Japan's economic trap: Part I

It was a time when all the world was thunderstruck by the japanese industrial sucess.

All the world was on a frenetic research for the reasons of the japanese sucess: which business sectors or work methods this asiatic country used to have so great performance.

But nowadays, this is a phenomenon of the past. It seems that the japanese economy wasn't so strong as all the world thought. But this way of thinking is completely wrong. We all should learn not only with their sucess but also with their failures.
Despite being replaced by China as the second world economy, not so long time ago, the niponic economy remains an economy with very highly qualified  labour force, with a modern social capital and great technological background.
In the political field, the country has a stable government which hasn't difficulties to receive taxes.
And is a creditor nation that doesn't depend of nobody.

But the 90s weren't so great for this economy: the country went through a crisis alternate by short periods of positive growth. And the political mistrust about to find a solution, contributed to aggravate this situation.
The japanese crisis wasn't so strong like some of its neighbours, but was much more lasting.

So, why this happens in such a "perfect"economy?
Japan suffers the strongest economic transformation in the 20th century: between 1953 and 1973, the country went from the agricultural predominance to the largest exporter of steel and automobiles.
Tokio was the city with biggest increase in the world, in that time. Also the standard living improved very much.
But was only in the 70s that the world was astounded by the incredible sucess of the niponic economy, when they have flooded the global market with highly-sophisticated products: automobiles, electronic and informatic products.
The curious fact was that when the West started to look for the japanese miracle, the country started to slowdown.
In the 70s the global economic growth started to slowdown, including in Japan. But they can remain with considerable high economic growth rates.
However, despite of all, the Japan remained as a sucess case.
At the time were two theories that sought to prove the niponic sucess:
- one, ensure that the sucess was the result of an excellent education basis and high saving rates;
- the other defended that the country could create a new form of capitalism: an innovating and superior way of capitalism;

This led to a political debate about the economics principles of the Western countries.

One of the subjects very debated was the superior governmental orientation of the country. In the 50s and 60s, the industrial and international trade Ministry and the Financial Ministry, had a fundamental and very pro-active role in the economic activity.
The economic strategies, not only of the country but also of the companies, were established by the government: the bank loans and import licenses were influenced by the government strategies.
But this idea of the japonese economic structure remained until the 90s.
Another distinctive element was the firms protection from the short-run financing pressure.
The members of the Keiretsu - firm conglomerate organized around a nuclear bank - generally had shares from each other, turning the management highly independent of foreign shareholders.
As the loans were granted by the banks, the japanese firms were free of the stock prices and market distrust.
Hereupon, we are lead to think that the financial conditions of a Keiretsu bank would discipline the corporate investment: if the loads granted seemed unsafe, the bank started to lose depositors. However, the depositors believe that the government would not allow that they lose their savings.
Consequently, the people not paying attention to the destination of the money they deposited.

The result would be a strong and powerful economy, able to invest in strategic industries, that would work as growth engines.
The private sector would be guided by these strategic industries, and initially would be protected from the foreign competition: first to get stronger with the domestic market, and then would be encouraged to export (don't paying attention to the profitability and simultaneously would annihilate the foreign competition). Then, the japanese government would pass to another industrial sector: steel, automobile, VCRs, semiconductors and finally, computers and airplanes.
However, even the more skeptics agreed that the niponic economy had some "special" conditions and characteristics that allowed them to have so great performance. But its true that, at that time, the foreigners didn't saw this specially context:
•The close relations between government and firms;
•Extension of easy credit granted by banks, guaranteed by the government to companies with whom they had good relations.

However, in the 80s the gaps of this "crony capitalism", started to emerge despite the fact that nobody saw them.

(Continued)