Tuesday, May 28, 2013

Shinzo Abe Cannot Save Japan

Source: The Economist.

I should probably just end this post with the picture, but a little explanation would be polite.  Shinzo Abe is on the cover of this week's Economist.  Ironically, it is also source of the graphic above.  The Economist is all but endorsing Shinzo Abe's approach to revitalizing Japan, but unless something radical changes with its demographics, it will have too many old people to support with too few workers.  They admit as much in one of the opening paragraphs:
Pulling Japan out of its slump is a huge task. After two lost decades, the country’s nominal GDP is the same as in 1991, while the Nikkei, even after the recent surge, is at barely a third of its peak. Japan’s shrinking workforce is burdened by the cost of a growing number of the elderly. Its society has turned inwards and its companies have lost their innovative edge.
What are the Prime Minister's bold proposals?  More government spending in an economy with an already debt to GDP ratio over 200% and printing money.  And vague "supply side" reforms to be created by five different commissions.  This won't help, but to be fair, nothing will help.  Mr. Abe also proposes to reinvigorate national pride.  Unless this results in more babies; nothing he does will do much good, because his economy lacks workers and the old folks want their benefits.

A stable or growing population is a source of economic growth.  We see this over and over throughout the world.  When native birth rates fall, then immigration is the only other source of population increase, which isn't happening in insular Japan.

Here in the United States, immigration reform is necessary for the same demographic reasons as exists in Japan.  However, pulling in an unskilled immigrant population that is as dependent on the government as the elderly will do us no good.  We need skilled and wealthy immigrants.  The current effort in the Senate does not emphasize this outcome.

What You Should Be Reading

Dean outlines simple and common sense health care reform implemented by one doctor.

Could we finally be getting rid of that miserable hack Holder?

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