Mining for Growth

For quite some time i’ve been looking for economic data on Japan. Much of the analysis written by western commentators is interesting, but often written with a sense of puzzlement, which is exactly what i’m attempting to overcome. There is also a tendency to attempt to tell Japan what it is doing wrong. This has run both ways, during the bubble there were no shortage of column inches / books describing the miracle… we all love a winner – right up until the hustle is revealed.

A few days ago i stumbled up the Japan Economy Watch blog. It’s put together by three non-japanese, is very data heavy, and appears to be well sourced / researched. I’m not going to tell you it’s great because i haven’t read through all of it, and certainly haven’t reached any new conclusions.

What prompted this renewed interest in Japan was last weeks reported fall in GDP:

There is no way to sugar coat the first quarter Japanese gross domestic product figures released on Wednesday: they are breathtakingly bad viewed from virtually any angle.

The economy shrank by a record four percent in the quarter, or an annualized fall of 15.2 percent, leaving the economy no bigger in real terms than it was in 2003.

The above quote, from Forbes, left me pretty confused. I was here in 2003, and i’ll be honest, it wasn’t much different from now. There might be a few less people on the trains, but the ridership numbers for my line are still increasing. There might be a few less people in Shibuya, sometimes you can catch a glimpse of the pavement… Which isn’t to say that it’s sensible to judge the economy of a country based on a couple of observations in the capital, but the impression that quote gives is that homeless should be lining the streets (yes, there are more than there were 5 years ago), soup kitchens, street urchins running through black snow without shoes on, etc. Er, no.

Here are two pages from the fancy new Wolfram Alpha:

[I don’t seem to know how to link directly to graphs… look at both the linear and log versions, they are revealing.]

What i take away from that comparison is that, over the last ~40 years both the UK and Japan have done a lot better than the US in terms of increasing GDP per capita, and that the growth in US GDP is clearly unsustainable. Any graph that shape (exponential increase) is inevitably going to be run into limits. Looking at the population graph over the same period, it make sense why the US has felt the need to push for a larger economy – it has more mouths to feed.

It’s not clear to me what is leading indicator: allowing the population to increase rapidly, causes the GDP to increase rapidly, or the rapidly increasing GDP, allows the population to rapidly increase. And, there is always the argument that the two are unrelated… but it’s hard for me to take seriously.

This raises an interesting question: is Japan so horribly worse off than it was in 2003? The population is indeed older, and therefore less people are supporting the aged, so it can hardly be an improvement. However, i’m having a hardtime seeing it as being a massive hardship to be back where things were 5 years ago.

The real problems in Japan are things like the construction state, the corrupt bureaucracy, the reliance on fossil fuels for 80% of energy, the loss of ability to feed itself, it’s poisoned relationships with the rest of asia. As far as i can see an increasing population let the government hide from all these issues, but now they are going to be bought into stark relief. Unfortunately there is very little chance of the much needed radical change happening in the absence of disaster.

I keep telling myself that (intellectually) this is a great time to be alive – we’re going to see if humanity is up to the challenge of sustaining itself in a much more constrained world. The planet really has got a good deal smaller with so many of us camped out here…

Update: Hmm. The data doesn’t immediately support my hypothesis. That’s a shame. Now i’m reduced to trying to find income distribution data for Japan (the US is easy, and obviously a basket case: First two papers two read:

Unfortunately i’ve now forgotten what point i was trying to make, and am just enjoying reading the paper trail!

Wise words...

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