fbpx
Politics Foreign Affairs Culture Fellows Program

The Japanisation of Europe

Ambrose Evans-Pritchard sees no way out for Europe, which he predicts is likely to endure the economic stagnation that Japan has suffered for 20 years: The risk is “Japanisation” without the benefits of Japan, without a single government, or a trade super-surplus, or 1pc debt costs, or unique social cohesion. Even today, the jobless rate […]

Ambrose Evans-Pritchard sees no way out for Europe, which he predicts is likely to endure the economic stagnation that Japan has suffered for 20 years:

The risk is “Japanisation” without the benefits of Japan, without a single government, or a trade super-surplus, or 1pc debt costs, or unique social cohesion.

Even today, the jobless rate for youth is near 10pc in Japan. It is already 46pc in Spain, 43pc in Greece, 32pc in Ireland, and 27pc in Italy. We will discover over time what yet more debt deleveraging will do to these societies.

Forty-six percent youth unemployment in Spain! I knew it was bad, but not that bad. Evans-Pritchard is right to fear what the lack of social cohesion among European nations will do to Europe in the years to come, as the economies stall out.

The columnist Spengler has written that Europe’s population decline all but guarantees precipitous economic decline. Excerpt:

America has enough taxpayers to fund its obligations at all levels of government. The euro zone will lose 30% to 40% of its potential taxpayers by mid-century. And at some point, today’s Italian and Spanish government bonds will have about as much value as obligations signed by Emperor Romulus Augustus in the year 475 CE.

Earlier this year, Daniel Gros, director of the Center for European Policy Studies, observed that Japan has actually done reasonably well to hold its own considering how steeply its population has declined:

Demographic differences are relevant not just in comparing Japan and the US, but also in explaining most of the differences in longer-term growth rates across developed economies. A good rule of thumb for the average growth rates of the G-7 countries would be to attribute about one percentage point in productivity gains to the growth rate of the working-age population. The US has done slightly worse than suggested by this rough measure; Japan has done a bit better; and most other rich countries come pretty close.

Looking to the decade ahead, this analysis suggests that one can predict the rich countries’ relative growth rates based on the growth pattern of their working-age populations, which one already knows today, given that anybody starting to work over the next two decades has already been born.

On this basis, Japan’s relative decline as a major economic power will continue, as its working-age population will continue to shrink by about 1% per year. Germany and Italy increasingly show Japanese patterns of decline in their working-age populations, and are thus likely to grow very little as well.

Advertisement

Comments

Want to join the conversation?

Subscribe for as little as $5/mo to start commenting on Rod’s blog.

Join Now