Peter
Although you are right in pointing out that unequal distribution is a fundamental economic problem, together with productivity and unemployment, but these are the province of national governments, and to solve them on the world scale will take generations. During this time new difficulties, such as the environmental issues may well come to the forefront. So the answer is basically to keep developing institutions that can cope with the situations at hand and in the future as the world becomes more integrated. Overcapacity is a problem right now, as the industrial countries have been guided by the notion of global competitiveness more than fundamental economic issues. After all companies are guided by microeconomic forces rather than macroeconomics.
Zeev,
Although your prescription for Japan is right, it may not work for the reason that Japanese consumer has seen the economy slide for so long now. The Japanese may not spend the extra money that may come their way but are likely to stash it away. Monetary policy does not work, this we know as they are in a liquidity trap, so the only thing left is fiscal policy, but it may not work either. So the alternative is to just work this thing out by reform of their financial institutions, if they are capable of it. They may, as a slow approach would fit the notion of saving face also. The only big question mark is, whether they understand their own dilemma or are they in denial. |
