JAPAN OR AMERICA?

JAPAN OR AMERICA?

In 1980-1990, according to economists Japan could do no wrong taking into account their competitive edge when related to the North America which has broad range of high-tech and mass-production industries which manufacture goods for trading. Economists also saw Japan as an economy which has reconstructed itself since World War 2 which outperformed many of the economies in the world. It was the only economy outperforming the America in the growth rate when they had the same productivity levels.

Japan due to its political and economic pressures had to undergo the transformation to export sensitive manufacturing and intensive machine usage. That has been an era of automization, computerization and materialization which has been keenly adopted by the Japanese and that has been their mission.

The slow growth population, high savings and the work ethics of the Japanese gave them an edge in intensive capital and so the results from labor productivity. Since it is a newly developing economy Japan has a vast pool of low wage laborers and took full advantage of the educated and high-paid workforce and started outsourcing low-waged and low-skilled laborers to regions of Asia. In terms of capital intensity and industrial knowhow Japan has equaled and surpassed most powerful economies in the world. The companies and industries which wanted high-end fashion, high finance and high-technologies and corporate field control would choose Tokyo for migration.

Japan may not or it is unlikely to become a super power economy with just a one-third population of US. The per capita GDP of Japan and US has a gap of around 30% which Japan is expected to come-over and moreover if Japan grows at this same rate it is not a surprising fact that it might have GDP 10% higher than US.

Rural and small business interests were collapsed due to political interference for interest into the export-oriented manufacturing. Women-culture of Japan produces a great obstruction in employing them. Before the financial crisis- “Global Financial Crisis” the Japan’s production capacity was not accounted for.

Japan has taken US as an economic-development model. The industrial development and export-oriented manufacturing was maintained by MITI-Ministry of International Trade and Industry which was not their core but these companies were well separated which posed a problem.

The WW2 development model was not doing any good anymore and the growth rate has fallen by 2% more by 1990. This slowdown has timed with the asset collapse and depression, which caused the 10% fall in Japanese output.

US economy 7% poorer than what it is expected to be in 2007, this give a clear-cut idea that the Japanese have to rethink the thought of taking the economy-development model as their own. Such decline still creates a great fear- fewer competitive pressures for keeping efficiency, low risk tolerance diminishes innovations.

Let us now think on the larger danger ahead- if a well handled bubble collapses in US economy it will leave the country 10% poorer in over a decade, what if the bubble as such collapses in Japan, would it leave the country 40% poorer than what it is?

This has made clear that there is no trend or cycle to rely upon and their reciprocal interactions cannot be neglected. This approach has left many economists in amazement and who themselves had to this about rethinking their strategies before putting them into place.

World is not what it was anymore, world is not what it was yesterday.