Potemkin prosperity

Charles Jannuzi jannuzi at edu00.f-edu.fukui-u.ac.jp
Mon Oct 1 19:42:53 PDT 2001


Re: Potemkin prosperity

In reply to Lawrence, Carl R. wrote in part:

beginning of quote >In short, US society at large has turned its back on the hard lessons learned by earlier generations and reinstituted an economical model that has been proved beyond cavil to produce profligate wastage and bitter social divisiveness.< end of quote

My comments for the most part are not really in direct counterpoint to this, but I'll bring it around to Japan's place in this.

Such a turning back (or revivalist evolution) seems pretty easy to have accomplished. Had the US been constitutionally stuck with a true national or federal government mandated to do things like run a national health insurance system or redistribute wealth through progressive taxes, things might have been different. Instead, it was a veneer thin layer of government social activism from the Roosevelt era transmogrified through the Cold War, the Vietnam War, and the economic malaise of the 70s.

Growth in the powers of government in the US has largely meant adventurist foreign policy and militarization from the late 19th century onward (true, some of it in response to militarization elsewhere, but remember, the US had a three ocean navy when the Japanese navy struck Pearl Harbor in 1941). This growth is largely disconnected from American society. There is very little if any direct democratic connection between US foreign policy and the American people. About the only feedback loop there is is opinion polls.

The US may be the world's only superpower, but most of its people do not get to enjoy that privilege. It has the big stick, but I still wouldn't eat any canned meat with USDA approved stamped on it (see 'The Jungle', Upton Sinclair, 1906). The US is hardly a lifestyle superpower for much of its society.

What's more, some Americans have worked very hard to export that model in essense--through its influential grad. schools (who educate many from abroad and actually set up campuses overseas), through its trade missions (run not just by trade reps but by ambassadors and the American Chamber of Commerce--and note how the WTO was such a high US priority until it started to lose dumping cases), through the US media, through the ability of stock market superpowers (IBM, Microsoft, Intel, Prudential, Citigroup, GE to name a few) to set up operations or buy up companies pretty much anywhere they want, etc.

There have been a couple threads about Krugman's analysis of Japan and what the malaise here is all about. Economists focus on failed Keynesian pump-priming (fiscal measures, leaving gov't debt extremely high ) and failed interest rate cuts (monetary measures, interest rates now close to 0%), plus the deflationary economy (linked to an overvalued yen) which makes many if not most businesses unprofitable. And then there are all the bad loans (though how bad? since many foreign companies want to buy these assets) and tottering banks because so many businesses aren't making profits. Of course this is just re-stating the obvious.

My thesis goes a step further: the Japan malaise is basically a symptom of globalization's failure . The mainstream says that Japan has failed to integrate properly with the global system. How did Japan get to be the world's number two economy and its largest industrial producer, then?

I think Japan's failure is a symptom of globalization's failure, not just Japan's. No one bought this globalization thing hook, line and sinker as the Japanese elite did (the LDP politicians running things from the early 80s on). They still pay Margaret Thatcher to come over annual in a nationwide tour in which she yaps off about how to liberalize. .

The reasons I have given for this failed globalization put the blame with the US, and to some extent protectionist Europe. Now that doesn't mean I necessarily think it would have been a good thing for globalization to have taken place either according to the WSJ and Business Week or the Nikkei Keizai Shimbun.

But the point is, just when Japan had a fairly strong yen and a high stock market, Japan was THE threat for much of the US establishment. Globalization theory wouldn't have worked that way. This was naked US economic nationalism, even mercantilism, if we can agree to the use of the term.

Now Japan is bombarded with critiques from US experts and consultants about how Japanese business or government can't do anything right and how Japan has to become more like the US. Institutional investors and financial firms from abroad, mostly the US and UK, determine where the Nikkei stock market is going to go, that's a fact. Everytime Koizumi walks the free market talk and does something to dismantle the national government or make life hard for small (the foreign consultant synonym is 'uncompetitive') companies here, the Nikkei foreigners reward him by upward movement of the Nikkei. Of course, he hasn't been very effective at convincing them of anything much in the past two months.

If the national government here is stripped of or shirks its mandates for coordinating and managing undertakings that help ease social inequality and economic turmoil, Japan will have found all the wrong American 'solutions' to its many and growing problems (national or nationally subsidized enterprises include: national health insurance, national retirement, national universities*, national postal savings and life insurance, agricultural and local credit cooperatives, subsidized national and local train networks, etc.),

Charles Jannuzi

*Contact me off list for information about two pieces I co-authored for the 'Times Higher Education Supplement' about the 'reform' of national universities in Japan.



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