Why the U.S. would be lucky to become Japan.
By Zachary Karabell
Over the past few years, it’s become ever more common to hear comparisons between the United States and Japan. They are not favorable. They come in the form of dark warnings that the current policies of the United States will lead to a fate similar to Japan’s over the past 20 years: stagnant growth with no end in site.
Let’s just say for the moment that the United States is becoming Japan – a nation of little to no economic growth, high public debt and a broken financial system. How bad is that? Is becoming Japan really a worst-case scenario?
The past 20 years for Japan have been called the lost decades. Government debt is in excess of 200 percent of GDP. The country has suffered from chronic deflation, a sluggish job market, an aging population, an insular culture and growth stalled at between 1 percent and 2 percent a year. Governments have come and gone. What’s most notable is that until recently, Japan has rarely been at the forefront of economic news the way it was in the 1980s and 1990s, even though it is the world’s third-largest economy and one of its wealthiest. If you factor in deflation, Japan hasn’t just seen tepid growth; it has seen none: Nominal economic output has barely budged since 1992.
Now we look at the United States and see…mounting government debt burdens, deflation, slow growth, a blech labor market and political sclerosis. And that does sound awfully Japan-like.
Except that it isn’t, because that isn’t the entire story of Japan. Yes, those numbers are factually correct, but they paint a dire picture that doesn’t square with today’s reality. First all, Japan is not just a country that for 20 years has had higher debt, no growth and less global impact. It is one whose citizens are in extremely good health, with the third-highest life expectancy in the world after tiny Macau and Monaco, which means for all intents and purposes it has the highest in the world. It Levels of violence are low. Democratic government is orderly and ordered, and a technocratic and efficient bureaucracy attends to issues such as public safety, infrastructure, education, housing and healthcare with a high level of competence and efficiency. The country is peaceful; its citizens are prosperous. And while defense forces are bulking up in anticipation of tension with China, it has dramatically ended a culture of war that dominated society until 1945.