The Hobbesian Salutes the Japanese!
I’m proud of the Japanese, they are breaking free from the neoliberal rhetoric and have taken control of their own destiny. For over 20 years the economy of Japan has suffered, deflation has crushed opportunities, their business has stagnated, their future looked bleak. But a new wind is blowing in Japan these days. The government of Shinzo Abe has embarked on a bold expedition, dubbed “Abenomics” the Japanese government is finally doing what it should have done years ago. The Japanese currency, long suffering from deflation has devalued substantially, from around 77 yen to a dollar in November 2012 to 99 yen per dollar (US) today. Spending has increased as well, government bond buying is putting money into the economy, corporations are becoming more competitive( partly due to the devalued yen), the Bank of Japan has even talked about the possibility of buying corporate stock! I love it.
The Nikkei has been soaring, and the fundamentals are all improving. But the Japanese progression has not just been a financial upswing, there is also a cultural uplift as well. The Japanese people are reinvigorated once again, spending is up, people are investing, this is a national effort towards a better future. All of this coincides with the election of Shinzo Abe, who many call a right wing nationalist. The Nationalism of his government is putting Japan first.
Like all economic developments, the Japanese resurgence has its naysayers. The neoliberals and laissez faire ghouls have predicted that the Japanese bond market will disintegrate, their currency fall apart and their stock market implode. These people were also the same ones who wrongly predicted that this would happen in America as well, and many of them are also the same ones who applauded European Austerity.
But those of us who know better see things differently. The stagnant growth and deflation helped fuel a liquidity trap in Japan for many years. If stocks are down, bonds virtually yield less and a currency that is constantly deflating, simply holding on to your cash could make you wealthier than actually investing it. Simply lowering interest rates and increasing the money supply may not be enough, there are times when the state needs to take action.
The Japanese are taking action, the government is making a concerted effort to embark on a Keynesian growth experiment, and it just might work. A similar event occurred in the 1930s, while the world was in the throes of a global financial crisis, one country bolted ahead from the rest of the pack: Germany. The German economic policies of the early to mid-30s were essentially Keynesian in their nature: easy monetary policy, infrastructural investment and stimulus to help private corporations and boost employment. By 1936 Germany had the strongest economy on earth. Although the economic policy of the Nazis were essentially Keynesian, Keynes himself was hesitant to point this out, as he didn’t want to be give any credit to the Nazi regime, but even the staunchest opponents to Nazism will tell you that their economy did improve in those years, while the austerity ridden countries remained stagnant. This is not to suggest that Nazism is actually a good thing, the Nazis were an awful and terrible regime. But their example does prove stimulus led economic recoveries are in fact possible.
Another interesting parallel is that both Abe and the German regime were right wing rather than left wing. This is interesting because in America and Europe most of the advocates of an active fiscal policies are big old bleeding heart liberals like Paul Krugman. The right wing in America and Europe has become thoroughly anti-government in their view of the economy along with their other ridiculous views on hyperinflation and central bank bubbles. So far the right in both America and Europe have been a major stumbling block for any kind of meaningful stimulus as of late. The tea party blocks all bills in the states and Angela Merkel, well she’s just a bitch.
Perhaps the key to a true turn around Keynesian miracle is to get the right wing on board. It would make sense, conservatives are big blowhards when it comes to culture, and they really buy into the whole nationalism and patriotism and sense of duty to one’s country. Liberals on the other hand are not going to get all choked up about these things. They may care about helping the poor and middle class, but they certainly aren’t as focused on making their country “the best”. Maybe there is a difference between simply throwing money at something for stimulus (like what Obama did) and rousing the animal spirits like Abe is doing. The US may have had a stimulus program but Obama certainly hasn’t stoked the animal spirits here, in fact if anything our cultural fabric is becoming even more pulled apart.
The Japanese bull market is not just a regular bull market, it’s a cultural transformation. People aren’t just altering their spending habits, they are altering their state of mind. After all, true prosperity is not just in the numbers, its in the Gemütlichkeit. Economic progress requires not only growth in production, but an increase in confidence and motivation as well. The Japanese know that this may be their last chance to truly break free from the economic stagnation they have been suffering over the years, so its all in at this point. If their efforts work out it will make the case for such efforts in Europe and America stronger. I am skeptical though, the right wing here is so entrenched in their anti-government nonsense that it may be hard to overcome.
The only way that something like this could spread to America or Europe is if a spirit of cultural unity reawakens, and people learn that rather than simply being self-absorbed individuals, that through the government they can achieve a greater strength. It will really only be possible if the conservatives return to their senses and abandon the anarchism that has hijacked the right wing in America. Either way, we still salute the Japanese, we are rooting for them, and hopefully the Japanese bull market will become the Japanese miracle.