An American's Advice to Japan,
His Adopted Country
[8 June 1998]
Bill Totten is president of K.K. Ashisuto, an
information technology company from Kawasaki, Japan. He also
publishes a cyber newsletter titled "Our World." He
can be contact by email at: firstname.lastname@example.org.
We live in topsy-turvy times. Nearly everything being said and
done about Japan's economy is wrong. The Liberal Democratic Party
(LDP), Ministry of Finance (MOF), and Japan's mass media - all of
which have legitimate reasons to be concerned with Japan's economy -
say it is languishing while the US economy is thriving. The US
government, IMF and World Bank - none of which have any legitimate
reason for meddling in Japan's domestic affairs - all say the same
thing. And they're all wrong: Japan's economy, not the US economy,
is the one thriving. The ones who are suffering are average
Americans, not average Japanese.
Despite bizarre reports of recession and "minus growth"
in Japan's frenzied media, any careful comparison shows that Japan's
economy is serving its citizens much better than the US economy is
serving most American citizens. Although currently experiencing a
brief bubble similar to what Japan endured in the late 1980's, the
US economy has deteriorated steadily for over three decades and
continues to deteriorate. Some recent studies on compensation and
income distribution provide details for comparison.
According to Business Week (September 1, 1997; "Sharing
Prosperity"), for example, "the US still has a two-tier
economy, and many Americans are struggling...At $10.49 an hour
(1,363 yen) on average, US wages are still nearly 8% below the
all-time high of $11.35 an hour, reached in 1973... Household
incomes...fell by 5% in real terms during the 1990s recession,
according to Census Bureau figures...By 1995, the latest year
available, the average household still took in 4% less than in 1989".
A 1989 survey by the US Federal Reserve compares the decline in
US wages and benefits to the situations found in other nations. "Production
workers in every other G-7 nation saw their compensation grow. In
Japan, average annual compensation growth during the decade
[1979-1989] was 1.3%. It was 1.9% in Germany and 1.9% in
France...Overall, compensation for average US workers fell by 6%
between 1979 and 1992 while it increased by 26% in France, 35% in
Germany and 26% in Japan".
Other statistics indicate that the income gap between wealthy and
lower- income Americans continues to grow. According to a survey by
Professor Edward Wolff of New York University, "the portion of
the nation's wealth held by the top 1% nearly doubled between 1979
and 1989 - skyrocketing from 22% to 39%". And an OECD report
showed that the top 20% of the US population has about 11 times as
much annual income as the bottom 20%. That is about twice the
disparity found in such countries as Germany, France, and Italy.
Japan's ratio of 4.0 indicated that it had the most equal income
distribution of major OECD countries.
POISONOUS, QUACK "REMEDIES"
What's worse, having misdiagnosed health for illness, the
charlatan economic doctors are prescribing "remedies" that
can only harm Japan's healthy economy. Their so-called remedies are
patently wrong and harmful. The media, LDP politicians, and the MOF
all tell us that (1) Japan's economy is sick because it is not
growing adequately; (2) to make it grow more, the government needs
to stimulate personal consumption; and (3) to stimulate personal
consumption it needs to cut personal and corporate income taxes.
This prescription is wrong on all counts.
Growth is not the goal of an economy. The goal of any society's
economy should be the happiness and well-being of its members. As
Matsushita Konosuke and other leaders of Japan's "economic
miracle" explained often, (1) the goal of a society is the
happiness of its members; (2) the role of business is to provide
goods and services that contribute to the happiness of citizens as
well as jobs that allow them to earn income to pay for those goods
and services; (3) a company should seek only the amount of profits
required for investments needed to enable it to continue providing
goods, services and jobs that contribute to the well-being of
citizens; and (4) instead of taking profits beyond that level, a
company should lower prices, or raise the wages and benefits it
provides to its employees.
The idea that an economy is not healthy unless it is growing, as
well as the idea that an economy's health is proportional to its
growth, has plagued Anglo-American economic thinking since Alfred
Marshall first popularized mathematical economics a century ago. He
assumed that an economy is a physical mechanism, and began applying
the mathematics of mechanics to the analysis of economies.
But an economy most obviously isn't a physical mechanism; it is a
living organism. It is governed by the decisions and actions which
we as consumers, workers, bureaucrats, politicians and other
citizens make. Like plants, animals and all other living organisms -
an economy has an optimal size. Just as humans tend to get fat and
sick if they eat too much, an economy gets sick if it consumes too
How much is enough? Japanese already have the lowest unemployment
rate, the highest average wages, and one of the highest rates of
consumption of all major economies. And because their personal
consumption needs have largely already been satisfied, they also
have the largest accumulated personal savings in the world - about
1200 trillion yen. Can you think of anything (other than a nicer
home) you or your friends want to buy but cannot afford? If not, how
would more economic growth via personal consumption benefit Japan?
Any more growth in personal consumption would harm Japanese society
in the same way that overeating harms an individual.
English and American usurers and rentiers have exploited
Marshall's mistaken notions for their own advantage. By having their
publicists perpetuate the illusion that economies are mechanical in
nature, they have disproportionately influenced economic policies in
their countries. Today the English and American economies are being
operated primarily for such unbalanced "growth". The
results are that profits for relatively small numbers of rentiers
and usurers have increased dramatically, while the real incomes, job
security, and affordable private and public goods and services for
most English and American citizens have all decreased substantially.
The latest twist of this terrible scam is to deregulate the
financial industry, eliminating restrictions against usury, which
major Western authorities - from Biblical writers, through Plato,
Shakespeare, Adam Smith and most economic writers up to John Maynard
Keynes - all damned because usury allows the few rich to plunder
Most informed world leaders see the danger of this Anglo-American
disease and try to prevent it from spreading to their own economies.
Unfortunately, the LDP, from ignorance or greed, or because it keeps
itself in office by administering Japan as a colony of the US
instead of as a sovereign nation for Japanese citizens--or perhaps
because of all those reasons--is actively importing this
Anglo-American disease. It is doing this via policies of
deregulation, globalization, "Big-Bang", and cutting taxes
for the rich while raising consumption taxes for everyone else.
Even supposing that stimulation of personal consumption were a
good idea (which it isn't) the LDP's proposal to cut corporate and
personal income taxes would be a bad way to try to achieve it. While
reduction of consumption taxes might stimulate personal consumption,
cutting corporate and personal income taxes would not. Cutting
corporate taxes would only reward corporations that buy politicians
via campaign contributions and venal bureaucrats via "amakudari".
Further, cutting personal income taxes would reward rich
politicians, high-level bureaucrats, top-level business executives
and even media pundits (whose broadcasts and publications advocating
tax cuts attract advertising revenue).
Avarice, rather than ignorance, may be the motive behind this
poisonous prescription to "cure" Japan's healthy economy
via income tax cuts. There may even be a conspiracy to deceive us
into believing Japan's economy is "sick" so that we will
accept the idea of tax cuts for the rich who initiated and hiked
taxes on our consumption. We should realize that when Hashimoto and
his affluent LDP cronies cut taxes on wealth and high incomes, they
are cutting their own taxes in particular. The average declared
personal assets of LDP members of the lower house was over 115
million yen last year!
Moreover, Japan cannot afford to cut taxes. According to the
OECD, national and local government debts in Japan already amount to
93% of GDP, compared to only 64% of GDP in the US, 62% in the UK,
67% in Germany and 63% in France. Cutting taxes would only run up
more debt; are we now going to accrue debts that our grandchildren
will have to repay?
Cutting income taxes is particularly irresponsible. Hashimoto
Ryutaro is lying when he says he wants to "bring Japan's income
taxes down to international levels". As the following OECD
table indicates, Japan's average income tax rate already is one of
the lowest in the world: Average Income Tax Rate for Select OECD
(Source: OECD Financial Statistics)
WHAT LDP AND GOVERNMENT SHOULD DO
There are two things the LDP and government should do to improve
the economy to increase the well-being of Japanese citizens. FIRST,
they should stop inhibiting the fall of land prices. Most Japanese
citizens want nicer homes closer to where they work, and most
businesses would be more competitive if they didn't have to pay
exorbitant prices for office and factory space. Moreover, if
individuals and businesses could afford better homes and facilities,
their purchases of new appliances, office equipment, and other
furnishings would stimulate the economy somewhat. But the LDP and
government are striving to prevent the natural fall in land prices.
They favor Japan's Usury Industry (which views land as a financial
asset) over Japan's citizens and businesses (which see land as
places to live, work and produce).
The SECOND thing the LDP and government should do to improve the
economy for average Japanese citizens is to increase SOCIAL
investments as opposed to promotion of personal consumption.
Although the Japanese people are satiated with goods and services
they can buy personally, they are rather destitute in goods and
services that must be bought socially. For instance, the government
has not adequately invested in disaster preparedness nor in
financial programs to alleviate financial hardships of citizens
affected by natural disasters. Even today, more than three years
after the Hanshin earthquake, 24,000 families are still living in
temporary shacks. Surely financial hardship on citizens affected by
natural disasters could be minimized if we had a national earthquake
insurance program like our health insurance program. Speaking of
health insurance, rather than cutting spending on health care, the
LDP and government should be improving investments in that area to
cope with the aging of our population.
Another important social investment is defense. Japan is the only
defenseless major nation in the world. The LDP and government have
duped the Japanese populace into believing they're protected by the
so-called US-Japan Security Treaty. But anyone who reads that short
document can readily see it guarantees no US protection of Japan
whatsoever; it merely licenses the continued occupation of Japan by
US military forces. And anyone who has watched US actions over the
past 25 years should realize US citizens would never permit their
government to spill the blood of Americans to defend Japan. Japan
needs to build the capability that every other nation maintains to
defend itself. That includes not only strengthening its Self-Defense
Forces, but also rebuilding its agriculture. It's a tragedy that the
LDP and the government have brought the food sufficiency of this
nation down from more than 70% to under 30%during the past twenty
years. Ostensibly this has been done to appease US trade negotiators
but perhaps secretly it has been done as part of a Faustian bargain
by the LDP to keep itself in power while keeping Japan subjugated to
the United States.
In sum, instead of subsidizing usurers and reducing taxes on the
wealthy, the government should invest more SOCIALLY. It should
invest to provide cleaner water and air, to build more and better
parks, to put electrical poles and lines underground, to conserve
the natural environment and to preserve the historical and cultural
heritage. Instead of decreasing investment in health and nursing
care, increases should be made to care for Japan's aging populace.
Further, because the US-Japan Security Treaty is a fraud and
merely licenses continued US military occupation of Japan without
committing the US to defend Japan--thus making Japan the only nation
within either the G7 or OECD without defense against military
attack--Japan should make the investment necessary to securely
defend itself against military attack. All of these social
investments would increase the well-being, security and happiness of
Japan's citizens while increasing economic activity through improved
opportunities for companies as well as jobs for citizens.