Is Japan doing as well? Well, no.
The real Japan issue is that a lot of its slow growth has to do with demography. According to OECD numbers, in 1990 there were 86 million Japanese between the ages of 15 and 64; by 2007, that was down to 83 million. Meanwhile, the US working-age population rose from 164 million to 202 million.
What do you find if you look not at GDP per capita, but GDP per working-age resident?
What you see is that 1990-2000 really was a lost decade: Japanese output per potential worker fell a lot relative to the United States, when in the past it had been steadily rising. However, Japan made up most though not all of the lost ground after 2000.
I think you can make the case that Japan should have been doing better in 2007. And even if you think that 2007 was where it “should” be, it spent a long time operating below potential. ... the data don’t match the picture of relentless decline that is so widely held.
And Japan did go through all this period without anything like the suffering, the human disaster, that America is experiencing.
I’ve been saying for a while that when people ask whether we might respond to our crisis as badly as Japan did, they’re way behind the curve. We are, in fact, doing worse than Japan ever did.
"Japan, Reconsidered"
ReplyDeleteby Paul Krugan
A number of readers have asked me for an evaluation of Eamonn Fingleton’s article about Japan. Is Japan doing as well as he says?
ReplyDeleteWell, no — but his point about the overstatement of Japan’s decline is right.
Fingleton’s essay basically throws everything he can think of against the wall, in the hope that some of it sticks. And this detracts from the story. No, current account surpluses aren’t necessarily a sign of success. No, you shouldn’t take the shadowstats stuff seriously. And so on.
The real Japan issue is that a lot of its slow growth has to do with demography. According to OECD numbers, in 1990 there were 86 million Japanese between the ages of 15 and 64; by 2007, that was down to 83 million. Meanwhile, the US working-age population rose from 164 million to 202 million.
What do you find if you look not at GDP per capita, but GDP per working-age resident? I’ve taken the BLS data on GDP and the OECD data on population 15-64, and gotten this picture of the ratio of Japanese output per potential worker to US output per potential worker:
By the way, I stop at 2007 so that the response to the financial crisis doesn’t blur the picture.
What you see is that 1990-2000 really was a lost decade: Japanese output per potential worker fell a lot relative to the United States, when in the past it had been steadily rising. However, Japan made up most though not all of the lost ground after 2000.
I think you can make the case that Japan should have been doing better in 2007. And even if you think that 2007 was where it “should” be, it spent a long time operating below potential. But Fingleton is right in this: the data don’t match the picture of relentless decline that is so widely held.
And Japan did go through all this period without anything like the suffering, the human disaster, that America is experiencing.
I’ve been saying for a while that when people ask whether we might respond to our crisis as badly as Japan did, they’re way behind the curve. We are, in fact, doing worse than Japan ever did.