Paul Krugmans column this morning explores just how Europe and the U.S. could have looked at the Japanese economic experience of recent years and then done quite so badly themselves. He suggests that apologies to the Japanese are in order. Its a fine column. Worth a read. Tom For almost two decades, Japan has been held up as a cautionary tale, an object lesson on how not to run an advanced economy. After all, the island nation is the rising superpower that stumbled. One day, it seemed, it was on the road to high-tech domination of the world economy; the next it was suffering from seemingly endless stagnation and deflation. And Western economists were scathing in their criticisms of Japanese policy. I was one of those critics; Ben Bernanke, who went on to become chairman of the Federal Reserve, was another. And these days, I often find myself thinking that we ought to apologize... What policy failures am I talking about? Start with government spending. Everyone knows that in the early 1990s Japan tried to boost its economy with a surge in public investment; it’s less well-known that public investment fell rapidly after 1996 even as the government raised taxes, undermining progress toward recovery. This was a big mistake, but it pales by comparison with Europe’s hugely destructive austerity policies, or the collapse in infrastructure spending in the United States after 2010. Japanese fiscal policy didn’t do enough to help growth; Western fiscal policy actively destroyed growth... I’ll be writing more soon about what’s happening in Japan now, and the new lessons the West should be learning. For now, here’s what you should know: Japan used to be a cautionary tale, but the rest of us have messed up so badly that it almost looks like a role model instead. nytimes/2014/10/31/opinion/paul-krugman-apologizing-to-japan.html
Posted on: Fri, 31 Oct 2014 13:00:01 +0000
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