Skip to comments.Krugman, Fingleton, and Japan (Krugman: Japan, now a role model)
Posted on 05/27/2012 5:24:45 PM PDT by TigerLikesRooster
Krugman, Fingleton, and Japan
By James Fallows
May 26 2012, 10:22 AM ET
This is a case I sympathize with, and have made various times -- for instance, in the Atlantic two years ago. I am sure that Fingleton has noticed that Paul Krugman, long a skeptic of the "Japan is stronger than it looks" view, now agrees. Or so a new interview with Martin Wolf in the FT suggests:
The conversation turns to the Japanese crisis of the 1990s. In retrospect, I [Wolf] suggest, the Japanese seem to have managed the aftermath of their crisis quite well.
He [Krugman] agrees. "What we thought was that Japan was a cautionary tale. It has turned into Japan as almost a role model. They never had as big a slump as we have had. They managed to have growing per capita income through most of what we call their 'lost decade'. My running joke is that the group of us who were worried about Japan a dozen years ago ought to go to Tokyo and apologise to the emperor. We've done worse than they ever did. When people ask: might we become Japan? I say: I wish we could become Japan."
Respects to Fingleton, who was one of the few making the case against exaggerated Japan-pessimism all along. (Bill Holstein is another.) And to Krugman, for acknowledging how things have evolved.
(Excerpt) Read more at theatlantic.com ...
Japan survived by being impressive savers between 1991 and now, but that is changing now, as the demographics have turned savers into retired spenders. Their debt is twice as large as ours, and they have a smaller generation to pay that debt off. They are on the edge of a cliff right now just like we are, in no better position.
With the exception of a few years during FDRs leadership in the ‘30s, we didn’t shape our economic policies by looking at any other country. Instead, we did what we know how to do (or did) and other countries looked at our successful policies. It’s one of the reasons we were called “the leader of the free world” for so many decades.
How times have changed. Now, it seems we are hell-bent on trying to “be like them” instead of saying “we are going to lead, either follow or get out of the way”.
The difference between US debt and Japanese debt is twofold: 1. What was the money spent on and 2. Who was it borrowed from.
Fingleton's claim is that the debt largely was invested in capital goods (things that increased Japanese productivity), and it was borrowed from Japanese citizens who saved.
Now look at the US in contrast.