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I Think We’re Turning Japanese

We have learned the lessons of the Great Depression. We will not make the same mistakes again. We will make all new ones. Bigger, bolder, and swifter. Today’s NY Times story on Japanese efforts to stimulate their flagging economy declares this more recent history holds a lesson for us now. While Japan is hardly an ideal […]

We have learned the lessons of the Great Depression. We will not make the same mistakes again. We will make all new ones. Bigger, bolder, and swifter. Today’s NY Times story on Japanese efforts to stimulate their flagging economy declares this more recent history holds a lesson for us now. While Japan is hardly an ideal proxy for America in such a comparison, it’s probably a better one than America in the thirties. According to our new Treasury Secretary (and the spin of the Times story), who was there (which would be reassuring but for the fact that he was not only there for but oblviously instrumental in the Blunder Years of the credit and housing bubble), the lesson we should take from it is not this, the product of Japanese hindsight:

Among ordinary Japanese, the spending is widely disparaged for having turned the nation into a public-works-based welfare state and making regional economies dependent on Tokyo for jobs. Much of the blame has fallen on the Liberal Democratic Party, which has long used government spending to grease rural vote-buying machines that help keep the party in power.

“…vote-buying machines to help keep the party in power”; this hasn’t even happened in our case yet, and it already feels familiar. Nor should we take caution from this:

Dr. Ihori of the University of Tokyo did a survey of public works in the 1990s, concluding that the spending created almost no additional economic growth. Instead of spreading beneficial ripple effects across the economy, he found that the spending actually led to declines in business investment by driving out private investors. He also said job creation was too narrowly focused in the construction industry in rural areas to give much benefit to the overall economy.

 But rather this just means go long, again and again. Like Brett Favre after four interceptions:

In a nutshell, Japan’s experience suggests that infrastructure spending, while a blunt instrument, can help revive a developed economy, say many economists and one very important American official: Treasury Secretary Timothy F. Geithner, who was a young financial attaché in Japan during the collapse and subsequent doldrums. One lesson Mr. Geithner has said he took away from that experience is that spending must come in quick, massive doses, and be continued until recovery takes firm root.

Lord help us.

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