February 06, 2012

Silver linings


Eamonn Fingleton is a one-note contrarian who mostly plays solo. His basic argument is that Japan isn't quite the economic basketcase it's been made out to be since the real estate bubble burst twenty years ago.

He has a worthy point there, namely that human beings possess a remarkable ability to simply muddle through. (The apocalyptic nuts have all abandoned religion for economics and climatology.) To start with, even including earthquakes and meltdowns, Japan certainly isn't Greece.

Western journalists are just as gullible now as they were back during the rah-rah 1980s when Japan was #1! And Japanese are sanguine about the problem of population growth (despite there being a cabinet minister with the problem of population growth in her portfolio) for good reasons.

The problem is, Fingleton messes up a worthy thesis with nonsensical apples vs. oranges arguments. The grouchy Spike Japan admits that "had Fingleton deigned to mention crime, drugs, or even general orderliness, I would have conceded the advantage to Japan immediately."

But practically everything Fingleton cites in Japan's favor betrays a no less superficial understanding, is unrelated to the actual strength or weakness of Japan's economy, or is a product of Japan being chock full of Japanese. As far as that goes, Japanese live longer and better in the U.S.

Paul Krugman's response, however, in the form of a backhanded compliment, is more revealing.

Krugman quickly points out Fingleton's errors, but then predictably comes to the conclusion that "[the U.S. is] are doing worse than Japan ever did." Except that in arguing that "1990-2000 really was a lost decade," he makes the sort of silly mistake Fingleton likes to crow about.

Krugman bases this on the pre-popped 1990 bubble, the same way cynical economists like to use the inflation-riven 1970s as a benchmark for middle-class malaise. But draw a straight line through Krugman's graph and 2000 performance fall right in line with the previous three decades.

But taking Krugman at face value, the more interesting question is why Japan is supposedly "doing better." For reasons, alas, that would not please any liberal's heart:

1.) Japanese prefer underemployment to unemployment. "Extending unemployment benefits" is not a subject that greatly consumes the attention of Japanese politicians.

2.) Probably because population growth is flat and immigration is almost nonexistent, factors that will produce tight labor markets under practically any conditions.

3.) Japanese still have to put 20 percent down to get a secured loan on anything. Unsecured loans (credit cards) remain difficult to come by (short of payday lenders and loan sharks).

4.) Bonus-based pay at all levels means that a "salaryman" has to live with the expectation of losing a big chunk of his take-home pay if his company hits a rough patch.

5.) Which means that he has no choice but to save heavily (at zero real interest rates) or live significantly within his means (or live with his parents).

As a result, the average middle-class Japanese has a significantly lower standard of living than his American (or even Italian) counterpart, which is readily apparent from the residences they live in.

But it also means that the Japanese have a greater ability to conform and adapt (as Gillian Tett points out in this BBC interview), and so are much better prepared to make the "sacrifices" our political scolds like to go on about.

NHK set three of the last four Asadora dramas in the Showa Era. The inescapable message: you think life is tough now? Let's remind you what it was like then.

Japan's productivity is still ranked dead last in the G7 and lags even the OECD-30 average. Looking for the silver lining, that means bringing up productivity could buffer the effects of an aging and declining population. I'll bet on the country that would rather work than not.

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Apocalypse not now

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