Last updated on January 23, 2011
I grew up in the 1980s and the 1990s. Back then, cultural references to the superiority of the Japanese economic model where everywhere. Most of William Gibson’s Neuromancer takes place in Japan’s Chiba prefecture, which had become a suburb of Tokyo populated with expatriates much like New York or London are today. In John McTiernan’s “Die Hard,” a team of terrorists hijacks the Nakatomi Corporation’s office building in downtown Los Angeles in an effort to steal $640 million in bearer bonds. The first time I visited the United States on my own in 1996, I met people my age who were learning Japanese in college, “to do business with Japan.”
In short, if you grew up in the 1980s and 1990s, some part of your mind probably still equates “Japan” with “economic might.”
These days, it seems as though “China” has become the new shorthand for “economic might.” Not too long ago, President Obama refused to meet with the Dalai Lama so as to not upset our relations with China. Dambisa Moyo, of Dead Aid fame, has a new book coming out titled How the West Was Lost which discusses the many ways in which the West — the United States, really — lost its edge to China.
Yet whenever someone brings up the prospect of China eclipsing the United States as an economic power (say, because much of the US debt is owed to China), I always feel like telling them to remember how most of us held Japan in awe back in the 1980s and 1990s, and how spectacularly wrong most of us were.
Now, I am no macroeconomist, so my feeling only comes from what I perceive as version 2.0 of the hubris that accompanied all things Japan back then. So let me be clear: I don’t have any special insight coming from my training as an economist. I took as little macro as I could in graduate school and barely made it through, so it would probably be wise for readers not to base any significant economic decision on what I occasionally write on macro topics.
Just as I was thinking about this topic this week in the wake of Chinese president Hu Jintao’s visit to the United States, Mungowitz over at Kids Prefer Cheese comes up with a brilliant post filled with a sound macroeconomic argument for why the Chinese “miracle” really may be all shadow puppetry, and how China may well be the new Japan. Here’s an excerpt:
“China’s growth is fake. Not as fake as Japan’s, because the China doesn’t have a zombie financial sector. That’s because they have ZERO financial sector, at least in the sense of being able to generate liquidity on a consistent scale. And the threat of nationalization rules out private offerings of publicly traded stock. It is true that they are producing mountains of stuff. But what they are doing is taking all private saving and expropriating it, converting it into capital for more semi-state-owned factories.”
The rest of the piece, filled with typical Mungerian mordant, is even better.