Monday, March 02, 2009

Japan’s Crisis of the Mind
The truth is, Japan is a mess. Mr. Aso’s approval rate recently hit 11 percent, and his ruling Liberal Democratic Party is in open disarray. His predecessor barely lasted a year. The opposition Democratic Party of Japan just offers more of the same. This is largely because we have become a nation of bureaucrats. What passes for national policy is the sum of various ministerial interests, often conflicting or redundant, with jealously guarded turfs and budgets.
There can be no justification for all those mostly unused airports. Or for roads that lead nowhere. Or for the finance minister who appeared to be drunk at the Group of 7 meeting this month in Rome. Our problem is so deep that it sometimes seems that no political party can tame the bureaucracy and put in place a coherent national agenda.

But what most people don’t recognize is that our crisis is not political, but psychological. After our aggression — and subsequent defeat — in World War II, safety and predictability became society’s goals. Bureaucrats rose to control the details of everyday life. We became a nation with lifetime employment, a corporate system based on stable cross-holdings of shares, and a large middle-class population in which people are equal and alike.

Conservative pundits here like to speak of this equality and sameness as being cornerstones of “Japanese” tradition. Nonsense. Throughout much of its history, Japan has had social stratification and great inequality of wealth and privilege. The “egalitarian” Japan was a creature of the 1970s, with its progressive taxation, redistribution of wealth, subsidies and the dampening of competition through regulation. This all seemed to work just fine until our asset-price bubble popped in the 1990s. Today, the hemmed-in Japanese seem satisfied with the knowledge that everyone around them is equally unhappy.

Since the middle of the 19th century, our economic success has relied on the availability of outside models from which to choose. Our model for social security took inspiration from Bismarck’s Germany, state planning from the Soviet Union, public works from the Tennessee Valley Authority, automobile assembly and manufacturing from Ford. Much of Japanese innovation has involved perfecting what others have created. Sony is famous for its Walkman, but it didn’t invent the tape recorder. Japan’s rise to economic greatness was basically a game of catch-up with the advanced West.
India Maintains Sense of Optimism and Growth
While most of the world grapples with a crippling financial crisis and a recession, optimism reigns in much of India as its economy continues to grow.
India’s trillion-dollar economy remains a relative bright spot, some say, in part because the country’s bureaucracy and its protectionist polices have kept it insulated from the fallout of the global downturn.

“India is not as vulnerable” as other countries, said Rajeev Malik, head of Indian and Southeast Asian economics at Macquarie Capital, who recently wrote a report titled “India: Better Off Than Most Others.”

On Friday, India reported that its economy grew 5.3 percent in the quarter ended in December when compared with the previous year. While that was down from the 7.6 percent growth in the earlier quarter, it was in sharp contrast to the retrenchment in other countries.
Washington, for example, reported Friday that gross domestic product for the end of the year had contracted at an annualized rate of 6.2 percent, and Japan recently reported that its economy shrank at an annual rate of 12.7 percent.
Even after the G.D.P. figures were released, government officials pledged the economy would grow more than 7 percent this year, and major stock indexes finished last week in the black.

Advocates of free enterprise often complain about many of the country’s economic policies, including a state-dominated financial system virtually unconnected to foreign markets; sluggish export growth because of bureaucracy and shoddy infrastructure; and hundreds of millions of farmers who raise crops mainly for domestic consumption. But such policies have helped the country maintain its ground as the world slides into a recession.
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