Friday, October 03, 2008

The Mismeasure of Japan

Columnist Nicholas Kristof of The New York Times, rather than wasting his talents on yet another infuriating, you-want-to-pull-your-hair-out, faux-centrist homily about the beliefs of average Americans, switches to the surer ground of his own professional and personal experience to draw the connections between the Japanese government's handling of the 1980's real estate bubble and the recent fumbled U.S. Congress response to the U.S. housing debacle.

Save the Fat Cats

In the early 1990s, when I was a foreign correspondent looking for my next overseas posting with The Times, I sought Japan. At the time, Tokyo was an awe-inspiring economic titan, arguably the most important capital outside the United States.

Then Japanese politicians, acting with the same sublime ineptitude that our own House of Representatives displayed this week, ignored a growing banking crisis and dithered on a bailout. And so I watched from Tokyo as a mighty economy melted like an iceberg in the Caribbean.

Japan's failure to respond urgently and decisively to its banking mess caused the country to endure a "lost decade" of economic stagnation. If America wants to avoid Japan's decline, the House should follow the Senate's lead and approve the bailout — immediately.

Just as in the U.S. today, most Japanese did not initially appreciate how devastating a banking crisis could be to the real economy. Banks and real estate tycoons in Japan were corrupt, profligate and unsympathetic figures, and no one wanted to help them. On corporate expense accounts, they sipped coffee with gold leaf and patronized "no-panties shabu-shabu" restaurants, which had mirrored floors and miniskirted waitresses.

In short, the businessmen involved were jerks. And, whether in Japan or the U.S., it's challenging for politicians to frame a bailout with the slogan: Save the jerks!
Consider once again how Kristof starts off his last sentence: "Whether in Japan or the U.S..."

Such a tiny revolution in thinking, pattering in on little cat's feet!

One of the assumptions (prejudices) of U.S. officials and academics over the last 15 years has been that the U.S. would never have a crisis commensurate with The Bubble. America's capital markets were too deep and sophisticated; America's market players had a superior ability to quantify and disperse risk; America's officials were pro-active, not reacitive and specialists, not bungling generalists; its corporations not governed by a "expand at all costs" mentality but by a concern for steady returns to shareholders.

In sum that for the United States, because of its superior qualities, the outcome would be different.

However on Tuesday, when the confidence of the markets hung in the balance, when the piecemeal efforts to shore up the weakest links in the chain of financial counterparties failed, when the Treasury and the leadership of Congress begged the members of Congress to bail out the venal and the corrupt, the representatives of the people could not bring themselves to vote for a bailout...

...just as the democratically elected Representatives in the Diet could not bring themselves to do. Instead, the members of the Diet voted for stimulus packages--a policy mimicked by the U.S. Congress and the U.S. Administration this spring.

Ah, the years of half-measures and lies in Nagata-chō, years of supplementary budget after supplementary budget...

In the U.S. the Administration and the Congress tried to kick start the economy through a tax rebate. In Japan, the LDP-led governments colluded with their supporters in the construction industry to issue government bonds to build infrastructure in places nobody lived and nobody worked.

Same difference.

Perhaps American commentators on Japan...or Euro-American economic policy commentators will finally cut the people, politicians and bureaucrats of Japan a little slack. It seems it was not The Japanese System that failed to deal with the immovable mountain of rotten bank assets hobbling the Japanese economy down from 1990 to 2001. It was The System, period - the System where politicians and bureaucrats buy so deeply into no-holds-barred Wild East mentality they cannot extricate themselves from it; where where the social value of limitless aggrandizement is unquestioned; and where the resentment the average citizen feels for the conspicuous and titanic waste of public resources is belittled by a super-remunerated elite of "those who know what is good for the country, thank you very much."

Will the "Japan failed because Japan is different" crowd roll up their tents and get out of town? I hope so. Because it sure looks like the new mantra should be, "America failed because AMERICA IS JUST THE SAME."

Perhaps soon some other clever chap or sheila will find the connection between Japan's history and Bush Administration's preventive war in Iraq...because the Bush Administration seems to got and still gets the who-is-who in the "Japan has lessons for the U.S. invasion and occupation of Iraq" metaphorical all mixed up...

...but that might just too provocative a thought...for now.

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