It’s not always enjoyable to look in a mirror. But we can learn a lot when we do. Perhaps it’s time for the United States to give it a try.
As the nation’s economy struggles, with new reports of job losses, bank failures and shaky consumer confidence, our mirror should be Japan, a country that’s also battling a fading economy.
In fact, President Barack Obama has already encouraged Americans to consider Japan’s experience a warning. Speaking on Feb. 9 about the recession, he said, “We saw this happen in Japan in the 1990s, where they did not act boldly and swiftly enough. As a consequence, they suffered what was called the lost decade, where essentially, for the entire ’90s, they did not see any significant economic growth.”
But as Asia expert Derek Scissors points out, Japan’s struggles have been going on longer than that. Japan’s been sinking for some 17 years. In current yen (the country’s currency) Japan’s economy appears to have been smaller in the fourth quarter of 2008 than it was in the fourth quarter of 1995. Further contraction is predicted this year.
Scissors notes that some of our biggest problems mirror Japan’s. For decades, the government in Tokyo encouraged exports to boost economic growth. Meanwhile, in recent years the American economic boom has been fueled by inexpensive imports and even imported savings. Much of Washington’s ballooning debt is financed by Treasury bills sold to foreign investors, led by China.
“If the U.S does not fundamentally change its tax, spending and regulatory policies,” Scissors and co-author J.D. Foster warn in a recent paper, “this nation risks replaying Japan’s two lost decades, with all that entails.”
Unfortunately, we’ve already taken a step down the wrong path, by mistakenly copying Japan when we ought to be moving in the opposite direction.
The near-trillion dollar stimulus package Washington passed last month is comparable to the big infrastructure programs funded by Japan’s government throughout the 1990s. Japan is now a country littered with “roads to nowhere,” but all that concrete failed to drive an economic turnaround.
Unfortunately, American leaders such as House Speaker Nancy Pelosi are already hinting they may throw even more “stimulus” money around this year. There’s a better approach.