Japan, in my subjective view
As I wrote yesterday, the Japanese economy continues to limp along at about stall speed, hugging closely to the 0% line between growth and contraction. There are several reasons for this, in my :
–an aging population
–strong social prejudice against accepting women as working professionals (meaning Japan wastes potentially half its workforce)
–strong aversion to foreigners that manifests itself as an unwillingness to allow immigration
–therefore, a shrinking workforce
–money-based politics that fiercely defends the status quo
–veneration of age as the source of wisdom, meaning that older managers can’t/won’t solicit/accept suggestions from younger, more technically competent, subordinates
–a docile electorate
the US is the same, in…
–an aging population
–lingering discrimination against women
–growing political (shoot-yourself-in-the-foot) pressure to limit immigration overall, and especially by high skilled professionals from Asia
–money-based politics that defends the status quo, seen, among other places, in failure to reform the federal tax code (Japan and the US have the highest rates in the OECD)
the US differs, in…
–having a younger population than Japan, meaning we have time to make changes–and the example of the fate of Japan to motivate us to do so
–a better record on hiring women (not a high bar, though)
–political and cultural embracing of youthful entrepreneurs and disruptive ideas
The US has younger population tan Japan and a more vigorous economy, but is carrying similar dead-weight in the forces of the status quo, typified by politics in Washington.
In the past 25 years, Japanese voters have voted on two occasions to toss the dominant Liberal Democratic Party out of office and replace it with the Democrats (formerly the Social Democrats, and the Socialists before that). Both occasions triggered bitter intra-party warfare about who should receive credit for the victory. Nothing got done, so voters quickly reselected the LDP, as the lesser of two evils.
Hopefully, we can do better than that.
A couple of other factors which are similar between the U.S. and Japanese economies are the build-up of very high debt loads (U.S. is levered about 3.5x debt to GDP, Japan is well north of 4x) and the bursting of very large asset bubbles (Japan in 1990 and the U.S. in 2000 and the echo in 2007/2008). These two factors are related (e.g., the asset bubbles were probably the result of the excessive debt) and neither economy seems to have succesfully addressed the high debt loads. In fact, policy makers in both economies (and now in Europe and China as well) have gone to great length to avoid dealing with the high debt loads directly – perhaps in a hope that we can grow are way out of the debt burden. So far, the debt in these economies appears to be constraining growth.
Good points. Thanks.