Robert Madsen: Japan Leading the West? December 5, 2012 COUNCIL ON FOREIGN RELATIONS <i> Robert Madsen is a senior fellow at the Center for International Studies at MIT </i> How the Mighty Have Fallen. It is easy to forget the fear Japan inspired abroad in the late 1980s and early 1990s. The collapse of an enormous asset bubble between 1989 and 1991 initiated a process of household and corporate deleveraging that eviscerated demand and produced the modern equivalent of a depression. As the private sector started to pay down its debts, the Japanese government stepped in and ran ever-larger deficits in order to preclude economic contraction. The upshot was two decades of very slow growth, a tripling of the gross national debt as a proportion of GDP. By the late 1990s the West had lost its fear of Japanese superiority and begun criticizing Tokyo for its evident failure to revivify its economy.<b> The irony was that even as they confidently proposed their various nostrums, the United States and other Western countries were unwittingly following in Japanâs footsteps.</b> Debt levels in almost all of the OECD economies had been rising steadily from about 1980 onward, and now the Federal Reserve and other central banks were holding interest rates too low and thereby inflating the greatest asset bubble the world had ever seen. <b>In broad brushstrokes, the experience of the Western economies over the last five years resembles that of Japan in the 1990s fairly closely. The extraordinary stimulus enacted during the Great Recession has not produced impressive GDP growthâthe average rate of expansion in the United States since 2007, for example, has been comparable to Japanâs in the early 1990sâand unemployment rates remain stubbornly high. Slower GDP growth, high unemployment, massive government intervention, and the weakening of centrist political parties have already constrained the ability of Western governments to act wisely and assertively abroad. That pattern is likely to persist for at least another decade.</b> Defense and diplomatic budgets will consequently shrink and Western influence around the world decrease. The single biggest political issue in the advanced industrialized economies will be the redefinition of the social contract as governments hike taxes and slash entitlement spending in an attempt to balance their budgets and forestall eventual financial crises. This fraught process and the resulting social strains will preoccupy Washington, Tokyo and the European capitals for many years, limiting their ability to promote Western interests and values and giving China and other rising powers somewhat more freedom to pursue their strategic goals. So this time the geopolitical balance really has shifted toward East Asia. That has happened, however, in a way that few envisioned two decades ago: for rather than benefiting from the relative rise of the East, Japan is now watching from the sidelines, a bystander at best and a victim at worst. http://blogs.cfr.org/asia/2012/12/05/robert-madsen-japan-leading-the-west/ Welcome to another 2 decades of recession......
My question is : Do the japanese have their own parasite class like we do ? Not having one might explain how they have survived thus far
That's an interesting point, they have a very homogeneous and cohesive culture. That is a fundamental difference with the USA. Who knows what can happen here if this drags on?
They have a demographic problem similar to the retiring baby boomers, but I don't believe they have the same sort of parasite class we do. They have sensible immigration laws and enforce them with a vengeance. The idea that they would allow the basic character of their country to change through legal and illegal immigration would fill them with horror. Like it should have done us.
I think we are going to make the Japanese downfall look like an optimum outcome compared what we will face. Four more years of Obama is just going to bury us. There is a sliver of hope if the GOP can gain control of both the Senate and the House in 2014. We may be too far in by then to turn the corner. It will depend upon how deep and long the coming recessions is and whether Obama continues to pursue his agenda or learns some real economics and applies it. I'm not hopeful.
And THAT is a very important distinction...one that is overlooked by the many pie in the sky idealogues.
I remember hearing or reading some commentary back in the late 80's or early 90's. About how Japan had an advantage over us in that they were not as "diversified" as we are.