This was a curious title on Reuters so I just had to read it. We've talked before about how so many of the same solutions the Japanese took for their property / credit bubble have been copied by the U.S. The main difference is our solutions came much quicker and with a scale that dwarfed the Japanese. Hence we are doing a far better job of papering over the real damage in the economy with paper printing prosperity than the Japanese did. Proponents of the American way point to immigration, a younger population, and the dynamic economy that can constantly revolutionize as reasons we won't be Japan. I won't go heavily into the reasons I think a lot of that is false - we've delved into some of these issues many times such as in this piece [Oct 28, 2008: Pooring of Japan Too?]
One of my long term themes is the Pooring of America - which is effectively a combination call on the dislocations via globalization and the implications of a world where capital is without boundary and median economic status of the middle/working class will move much closer together across countries (the middle classes in richer countries get poorer, and the poorer middle classes get richer) [Do the Bottom 80% of Americans Stand a Chance?] - along with the the US specific issues (massive debt both in government and individual households, lack of energy policy, lack of entitlement reform, exploding income inequality, concentration of wealth in fewer hands).
Well, it appears the Pooring of Japan might also be happening; my thesis on the globalization of wages to a more median level regardless of nation is starting to hit Japan as well. For those in low cost of living countries that's a good thing. (higher wages buy much in low cost countries) For those in countries where the cost of living is high - not so good. Fascinating stuff as it appears we are not the only nation where median wages are flat lining; and a growing disparity is rising between the well off and the not so well off as job security becomes a thing of a bygone era.
It is very interesting as this world seems to be developing into two modern models - that of the US/UK and apparently Japan where the worker is not protected in the name of flexibility and innovation versus that of more socialistic Western countries where a safety net for workers is immense and firing is a not so easy thing to do - and unions remain strong.
Many will say the U.S.'s ability to be quite a bit more cruel to the working class will help it shed industries and retool for the future in rapid fashion - that's an open question. Yes there is innovation and ability for quick profit but to how many in the society? Is it being spread or just concentrated among very few while the masses of society subsidize this wealth creation?
Further, if profits are reinvested increasingly more to capital & investors (share buybacks, dividends) instead of to the workers - what are the long term implications? A lot of interesting social debates can be interwoven into the economic policies
The reality is globalization is changing the world, and advanced developed countries can't do much about it except at the margin. Global wage arbitrage continues to happen, placing pressure on those who must actually compete in the global marketplace - as opposed to US workers those who live in ivory tower worlds such as government workers, healthcare workers (by proxy supported heavily by government), education (also heavily supported by government and or brainwashing of our parents that you must pay $20K a year for university - growing 8% a year annualized of course). We've also been told our dynamic economy - to maintain the profits for the elite 0.02% at the top must have a mobile work force that can be cut at a moment's notice, otherwise we will be (wait for it) like those Europeans.
Well let Japan be your guide. They have adopted the American model. They used to have cradle to grave employment like the socialists but adopted the American nomadic worker emphasis on temporary workers that can be cut at a moment's notice. In that October piece I listed above -
In one of the world's wealthiest nations, Junpei Murasawa is a poor man. He skips meals to make ends meet. A bachelor, he lives in a tiny apartment in Tokyo, sharing a kitchen, toilet and shower with nine neighbors. He doesn't have health insurance because he can't afford the premiums.
The 29-year-old laborer is one of a burgeoning class in Japan -- the working poor. The number of Japanese earning less than $19,610 a year surged 40 percent from 2002 to 2006, the latest data available, the government says. They now number more than 10 million.
n a country that boasts the world's longest-living population, where young women with Louis Vuitton bags crowd the sidewalks, Murasawa's is a voice of hopelessness and despair -- a voice increasingly heard in Japan.
The growth of the working poor -- not seen in such numbers since Japan surged to wealth in the 1980s -- has been a shock to a country that once prided itself on being a bastion of economic equality.
It is unprecedented to see such a widening income gap in Japan, said Yoshio Sasajima, economist at Meiji Gakuin University in Tokyo. Our society is definitely becoming a class society.
The seeds of changes now wrenching Japanese society were planted in the burst of the so-called bubble economy in the early 1990s.
As the Tokyo stock market tumbled, evaporating vast stores of wealth, corporations restructured by laying off workers. In the 2000s, that was followed by a round of free market reforms that widened the disparity between haves and have-nots.
A key to the growth of the working poor has been the explosion in temporary employment agencies, which allow corporations to take on labor without having to pay benefits -- and then unload workers at will.
The spike in the number of the working poor is already taking a toll on Japanese society. More people are putting off marriage because of tight finances, exacerbating a declining fertility rate. Part-time workers unable to afford rent sleep in 24-hour Internet cafes to escape the streets. Some have stopped going to the doctor because they can't afford it.
Despite his poverty, Murasawa doesn't qualify for government welfare payments -- he makes too much. To make ends meet, he's given up dining out, drinking, smoking, going to the movies or buying CDs, clothes and magazines.
Even though I have a good job now, I'm always worried that I could slip back to poverty anytime, Yamaguchi said. There is no job security in Japan anymore.
That should all sound VERY familiar to you if you are an American. All the exact same triggers have happened in the US. We can deny it, look the other way - talk about trickle down economics working like a charm... say that any country where iPhone sales are rocketing must be doing great. But trust me, most of those living this life will never see this blog. They are too busy trying to survive. Much of what I speak about is a very long term erosion that is not easy to see. It happens year after year, and then 20 years later you look around and ask what just happened? That question is already being asked in the lower 1/3rd of our society as those parents realize their children don't have a very good chance of living the lifestyle even they enjoy. My belief is this will happen to the next 1/3rd higher up the food chain over the coming 20 years as their jobs either go away or are arbitraged down in wage (I am speaking real wages of course).
Japan has a lot of other things that are increasingly being seen in America. [Nov 17, 2008: Poverty, Pension Fears Drive Japan's Elderly Citizens to Crime] Both countries now are hitching their wagon to China and exports (Japan well ahead of this curve) - both countries believe everything will just be fine as long as the Chinese and greater Asia buy stuff they make. Ironically the US is getting rid of making stuff at an alarming rate (ex weapons, movie stars, agriculture, et al) but enough about that. We will export our way to prosperity - trust us.
The main difference between the two is while both countries run high deficits, the Japanese have a high personal savings rate. [Feb 26, 2009: NYT - When Consumers Cut Back - An Object Lesson from Japan] So in actuality, as bas as the Japanese situation is, who is really better off for the long run? Those who don't save? Or those who do? And what shape would we really be in if the government didn't keep handing us money we don't have via incentive programs or incredibly low borrowing rates. That's something for you to mull as you stare at the ceiling tonight. Or, do the normal American thing and don't think about it - just say we're not Japan and be content as ignorance is bliss is now a national sound track. [Feb 9: FT.com's Martin Wolf - We'll Be Lucky if Downturn is Only as Bad as Japan's]
Since they had their bust 2 decades before us, it will be interesting to see if our outcomes mirror theirs. But not if you listen to the pundits - the same ones who said housing prices could never fall nationally say we are not like Japan. What I found interesting in this story is what the aggregate effect has been on the youth that lived through this bubble bursting and continue year after year in an economy that leaves them behind with no real hopes for a better life. Sort of like what has happened to what we call the working poor in America (but as I say, it will work its way up the food chain in my estimation). Based on age, these young men in Japan would be equivalent to say approximately the newborn to 15 year olds of today. Will we have American Herbivores in 15+ years?
- Hotel worker Roshinante has no interest in actively pursuing women, is nonchalant about a career and finds cars a bore -- and he is not alone in opting for a quiet, uncompetitive lifestyle. Roshinante, 31, who prefers the anonymity of his online handle, is one of a growing group of men dubbed herbivorous boys by the media, who are rejecting traditional masculinity when it comes to romance, jobs and consumption in an apparent reaction to the tougher economy.
- Forget being a workaholic, corporate salary-man. These men, raised as the economic bubble burst, are turning their backs on Japan's stereotypical male roles in what is seen as a symptom of growing disillusionment in their country's troubled economy.
- For decades, Japanese men were expected to work full-time after graduating from high school or college, marry and support their wife and children. Roshinante, a university graduate, has no plans to follow that path.
- Almost half of 1,000 men aged 20-34 surveyed by market research firm M1 F1 Soken identified themselves as herbivorous, defined literally as grass-eating but in this context as not being interested in flesh or passive about pursuing women. We cannot ignore herbivorous boys because they are almost a majority, said Shigeru Sakai, a researcher at M1 F1 Soken.
- Most herbivorous boys lack self-confidence, like to spend time alone, and use the Internet a lot, the survey showed. The mindset appears to be a reaction to the end of Japan's late 1980s bubble economy of soaring asset prices, when everything looked rosy, and a subsequent economic slump.
- Experiencing tough times has given this new breed of men different attitudes about consumption. In the bubble era, whatever led to consumption was good and people measured their worth by money, Fukasawa said.
- But herbivorous men don't buy things to show off. Partly, at least, that's because they can't afford to. Their generation joined the work force after deregulation measures helped to swell the ranks of contract and other non-regular employees to about one-third of all workers.
- Roshinante worked part-time until two years ago, when he took a full-time post at a hotel chain. But he's still anxious about the future. At my previous workplace, a whole bunch of managers in their 40s and 50s were laid off, Roshinante said.
- Marriage isn't on his agenda at the moment, but he couldn't afford it even if it were. I think there are many part-time workers who cannot get a full-time job and cannot plan their life and marriage. That is also the case of romantic relationships. While they don't want to follow the traditional model, they don't know what to do, he said.
On a very related note the top story online in New York Times business section the past few days is the rise of the Hostess job in Japan. Hey we don't want to focus just on the males - it appears as a dearth of full time jobs afflicts everyone, young females are ditching the temporary nomadic work now a feature in both our countries and turning to a once scorned industry. Boo Yah - always a bull market somewhere. Young Japanese Women Vie for Once Scorned Jobs.
- The women who pour drinks in Japanâ€™s sleek gentlemenâ€™s clubs were once shunned because their duties were considered immodest: lavishing adoring (albeit nonsexual) attention on men for a hefty fee.
- But with that line of work, called hostessing, among the most lucrative jobs available to women and with the country neck-deep in a recession, hostess positions are increasingly coveted, and hostesses themselves are gaining respectability and even acclaim. Japanâ€™s worst recession since World War II is changing mores.
- Even before the economic downturn, almost 70 percent of women ages 20 to 24 worked jobs with few benefits and little job security, according to a government labor survey. The situation has worsened in the recession.
As I've said many times, we have a very interesting few decades ahead of us ... if you believe the flattening world is a zero sum game (or close to it) as the living standards in the middle class in the developing countries rise (as they obtain production means), those in the developed countries can only fall to keep the water level steady. I expect the elite to prosper in all countries as they gather more of the resources as has always happened throughout human history - except in those socialist European states of course. ;) Those who work producing things always in need - i.e. food production - should do fine (although most of US food production is already corporate). The counter argument is this breaking of borders creates a nirvana for all and not a zero sum - the pie grows exponentially. So far the latter argument has been very difficult to make the past decade... at least for Americans. And the Japanese.
Thankfully both Japan and the US have central banks with no shame in giving us ever more potent cocktails of drugs to make the pain seem much more dulled. (what happens when the patient overdoses? never mind - we don't ask such question as we applaud prosperity) Speaking of which (a) hey the stock market is up so enough of the doomsday talk - the stock market inflated by increasing fiat money means all is well and (b) can I interest you in a new car? A new handout is going on, with more paper money we had to create and or borrow from the Chinese - but the peasants are flocking in glee - so a rousing success! Cash for Clunkers forever!
As always, this is only my view and it clashes with the everything works out in the end, our government will make sure of it and create a new bubble every 6-7 years so the peasants are distracted - I live in an abject minority. :)