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Are The Failed Japanese Government Economic Policies And Obamanomics One and The Same?
 by: Walter "Bruno" Korschek





Robert Samuelson had an interesting article in the latest issue of Newsweek magazine, "Why Japan Fell And What It teaches Us." Mr. Samuelson reviews how Japan got into its current and long running economic slump, highlights of which include the following:

- Japan's economic problems started after several economic bubbles arose in the late 1980s including a tripling of their stock market's value from 1985 to 1989 and the tripling of its real estate values by 1991.

- However, by the end of 1992, the stock market had lost 57% of its peak value and land prices fell so low that they are still at early 1980s level.

- Banks weakened as the bubbles burst and they did not have enough collateral, with some banks going bankrupt.

- Economic growth stalled and grew only about 1% a year for the entire decade of the 1990s. This was a fraction of the annual 4% average growth in the 1980s in Japan.

- Despite implementing massive government stimulus spending programs, the economy is still stalled two decades later.

- They increased government spending while cutting taxes, resulting in massive budget deficits. Government debt as a percent of Japan's GDP went from 63% in 1991 to 101% by 1997 to 200% today.

- The Bank Of Japan, their equivalent of the Federal Reserve Bank in the U.S., cut interest rates all the way down to zero percent by 1999 with no discernible impact on the economy.

- Japan has an aging and shrinking population which tends to dampen domestic economic demand and growth.

All of these policies and facts have led to twenty years of anemic economic growth in what used to be a power house economic engine.

Do the symptoms of the Japanese experience sound familiar? They are almost identical to the economic policies of the Obama administration and Democratic Congress, policies that have been successful in only creating a skyrocketing national debt. Our political class and other arms of the Federal government never saw the devastating impact of the impending real estate bubble burst before it happened, just like in Japan. Our national bank continues to support very low interest rates with not positive results, just like in Japan. Our political class spends hundreds of billions of dollars on stimulus programs that do not work, just like in Japan. Our annual GDP growth has been steadily below the long term GDP growth rate, just like in Japan. Our national debt as a percentage of GDP is getting dangerously close to 100%, just like in Japan. We have an aging population, just like in Japan.

Sounds like we are going down the same road as the Japanese went through and that is not good. Everything that the Obama administration has done from an economic policy has mimicked the failed Japanese model with the same results: low growth, high unemployment, growing national debt, no apparent way out.

However, there may be some ways out if we look at our own history and some of the contrarian economic actions being taken by governments around the world:

- After Word War II, the United States faced an economic quandary. Much of the civilian workforce worked in the war factories making goods to support the war effort. Their current jobs were no longer needed once the war was over. Millions of military people were about to be discharged into civilian life, all of whom would be looking for a job. What did the Truman administration do? Did they significantly increase government spending to provide government jobs for everyone? Did they raise the national debt to frightening levels? Did they drop interest rates to near zero? No, between 1945 and 1948, the budget of the United States government was shrunk by over 60%.

Unemployment, despite this high influx of new workers, never got about 4.5%. Economic growth, even without massive government stimulus and deficit spending, was robust every year. In other words, they did the exact opposite what Japan did and Obama, and the got outstanding economic results.

- In Europe, France has taken the bold step of increasing its retirement age by two years to alleviate the financial pressure on their national retirement system caused by its aging population, i.e. they are cutting government spending. England is making substantial cuts in its military budget and is cutting nearly half a million government employees from its payroll, i.e. they are cutting government spending. Other western European countries are also cutting government spending, contrary to what the Obama administration budget busting spending is doing.

- Other countries outside of western Europe are also shrinking its itself by selling off government assets. According to an article in the November 1, 2010 issue of Businessweek, the Russian government is selling some of its government ownership in over 900 government companies, India plans to sell some government stakes in at least eight companies in the next five months, Poland is selling shares in its energy, insurance, copper, telecom, and power companies, and Malaysia is selling government interests in its postal system, its national chemical company, and other companies. In other words, while the Obama administration is becoming more and more entangled with U.S. businesses, e.g. General Motors, Chrysler, banks, the rest of the world is trying to shrink its government footprint in its domestic industries and shrink its national debt.

While the rest of the world is trying to get its government spending under control, the Obama administration has ruled over astronomical growth government spending, just like in Japan. In fact, everything that this administration is doing on the economic front is just like what did not succeed in Japan. Albert Einstein once said that the definition of stupidity is doing the same thing over and over and expecting the same results. Japan has been doing the same thing over and over with a failed twenty year track record. Could the Obama administration be fulfilling Einstein's insight?

Mr. Samuelson concludes his article with the remedy for our ailing economy and a way to not follow Japan down the failed rabbit hole of economic policy. He is one of many Americans, most of whom do not currently hold an elected office, who recognize that lasting economic prosperity and employment opportunities lie not with governments and politicians since governments and politicians do not create jobs. Only the private sector creates true, lasting jobs and wealth. Unless we reduce the thicket of business regulations, create a viable and low cost tax policy, reduce government spending and, most importantly, remove uncertainty from the equation, Mr. Samuelson predicts, probably correctly, that we will follow the path of a faltering Japan.

Removing uncertainty is the key. The Obama administration has introduced never before seen levels of uncertainty in the economy. Uncertainty as it results from a 2,500 page health care reform bill, uncertainty as it applies to the delay in finalizing tax rates for small business, historically the engine of this nation's economic growth, uncertainty from what would happen if cap and trade ever occurred, uncertainty from a financial sector regulation bill that left all of the details to unknown Federal government bureaucrats, etc. No wonder no American businesses are hiring, they have no idea what the future holds due to Obama's uncertainty factor but understand that the future is starting to look like Japan's past, and that is plain stupid.

About The Author

Walter "Bruno" Korschek is the author of the book, "Love My Country, Loathe My Government - Fifty First Steps To Restoring Our Freedom and Destroying The American Political Class," which is available at www.loathemygovenrment.com and online at Amazon and Barnes & Noble. Our daily dialog on freedom in American can be joined at www.loathemygovernment.blogspot.com.
The author invites you to visit:
http://www.loathemygovernment.com

 


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