Re: What happened to Japan?

royls_at_telus.net
Date: 07/15/04 

Date: Thu, 15 Jul 2004 20:05:43 GMT

On Tue, 13 Jul 2004 18:46:13 +0000 (UTC), Jim Blair <see@sig.com>
wrote:

>During the 1970’s and 80’s it seemed like everyone was worried about
>Japan taking over the world. They were smart and efficient, and were
>employing TQM (remember that?) and the ideas of William E. Demming.
>They had an "Industrial Policy". The USA was going to be falling
>behind them and eventually they would control the world economy
>and even buy up most of the valuable property in the USA: Rockeller
>Center and Pebble Beach, lots of hotels and our companies, etc.
>
>Then during the 1990’s everything changed. Japan fell into a decade
>long recession, sold off their US holding at a loss, the yen dropped
>to under a penny and the question was what happened to them and why.
>
>Georgists said it was because they directed their tax base away
>from land.

Which explanation at least has the advantage that it actually
happened.

>Supply Siders said it was because their taxes were too high.

Which explanation has the disadvantage that it didn't actually happen:
taxes were not high, they were low, especially the land tax; and taxes
that were higher than in competing countries, like the corporate tax
and top-rate personal income tax, had been just as high during the
boom years.

The only tax that increased significantly before the crash was the
consumption tax, which was introduced a year before the crash -- and
then, proving that there is no such thing as too much of a bad policy
when you are intent on shoveling money into landowners' pockets --
increased _twice_ after the crash, while the land tax was being
eliminated altogether.

>Conservatives said Japan was an example of failed Keynesianism.
>
>http://www.aei.org/publications/pubID.7119/pub_detail.asp

Which explanation has the disadvantage that it doesn't explain why the
recession occurred, only why it continued.

>Paul Krugman offered the interesting idea that it was demographics:
>too many old people.
>
>http://web.mit.edu/krugman/www/japan.html

Which explanation also has the disadvantage that it didn't happen:
Japan's birth rate -- its post-WW II demographic echo boom -- peaked
in 1973; so in fact, more young people entered Japan's workforce in
the 1990s than had done so in either the 70s or the 80s, both of which
were boom decades.

It is perhaps significant that among the possible explanations Krugman
enumerates in his article, the true one -- the shift of taxation off
of land and onto consumption, which I have identified numerous times
in this newsgroup -- is not mentioned. Does anyone know if Krugman
permits himself to know any of the economic facts about land?

>But for the last several years Japan has pulled out of its recession
>and is on the rebound again.
>
>Why?

You said it: rebound. Things can only go down for so long, and then
they go up. Even disaster areas like Cuba, North Korea and Zimbabwe
occasionally have years that are better than the previous ones.

>Do they tax land again?

Nope.

>Have they cut their tax rates?

Nope.

>Have
>they stopped trying to deficit-spend their way to prosperity?

Nope.

>Did they get younger?

Nope. Older. Japan's birth rate has been dropping for 30 years, is
now far below replacement level, and the proportion of elderly
continues to grow. As the women of Japan's echo boom move past their
fertile years over the next decades, Japan's birthrate looks set to
fall to lows never recorded anywhere in history, other than times of
war and famine.

-- Roy L

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