I’m not sure i agree with some of the arguments presented in this article – i certainly do think Japan has many things it should be worried about and should change – but it’s refreshing to read an article which isn’t all gloom and doom.
Japan finds there is more to life than growth (FT, 5 Jan 2011)
By David Pilling
Is Japan the most successful society in the world? Even the question is likely (all right, designed) to provoke ridicule and have you spluttering over your breakfast. The very notion flies in the face of everything we have heard about Japan’s economic stagnation, indebtedness and corporate decline.
Ask a Korean, Hong Kong or US businessman what they think of Japan, and nine out of 10 will shake their head in sorrow, offering the sort of mournful look normally reserved for Bangladeshi flood victims. “It’s so sad what has happened to that country,” one prominent Singaporean diplomat told me recently. “They have just lost their way.”
It is easy to make the case for Japan’s decline. Nominal gross domestic product is roughly where it was in 1991, a sobering fact that appears to confirm the existence of not one, but two, lost decades. In 1994, Japan’s share of global GDP was 17.9 per cent, according to JPMorgan. Last year it had halved to 8.76 per cent. Over roughly the same period, Japan’s share of global trade fell even more steeply to 4 per cent. The stock market continues to thrash around at one-quarter of its 1990 level, deflation saps animal spirits – a common observation is that Japan has lost its “mojo” – and private equity investors have given up on their fantasy that Japanese businesses will one day put shareholders first.
Certainly, these facts tell a story. But it is only partial. Underlying much of the head-shaking about Japan are two assumptions. The first is that a successful economy is one in which foreign businesses find it easy to make money. By that yardstick Japan is a failure and post-war Iraq a glittering triumph. The second is that the purpose of a national economy is to outperform its peers.
If one starts from a different proposition, that the business of a state is to serve its own people, the picture looks rather different, even in the narrowest economic sense. Japan’s real performance has been masked by deflation and a stagnant population. But look at real per capita income – what people in the country actually care about – and things are far less bleak.
By that measure, according to figures compiled by Paul Sheard, chief economist at Nomura, Japan has grown at an annual 0.3 per cent in the past five years. That may not sound like much. But the US is worse, with real per capita income rising 0.0 per cent over the same period. In the past decade, Japanese and US real per capita growth are evenly pegged, at 0.7 per cent a year. One has to go back 20 years for the US to do better – 1.4 per cent against 0.8 per cent. In Japan’s two decades of misery, American wealth creation has outpaced that of Japan, but not by much.
The Japanese themselves frequently refer to non-GDP measures of welfare, such as Japan’s safety, cleanliness, world-class cuisine and lack of social tension. Lest they (and I) be accused of wishy-washy thinking, here are a few hard facts. The Japanese live longer than citizens of any other large country, boasting a life expectancy at birth of 82.17 years, much higher than the US at 78. Unemployment is 5 per cent, high by Japanese standards, but half the level of many western countries. Japan locks up, proportionately, one-twentieth of those incarcerated in the US, yet enjoys among the lowest crime levels in the world.
In a thought-provoking article in The New York Times last year, Norihiro Kato, a professor of literature, suggested that Japan had entered a “post-growth era” in which the illusion of limitless expansion had given way to something more profound. Japan’s non-consuming youth was at the “vanguard of the downsizing movement”, he said. He sounded a little like Walter Berglund, the heroic crank of Jonathan Franzen’s Freedom, who argues that growth in a mature economy, like that in a mature organism, is not healthy but cancerous. “Japan doesn’t need to be No 2 in the world, nor No 5 or 15,” Prof Kato wrote. “It’s time to look to more important things.”
Patrick Smith, an expert on Asia, agrees that Japan is more of a model than a laggard. “They have overcome the impulse – and this is something where the Chinese need to catch up – to westernise radically as a necessity of modernisation.” Japan, more than any other non-western advanced nation, has preserved its culture and rhythms of life, he says.
One must not overdo it. High suicide rates, a subdued role for women and, indeed, the answers that Japanese themselves provide to questionnaires about their happiness, do not speak of a nation entirely at ease with itself in the 21st century. It is also possible that Japan is living on borrowed time. Public debt is among the highest in the world – though, significantly, almost none of it is owed to foreigners – and a younger, poorer-paid generation will struggle to build up the fat savings on which the country is now comfortably slumbering.
If the business of a state is to project economic vigour, then Japan is failing badly. But if it is to keep its citizens employed, safe, economically comfortable and living longer lives, it is not making such a terrible hash of things.
