Fixing the Japanese Economy

Having spent decades learning the political economies of Asia, I’ve always thought of Japan’s 25 year deflationary spiral and its attendant exotic monetary policies as proxies for exhausted political regimes.

I still think so.

Although they learned quickly at the hands of superior teachers during reconstruction Japanese civilization has remained very much like Athens after mastering the challenge thrown down by Persia.  They idolized the ephemeral achievement that became the Greek City State; but that advance ushered in a far more intractable political, social challenge that left the Greeks bereft of any policy.  The civil war known as the Peloponnesian War exhausted the achievement that was Aristotle, Sophocles etc. . .

Japan is that today.

How do you fix it!

You start by inculcating the Republican ideals of individual sovereignty.  You start with sound money.  You kill off the indigenous drive for centralization.  If that gains no traction, then you begin doing the difficult political work fiscally by liberating your tax code, your labor market inefficiencies etc. . .

The immediate cause of Japan’s 25 year deflationary spiral is not only demographic but the ideas that animate such plummeting demographic decline.  As countries mature, their sources of capital and competitive advantage change.

In the beginning of a growth cycle, both nation states and businesses have abundant labor, cheap capital tied to wage growth and disinflation, this characterized the rise of Japanese prosperity.

But the keys to innovation lie in creative destruction.  This is the fault line in Japanese political culture, a civilization tied to archaic views of time, history and achievement.

Innovation hits the bulwark that has become an ossified business, political culture.

Just look at the dominant characteristics of Japanese corporate culture.  CEO’s act like losing gamblers who won’t leave the table until they recover losses.  Executives throughout Japan institutionally delay losses until he/she moves on.

The social, political impact of such idolization is stagnation.  In the U.S. creative destruction is intrinsic in sound governance.  Emerging technologies throughout the U.S. are championed by new firms that usually have no financial or emotional stake in old business models/achievement.

If Japan wants growth it must gain traction on importing new social, political ideas.  This alone will create NEW CAPITAL.

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About William Holland

Systematic Theologian/International Relations
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