The blogosphere is filled with articles about how this, that, and the other thing will end badly, and a favorite is Japan’s economic policies. The one thing wrong with such articles is they implicitly assume that financial markets have to validate the dire projections before they can be realized. There is no “will” in Japan; it is in bad shape now and getting worse every day, regardless of what the twits in government and central bank do to manipulate its stock and bond markets. From Yonathan Anselem at mises.org:
The greatest tragedy of the 2008–2009 financial meltdown was not that it happened. The collapse of asset prices was the necessary result of near zero interest rates. No, the most devastating aspect of the financial meltdown is that central planning alchemy lost no credibility. Policymakers around the world are still turning to Keynesian and socialist interventionism to address problems caused by Keynesians and socialists. The twin sledgehammers of central banking and almost unlimited state power have so distorted global markets (again) that some economies are now terminal. The latest victim of the interventionists and micromanagers is the nation of Japan. A once genuinely productive and innovative nation has, over the years, slowly succumbed to the cancerous rot of interventionism.
Japan’s World War II defeat left behind a barren rocky island whose industrial capacity, infrastructure, and labor force were devastated by Allied bombs. Japan’s flattened cities and smoldering factories may have painted a gloomy future but Japan had the thing that mattered most — a population largely free to organize and rebuild. The American military and remnants of central Japanese authority tried to lead the rebuilding of Japan through the political process but lines of communication and the transportation infrastructure were so damaged that many population centers away from Tokyo were left relatively free to rebuild. The resulting Japanese economic boom catapulted Japan’s living standards to a level on par with most Westernized nations. This explosive growth, described as a “miracle,” was no such thing. Japan’s new-found prosperity was simply what happens when markets are allowed to function. Unfortunately, the central planners in banking and government couldn’t resist the statist urge of heavy-handed interventionism. If there’s anything the political elite hate, its free people making voluntary decisions without their forceful input.
Central Planning Has Turned Japanese Corporations into Welfare Queens
The central planners imposed a number of zany anti-market schemes on the Japanese economy that have never been substantively reformed to this day. Legislators shielded Japan’s massive industrial base from foreign competition through protectionist tariffs and even subsidized some overseas exports. On the domestic front, nascent Japanese companies were heavily burdened by onerous regulations and very high taxes — this made it nearly impossible for start-ups to get off the ground and challenge the corporate establishment’s market share. As if this was not enough, exporters were further coddled by the Bank of Japan (BOJ). The BOJ has been fervently trying to turn the yen into toilet paper for the last thirty years. A cheap currency means artificially high profits for companies that export goods and artificially high costs for companies that import goods. After all, no government scheme could rightfully call itself a government scheme if it didn’t enrich somebody at the direct expense of others. The destructive effects of these policies have massively eroded Japanese productivity in the twentieth and twenty-first centuries.
To continue reading: How Central Planners Crippled Japan’s Economy
