peter,
<<Subsidies and central planning, if allowed to persist beyond the time of absolute need, cause inefficiency, which mounts and mounts until it's impossible to maintain. How am I doing, my teachers?>>
I am a student here, not a teacher, but I will accept your invitation to comment. I believe you are absolutely right. Eventually there will be a narrowing of interest rates between Japan and the U.S. Furthermore there will be a strengthening of trade relationships as well as political alliances IMO. I think this will be born out of an increasingly relaxed market in Japan accompanied by the structural changes in Japan similar to those suggested by Prof. Roubini at the Stern School of Business. They are worthwhile reviewing so I reprint them here without permission but with the intentions that they are for personal use only. His Asia Crisis web page was posted here before but I post it again for those who may have missed it. Although I believe that these structural changes will eventually occur I am concerned about the pace of change and the havoc in between. Another point: China and Southeast Asia have largely modeled their economies and business practices on Japan. All part and parcel of the phenomena formerly called the Asian Economic Miracle. I think we must fervently hope for these structural changes to occur in Japan as I belive Japan is a key to the rest of Asia with China's role increasing as Japan lags. I would prefer to see Japan regain the lead in influence in the region.
Best, Stitch
stern.nyu.edu
A portion of his remarks follows:
Features of the Traditional Japanese Growth Model
What were the features of the old economic growth model and of the Japanese social and institutional system as compared to the US ? To the risk of simplifying things, I would argue that Japan had: 1. An economic and social system valuing social cohesion and collective goals over individualistic pursuit of personal welfare; pursuing consensus over conflict; emphasizing cooperation versus aggressive competition; valuing conservative risk aversion versus aggressive risk-taking. The recent book by Fukuyama "Trust" argues in favor of such Japanese values by stressing the role of "trust" and "social capital" in economic development . 2. An economic system based on limited market competition and oligopolistic market structures as opposed to free market competition 3. Strong amount of regulation and government intervention in most markets as opposed to aggressive deregulation 4. A relatively projectionist trade regime, emphasizing exports over imports and restricted policies towards inward FDI policies 5. A system of life-time job security versus high job mobility and insecurity 6. Implicit and explicit systems of social insurance for firms and households to address the overall risk-aversion behavior of agents in the economy. Contrast this with the strong American risk-taking attitudes 7. A corporate organization system based on Keiretsu instead of "holding companies" and unrestricted Mergers and Acquisitions 8. A R&D model based on "process innovation" rather than "product innovation", i.e. based on the quality improvement of already existing goods rather than the creation of new goods 9. An educational system emphasizing traditional values over innovation and individual creativity. This economic and social model worked in an excellent way from 1960 until 1990. The old model worked so well for Japan that it became the "Growth Model" followed by several East Asian countries. But this growth model does not seem to work in the 1990s.
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