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Wednesday, Jan. 14, 2004

Japan blind to Chinese reality


A recent tour of Chinese universities took me to Changchun, the capital of the puppet Manchukuo state that Japan tried to set up in the 1930s in China's remote northeast region. Today it is a sprawling conurbation of more than 6 million people, broad highways and high-rise apartments and a key player in China's car industry, which is expanding at around 40 percent a year.

A modern university covers a campus that could embrace half a dozen of Japan's main universities. Unlike in Japan, its students operate in a system that rewards hard work and intelligence. Even in the bitter cold of a Manchurian winter, one could feel the dynamism of a nation on the move. And Changchun is only one of China's little-known boom towns.

Before leaving for China I had been invited to a conference on China organized by some of Japan's alleged opinion leaders. Most were in severe denial. Some wanted to insist that China's growth figures were faked, as if those well-dressed crowds, floods of cars and endless apartment blocks meant nothing. Others claimed that progress is confined to the coast, as if Changchun and many other booming inland centers did not exist. In any case, they said, China has only one quarter of Japan's GNP, ignoring studies showing that in terms of purchasing power China may already have overtaken Japan.

Returning to Japan, the fantasies continue. I find a stagnant economy headed by a flaky prime minister whose main interests seem to showing fascination with things military and dressing up in anachronistic gear to pay homage at an equally anachronistic Yasukuni Shrine glorifying Japan's former military conquests.

He and others around him believe they are standing up to the Chinese leaders who object to those visits. In fact, they are undermining those leaders as they try hard to defuse intense anti-Japan feelings throughout China by insisting that the Japanese are a peace-loving people and that the blame for past aggressions and atrocities lies entirely with the 14 Japanese leaders convicted as Class-A war criminals who are enshrined at Yasukuni.

I find a juvenile economic debate obsessed with minor issues like highway privatization, while ignoring the massive fiscal deficit blowout caused by Koizumi's mistaken economic policies -- the same policies that were supposed to reduce deficits, deficits that at the time Koizumi told us with unflinching certainty would lead Japan to economic ruin.

We find foreign policies spinning out of control, leaving Japan in bed with U.S. hawks determined to force military confrontation with North Korea and ultimately China. Only now are we beginning to see a reluctant response to Pyongyang's very reasonable and long-standing offer to allow former abductees to return to North Korea to find out whether their kin want to go to Japan.

Needless to say, we are told that it was tough threats -- harsh economic sanctions and even talk of war -- that forced this alleged concession from Pyongyang, and that these threats will probably be revived if any of the kin decide they do not want to be forced to go to Japan.

And we have still to see any movement on Pyongyang's equally reasonable offer to freeze nuclear development in exchange for security guarantees. Hopefully China's sensible leadership will intervene to put an end to this nonsense.

Where did Japan go wrong?

We can begin with the economy. China today resembles the Japan of four decades ago. Surging demand for essentials combined with ample supply of investment funds and labor plus good technologies and infrastructure create a powerful economic mix. High growth rates are inevitable.

But in the case of Japan, when those basic demands were filled we did not see the emergence of the insatiable lifestyle demands that have helped fuel continued progress in the advanced Western economies. Instead, Japan had to rely on self-defeating export surpluses, asset booms and excessive competitive investments.

Sensibly it also began to rely on official spending. But the spending was financed by borrowing rather than by taxes, leaving the way open for demagogues like Koizumi, second-rate economists like his adviser Heizo Takenaka, and conservative business troglodytes to insist that all deficit spending is evil, that the supply-side economic policies of the United States and Britain in the 1980s were the answer.

But advocating supply-side policies in an economy starved of demand are like prescribing diet pills for an anorexic.

Meanwhile, China simply sticks to sensible demand-side economics -- cut official spending in booms and increase it in slumps. It does very well as a result.

Helping sustain Koizumi's destructive economic policies is support from Western media determined to see him as a brave reformer fighting old guard reactionaries. Part of the mild economic recovery Koizumi boasts of is fueled by short-term stock market gains by Western speculators taken in by that media image.

Another part of the recovery is fueled by expanded exports into China's allegedly fake economy. That owes very little to Koizumi economics.

Meanwhile, the hapless Takenaka clings dogmatically to his discredited supply-side policies, sustained by the very strong support and advice he gets from rightwing U.S. colleagues anxious to see Japan recover and act as a counterweight to China in Asia. Ironically, it is just this advice that guarantees Japan's continuing decline vis-a-vis China.

Some politicians and business leaders in Japan realize the insanity of current policies. But they are helpless against the tide of media and public opinion mesmerized by meaningless Koizumi-Takenaka "structural reform" slogans and an ersatz Koizumi charisma.

The case is similar in the realm of foreign policy. Repeated talk of the threat of "terror" has allowed Japan's hawks and hardliners to take control, in much the same way as constant warnings about the Comintern and international communism in the prewar years helped mesmerize the public into militarism.

Corporatist, mood-driven societies such as Japan, prewar Germany and, to some extent, the present U.S. are vulnerable to crackpot policies and theories in times of crisis. More principled societies such as China and Iran can suffer badly from crackpot ideologies. But once they get over that, as China most certainly has, they become more stable and balanced.

Gregory Clark, a former Australian diplomat, is honorary president of Tama University. A translation of this article will appear on www.gregoryclark.net.


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