Underlying much of the head-shaking about Japan are two assumptions. The first is that a successful economy is one in which foreign businesses find it easy to make money. By that yardstick Japan is a failure and post-war Iraq a glittering triumph. The second is that the purpose of a national economy is to outperform its peers.
If one starts from a different proposition, that the business of a state is to serve its own people, the picture looks rather different, even in the narrowest economic sense. Japan’s real performance has been masked by deflation and a stagnant population. But look at real per capita income – what people in the country actually care about – and things are far less bleak.
By that measure, according to figures compiled by Paul Sheard, chief economist at Nomura, Japan has grown at an annual 0.3 per cent in the past five years. That may not sound like much. But the US is worse, with real per capita income rising 0.0 per cent over the same period. In the past decade, Japanese and US real per capita growth are evenly pegged, at 0.7 per cent a year. One has to go back 20 years for the US to do better – 1.4 per cent against 0.8 per cent. In Japan’s two decades of misery, American wealth creation has outpaced that of Japan, but not by much.
Those numbers are significantly gamed, since the US housing market was basically peaking in 2005/06 and began to collapse shortly thereafter, whereas 20 years ago (back when Clinton was first running for president) the US economy was in the toilet and Japan was still in the midst of its landing from the bubble. But you get the point.
I had a conversation with a local lawyer friend a few nights ago, part of which went something like this:
FRIEND: Man, this place is dead. No business, no innovation. Even the population is declining. Some guys respond “uhhh! uhhh! immigration will fix it all!” but I don’t buy that crap.
JOE: Well… [pause for effect] that’s one way to look at it. Tokyo is still growing even if the regions are hollowing out. Infrastructure is getting better. We can get real pizza and Mexican food now.
FRIEND: Yeah, but so what? There’s still no activity, no buzz, no meaningful deals in the pipeline. Everyone is just sticking their heads in the sand or living off of their savings.
JOE: It says a lot that they actually have savings. Anyway, if this is what an apocalypse looks like, none of us have much to worry about. I’m not in a rush to escape. Crowding and corporate lameness aside, life is pretty good here.
FRIEND: Ehhh, I just don’t see a future here.
JOE: Yeah, well, even when people “see a future,” they often get nasty surprises. (NOTE: It’s possible that being in Japan for a while has simply eroded my personal risk appetite.)