How Japan Failed To Become A Superpower

Remember the threat that Japan posed to everyone throughout the 1980’s?  The spooky truth is easy to discern, for they performed well because they had America as its tutor.  We abanoned our own principles as evidenced in the Keynesian stagflation that wrecked the 1970’s.  Japan’s weakening is of a different order.

The Japanese have failed to become a Superpower.  How did this come about?

Their leadership became enamored with its own success, it became in the words of Toynbee a ‘dominant minority’ resting on its laurels.  They failed to learn that as countries mature (like individuals), their source of competitive advantage changes.

Early on in development one can find abundant skilled labor, cheap capital and price stability, all become the foundation for competitiveness.  As time moves on, innovation not preservation becomes key.  For economies that are not service based, it means knowing what products to offer and what products NOT to offer.

Japanese corporate structure has not learned about the culture of innovation.  Throughout the United States emerging technologies are usually championed by new firms that have absolutely no financial or emotional stake in old technology.  This ‘clean break’ permits growth.  The Japanese have no such culture, they continue to peddle the old guard in hopes of preventing any such ‘clean break’.

Japanese government continues to act as if tax rates don’t matter and bloated budgets are indifferent to reality.  As of this writing, Japan has the second highest tax rate, the United States is number one.  Japan’s aging population and strict immigration policy mean the social, political impact of remaining a dominant minority will  have a reckoning.  Make no mistake prosperous stagnation has its impact.

Dr. Derek Scissors of the Heritage Foundation recently wrote how the average Japanese citizen is poorer than your average Mississippi citizen!  Permanently failed Keynesian experiments in ‘demand growth’; a lost generation of growth has compounding consequences.

The end of Japanese mercantilism is frightening.  Japan has suffered its first trade deficit ever.  The Earthquake and Tsunami only compounded an already weakened Japan.  Domestic export industries have been badly damaged.  Globilzation also hurt Japan for it scattered both its skills and factories abroad.

To the extent that Japan continues its authoritarian Keynesian hold on its once flourishing private sector, Japan will continue the downward spiral of an ‘ascendant’ nation.

About William Holland

Systematic Theologian/International Relations
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