The Great Waveby
Sean Corrigan Recently by Sean Corrigan: The Captains and the Kings Departe
Rather than pretending to a level of insight into the scale of Japan’s problems which neither we nor anyone else truly possesses at this stage of the disaster, we think it might be worthwhile instead to run through some general considerations of what ramifications might be felt in its aftermath. Before we do, however, we cannot abstain from expressing our utter contempt for the many idiots who have already begun parroting the standard Keynesian nonsense that this calamity will ultimately ‘prove positive for GDP ’, or that the rebuilding efforts can only redound to the nation’s well-being to the extent that they shake it out of its ongoing ‘deflation’. As is their wont, such imbecile Cargo Culters are once again making a fetish of a coarse-grained statistic which is supposed – however imperfectly – to offer a rough measure of material progress being made in the real economy and not the converse, leading them to lose all focus on what is actually happening to people’s living standards and wealth accumulation. Japan has been stricken with a huge loss of productive capital – as well as an appalling toll of human suffering – and this cannot do anything other than to leave the nation discernibly poorer and, by extension, to curtail its ability to make people across the world better off than they otherwise would be by offering them valuable goods and services as part of that beneficent mutual enrichment which is the international division of labour, conducted under conditions of free(ish) exchange. Contrary to popular belief, the Japanese have not, in fact, been trapped in a deflationary slough of stagnation these past two decades as both the real and nominal supply of money have risen throughout his period (with the exception of the worst months of the GFC itself), while real per capita national income has also increased modestly, especially on a PPP, or TWI-adjusted basis. Granted, the consumer price basket has trended lower at a rate of less than 1% a year, but this is something which is presumably no more than a reflection of ongoing productivity gains – ones delivered, to boot, in a country formerly marvelled at for the extreme levels of its domestic pricing. But, even were we to subscribe to this myth of secular slump, the idea that to eradicate a large quantum of people’s possessions or to evaporate a sizeable fraction of their nest-eggs would be to contribute to their prosperity is to reckon that in futilely striving to heft his rock up the hill for all eternity, Sisyphus was the most tireless ‘engine of growth’ for Hades at large. If you go to the trouble of cooking yourself a dinner, only for the dog to snatch it from the sill where you placed it to cool, do you congratulate yourself on your own good fortune as you troop back to the larder to begin again? If a sudden hailstorm strips bare the groaning ears of your wheat crop the day before you were due to harvest it, do you cheerily go about preparing the field for replanting, content in the knowledge that your doubled labour is being duly recorded in the plus column by a mindless government data-gatherer? After all, if the awful spectacle of vast swathes of land littered with shattered buildings and crumpled vehicles – or the concern that they suffer the invisible hazards of radioactive contamination – offers such grand opportunities for advancement, why stop there? Why wait for the vagaries of the climate, or the tortured creaking of continental plates to bring about such a ‘stimulus’ to growth? Why not declare war on ourselves and unleash our titanic arsenals of destruction on our own towns and cities, and rain down hellfire upon our own farms and gardens, razing the first to the ground and sowing the last with salt, until we make a self-inflicted Carthage of them, one in whose midst we can hope to become rapidly richer than our neighbours as, shivering and starving, we pick our way among the debris of our former civilisation to the nearest construction site? This is all such arrant nonsense that you should banish from your consideration, henceforth and forever, all of the jejune scribblings of the fool whom you once catch propounding it! But enough of this! The real crux of the matter is to look at the two sides of Japan, Inc. – both as a user (and end-consumer) of certain goods and as a provider of often highly-valued and not easily replicated material inputs to the world economy in exchange. All else being equal, the country will be consuming some goods (e.g., lumber, steel, copper wire, concrete, fossil fuel) far more directly in the near future and, moreover, consuming them with little onward production of value from their use. The first order effect of this would be expected to push up preferentially the prices of both the materials they will be absorbing and those whose production by them is temporarily being reduced. Conversely, the consumption patterns of the ordinary Japanese will also suffer a compositional shift away from the enjoyment of certain goods and services and, ceteris paribus, the prices of these should be less well supported as a consequence. Where they no longer supply goods to the market – initially being completely unable to do so, perhaps, and, later, devoting selectively less resources to that production as they first tackle the problems of rebuilding – there is certainly scope for their competitors to prosper, but also significant dangers that the partial or total absence of such goods will disrupt production in factories and fab plants elsewhere, too. [Incidentally, the possible fall in the external surplus this comprises is one offset for the fabled yen ‘repatriation’ flows which the market so fears] In short, where Japan’s goods are competing for sales, others may benefit at her expense: where they are complementary to them, they will equally share in her ruin. In the counter-weighting of these two factors will be decided the first question of whether output suffers beyond her shores and of what impetus is given to what prices.
March 17, 2011 Sean Corrigan [send him mail] writes from Switzerland. Copyright © 2011 Cobden Centre
|
