Opinions - February 2nd, 2005

Henry Scott Stokes’ learned friend says Japan’s Mr. Micawbers need to face up to its economic plight

Many years ago a British school-friend of mine named Andrew Smithers started to visit this country. He worked for an august establishment in the City of London — the celebrated house of S.G. Warburg — and in that capacity it was one of his duties to watch out for opportunities. Japan looked like one big opportunity at the time, and he commenced visiting this country in the 1960s.

He comes to mind now, 40 years later, for several reasons. Firstly, he has been visiting Japan again, for about the l00th time — he lived and worked here in the 1980s, the infamous Bubble years. Next, he gives a lecture on Monday, Jan. 31, at Keidanren, the imposing employers’ organization, that we should all think about (his title is “Has Japan’s Sad Experience Taught Her Nothing?”).

Anyone in business here should pay attention. The reason? Andrew is an economist and consultant trained at Cambridge U., the seat of learning of Maynard Keynes, the outstandingly brainy economist of the 20th century — the brilliant Brit who helped to found the International Monetary Fund and the World Bank, the twin “Bretton Woods institutions,” in the mid-1940s just as World War II was coming to an end. Keynes was far cleverer than any U.S. economist in sight, and far more experienced, and others deferred to him. He built well — his twin creations flourished at their well-located headquarters in Washington, D.C.

Simply put, the IMF and the World Bank served to lay a foundation for a post-1945 economic recovery of the world’s shattered nations, not least Japan. They were a very great help.

All this is a way of saying that we would be wise to pay attention to a Keynesian disciple … someone who, as he sometimes reminds me, knows economics.

Well, listen up. Andrew is a man who loves this country. Yet he thinks it unlikely that “everything is for the best in this best of all possible worlds” — I am quoting Voltaire. He believes in fact that the tremendous aging of the population here — Japan is indeed a world-class ager, second to none — is a worry. Also problematical in his view is the fact that experts here in Japan won’t focus on the underlying problems raised by the fact that this society is getting old in a rush.

Andrew says that Japan is full of what he calls “economic Micawbers.” Well, Mr. Micawber, I should mention, was the renowned 19th Century fictional character — a creation of Charles Dickens — who always believed that things were going to get better, probably tomorrow. He was mistaken, was the good doctor. What Smithers sensei says is this: let us for heaven’s sake not be latter day Micawbers espousing an empty, uncalled-for optimism on Japan.

The theme of my school-friend’s talk at Keidanren was a salutary one. It was that, sadly, the Japanese are not facing up to their plight. In fact, they are not even talking about it, so how can they be expected to confront their difficulties? Andrew sees only two possible responses to the issues that so few want to talk about in depth.

One course of action would be for Japan to run a massive current account surplus (this means a trade surplus plus earnings) of the order of 6–7 percent of GNP, and thereby accumulate enough assets overseas to keep the country going in the dire decades that lie ahead. Now 6–7 percent may not sound like very much to non-experts, but it is gigantic in comparison to a current figure of 2–3 percent of GNP, and in terms of what other countries may be willing to accept. The alternative strategy would be to permit wholesale immigration like the U.S. — and grow the economy that way. Other than that, the outlook here is bleak.

Is anyone else here thinking the unthinkable? Possibly not. Meanwhile, if it’s true, as Ian Fleming remarked, that “you are only as good as your friends” I commend Andrew’s work to you.