I. Question: Why is Japan like the United States?
Answer: Both countries are experiencing worsening of income inequality.Income inequality and relative poverty among the working-age population in Japan have risen to levels above the OECD average. This trend is partially explained by labour market dualism, with an increasing proportion of non-regular workers who are paid significantly less than regular workers, as well as by other factors, including the ageing of the workforce. Social spending as a share of GDP has been expanding in the context of population ageing, although it remains below the OECD average and the proportion received by low-income households is small. Consequently, the impact of social spending on inequality and poverty is weak compared to other OECD countries and inadequate to offset the deterioration in market income. The scope for increasing social spending is constrained by the fiscal situation. Instead, reversing the upward trend in inequality and poverty requires reforms to reduce labour market dualism and better target
social spending on low-income households, particularly single parents
http://ritsumei-gssgp.jp/sansyagp/lecture/lecture-pdf/Shinoda/090428Income_Inequality_poverty_and_social_spending_in_Japan.pdfBy Saez’s measurements, income inequality in the US is now greater than it has ever been over the last century. It is much, much greater than it was in the thirty years after World War 2 ended. From 1980 to 2007, the US became a far more unequal society.
Income inequality – and especially rapidly rising income inequality – provokes envy, resentment, and tension in a society. They lie behind the more visible signs of bitter hostilities on talk radio, in harshly fought legislative struggles between liberals and conservatives, in nasty outbursts at tea parties and by politicians unaware the microphones are still on, and in election outcomes that break with past patterns.
There is no mystery about why income inequality got so much worse. The real wages of average workers stopped rising during the 1970s (after having risen for a century or more). Meanwhile those workers’ productivity rose. They produced ever more goods and services for their employers to sell, but their employers no longer had to raise their wages to get that work from them. Employers and those they support (share-holders, top managers, professionals, etc.) thus “earned” ever more as workers’ incomes stagnated. That top 10 percent got an ever bigger share of the total national income, while the other 90 per cent of us were left with an ever smaller share.
http://www.rdwolff.com/content/rising-income-inequality-us-divisive-depressing-and-dangerousII. Question: How is the cause of Japan’s income inequality different from ours?
Answer: Trick question. It is exactly the same. The only difference is Japan's happened first. In the 1980s, real estate prices in Japan were soaring. Banks were practically giving money away to anyone who wanted it, whether they would be able to pay off their loans or not. Interest rates were kept artificially low in order to encourage consumers to spend, spend, spend like there was no tomorrow---
And then tomorrow came, and it turned into the so called “Lost Decade” in which real estate prices bottomed out, people lost their savings (their expensive houses whose value they had been told would only continue to rise). Banks suddenly cut off the flow of cash to folks and small businesses that needed it while at the same time the Japanese government handed out billions to banks and other corporate concerns that were considered to be “too large to fail” and invested billions of dollars in public works projects that made corporations a bundle but did not actually stimulate the economy.
When the bubble eventually collapsed in the early 1990s Japanese banks and corporations were left with billions of dollars of worthless assets on their books, leading to cutbacks in investment and stagnation throughout the economy.
http://www.wsws.org/articles/2000/jul2000/jap-j14.shtmlIf you want a Classic Comics version of this economic fiasco and its psychic repercussion on the Japanese people read the manga
Akumetsu which you can find online here:
http://www.mangafox.com/manga/akumetsu/You will probably experience a sense of déjà vu as you read about the average working people who were plunged into poverty, homelessness and despair by a government that exists to service the uber-rich. You will probably empathize with their anger. You might even understand why one young man decides to fight back.
And, if you are like me, you will ask yourself
If this happened in Japan twenty years ago, and we knew all about it and all about its terrible consequences, why did our government and our banks allow the same fucking thing to happen here? I mean, wasn’t uber-genius Alan Greenspan supposed to be in charge? Didn’t he see this coming? A bunch of other people did.
In 1998, when the Asian crisis spilled into the global financial system, Alan Greenspan, head of the Federal Reserve Bank, decided on the hitherto untried approach of stimulating an ongoing economic boom. Recession in the U.S. was successfully held back for over two years. The cost was high: The dot-com bubble led to a stock market implosion, and huge trade deficits and foreign debt built up as the U.S. became Asia’s “buyer of last resort.” Again when the recession finally hit the U.S. in 2001 with the biggest drop in profits since the 1930s, its full effects were cushioned by the largest stimulus package since World War Two. The $250 billion government budget surplus was transformed into a $300 billion deficit; $1 trillion in tax cuts for the rich and war spending were used to moderate the effects of the crisis. Interest rates were cut to between 1 and 2 percent for three years in order to lower business costs and restore profitability. The result was the weakest business recovery since World War Two, and the ultimate price was the housing and debt bubbles, whose collapse brought on the current crisis.
http://www.isreview.org/issues/58/feat-economy.shtmlAnd from Paul Krugman quoting Adam Posen
The guarantees that the US government has already extended to the banks in the last year, and the insufficient (though large) capital injections without government control or adequate conditionality also already given under TARP, closely mimic those given by the Japanese government in the mid-1990s to keep their major banks open without having to recognize specific failures and losses. The result then, and the emerging result now, is that the banks’ top management simply burns through that cash, socializing the losses for the taxpayer, grabbing any rare gains for management payouts or shareholder dividends, and ending up still undercapitalized. Pretending that distressed assets are worth more than they actually are today for regulatory purposes persuades no one besides the regulators, and just gives the banks more taxpayer money to spend down, and more time to impose a credit crunch.
These kind of half-measures to keep banks open rather than disciplined are precisely what the Japanese Ministry of Finance engaged in from their bubble’s burst in 1992 through to 1998
http://krugman.blogs.nytimes.com/2009/02/25/turning-japanese/When the banks suddenly held up their hands and said “Oops. We’ve made billions of lousy loans. Our bad” our federal government did exactly what the Japanese government had done over a decade ago. It bailed them out. Never mind that individual investors were now rich as a sin as a result of betting against their own bad loans. Once the banks got some free money, everybody wanted in on the actions.
We are “too big to fail.” Gimme, gimme, gimme. Where did the money come from? Did George Bush Jr. pull it out of his ass? No, it came from the government funds that Florida will no longer set aside for the disabled. It came from poor kids’ school lunches. It is going to come from your social security retirement savings that you have been paying into all your life. But
That’s my money! you exclaim. Not any more it isn’t.
Right now, we have an appalling mess in this country. Unemployment is at near depression levels. The rates of the uninsured keep rising. People are losing their homes and their savings. Last hired first fired has become a catch phrase for another century. Unions are the anti-Christ. Public schools are the source of all our woes. Now, if you have seniority, a good salary and the possibility of a pension in a few years, you are likely to lose your job---and your insurance---to some kid who will work for half as much. Or some guy in another country who will work for one tenth as much. This is bad for U.S. businesses which sell to U.S. consumers. It is bad for the U.S. government which is seeing its tax base erode. And yet, there appears to be a concerted effort to make sure that no middle class person in this country has enough to pay his bills let alone indulge in any discretionary spending----while corporate profits soar through the roof and the uber-rich get even richer.
III. Question: As William Blake wrote “A dog starved at its master’s gate predicts the ruin of the state.” If a dog could have predicted the mess we are now in, then why couldn’t our banks/corporations/government?
Answer: I think they did. I think they looked at Japan and said “We need some of that here.”The economic Humpty-Dumpty that a whole lot of people including Phil Gramm, Alan Greenspan, investment bankers, George Bush Jr. and even (as much as I hate to admit it) Bill Clinton created was always doomed to fall. Everyone knew what was going to happen, because they had seen it already in Japan. So, why didn’t someone step forward to suggest
“Um, maybe we should take the egg off the wall before it breaks?’I think the answer can be found here, in an article from 2000 entitled
“Japan Slowly Embraces Greater Income Inequality Over Social Harmony”. http://www.international.ucla.edu/eas/NewsFile/japanecon/000104-nyt.htmNot surprisingly, wealthy Japanese welcome the changes.
"The burden of taxes falls much too heavily on wealthy people here," said Yoshiro Okada, president of a construction company in Fukuyama, a city in southwestern Japan.
He considers himself affluent but not vastly more so than his neighbors and friends. He does, however, see an increase in wealth discrepancies, and he welcomes it.
"I don't think Japan is an egalitarian society," he said. "I sometimes think that the gap is expanding, and I think the environment in which one can accomplish one's dreams by striving to reach ever higher is growing in Japan
I think Yoshiro Okada speaks for a bunch of wealth Americans, who have been working for years to roll back history to the days before FDR, when sweat shop laborers kept their mouths shut and kissed their factory owners’ feet. And I suspect that people like the Kochs (Cato Institute and John Birch Society) and the New Federalists (including Scalia) saw the rise in income inequality in Japan and they said to themselves
“We need some of that here. So those uppity (insert oppressed group of your choice) will start giving me the respect I deserve.” You gotta feel sorry for folks who are so full of fear and self loathing that they can only sleep at night if they know that other people are sleeping in their cars. They must have been emotionally squashed by their parents and teachers to have such low self esteem. But as much as I pity them, that does not make it right.