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The Real Problem with Japan

January 9, 2012 14 comments

Of late, many articles have popped up in the blogosphere arguing that Japan did not really stagnate and that all is well in the land of the rising sun. I have myself seen the Japanese stagnation of the last 2 decades as the best case deflationary scenario, possible largely because of a homogenous and indoctrinated population combined with a decent growth in export markets. To their credit- the Japanese have been able to maintain a very functional socio-economic system by creating and maintaining jobs. Moreover most of their debt is internal, not external.

However everything is not OK.

They have achieved those goals by destroying the lives, hopes and prospects of their youth. Yes, you heard that right.. pretty much everyone in japan who was born after 1970 has been screwed. To understand how this occurred, one must start at the beginning- at the end of WW2.

After Japan lost WW2 and was demilitarized, they set about conquering the world through trade. They almost achieved that through very hard work, group cohesion, high savings rates and a lot of government controlled capitalism. However there was a fatal flaw in this plan- their asian mindset.

Japan never westernized at a cultural level.

I am not talking about acting like an american or french, but rather developing the intellectual traditions that make dissent and free though possible. They were therefore limited to improving and making better versions of what westerners did. Combined with their entrepreneur and change-averse culture, they missed many opportunities to go past the west. Therefore Japan makes excellent cars, machinery and a host of other high-quality things but almost nothing that is path-breaking.

Now the problem with making things is that the manufacturing is becoming less labor intensive, thereby removing the principal source of new well-paid jobs for their youth. Since many of their youth have no real alternative to well paid manufacturing jobs, they subsist on low-paying temp or contract jobs in a range of industries from manufacturing to services. Given the relatively high cost of living in Japan and pre-existing cultural norms, most of them remain single and live with their parents.

Young men have seen the fate of their hard-working parents and therefore have no intention to slave for an employer just to give up their paycheck each month to a demanding and greedy woman- aka a Japanese wife. They have just dropped out of the dating market and have no interest in “growing up”.

Then there is the issue of how their government’s policy and mindset caused them to deliberately restrict their own consumption in accordance with mercantile norms and created a culture of doing with less. However austerity is not good for business, growth and most importantly- morale. They now have a problem which is somewhat unique in human history-

A rich and technologically capable, but rapidly aging, society without enough youth who have aspirations or ambitions.

Many Japanese, especially the younger ones, are aware that things are not going well. However the system still functions well enough and so nobody wants to rock the boat or complain. Furthermore the structure of their society is such that complaints or attempts to reform are hushed or ignored and usually result in social ostracism of those who disagree. It is like watching a very slow-motion train accident where even those in the train are aware of the accident but don’t want to do anything about it.

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