The half-decade before the financial crisis was a go-go time for the global economy. Consumption reached unprecedented heights; so did oil prices and shipping rates. And that frantic buying and selling was a boon for manufacturing. As U.S. consumers flexed their credit cards on flat-panel TVs and video games, factories sprouted around the world to make all the stuff crammed into their SUVs. But amid the recession, spending has shrunk dramatically, as debt-laden U.S. consumers are learning to save -- and those factories have a lot less to do. During the downturn, the rates at which industrial capacity was being utilized in the U.S. and Japan, the world's two largest economies, plummeted to the lowest levels on record. In China, the world's workshop, tens of thousands of factories making mostly low-end merchandise have shut down.A slowdown on the world's assembly lines is a normal part of any recession. As demand shrinks, so must production. But now that the recession is easing, there is considerable debate among economists about whether manufacturers will be re-hiring workers and restarting assembly lines any time soon. Despite aggressive downsizing by industries such as auto manufacturing over the last 18 months, there are fears that the world remains stuck with so much excess production capacity that any recovery will be anemic, plagued by deflationary pressures, high unemployment and ailing bank loan portfolios. "Unless we deal with the excess capacity situation, we will have a protracted crisis that will continue to wreak havoc on all countries," warned World Bank chief economist Justin Lin in a July speech.
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