Looking for a powerful future economy? Look no further than the Land of the Rising Sun.
September 22 2008 / by TonyManfredi
Category: Economics Year: General Rating: 8 Hot
As global economies are shaken by the US financial disaster and rising stars digest their growth, Japan continues to be the world leader in innovation. Could massive investments in areas such as robotics make it the envy of the world?
In the midst of our current economic storm it is difficult to see any light at the end of the tunnel. Leading financial experts are talking about a twenty year stagnation. In the face of this cold economic reality some are calling for the wholesale abandonment of the consumption based economy in order to embrace a system more focused on innovation and quality of life. Thanks to their own stark lack of native resources, the Japanese have been embracing this model for some time, intensely focused on education, infrastructure, and innovation.
For the past ten years the United States has replaced one outlandish bull market with another, allowing itself to become drunk with complacency as the tech bubble and housing bubble each provided false buoyancy to a badly misguided set of principles, or lack thereof. During this time countries such as China became the envy of the world, supplying the seemingly insatiable American appetite for stuff. Now even China, despite its still strong GDP growth numbers, is being forced to deal with the weaknesses offered by an economy devoted to manufacturing. Competition from the likes of Vietnam, Laos, and Bangladesh, environmental degradation, and the rust-belt principle are all slowly chipping away at what were once stellar growth numbers.
During this time Japan has emerged from its own bubble, and has been slowly and steadily rebuilding for over a decade. While all of the media attention has been focused on China due in large part to its incredible growth, Japan has been out of the limelight.
Could it be possible that Japan is quietly poised to be the leading economy of the future? By looking at some interesting factoids on economics and technology, it seems not so far fetched. While most would agree Japans GDP growth rate likely won’t exceed 2%-3% in the coming years, raw growth has proven that it will never replace a stable and innovative economy. Maybe there are other metrics that are more important.
Japan already possesses a manufacturing base that in recent years was larger than that of the United States. For such a geographically small country that is innovation in and of itself. It also is the largest creditor nation in the world, meaning more countries owe it money than any other country in the world. Many of its corporate titans, such as Toyota, are the number one companies in their respective fields. It also has a technological sophistication that few countries can match, producing more patents than any other country.
To find out why a country is poised for success it is better to look at its weaknesses as well as its strengths. Many in the west have looked at the Japanese post-war mindset, a mindset that has created a nation of savers instead of voracious consumers. Economists look at low domestic consumption rates as a major weight dragging down Japanese growth. This mindset however is beginning to change, as young Japanese have begun to spend and demand more in material wealth. Since when is fundamentally strong individual savings bad for a country? Our economy is reeling because we abandoned that antiquated ideology.
The second issue to which Japanese growth is dependent is a shrinking (and aging) population. With a decreasing supply of workers labor markets will be tight. Labor input as a measure of the economy will decrease, in many cases more than other developed countries. To combat this anchor on sustained growth the Japanese have been looking for ways to improve their labor productivity. They understand, as they always have, that this depends on technological innovations and their diffusion, enhanced education and training, and better capital for each worker (buildings, machinery, software.) Which sounds more like the economy of the future, that scenario or the country that just spent a cool trillion bailing out everything that was stupid, incompetent, and more importantly critically outdated.
What’s more Japan has another card up its sleeve. To combat this growing labor issue it has embarked on an audacious plan to have 1,000,000 robot workers in place by 2025. It is literally planning for a massive robot workforce. Based mostly on a 2007 national technology roadmap by their own trade ministry, it calls for an unprecedented deployment of industrial robots. A single robot can replace about 10 employees, the roadmap assumes — meaning Japan’s future million-robot army of workers could take the place of 10 million humans. That’s about 15 percent of the current work force.
“Robots are the cornerstone of Japan’s international competitiveness,” Shunichi Uchiyama, the Trade Ministry’s chief of manufacturing industry policy, said at a recent seminar. “We expect robotics technology to enter even more sectors going forward.” Not wanting to focus just on industrial robots, many companies are also plowing massive resources into bio-mimetic robots and they are striving for commercially succesful consumer robots. With cultural roots in Shintoism the Japanese are more quick to accept these inanimate animates in their lives, making what would be a social revolution in another country both commonplace and widely accepted. With necessity being the mother of invention, one can only hope that other countries such as the United States, begin to actually implement their tech roadmaps.
Comment Thread (5 Responses)
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Japan is America’s R&D department since it has a pacifist ideology. That’s why they are so ahead, since we’ve been going to war for over a century in almost every country. Kinda ironic, since we were so far ahead of them in WWII.
Posted by: Covus September 23, 2008
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The US is going to have to come to terms with the fact that it can’t stay on this track of buy buy buy. But I seriously doubt we’re ever going to change, unless we’re forced into it.
Posted by: John Heylin September 23, 2008
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Fascinating post. I have always thought that a good economic infrastructure of education, innovation, conservation etc. was more important than yearly growth in GDP and Japan seems to have a great infrastructure. I’ve read that the Yen is the most undervalued currency in the world.
I guess my once concern about the robots would be that they might lead to lower wages or higher unemployment. I know Japan is creating the robot workforce to combat a lower population, but is there any evidence it might lower the standard of living or create unemployment?
Posted by: Mielle Sullivan September 23, 2008
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@Mielle – That has been discussed but you have to hope that free-market economics works. New industries will hopefully be created to replaced old and decrepit ones, thus negating any negative outcomes that might arise from them.
Posted by: Covus September 23, 2008
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Tony Manfredi: Since when is fundamentally strong individual savings bad for a country? Our economy is reeling because we abandoned that antiquated ideology.
Mielle: I have always thought that a good economic infrastructure of education, innovation, conservation etc. was more important than yearly growth in GDP and Japan seems to have a great infrastructure. I’ve read that the Yen is the most undervalued currency in the world.
Both are strong ideas, and I’ve often wondered the same. It certainly appears that here in the U.S. our spending and resource mis-allocation is catching up with us, that we’ll have to pay the piper soon (unless acceleration bails us out).
I think that, fundamentally, we need to get better at estimating value and change the way we view economic systems if we are to have any chance of changing our irrational behavior.
re: robotic automation – That will be an AWESOME force indeed. Can see nations competing to produce robots, a la Start Wars Episode I. (Incidentally it always bugged me that there weren’t many more highly capable robots in those films.)
Posted by: Alvis Brigis September 23, 2008
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