Japan & the U.S.: Lost Economic Leadership?

Robert Samuelson in the Washington Post makes some stark points about Japan’s “lost decade” and its implications for the U.S.:

➢ in the 1990s. . . Japan experienced a listless, boring prosperity. Its economy expanded in all but two years, although [u]nemployment rose to 5% in 2001 from 2.1% in 1990. Not good, but hardly a calamity. . .[Yet f]rom 1956 to 1973, Japan had grown 9% a year; in the 1980s, it was still growing at 4%.

➢ Japan's economic reverses reflect deeply held social and political values. The same might be true of us. Japan has . . . a "dual economy." On the one hand, export industries are highly efficient. They face intense global competition. On the other, many domestic industries are inefficient and sheltered from local competition by regulations or custom.

➢ this system broke down in the mid-1980s. The rising yen made Japanese exports costlier on world markets. New competitors -- South Korea, Taiwan -- emerged. Japan lost its engine of growth and hasn't found a new one. That's Japan's central economic problem. . . Even now, the economy is trade dependent; in December, exports dropped 35% from a year earlier, pushing Japan into a deep recession.

➢ Since the early 1980s, American economic growth has depended on a steady rise in consumer spending supported by more debt and increasing asset prices (stocks, homes). . . the present U.S. slump signals the end of upbeat consumption-led growth. . . its legacy is an overbuilt and overemployed consumption sector. . . [Is] our system. . . adaptive enough to create new sources of growth to fill the void left by retreating shoppers[?]

Yikes. Are we permanently in the trough along with Japan? Probably not, but the U.S. isn’t the place to look for the folks who'll get us out of the ditch. The next center of growth is likely to be Asia and its middle class. As the World Bank says, “a new engine of private demand growth will be needed, and we see a likely candidate in the still largely untapped consumption potential of the rapidly expanding middle classes in the large emerging-market countries.”