THE INTERNATIONAL ECONOMY: IS THE WORLD STILL AT RISK OF THE “JAPAN DISEASE” ?

KISHORE MAHBUBANI WRITES — No one knows what the post–Covid-19 world will look like. But we know it will be very different. Many countries are likely to suffer from low growth and high debt, the “Japanese disease.” Poor developing countries will certainly suffer from this condition. Yet for developed economies, the “Japanese disease” could well become the “Japanese cure.” Even China could learn a lesson or two from Japan.

Conventional wisdom tells us that America has done well in recent decades while Japan has faltered and stagnated. Economic data confirms this. The U.S. economy has grown at an average rate of 2.6 percent from 1988 to 2018, while Japan grew by only 1.4 percent. Hence, U.S. per capita GDP (current US$) rose from $21,417 to $62,794 in the same period, while Japan’s went up slightly from $25,051 to $39,290.

But how did the people fare? Despite economic growth, Americans fared badly. The United States is the only major developed society where the average income of the bottom 50 percent went down over a thirty-year period. Two Princeton University economists, Anne Case and Nobel Prize winner Angus Deaton, have documented how this has produced a “sea of despair,” leading to “family dysfunction, social isolation, addiction, obesity, and other pathologies.” This “sea of despair” has in turn given rise to populist anger and political polarization. America is not a happy place.

By contrast, when one looks at key data that measures social well-being, including life expectancy, infant mortality, working class incomes, and cost of basic necessities (food, clothing, health, education), the Japanese people are better off. Japan has longer life expectancy and lower infant mortality rates. Japan has lower inequality at 29.9 compared to 37.8 for the United States for Gini inequality. Japan also spends far less on healthcare (9.5 percent of GDP compared with 16 percent in the United States) with far better outcomes, as well as in education where university costs are about one-quarter those in the United States.

John Rawls, the eminent American political philosopher, wisely said that the best society to be born into (if one didn’t know which class we would be born into) would be the one where the bottom 10 percent are best off. The bottom 10 percent in Japan lead a far better life than those in the United States.

In short, the contrasting fortunes of those at the economic bottom of United States and Japan raise profound ethical and philosophical questions about the nature of human societies we want to create. American society remains sparkling in many respects. The Japan which was once acclaimed as “Japan as Number One” in 1979 hasn’t produced an Apple or Amazon, Facebook or Google, Microsoft or Tesla. Yet it is also clear that the fruits of America’s economic growth have been siphoned away by the top 1 percent (if not the top 0.1 percent). As I document in Has China Won? The Chinese Challenge to American Primacy (2020), deep structural forces have led to this enormous inequality and social dysfunction. Since powerful entrenched vested interests will prevent U-turns, there is little hope that the condition of the bottom 50 percent in America will improve anytime soon.

China should do a deep study of how the bottom 50 percent have fared in both America and Japan. In Chinese society, like Japanese society, social harmony is prized more than individual achievements. Equally importantly, despite low growth, Japan has preserved a society with social harmony, a focus on deeper meanings of life, including beauty, care for environment, and self-reflection, as well as a deep sensitivity to fellow citizens. No human society is perfect. Yet the balance that Japanese society has generated between meeting our material and non-material needs is a model worth studying and emulating, even for China.

KISHORE MAHBUBANI Distinguished Fellow, National University of Singapore’s Asia Research Institute; Founding Dean, Lee Kuan Yew School of Public Policy; and author, Has China Won? The Chinese Challenge to American Primacy(Public Affairs, 2020)

*Reproduced from a copy of the International Economy and courtesy of the author.

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