gkanai.weblogs.com

At the most basic level, what is the key driver of economic growth?

The answer, according to some people who think very hard about these
issues, is very simple: population growth.

About such things, I know little. I am but a humble value-added
typist for an Asia-focused Internet professional services firm. But
the logic makes sense to me. When there are more people, they need
more food, clothing, shelter, automobiles and cellular telephones that
play "You've Really Got Me" when they ring.

That's why projections that Japan will start experiencing negative
population growth within a few short years are worrisome. The
nation's economy has been sputtering for a dozen years, and long-term
trends, including negative population growth and the rapid aging of
the workforce, point toward more economic problems.

But there is far more to the story of Japan's decline than simple
economics. The decline I sense around me every day seems cultural and
environmental as well. When I try to put my finger on exactly what it
is, I remember the first day I landed here, back in February of 1984.

While riding the train into Utsunomiya, about 100 kilometers north of
Tokyo, I was subconsciously struck, almost to the point of nausea, by
the profound ugliness of the bleak, cemented-over urban landscape I
was witnessing for the first time.

I hadn't expected pristine temple-like homes with Zen gardens and tile
roofs, but I was completely unprepared for the tenement-like,
undifferentiated houses, jumbles of telephone wire, lack of greenery,
cemented-over river banks, and what appeared to be outdoor signage
policies that would make a U.S. strip mall look like a walkway to the
Louvre.

The terrible incongruence between what I was seeing with my own eyes
and my preconceived image of Japan as a technologically-advanced, yet
nature-loving society was so great that I probably would have been
thrown into ontological crisis had I consciously recognized the gaping
disparity between reality and my preconceptions, particularly since I
was fresh off the boat and committed to living here for at least a
year.

Only slowly, over the years that followed, did I start to recognize
the malaise and decline that was evident to my unaccepting mind even
on that first day in Japan.

Since, and particularly over the last six months or so, I've been
trying to piece together exactly what this decline is, and the reasons
for it. Now comes an extraordinary, illuminating book that explains
much: "Dogs and Demons: Tales from the Dark Side of Japan" by Alex
Kerr.

I strongly recommend this book to everyone who has more than a passing
interest in Japan. The content is controversial, and Kerr may
overstate some of his points, but his basic theses - among them that
Japan's economy is sustained by unnecessary, even destructive "make
work" construction projects that have literally paved the nation with
cement - are, in my view, spot on. Here's a sample:

"At 80 trillion yen, the construction market in Japan is the largest
in the world. Strange that in the dozens of books written about the
Japanese economy in the past decades, it is hard to find even a
paragraph pointing out the extent to which it depends on construction.
And even fewer observers seem to have noticed the most interesting
twist: that from an economic point of view the majority of the
civil-engineering works do not address real needs. All those dams and
bridges are built by the bureaucracy, for the bureaucracy, at public
expense. Foreign experts may be fascinated by Sony and Mitsubishi,
but construction is not a sexy topic for them, and they have largely
ignored it. Here are the statistics: In the early 1990s, construction
investment overall in Japan consumed 18.2 percent of the gross
national product, versus 12.4 percent in the United Kingdom and only
8.5 percent in the United States. Japan spent about 8 percent of its
GDP on public works (versus 2 percent in the United States -
proportionally four times more). By 2000 it was estimated that Japan
was spending about 9 percent of its GDP on public works (versus only 1
percent in United States): in a decade, the share of GDP devoted to
public works had risen to nearly ten times that of the United States.
What these numbers tell us is that the construction market is
drastically out of line with that of other developed countries. The
situation is completely artificial, for government subsidy, not real
infrastructure needs, has bloated the industry to its present size."

Kerr goes on to point out the incentives that have kept this
construction machine rolling for more than 40 years:

"Construction ministry bureaucrats share in the takings at various
levels: in office, they skim profits through agencies they own, and to
which they award lucrative contracts with no bidding; after retirement
they take up sinecures in private firms whose pay packages to
ex-bureaucrats can amount to millions of dollars... The secret behind
the malaise of the Japanese economy in the 1990s is hidden in these
numbers, for the millions of jobs supported by construction are not
jobs created by real growth but "make work," paid for by government
handouts. These are filled by people who could have been employed in
services, software, and other advanced industries."

Kerr convincingly demonstrates the cultural and environmental impact
of Japan's construction-driven "modernization" and "prosperity"
policies, and the social and emotional malaise resulting there from.
As Andrew Nagorsky says, "Much of this book is provocative, and
deliberately so - but Dogs and Demons is a product of tough love."