Comment by lkrubner | Hacker News Reader

Comment by lkrubner | Hacker News Reader

It's important to realize that this article is by Eamonn Fingleton, who has been pushing a fixed idea for decades now: that Japan is secretly a terrifying power. He has written several books that touch (in whole or in part) on this theme:

http://www.amazon.com/s/ref=nb_sb_noss_1?url=search-alias%3D...

I read Blindside back in 1996 and I thought his argument was interesting for that time. However, when you read him, it is important to remember that he has not changed his opinion in 20 years, and there are new facts to be accounted for. At that time he seemed certain that Japan would be the worlds #1 economy by the year 2000. His prediction was wrong, but he has not much changed his opinion: he still believes Japan is an important success story.

Japan suffered a long depression in the 1990s. That is not fiction. That is a fact. However, it is also true that some of the stagnation of the period 1990-2013 should be attributed to demographic change.

Paul Krugman offered a partial counter-argument to Eamonn Fingleton here:

http://krugman.blogs.nytimes.com/2012/01/09/japan-reconsider...

Also, it is worth noting that for the last 20 years Fingleton has constantly harped on the fact that Japan has a trade surplus, sometimes a very large trade surplus, and he thinks this represents economic strength. Numerous economists have made the point that a large trade surplus can be a sign of economic weakness: perpetual insufficient demand at home in the domestic market. Fingleton has rarely taken this view into account.

Not to mention yet other signs of Japans wrecked economy:

* Zombie giant banks, addicted to bailouts

* Currency pushed and pulled by Yen carry trade

* Complete efficiency collapse. Workers work very long hours accomplishing little

* Eye watering debt ( worlds largest on many measures )

Kyle Bass is pretty bearish on the Japanese economy; has been for several years. If he turns out to be right, the Japanese are in for a bad time. I get the impression that a lot of it is due in part to the demographics (lots of elderly, at least they are healthy).

04/08/2013 - http://thecommonsensecapitalist.com/2013/04/08/kyle-bass-on-...

06/31/2013 - http://seekingalpha.com/article/1473301-should-we-allow-kyle...

01/21/2013 - http://www.forbes.com/sites/stephenharner/2013/01/21/whither...

05/23/2013 - http://www.bloomberg.com/news/2013-05-23/boj-bond-buying-to-...

Kyle Bass believes the Japanese will default, despite their ability to print their own currency. He was successful in shorting MBS, but his Japan fund has never been correct.

Kyle Bass is credible because he has a lot of money on the line too. He's not just selling books.

Kyle Bass advocates shorting Japanese debt. A trade colloquially known as the 'Widowmaker'.

I hear you. Add in the loss of good employment, and the make-work in the public sector.

Per capita GDP doesn't help if there are not enough new entrants in the workforce to replace departing workers. With no immigration, there won't be enough people to carry the load.

I love Japan, and the deflation made it cheaper to visit, but it's a cultural attraction more than anything else.

Michael Crichton was excellent for identifying the latest "worry" that was making the US anxious (sexual harrassment, nano-technology etc) and writing a novel about them.

Rising Sun was written when a lot of people were worried that Japan would overtake the US as an economic power. We all know how that turned out. It's also why I'm sceptical when people talk about China being the next economic superpower.

I have no doubt China will become an economic superpower. They are investing heavily in the African continent and central and South America. Those are long term, strategic investments.

It's a little disturbing to think that autocratic China at least seems to be able to plan decades ahead, while free America is largely stuck in quarterly business cycles and two-year political cycles. An oversimplification in both cases to be sure, but our culture could definitely learn some things about being patient and thinking ahead.

Today's champions are tomorrow's losers, that's the way it is... Maybe in a few decades we'll all have to learn Mandarin if we want to start a successful business :-)

If you look around a bit you'll find a lot of people who are rather bearish on democracy as practised in the first world west - professional politicians with no real world experience, being voted in by the cynical, uninformed masses, propagandised by bought and paid for mass media. Democracy has collided with the middle class and a free press concerned only with their own interests and come off second best - bitter, entrenched political paralysis at best. Like unions, it was a wonderful idea at the time, but now the cure is basically worse than the disease.

Frankly, the age of democracy is over, and we now have the age of the permanent civil service. The good news is, it is almost certainly an improvement. China, Japan and Singapore are run exclusively by their civil services (democracy in the latter two is an irrelevant sideshow), and they are run much better than most western countries, or at least with more long term strategy. In fact, pretty much everything wrong with Japan can be blamed on the idiot government trying to save face by not admitting reality. The USA would be pretty well served, IMO, by taking control of budget away from congress and giving it to - well, almost anyone. The GAO, maybe. The Fed, the SEC, the commerce dept, anyone, so long as they're not elected. Being accountable to the electorate turns out to be the worst idea ever for people who are actually trying to do their jobs. It means never being able to admit you're wrong.

I don't mind if they keep parliament/congress around for show but they're going to go the way of the Queen of England - a figurehead, kind of a sounding board for the people, a super-ombudsman. A hundred years from now we're going to look back and wonder how we ever could have been so mad to think that giving politicians the reigns of power could ever have been a good idea.

Ehhhh honestly real talk is 'controlled' economies have some of the absolute worst economic horror stories. I mean China during much of Mao's run experienced staggeringly bad management.

To the person who replied quoting the Economist about democracy in Japan, then deleted their comment - thanks for the link. Well yes, on a superficial level, I suppose democracy is kind of healthy in Japan. It sort of misses the point though.

Japanese Govt, like that in Singapore and South Korea, is characterised by the extreme strengths of their bureaucracies. It would be fair to say that the Japanese Diet, their government, is basically a peer to the JR railway company or MOFA. Imagine if in the USG, all the departments basically operated at the level of the DoD or Dept of State - frankly at the same level as congress. Congress can declare war on the DoD, sure, but would only do so under the most dire circumstances. In practise they cooperate.

Well, in Japan, that's how it is. Basically, the government could probably, if it came down to it, fire the heads of the bureaucracies, but it won't come to that and never has. They are peers for all practical purposes. They are like competing departments in a large corporation. You might think that is a recipe for wastefulness and corruption, and you would be absolutely right, but in a crazy sort of way they keep each other honest, somewhat, and it's better than Fox News making all your decisions.

Don't get me wrong, I'm not some fanatical Japanophile - I don't even live there anymore. But man, at least they can get at least some stuff done. In the west we could not even dream of having a 50-year high speed rail plan. Just think about that. What does that say about us? Look, we're not a dystopia, but we're still basically coasting on past success. The car is still moving, but it's slowing down. Maybe we ran out of gas, or maybe we're so caught up in fight about which way to drive we can't even put our foot on the accelerator.

Corporations that lose the ability to invest in or even think about the long term go out of business. I don't believe countries are any different. We are going to have to change, radically, or we'll simply be taken over - it's only a matter of time.

Yeah, but look who you have planning ahead - politicians.

If that's not a good point against it I don't know what is.

> while free America is largely stuck in quarterly business cycles and two-year political cycles

Key word here is "free". America's self-defeat will come from its misunderstood idea of "freedom" - really, just a self-centered attitude that hampers cooperation.

I wouldn't call it misunderstood. You're free to be selfish or cooperate, your choice. It's not freedom unless you can choose.

> you can choose

The last few decades of research in psychology and neuroscience are pointing at all sorts of issues with that part.

Planning ahead is not difficult. Planning ahead accurately is very difficult. And adjusting your plans to take new information into account is even more difficult.

China's economic central planning has worked so well to date because they have had larger, more successful economies to plan against--the U.S. and Europe. They have focused on exports, infrastructure, and exfiltration of intellectual property, in the hope of creating the foundation for a strong domestic economy.

Whether it will work remains to be seen. The 20th century clearly taught the world that central planning cannot maintain a consistently strong domestic economy; innovation happens too slowly. China's greatest challenge will be the transition to a more open and permissive society that is capable of bootstrapping its own innovations. This could be a very difficult transition for them culturally. Central planners very rarely give up their control and power peacefully.

That's one of the advantages of a regime like China's: if you are fairly confident that you will stay in power for decades, then you have a certain "ease of mind" with which you can plan long-term.

Whereas in most democracies the party in power always has to worry about the next election.

Sure, you can plan long term, assuming you're relatively principled and are looking out for the interests of your country. But that kind of situation is an open invitation for personal enrichment, too. China has had relatively good economic leadership recently, but when that changes the lack of "the next election" can be a serious problem.

you might find Moldbug interesting then.

moldbuggery.blogspot.in

Who the hell cares about what governments plan for?

I don't believe that a country can become an economic superpower whilst still being an undemocratic dictatorship. If I had to bet I would say some sort of internal unrest or revolution would derail China's attempt.

So you believe that the Soviet Union was never a super power and that all of the historic hegemons were not either, okay.

The Soviet Union was only able to maintain its position for 50 years.

America is a massive anomaly and we've only been a super power for 60-70~ years. Prior to WW2 we weren't that far ahead of everyone.

> economic superpower

Not that his point is valid, but he did say economic superpower and the USSR was certainly not.

Africa and South America are only long term, strategic investments to whoever controls oceanic chokepoints like the Panama canal, straits of Malacca, and other entries to the South China Sea, all of which are under US control since 1945.

Not if one of those investments is bypassing the chokepoint: http://en.wikipedia.org/wiki/Nicaragua_Canal

I think we could interdict a canal through Nicaragua just as easily as we could the Panama Canal.

You forgot global warming - rightly or wrongly, that was a huge pet peeve of his:

http://en.wikipedia.org/wiki/State_of_Fear

http://en.wikipedia.org/wiki/Michael_Crichton#The_Case_for_S...

http://scienceandpublicpolicy.org/images/stories/papers/comm...

And I tend to agree with his point of view...

> It's also why I'm sceptical when people talk about China being the next economic superpower.

I'm not an expert in economy, just a Civilization V player :) but I think these examples are very different. China is, simply put, orders of magnitude bigger. Even at a lower efficiency, they could output so much more "stuff", in any field of activity.

At this point, the only way they could go down in flames (or stay crawling at a low level) is self-sabotage via shortsightedness, bad decisions, cultural taboos, etc.

> China is, simply put, orders of magnitude bigger

Ah China, Like religion, a topic about which people who have no idea about are comfortable making grand, utterly wrong statements.

China's GDP is about 50% bigger than japans, its exports are about 2.5 times japans. The idea that china is too big to fail is ludicrous. It might be possible to argue though, that its too big to succeed

>It might be possible to argue though, that its too big to succeed

On the one hand it's already succeeded - second largest economy in the world and all that.

But from an economic development point of view, that's a very interesting question. Can China solve its development problems, which are numerous - development of the entire country not just the 30% of the population on the coast, governance of that unprecedented mass of people, and rapidly ramping environmental problems?

> Ah China, Like religion, a topic about which people who have no idea about are comfortable making grand, utterly wrong statements.

Careful, that sword has two edges.

I was referring to its potential - population, territory, resources.

>China is, simply put, orders of magnitude bigger.

One order of magnitude, anyway.

Basing your evaluation of China on anything that happened or didn't happen with Japan is a fallacy. China should be evaluated on its own merits or demerits, and not in comparison with Japan.

For one, Japan never had more than 50% of the US population. For their GDP to have eclipsed ours, their average citizen would have had to produce and consume twice as much as the average US citizen. The Japanese are highly productive, but not that much.

China on the other hand has four times our population. It's an entirely different dynamic here, and somewhat uncharted territory. No comparison.

Demography is destiny.

China's current rise is actually a return to historical norms. For much of history, China has been the wealthiest and most populous nation on earth. They just didn't have much direct contact with the West.

It's a bit more meta than that. I'm basing my evaluation on China on how wrong/overblown the prevailing narrative about Japan was at the time.

The difference between China and Japan relative to the US is about 1.2 billion people. It's really unlikely the Chinese won't eclipse the US in raw numbers, though coming out ahead in GDP/person is a much more dicey proposition.

>Numerous economists have made the point that a large trade surplus can be a sign of economic weakness

Exports are real costs, imports are real benefits. A trade surplus can help you keep net government spending low, but there's nothing positive about that in and of itself.

This is a good read about the real problems, lack of aggregate demand. Everytime government spending gets high enough to lift GDP, they pull the rug out from under the economy by raising taxes. A process they're looking to continue.

http://www.inginvestment.com/idc/groups/commentary/documents...

> Ordinarily, a decline in working-age population — and, thus, a decline in the supply of workers — would tighten the labor market and cause the unemployment rate to fall; in Japan’s case, however, the gradual rise in the unemployment rate and tepid job growth is occurring in spite of these demographic shifts, reflecting economic stagnation and weakness in aggregate demand.

We should maybe be a bit careful with competitive nationalist rhetoric. Japan has US military bases; it is in some loose sense an occupied nation. It's doing reasonably ok because we let it. (Imagine if the US had Chinese military bases, for "protection".) Japan is naturally kept from being too independent, but may be treated fine if obedient. (http://en.wikipedia.org/wiki/United_States_Forces_Japan)

On the dissident end, it's common knowledge that Japan's weakness has been overstated. Left Business Observer interviewed Fingleton (http://www.leftbusinessobserver.com/Radio.html#S130530), and Chomsky often mentions it.

(Never dug into the motivation though.)

> It's doing reasonably ok because we let it.

That's a rather startling claim, especially since the original argument is with respect to economic rather than military power.

Care to back this up?

What would you like me to expand upon?

I think the common-sense notion is that forms of power are interlinked. (Economics means ability to produce; military means capacity to inflict violence.)

Cambridge economist Ha-Joon Chang discusses the problems when we try to draw artificial, ideological boundaries between politics and economics; the analysis also applies to military. (http://ineteconomics.org/blog/institute/ha-joon-chang-and-ma...)

And when the economic sanctions in Iraq caused a US journalist to ask Madeline Albright, "We have heard that half a million children have died. I mean, that's more children than died in Hiroshima. And, you know, is the price worth it?" we see that economics can accomplish military objectives. (http://en.wikipedia.org/wiki/Sanctions_against_Iraq#Albright...)

> What would you like me to expand upon?

Suppose we immediately moved all of our military bases out of Japan. Are you predicting that the country would collapse, economically or otherwise?

Is Japan otherwise dependent on us, except insofar as we are a large market for Japanese-made goods?

a) I did not make such a prediction. For what it's worth, Hideyoshi Kase mentioned my initial common-sense reaction: "If United States withdraws its forces from Japan, we will spend the next ten years re-arming in various ways, including acquiring nuclear weapons". (http://en.wikipedia.org/wiki/National_security_of_Japan)

b) Japan has significant weaknesses, like historic lack of natural resources. I imagine it has enormous dependences, and not just on the US. (Dunno how the recent finds of rare earth metals changes this.)

The US worked very hard to restart the Japanese economy after WWII. To suggest that the US wants to keep them held down or "doing reasonably ok because we let it" is beyond silly. If a Japan in shambles was the goal, all the US had to do was just leave them alone after the war.

You repeat the self-serving propaganda of the US as a charity. ("We spy on you to protect you!") When you say "If a Japan in shambles was the goal", that is a non-sequitur, because I explicitly said Japan is "doing reasonably ok because we let it". So being in shambles would not be the goal.

This is an example of mechanically quoting arguments we're told to believe.

If you'd like to learn more about post-WWII US planning, simply look up the Marshall Plan and George Kennan. If you're able to deal with dissident lit, this may inform you: (http://books.zcommunications.org/chomsky/dd/dd-c11-s03.html).

"This is an example of mechanically quoting arguments we're told to believe."

And that is an example of when people who know they have no argument dismiss reality because it gets in the way of what they want to believe.

We have military bases in Japan because the Japanese people want US military bases in Japan. It allows them to focus on their economy without worrying about their strategic situation. If they change their minds and ask us to leave, we'll leave. SO the idea Japan is doing reasonable okay "because we let it" is a bit silly. US and Japanese interests coincide, for the moment.

And yes, Japan has the most powerful navy in the Far East (aside from the US navy, of course) regardless of what they call it. But that's temporary - they'll be eclipsed by China over the next decade.

> If they change their minds and ask us to leave, we'll leave.

Now who's being a bit silly? :) If anyone could cite sources supporting such a strange position, presumably they would have by now.

Let's take another example: "The current government of Cuba regards the U.S. presence in Guantánamo Bay as illegal and insists the Cuban-American Treaty was obtained by threat of force in violation of international law." (http://en.wikipedia.org/wiki/Guant%C3%A1namo_Bay) Of course the US does what it wants, because it's the military superpower. We don't ask people nicely if we could invade them, nor would we respect their votes on the matter.

As for Japan, Okinawans want the US military off their land. (http://en.wikipedia.org/wiki/Okinawa_Prefecture#U.S._militar...) Does the US hold votes, asking them if they wish to be occupied? Do we ask which other prefecture would prefer us to occupy them?

In any case, that's all besides the point. Even if your claims were 100% correct (and there's areas I agree with), the point still stands: "It's doing reasonably ok because we let it". (When you consider social dynamics, people often choose subordination to gain protection.) You're arguing a point I haven't made.

>Now who's being a bit silly? :) If anyone could cite sources supporting such a strange position, presumably they would have by now.

There's nothing strange about that position. The Japanese derive enormous benefit from the US presence. We left the Philippines when the Philippine government asked us to do so, and we'd leave Japan under the same circumstances. Do you really think we'd go to war with Japan to maintain bases there? That's preposterous.

>As for the US, Okinawans want the US military off their land.

So what? Okinawa isn't an independent country.

>In any case, that's all besides the point. Even if your claims were 100% correct (and there's areas I agree with), the point still stands: "It's doing reasonably ok because we let it". You're arguing a point I haven't made.

We "let" Japan do things to the same extent we "let" other countries do things. The only real stick we have with the Japanese is the threat to leave and take our money and protection with us.

The Philippines is a perfect example: "But, while Mt. Pinatubo provided a visible excuse to abandon the air base, U.S. officials were increasingly coming to view the facility as too expensive, as well as unnecessary in a time of tight budgets and easing post-Cold War tensions. Philippine political hostility to the continuing U.S. military presence and acrimonious negotiations with Philippine officials also made retention of the facility less attractive." (http://articles.latimes.com/1991-07-18/news/mn-3381_1_clark-...)

Dick Cheney said, "We have made a decision ... that we simply do not want to go back in and try to reuse Clark Air Force Base. The cost of doing so would be several hundred million dollars. It's in an area that is still threatened by continuing eruptions by the volcano."

> So what?

Indeed, "so what?" is our common reply to people's wishes to get our military off their land, as with Cuba's Guantanamo Bay and the Middle East in general.

I already mentioned one obvious alternative to occupying Okinawa against its residents' wishes. But as usual, "so what?" is the response.

> We "let" Japan do things to the same extent we "let" other countries do things.

Yep, ask people in the Middle East, Cuba, etc. (That's it from me, given that I cite evidence rather than merely repeat vague snatches of politics we can get from propaganda sources. I wish others would show us the same respect.)

>The Philippines is a perfect example...

No it isn't. We would not have left Subic Bay unless they asked us to.

>Indeed, "so what?" is our common reply to people's wishes to get our military off their land

It's not "their land". It's Japanese land, and people in Okinawa don't get to make that decision for the entire country. The country of Japan wants us to be there, and we'd leave if they didn't.

Places in Japan have NIMBY sentiment. Go figure.

>Yep, ask people in the Middle East, Cuba, etc...

The Cubans made a deal with us for a long lease in Guantanamo. When the lease is up we'll leave.

We never had any intention of staying in Iraq or Afghanistan, and we wouldn't have been in either country if the locals had kept to themselves. We were invited into Qutar and KSA.

I don't see the problem.

Reminds me of http://spikejapan.wordpress.com/2012/01/15/spiked-eamonn-fin...

It's also important to note that this isn't a forbes article, it's a blog on their site that anyone can write for.

It is not true that anyone can create a blog of Forbes.com. Their bloggers are all approved by the Forbes editorial staff, and the blog will be killed if it fails to meet standards for timeliness and quality.

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