Bottoms up.

• Position: World economic crisis - Editorial - Cover Story

You know capitalism is in trouble when Business Week comes out with the cover story: GLOBAL Crisis: Time To ACT. The voice of enlightened capital, Business Week sounds apoplectic. "Fundamental assumptions about the future of the American economy have been completely altered by the crises in Asia and Russia," Bruce Nussbaum, Business Week's editorial page editor, declares in the September 14 issue. "The peace and prosperity of the world are at stake."

Brought on by the currency collapses in Asia last summer, and compounded by foolish commands from the International Monetary Fund (IMF), the world economy is now in turmoil. Economies in Asia are down anywhere from 5 percent to 20 percent in the last year. Russia is in free fall. Japan is sinking into its deepest recession since World War II. South Africa, Brazil, Venezuela, and Mexico may also be hit. Meanwhile, the bubble on Wall Street finally burst when the U.S. stock market fell by almost 20 percent in late August and September.

We are in the midst of a global recession caused by overcapacity. There are too many goods chasing too few buyers. Deflation, not inflation, is the problem of the day. Hundreds of millions of consumers in the hard-hit countries no longer have disposable income to buy products. This fuels a vicious cycle. If consumers can't purchase goods, companies lay off workers, which means there are fewer people who can afford to make purchases.

"It is clear that the contours of the crisis are different from anything we've seen in a long time," warns Business Week. "In severity and speed, it has taken most economists totally by surprise."

One person it hasn't taken by surprise is William Greider, who wrote a book last year called One World, Ready or Not: The Manic Logic of Global Capitalism. In it, he assailed the religion of the global free market and predicted the deflationary crisis that is upon us. He described what he called "the problem of surplus capacity." He wrote: "The system cannot continue on its present trajectory, not without sooner or later facing a substantial--perhaps sudden--adjustment in expectations and returns. To put it crudely, capital is being invested in new factories to make more things when the market is already struggling with a mounting shortage of buyers.... The wider the gap becomes between productive capacity and realistic market demand, the more likely it is that the collapse of optimism will be sharp and shocking. This is the nature of the...