No, I’m not talking about The Vapors’ old pop hit (as my editors breathe a sigh of relief). Instead I’m wondering if the United States is beginning to become a bit like Japan. And in this instance, I don’t mean that as a compliment.
I’m writing this post from the town of Sendai, north of Tokyo. It snowed today, which was a lovely treat, something we never see back home in semi-tropical Hong Kong. Japan is an unusual respite from the rest of Asia in many other ways as well. While much of the region is still hurtling along the path of development, a blinding whirl of frenetic construction and perpetual change, Japan is a vision of stability, a nation that has everything others in Asia want, and has already had it for decades. Money. Technology. Global brands. A seat at the table with the powerful countries of the industrialized world. Japan decided to catch-up with the West a century before anyone else in Asia got the idea. Those of us old enough to remember The Vapors will also recall that Japan used to scare the pants off Americans and just about everyone else. Back in the 1980s, Japan was the first of Asia’s rising powers, a nation that seemed destined to overtake the U.S. as the dynamic force of the global economy. Management gurus and academics looked to Japan in search of guidance that could rejuvenate an America that, many thought, had lost its will and its way.
There are still a few things the U.S. can learn from Japan. One is its commitment to energy-efficient public transport. Anyone who sniffs at Obama’s plan to invest in high-speed railways should join me on the comfortable glide back to Tokyo. But unfortunately, the main lesson Japan can offer the U.S. today has nothing to do with rapid forward progress. It concerns the perils of inaction.
For most of the past 20 years, Japan has been in a state of political and economic paralysis. Ever since its gargantuan property-and-stock-price bubble collapsed in the early 1990s, the economy has teetered on the edge of recession, occasionally tumbling into one. With one exception (Junichiro Koizumi), the country has been captained by a series of uninspiring leaders who seemed content to reluctantly repair the economy so that it didn’t outright sink, but not enough for it to return to the high-flying days of yesteryear. What I find most baffling about Japan is how a nation can be in such a protracted period of malaise and never seem to muster the will or ability to do very much about it.
Paralysis isn’t unique to Japan; in fact, it appears to be a common affliction throughout the developed world. But Japan has been the unfortunate frontrunner in this regard, and by looking at what’s happening here, we can get a pretty good idea of the damage it can do. Unwilling to make hard choices, the government simply threw taxpayer money around, attempting to keep people employed without fundamentally changing the economy. The result is government debt approaching 200% of GDP. Overly protected at home, Japan Inc. has missed out on the globalization game; its companies, unable to adapt to a changing world, are losing global market share to more nimble competitors from South Korea or Taiwan. The nation that once led the way towards prosperity in Asia is sitting by while its influence in the region is being usurped by China. Problems beget problems, and the situation gets worse and worse, and harder and harder to change, the longer it persists.
As I sit here in Sendai, looking warily across the Pacific at my home country, I shudder to think America is heading in the same direction. Everyone in Washington knows what problems the nation faces, but there is a Japan-like inability to take the action everyone knows is necessary. Our broken healthcare system is an embarrassment for a country as rich as ours, a drain on the competitiveness of corporate America and the wealth of the middle class. Yet efforts to change it have been stymied for almost as long as Japan. The government’s finances deteriorate as our politicians blissfully refuse to make the hard decisions on what the country does and does not need. Our airports belong in a Third World country. Our education system requires far more attention if the economy is to compete in the 21st century. And yet, these problems just linger on, getting worse year after year.
The sources of this paralysis are somewhat different in Japan and America. In Japan, a combination of highly constraining social patterns, consensus-based decision making and an ossified political process have suppressed new ideas and made the country resistant to change. In the U.S., there is no shortage of fresh thinking, debate and outrage, and the paralysis is caused by a lack of consensus on how problems should be tackled. But we end up in the same place nevertheless. There are too many people in positions of power who seem to believe no real change is necessary, or that it can just be put off, for political purposes, to a another day.
In a rich country like the U.S., it’s easy to fool ourselves into thinking there’s always more time for problems to get solved. So it has been in Japan. The Japanese are wealthy enough that they don’t suffer too much from the prolonged period of stunted growth. The city of Sendai is in a province with a higher-than-average unemployment rate, but the streets are still filled with shoppers and restaurants with diners (even amid the snow). But nevertheless, Japan also stands as a warning to those who think tough decisions can be delayed indefinitely. After 20 years of going nowhere, Japan’s public finally seems ready for something new. Voters last year tossed out the Liberal Democrats, who had governed almost uninterrupted since 1955. The new sheriff in town is Prime Minister Yukio Hatoyama of the Democratic Party of Japan. He’s at least talking new ideas – reforming the government, improving the social safety net, cozying up to a growing Asia. It’s too soon to tell how much he’ll accomplish. But his options are constrained by the mess built up over two decades of inaction. He’s confronting an unsustainable fiscal position and an economy with deteriorating competitiveness.
Perhaps our political leaders in Washington should ask Hatoyama for some advice. Don’t wait, he might tell them, or you could turn Japanese.