Japan’s export-led funk

Japan and Ireland’s economies are so different in character that I have never once read a comparison of the two, other than a nod to the concept of zombie banks. That said, a recent article in Foreign Policy that looks at Japan’s perpetual slump caught my attention.

Ireland’s path out of recession, we are told, lies in export-led growth. Precisely what we are to export is unclear but, leaving that aside for the moment, there is also the question of whether or not Ireland citizens can survive being hobbled as consumers?

Japan achieved this remarkable growth with a weak yen – which supported exports and discouraged imports – and high savings rates, which funded massive investments in infrastructure and manufacturing capacity.

An unfortunate side effect of export- and investment-driven growth is that it strangles the consumer. But that’s kind of the point: The entire exercise depends on suppressing consumers as their cheap labor fuels exports. In Japan’s case, the same undervalued yen that supported exports sapped consumers’ purchasing power while yields on their savings were kept artificially low to fund cheap loans to corporations and government. And the shrunken share of economic spoils that did end up in the hands of consumers had no outlet but the heavily protected domestic market with its hopelessly inefficient and shockingly overpriced goods and services.

For my money, I’ve never been a believer in the “weightless”, “post-material” economy and believe that productive manufacturing and export is a better option than either selling houses to one another or incomprehensible services to business and government.

That said, the above passages do have a faintly familiar ring: an economy geared-up for the benefit of some narrow sectors of the economy and does nothing for its citizens, lowering wages, collapsing savings… Ireland’s domestic market is not “heavily protected” but goods and services do remain “shockingly overpriced”.

Update: Just read this on the RTÉ News web site: “Call for Budget details to boost spending“.

The group representing the retail sector wants the Government to provide details of its proposed budgetary measures as soon as possible to help improve consumer spending. […] Director of Retail Ireland Torlach Denihan said the Government should give people some idea of how they will be affected by December’s Budget.