultra-cheap “people’s car” that Tata Motors officially launches today. “What sparked it off was riding in a car and looking at them and saying, ’surely there’s a safer way that these people can be transported,’” Tata recalls.

That incident was the beginning of a six-year quest by Tata Motors, India’s largest automaker, to develop a car for the common man costing less than Rs 100,000 (about $2,000), roughly the same price as a motorcycle. Many thought Tata was bound to fail, that a car so cheap wouldn’t be much of a car at all. The Maruti 800, India’s best-selling sub-compact, costs almost twice as much. The chairman of Suzuki Motor, Osaka Suzuki, once said: “Tata will not be able to make a one-lakh car.” (Lakh is an Indian word for 100,000.)

The company has proven the doubters wrong. The Nano is going on sale at Tata’s 470 outlets in India; the base model does indeed carry a sticker price of Rs 100,000. Now, with global car sales in the worst slump in decades — Tata Motors itself is experiencing financial difficulties — the battered automotive industry is looking to the debut of the world’s cheapest car for clues to a future that could revolve around smaller, more fuel-efficient and more cheaply produced vehicles.

In an exclusive March 5 interview with TIME, Tata downplayed the tough market conditions and the impact that sagging consumer demand could have on Nano sales. Although car loans are harder to come by in India due to the credit crisis, the country’s economy is still growing. “If I had conceived a million-dollar supercar today, I think you’d have every reason to question whether that’s the right product at the right time in the planet that we are living in today,” Tata says. The Nano, he argues, is the right car for this difficult time. “What has happened in the changing economic situation globally reinforces, if nothing else, the fact that a low-cost car has a place.”

Tata Motors engineers developed the Nano by redesigning every component to minimize cost and weight, while trying to maintain performance and comfort. To see how well they accomplished their mission, I was offered the chance to drive a Nano on a test track at Tata Motors’ main plant in the western Indian city of Pune.

The first thing you notice is that the dashboard holds just two gauges: speedometer and fuel level. This is the basic model, and it’s stripped down to the bare essentials. But driving the car is surprisingly easy. The gearshift is smooth, the car accelerates adequately and you never feel cramped or low to the ground. The Nano doesn’t feel like a cheap, lightweight car that’s going to tip over with the first sudden turn.

Outside the Tata Motors facility, our photographer got to drive a fully equipped, bright yellow Nano along the highways, cobbled avenues and side streets of Pune. This car had air conditioning, worth the extra money in India (optional-equipment costs had not been released at the time this was written), but running the aircon sapped some of the power of the tiny, two-cylinder engine. Other drawbacks of the car: The storage space is hard to access because the hatchback doesn’t open, the brakes aren’t progressive, and the car we drove pulled slightly to the left even though there were just 40 km on its odometer.

Those quibbles are unlikely to make a difference to potential buyers. The Nano’s target customers are people riding two-wheelers, and for most of them, this is the only car they could hope to buy. Even without spending anything on marketing so far, Tata executives expect demand to far exceed their initial annual production capacity of 45,000 Nanos. Tata Motors had planned to build about 250,000 cars a year, but the company was forced to shut down its original Nano factory last fall after protests by people displaced by its construction turned violent. That disruption forced Tata Motors to relocate its main Nano production line and delayed the launch. Because plants in Pune and Pantnagar are now producing the car in reduced numbers, the company is bracing for long waiting lists and disappointed customers.

The lower volume means the Nano will do little for Tata Motors’ revenue and profits, at least initially. Vaishali Jajoo, a senior automotive research analyst at Angel Broking, an investment firm in Mumbai, says that even at projected output of about 250,000 cars a year, she expects the Nano will add just 3% to annual sales. Because the profit margin on Nano sales is small, “It will take at least four to five years to break even” by recouping development costs, Jajoo says. Fully equipped Nanos have higher margins, but the company has not yet decided how many of those it will produce. A company spokesman declined to comment on analyst reports regarding the Nano’s launch, calling them “speculative.”

Initially, the Nano will be sold only in India. The company plans to begin selling a European version in 2011. It has no plans yet to export the Nano to the U.S., although that has not been ruled out.

The Nano’s slow start comes at a time when Tata Motors is struggling financially due to slumping demand. The company in the quarter ending Dec. 31 reported a $58.5 million loss, its first loss in seven years. Loans for Tata Motor’s $2.3 billion purchase of loss-making luxury car brands Jaguar and Land Rover from Ford Motor are coming due. “That’s a major cash-flow crunch for them,” Jajoo says. Jaguar and Land Rover sales have tanked. The company is pursuing several options to meet its obligations, including getting a bailout from the British government.

The Nano certainly won’t solve Tata Motors’ immediate problems. But Tata says he hopes the groundbreaking vehicle will in the long run help redefine not only how much cars cost, but also how they are made. The future of the car industry, he says, lies in design and marketing — not manufacturing, which involves high costs and increasingly can be farmed out to other companies. If the Nano really takes off, Tata Motors may try “distributed manufacturing” — selling Nano kits to be assembled and sold by independent dealers. This, says Tata, would be a step toward fully outsourced manufacturing. “What I tried to describe on the Nano is an attempt to look at that as a business model,” Tata says. A new way of doing business may be something the beleaguered auto industry needs even more than a cheap new car.

It’s interesting to see key European issues discussed by the Americans. Actually I believe the Washington Post is more objective than the British newspapers, in this article by Craig Whitlock today. The crucial fact buried in this one is that Europe held two different meetings at the same venue – one for the Eastern Europeans and one for the “main players”. Their headline was E.U. Denies Request for Bailout of E. Europe – Members Sharply Split Over Economic Action

BERLIN, March 1 — European leaders Sunday rejected a Hungarian plea for a $240 billion bailout of struggling Eastern European countries, as divisions continued to fester over how to prevent economic ills from spreading across the continent.

Germany, Europe’s largest economy, led opposition to the Hungarian proposal. German Chancellor Angela Merkel said a broad, regional rescue plan was ill-conceived, though she did not offer specific alternatives.

“Saying that the situation is the same for all Central and Eastern European states, I don’t see that,” she said Sunday after a European Union summit in Brussels. “You cannot compare Slovenia or Slovakia with Hungary.”

Several Eastern European countries have been slammed by currency devaluations and other economic ailments in recent months, as global investors have warned that the region is ripe for a financial meltdown.

Hungary and Latvia have received bailouts from the International Monetary Fund, and Romania has said it may ask for one. The E.U., as well as the World Bank and other financial institutions, has approved aid, but national leaders say much more is needed.

The 27-member E.U., hamstrung by political infighting, has been unable to agree on how to respond. The E.U. was created as a common economic market; its members spent a generation easing border restrictions, coordinating regulations and harmonizing fiscal policies. But faced with the worst global economic crisis since World War II, members are accusing one another of protectionist impulses and national rivalries.

Hungary’s prime minister, Ferenc Gyurcsany, had proposed the massive rescue fund for Eastern Europe last week. On Sunday, he warned that old conflicts could reemerge and that “large-scale defaults” would result if the E.U. did not come to the aid of its newest members, who have spent the past two decades trying to recover from communism.
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“We should not allow a new Iron Curtain to be set up and divide Europe into two parts,” Gyurcsany told reporters in Brussels before the start of the summit. “This is the biggest challenge for Europe in the last 20 years.”

Disagreements are so widespread that E.U. leaders held two separate summits Sunday.

In the first, elected officials from Eastern European countries, which were granted admission to the E.U. starting in 2004, gathered in Brussels to discuss how to give their region more of a voice in deliberations that have historically been dominated by the continent’s economic powers: Germany, France, Britain and Italy.

Eastern European officials said they were frustrated that few of them have been included in talks with the United States, China, Japan and Western European countries over how to respond to the global economic crisis.

“None of those people around the table are actually from a country that is in the catching-up period in the E.U.,” Mikolaj Dowgielewicz, Poland’s European affairs minister, said Sunday, referring to the time since the collapse of communism two decades ago. “You have lots of old member states. There is certainly an issue here.”

Several Eastern European countries also want the E.U. to make it easier for them to replace their unstable currencies — such as the Polish zloty and the Hungarian forint — with the euro. Germany, France and other Western countries have insisted the new members follow a strict, gradual path into the euro club that limits deficit spending. The recession, however, has made the rules more painful to follow.

At the same time, Eastern European leaders have been squabbling among themselves, with officials from relatively healthy economies taking pains to distance themselves from their weaker neighbors.

Poland and the Czech Republic, for instance, also frowned on the Hungarian bailout proposal, saying they did not need to be rescued and did not appreciate being lumped together. “When it comes to any specific plans for Eastern Europe, we don’t need those plans,” Dowgielewicz told reporters.

“We do not want any new dividing lines,” added Czech Prime Minister Mirek Topolanek, whose country sponsored the summit and holds the rotating E.U. presidency until July. “We do not want a Europe divided along a north-south or an east-west line.”

According to the Independent a normally reliable poll shows that almost  40% of Britons anticipate serious rioting in city centres in the coming months. Hmm. Could be right. The picture shows December’s Athens riots as a taste of what we’re in for.

More than a third of voters believe the Army will have to be brought in to deal with riots on British streets as the recession bites, a poll showed today.

The widespread fear of serious unrest was disclosed as a senior police officer warned activists were planning a “summer of rage” and could find rioters easier to recruit because of the credit crunch.

Superintendent David Hartshorn, who heads the Metropolitan Police’s public order branch, said known activists were planning a return to the streets centred on April’s G20 summit of world leaders in London.

And intelligence shows they may be able to call on more “footsoldiers” than normal due to the unprecedented conditions – which have led to youth violence in Greece and mass protests elsewhere in Europe.

YouGov polling for Prospect magazine found 37 per cent thought such “serious social unrest in several British cities” was certain or likely – although a slim majority (51 per cent) disagreed.

Almost three quarters (73 per cent) said they feared a sustained return to mass unemployment.

And a clear majority (64 per cent) also favoured forcing the under-25s to do a year of full-time, modestly-paid community service such as working with the sick and elderly or helping with environmental projects.

Labour MP Frank Field told Prospect the main political parties should join forces to develop the idea.

“The time has come to look at this idea. A new bipartisan commission should be established to look into how it could be done, perhaps led by figures as respected as David Blunkett or David Davis,” he said.

Although the biggest support for a compulsory scheme was among the older generations, a majority of 18-30 year olds (52 per cent) also gave it their backing.

Talking about the prospect of disorder, Mr Hartshorn told the Guardian: “Those people would be good at motivating people, but they haven’t had the ‘footsoldiers’ to actually carry out [protests].

“Obviously the downturn in the economy, unemployment, repossessions, changes that. Suddenly there is the opportunity for people to mass protest.

“We’ve got G20 coming and I think that is being advertised on some of the sites as the highlight of what they see as a ’summer of rage’,” he told the newspaper.

Gordon Brown’s spokesman said: “The Prime Minister’s view on this is that of course he understands people’s concerns and he also understands that people are angry, for example about the behaviour of some of the banks.

“That’s why he is absolutely determined that the Government does everything possible to deal with those concerns and help people and businesses get through what is a global recession.”

YouGov polled 2,270 people between February 10-12.

This article appeared today in the Washington Post. I have only included recession credit crunchy stories where they have been interesting or well written. This piece was done by Annys Shin.

The unsold cars and trucks piling up at dealerships and assembly lines as consumers cut back and auto companies scramble for federal aid are just one sign of a major problem hurting the economy and only likely to get worse.

The world is suddenly awash in almost everything: flat-panel televisions, bulldozers, Barbie dolls, strip malls, Burberry stores. Japan yesterday said its economy shrank at an 12.7 percent annual pace in the last three months of 2008 as global demand evaporated for Japanese cars and electronics. Business everywhere are scrambling to bring supply in line with demand.

Downsizing can be tricky, though. No one knows how much worse the economy will get, and while everyone waits for the recession to peter out, businesses are grappling with how to cut costs and survive without sabotaging their ability to grow when the economy picks up.

And there is a lot to cut.

“There is over-capacity in everything,” from “retail to manufacturing to housing,” said Richard Yamarone, chief economist at Argus Research. “If capacity is too large, you don’t need that many people employed, which is another reason we’re seeing such high job losses.”

As long as capacity far outstrips demand, businesses have little reason to expand, buy new equipment or hire workers. Even if the government funds bridge repairs and banks step up lending, many industries still have to go through massive restructuring before growth can resume. But executives say they have to tread carefully. If they put off critical investments in technology or research for too long, they could hobble their recovery and even the economy’s.

Few industries have been as stung as severely by excess capacity as the U.S. auto industry, which produces millions more vehicles than it can sell. In 2008, there were enough automotive assembly plants in North America to churn out 18.3 million vehicles a year, according to the Center for Automotive Research. Analysts estimate that consumers this year will buy about 11 million. At current sales levels, it would take 116 days to sell all the cars and trucks clogging lots.

Automakers are scheduled to submit plans today outlining how they hope to restructure their operations to deal with a smaller marketplace, while still developing the new fuel-efficient cars that may be key to their future.

Auto suppliers are also trying to figure out how to survive in the face of massive excess capacity globally.

At its plant in Strasburg, Va., International Automotive Components, a Michigan-based supplier, secured wage and benefit concessions from workers in 2007 in hopes of staying competitive. But when Ford closed a factory in Norfolk, IAC had to lay off more than 200 workers, a third of the workforce in Strasburg. Since then, IAC has been able to line up more work for the plant.

“The unfortunate thing is we know . . . it comes at the cost of other workers whose plants were unable to survive,” said Karen Foster, president of United Auto Workers Local 2999, which represents the IAC employees at the affected plant.

There are echoes of the automakers’ plight throughout the economy. Sandra Berg, chief executive of Ellis Paint in Los Angeles, an industrial paint and coating manufacturer, recently found herself confronting over-capacity head on. Her company had been growing steadily since 2000 and was able to hand out bonuses for 2008. The downturn started to affect business toward the end of last year. Then came January, and “we just slammed into a brick wall,” Berg said.
Since the new year, as sales have plummeted, Ellis Paint has announced two rounds of layoffs, imposed a hiring freeze and cut pay for management by 5 percent. The company has cut everywhere but sales, marketing, and research and development. “Our goal is to keep our expenses at the level of sales. I don’t need to make a lot of money. I just need to break even . . . and look for the opportunities,” Berg said.

Non-manufacturing sectors are trying to get rid of excess capacity as well. Retail chains such as Ann Taylor and Gap are closing stores after years of expansion, and others, such as Mervyns, are closing for good. “We’ve tremendously expanded the square feet of stores but not the number of yuppies occupying them,” said Standard & Poor’s economist David Wyss.

Some analysts say over-capacity is so rampant that it will stymie government efforts to unfreeze credit markets. Banks have little reason to lend not only because they still have bad debt on their books but also because businesses don’t have a pressing need to expand, said Mike Shedlock, an investment analyst with Seattle-based Sitka Pacific who writes the popular blog Mish’s Global Economic Trend Analysis.

“What is it that we need more of?” Shedlock said. “Do we need more Wal-Marts, more Pizza Huts, more nail salons?”

Strip malls and stores proliferated alongside housing developments, but many of those houses are empty; there were never enough people to fill them in the first place, and there won’t be anytime soon.

Harvard economist Edward Glaeser estimates that from 2002 to 2007, the country’s housing stock increased by 8.65 million units, outpacing the number of new households, which increased only by 6.7 million over the same period. Taking into account a rise in the number of vacation homes, Glaeser estimates an overhang of about 1.3 million vacant units. Absorbing that excess, he said, could take an additional two years.

Over-capacity in the housing industry has spilled over into countless other peripheral industries — forcing cuts at chemical companies, home improvement stores and furniture manufacturers. The slump has prompted layoffs at PPG Industries, a leading paint company; Owens Corning, which makes roof shingles; and Therma-Tru, a door-manufacturing company. Therma-Tru recently moved up plans to close its plant in Fredericksburg later this year, citing “weaker-than-expected business forecasts.”

Some businesses that were careful to manage inventories during the boom are facing a hard adjustment.

Ben Anderson-Ray, who runs Hubbardton Forge, a small maker of high-end lighting fixtures in Vermont, said he’s had to lay off 26 employees after initially cutting hours, even though he expanded the business steadily and his customers aren’t stuck with massive quantities of unsold goods.

For now, Anderson-Ray said, he has not scaled back work on new products; he simply cannot afford to do so. As one of the last lighting companies that manufactures its goods in the United States, Hubbardton Forge has survived in part because of its original designs and constant innovation. It cannot compete with overseas producers on price.

“If our order rates improve, we have the capacity in place to come back,” Anderson-Ray said. But if order levels fall further over the next few months, he may have to consider further cuts. “We are watching our orders every day,” he said.

Some analysts see ending the credit crunch as soon as possible as critical to preventing lasting damage. Harvard economist Diego A. Comin, in his research on Japan’s decade-long bout of economic stagnation in the 1990s, found that demand stayed low long enough that businesses didn’t make necessary investments. Computer adoption rates, for example, slowed, as did productivity growth. Businesses lost ground to competitors in countries such as South Korea, which made it harder for Japan to emerge from its slump.

Investing in new products and processes matters even more in highly competitive global industries plagued by over-capacity.

“In China, during the boom, there was huge over-capacity in various lines of activity ranging from shoes and clothing, light manufacturing — all of that stuff. So that is why from the perspective of U.S. companies, we have found it so important to be on the innovative edge,” said Harvard business professor Joseph L. Bower. “The only way to create value is to be on the innovative, high-tech, fashion-forward side.”

If the credit crunch in the United States persists, “companies will find it difficult to invest in technology for a while, and then once the financial markets are back on track and demand recovers, companies will find themselves in a difficult position,” Comin said. “Productivity growth will be declining for a while. They will have a hard time catching up.”