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Musings Report #46 11-12-16 Japan, Inc.: Optimized to 1960, Failing in the 21st Century
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Japan, Inc.: Optimized to 1960, Failing in the 21st Century
This long-form article offers a wealth of insight into why Japan, Inc. has struggled for 26 years, since its massive credit-asset bubbles in 1990. Japan Gets Schooled.
Many observers see Japan's core problem as demographics: as its birth rate has fallen below replacement levels, the population of Japan is declining. Since young people start households and spend money, economic growth depends largely on the spending of young people rather than on the declining spending of older people.
While a relative decline in the youthful demographic impacts growth, this view overlooks the larger problem: Japan, Inc.--its education system, government, banking and corporate sector--were optimized for the mode of production that dominated the postwar world 1946-86.
Now that the Internet and the Digital-Industrial Revolution are remaking the way goods and services are produced and distributed, the system that worked wondrously well in 1960 no longer aligns with the needs of the emerging mode of production.
In the 1980s, Japan's optimized system reached its zenith, and many US pundits built careers predicting that Japan would soon eclipse the US in every economic and financial metric.
But the excesses of Japan's banking sector and the rise of new technologies that didn't lend themselves to gradual improvement and vertically integrated corporations disrupted the predictions of Japan's global dominance.
If you were able to go back in time to 1986 and tell the true believers in Japan, Inc.'s dominance that by the 21st century Japan was no longer a leader in electronics, mobile phones, software and computers, they would not believe you.
This article on the failings of Japan's system of higher education is a window into the failings of Japan, Inc.'s culture, mindset and system of governance.
"Dismay rippled through Japanese society over the summer after the venerated University of Tokyo lost its number one ranking, falling to number seven, in the Asia university rankings published by the Times Higher Education of London.
The University of Tokyo (known as Todai in Japan) occupies a cultural space akin to Harvard, Princeton, and Yale combined in the United States. It is the launching pad for those who go on to run the country’s elite institutions. After the rankings slip, many Japanese felt that the country itself—not just its university—had taken a tumble."
Todai’s defrocking is emblematic of a broader problem. Japan’s educational system is failing to keep pace with changes taking place in Japan and in the rest of the world. Its drop in the rankings was due to funding cuts, poor research output, and an insufficiently global 'outlook.'
Optimized for an earlier industrial age, anachronistic educational institutions are struggling to adapt to a globally competitive marketplace for students, faculty, funding, and jobs.
No wonder that in interviews, educators and students use language frighteningly similar to that which a prisoner might use to describe his or her own predicament: 'trapped,' 'suffocating,' 'stuck,' and 'wanting to escape or sneak out.'"
When I critique Japan, many people are quick to tell me that it is still a wealthy, well-ordered society with many enviable amenities. True--but where does the wealth come from? It turns out Japan, Inc. earns vast sums of money from its overseas holdings--assets purchased in the heady days of yesteryear.
If we look at the nation's balance sheet and soaring public debt, it becomes clear that Japan is slowly eating its seed corn to maintain its staggering public spending deficits.
The essay's description of what's wrong with Japan's higher education is also true of Japan, Inc.: a system optimized for the mode of production of 1960 will inevitably fail as that mode of production is replaced by another, much more demanding mode of production.
Every nation, developed or developing, faces the same core issues: either cling to systems optimized for a mode of production of 70 years ago and decay/stagnate, or adapt and optimize one's productive capacity and society to the new mode of production.
Summary of the Blog This Past Week
Seven Suggestions for President-Elect Trump 11/11/16
Who Lost: A Biased Media, Pundits, Pollsters, Political Parties, Warmongers, the Corporatocracy, Pay-to-Play Grifters, Neoliberals 11/10/16
The Source of our Rage: The Ruling Elite Is Protected from the Consequences of its Dominance 11/9/16
Now That the Presidential-Election Side Show Is Finally Ending.... 11/8/16
America's Ruling Elite Has Failed and Deserves to Be Fired 11/7/16
Best Thing That Happened To Me This Week
By a trail of events too convoluted to recount here, the well-worn antique dining table that had been in our Hawaii house 30 years ago (after coming round the Horn in the 1800s) returned to our dining nook. Thank you, S&C, for making this unlikely return happen.
Market Musings: USA Inflation and Some Peculiar Signals
The stock market rally I discussed last week did in fact occur, but there are numerous peculiar and potentially conflicting signals in global markets that muddy the waters.
Emerging market currencies are once again in free-fall, the USD is strengthening (as I have long predicted), China's yuan is weakening, copper went through the roof, the FANG darlings (Facebook, Apple, Amazon, Netflix and Google) tanked and bond yields in the US are soaring.
What do all these rather extreme signals mean? The consensus is that yields are rising because the market expects inflation to rise as a result of Trump's proposed infrastructure spending and the likelihood of rising deficits in the US.
Others hold that rising yields reflect the risk premium (currently modest) that the US will eventually default on its soaring debt.
I'd like to share two charts this week--one of yield-sensitive utilities and one of the CPCE, a measure of put-call option activity (i.e. trader sentiment).
Utilities have been rising because they pay hefty dividends, which makes them attractive in a zero-yield world. Utilities topped in early August and are now threatening to enter a Bear Market. This trend change occurred long before Trump's unexpected victory, so something else is at work here.
Markets are repricing the possibility of rising official inflation and/or the risk premium of bonds, and they were doing so long before the US election.
The CPCE is a reasonably good guide to stock market tops and bottoms: when sentiment spikes to lows, that usually marks a buyable low, while spikes into the stratosphere are generally reliable sell signals.
These huge swings in sentiment suggest significant uncertainty. The euphoric rally in stocks could be a short-covering event, or it could be a sign of renewed faith in future growth.
I am a bit wary of the sudden confidence that the rally is the start of a new major Bull uptrend, but as noted last week, it's unwise to discount the possibility.
From Left Field
Time-Based Cryptocurrency: Utopia or Uber-like Labour Market Game Changer? (via Paul W.)
Fair Money for All: Basic Income on the Blockchain (via Michael K.)
Surging Bond Yields Signalling Pain Not Growth Ahead For US Economy
Playground Divides Adults in Westport -- "Westport is rich enough to be a very litigious town," the Planning and Zoning Commissioner, Dan Katz, said. "If you don't like it, sue."
Searching for the True Britain: What happened to Britain? It's a question many Europeans are currently asking. I traveled through the country on the search for answers -- and found a deeply divided land.
Stretford, parades of fast food joints & tatty money laundering shops
Half UK budget deficit 'is down to job destruction in older industrial areas'
The closing of the liberal mind: The folly of the masses has replaced the wisdom of crowds as the dominant theme of our politics.
A Record-Setting Decade of US Immigration: 2000-2010 -- eye-opening...
The Power of Nightmares: Notes from the Mythic Year
The Republicans and Democrats failed blue-collar America. The left behind are now having their say
US newspapers lost advertising revenue found -- Facebook has already earned more advert revenue than the entire US newspaper industry in 2016... and Google's revenues are far above Facebook's....
"In the depth of winter, I finally learned that within me lay an invincible summer" Albert Camus
Thanks for reading--
charles |
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