Academic journal article The Quarterly Journal of Austrian Economics

The Origin of the Prolonged Economic Stagnation in Contemporary Japan: The Factitious Deflation and Meltdown of the Japanese Firm as an Entity

Academic journal article The Quarterly Journal of Austrian Economics

The Origin of the Prolonged Economic Stagnation in Contemporary Japan: The Factitious Deflation and Meltdown of the Japanese Firm as an Entity

Article excerpt

Economics writing has a reputation for stolidity unto soporiferousness. To be fair, prose that trades in margins, utils, and curves-named-after-other-economists is perhaps a bit difficult to jazz up enough to read like For Whom the Bell Tolls. If one asked the average undergrad to rate his or her econ textbook on spiciness, the response might clock in somewhere between "cell phone contract" and "house dust."

That may be true, but let no one--and I mean no one--lay the blame for it at the feet of Masayuki Otaki. The Origin of the Prolonged Economic Stagnation in Contemporary Japan: The Factitious Deflation and Meltdown of the Japanese Firm as an Entity (whew!) is, hands down, the most raucous economics volume I have ever read. This is gripping, dramatic stuff, larded with high-flown moralizing about policy and theory that is sure to grab and hold the attention of even the most indifferent reader. In the Preface alone, a mere two pages, Otaki manages to deploy "grievous," "precarious," "vicious," "spurious," and even "egregious," a running of the "-ous" adjectives that is perhaps even more thrilling than the running of the Pamplona bulls. I was hooked. Otaki had me at "acute roundabout trespass"; I swooned at "substantively surcharged nominally on account of keeping the Japanese border from the menus of China"; I went all doe-eyed at "fanatic captives in the quantity theory of money". Who could put this book down? Not I. I read it in one sitting, straight through, anxiously, even rambunctiously, turning pages to find out what would happen next.

So, what happened? Well, to be honest, I'm not exactly sure. Otaki has a gift for making economics read like dispatches from the French and Indian War, but I confess I was a little too thick-headed to penetrate the meaning of some of the more esoteric passages (and there are many). Here are the main points, as near as I can tell. (Otaki very helpfully includes a "concluding remarks" section at the end of each of his seven chapters. Without those, I would have been quite lost.)

- Otaki does not like Japanese prime minister Abe Shinzo or, more specifically, his economic policies, which critics and supporters alike refer to as "Abenomics."

- One of the main reasons Otaki does not like Abenomics is that he sees it as an extension of "Koizuminomics" (a term that I just made up and which I do not expect to catch on, for obvious reasons). Koizumi Jun'ichiro was the prime minister of Japan from 2001 to 2006, and made it the centerpiece of his administration, at least in the early days, to privatize the financial arm of the Japanese postal service. Unlike the United States, where the post office is responsible mainly for delivering grocery store circulars while racking up billions of dollars in taxpayer-funded deficits and campaigning on the side for Democrats, the Japanese postal service is generally efficient and well-managed. So efficient and well-managed, in fact, that it also has its own bank. (US post offices provided this service, too, until about fifty years ago.) The postal bank remains in a state of semi-privatization almost two decades after Koizumi's initial attempts at reforms, but it still holds the equivalent of some three trillion dollars US in savings and insurance assets. Otaki argues that the Koizumi brand of "privatization" was really a kind of crony capitalism that Otaki calls "pseudo laissez faire."

- The Japanese people overall have been sold a bill of goods by the late-postwar pseudo laissez fairers. While early-postwar Japan still took seriously the firm as an entity that allowed for transactions not possible in the broader market (Otaki relies heavily here on Coase and Williamson, and also on the alternative firm theory of Uzawa Hirofumi and Edith Penrose), the advent of neo-liberalism and globalism, and in particular Japanese foreign direct investment (FDI) in other Asian countries, have combined to drive down wages for the average Japanese worker and hollow out the firm. …

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