>Having produced everything people want should be the goal.
In socialism, if that thing existed, maybe.
In capitalism you don't produce what "people want".
You produce what you can SELL.
When you cannot sell what you have produced (e.g because people cannot afford to buy it anymore), and you have tons of investments in factories, production capacity and materials being underutilized, you have "overproduction".
It's not really overproduction so much as wrongly predicting what future demand would be.
What sells and what people want are highly correlated, which is what capitalism relies on. Yes it's not perfectly correlated and maybe there is a better system, for the most part it works.
In socialism, if that thing existed, maybe.
In capitalism you don't produce what "people want".
You produce what you can SELL.
When you cannot sell what you have produced (e.g because people cannot afford to buy it anymore), and you have tons of investments in factories, production capacity and materials being underutilized, you have "overproduction".
http://en.wikipedia.org/wiki/Overproduction