PITHOCRATES construction spending » construction spending Blog Archive » Versailles Treaty, Marshall Plan, Post-War Japan, MITI, Asian Tigers, Japan Inc., Asset Bubbles, Deflationary Spiral and Lost Decade
At the end of World War I the allies really screwed the Germans. The Treaty of Versailles made for an impossible peace. In a war that had no innocents the Allies heaped all blame onto Germany in the end. And the bankrupt Allies wanted Germany to pay. Placing impossible demands on the Germans. Which could do nothing but bankrupt Germany. Because, of course, to the victors go the spoils. But such a policy doesn’t necessarily construction spending lead to a lasting peace. And the peace following the war to end all wars wasn’t all that long lasting. Worse, the peace was ended by a war that was worse than the war to end all wars. World War II. All because construction spending some corporal with delusions of grandeur held a grudge.
The Americans wouldn’t repeat the same mistake the Allies made after World War II. Instead of another Versailles Treaty there was the Marshal Plan. Instead of punishing the vanquished the Americans helped rebuild them. The peace was so easy in Japan that the Japanese grew to admire their conqueror. General Douglas MacArthur. The easy peace proved to be a long lasting peace. construction spending In fact the two big enemies construction spending of World War II became good friends and allies of the United construction spending States. construction spending And strong industrial powers. Their resulting economic prosperity fostered peace and stability in their countries. And their surrounding regions.
MacArthur changed Japan. Where once the people served the military the nation now served the people. With a strong emphasis on education. And not just for the boys. For girls, too. And men AND women got the right to vote in a representative government. This was new. It unleashed a lot of human capital. Throw in a disciplined work force, low wages and a high domestic savings rate and this country was going places. It quickly rebuilt its war-torn industries. And produced a booming export market. Helped in part by some protectionist construction spending policies. And a lot of U.S. investment. Especially during the Korean War. Japan was back. The Fifties were good. And the Sixties were even better. construction spending By the End of the Seventies the Miracle construction spending was Over and Japan was just another First World Economy
Helping along the way was the Ministry of International Trade and Industry (MITI). The government agency that partnered with business. Shut out imports. Except the high-tech stuff. Played with exchange rates. Built up the old heavy industries (shipbuilding, electric power, coal, steel, construction spending chemicals, etc.). construction spending And built a lot of infrastructure. construction spending Sound familiar? It’s very similar to the Chinese economic explosion. All made possible by, of course, a disciplined workforce and low wages.
Things went very well in Japan (and in China) during this emerging-economy phase. But it is always easy to play catch-up. For crony capitalism can work when playing catch-up. When you’re not trying to reinvent the wheel. But just trying to duplicate what others have already proven to work. You can post remarkable GDP growth. Especially when you have low wages for a strong export market. But wages don’t always stay low, do they? Because there is always another economy to emerge. First it was the Japanese who worked for less than American workers. Then it was the Mexicans. Then the South Koreans. The three other Asian Tigers (Hong Kong, Singapore and Taiwan). China. India. Brazil. Vietnam. It just doesn’t end. Which proves construction spending to be a problem for crony capitalism. Which can work when economic systems are frozen in time. But fails miserably in a dynamic economy.
But, alas, all emerging economies eventually emerge. And mature. construction spending By the end of the Seventies Japan had added automobiles and electronics to the mix. But it couldn’t prevent the inevitable. The miracle was over. It was just another first world economy. Competing with other first world economies. Number two behind the Americans. Very impressive. But being more like the Americans meant the record growth days were over. And it was time to settle for okay growth instead of fantastic growth. But the Japanese government was tighter with business than it ever was. In fact, corporate Japan was rather incestuous. construction spending Corporations invested in other corporations. Creating large vertical and horizontal conglomerates. And the banks were right there, too. Making questionable loans to corporations. To feed Japan Inc. To prop up this vast government/business machine. With the government right behind the banks to bail them out if anyone got in trouble. Low Interest construction spending Rates caused Irrational Exuberance in the Stock and Real Estate Markets
As the Eighties dawned the service-oriented sector (wholesaling, retailing, finance, insurance, construction spending real estate, transportation, communications, etc.) grew. As did government. With a mature economy and loads of new jobs for highly educated college graduates consumption took
At the end of World War I the allies really screwed the Germans. The Treaty of Versailles made for an impossible peace. In a war that had no innocents the Allies heaped all blame onto Germany in the end. And the bankrupt Allies wanted Germany to pay. Placing impossible demands on the Germans. Which could do nothing but bankrupt Germany. Because, of course, to the victors go the spoils. But such a policy doesn’t necessarily construction spending lead to a lasting peace. And the peace following the war to end all wars wasn’t all that long lasting. Worse, the peace was ended by a war that was worse than the war to end all wars. World War II. All because construction spending some corporal with delusions of grandeur held a grudge.
The Americans wouldn’t repeat the same mistake the Allies made after World War II. Instead of another Versailles Treaty there was the Marshal Plan. Instead of punishing the vanquished the Americans helped rebuild them. The peace was so easy in Japan that the Japanese grew to admire their conqueror. General Douglas MacArthur. The easy peace proved to be a long lasting peace. construction spending In fact the two big enemies construction spending of World War II became good friends and allies of the United construction spending States. construction spending And strong industrial powers. Their resulting economic prosperity fostered peace and stability in their countries. And their surrounding regions.
MacArthur changed Japan. Where once the people served the military the nation now served the people. With a strong emphasis on education. And not just for the boys. For girls, too. And men AND women got the right to vote in a representative government. This was new. It unleashed a lot of human capital. Throw in a disciplined work force, low wages and a high domestic savings rate and this country was going places. It quickly rebuilt its war-torn industries. And produced a booming export market. Helped in part by some protectionist construction spending policies. And a lot of U.S. investment. Especially during the Korean War. Japan was back. The Fifties were good. And the Sixties were even better. construction spending By the End of the Seventies the Miracle construction spending was Over and Japan was just another First World Economy
Helping along the way was the Ministry of International Trade and Industry (MITI). The government agency that partnered with business. Shut out imports. Except the high-tech stuff. Played with exchange rates. Built up the old heavy industries (shipbuilding, electric power, coal, steel, construction spending chemicals, etc.). construction spending And built a lot of infrastructure. construction spending Sound familiar? It’s very similar to the Chinese economic explosion. All made possible by, of course, a disciplined workforce and low wages.
Things went very well in Japan (and in China) during this emerging-economy phase. But it is always easy to play catch-up. For crony capitalism can work when playing catch-up. When you’re not trying to reinvent the wheel. But just trying to duplicate what others have already proven to work. You can post remarkable GDP growth. Especially when you have low wages for a strong export market. But wages don’t always stay low, do they? Because there is always another economy to emerge. First it was the Japanese who worked for less than American workers. Then it was the Mexicans. Then the South Koreans. The three other Asian Tigers (Hong Kong, Singapore and Taiwan). China. India. Brazil. Vietnam. It just doesn’t end. Which proves construction spending to be a problem for crony capitalism. Which can work when economic systems are frozen in time. But fails miserably in a dynamic economy.
But, alas, all emerging economies eventually emerge. And mature. construction spending By the end of the Seventies Japan had added automobiles and electronics to the mix. But it couldn’t prevent the inevitable. The miracle was over. It was just another first world economy. Competing with other first world economies. Number two behind the Americans. Very impressive. But being more like the Americans meant the record growth days were over. And it was time to settle for okay growth instead of fantastic growth. But the Japanese government was tighter with business than it ever was. In fact, corporate Japan was rather incestuous. construction spending Corporations invested in other corporations. Creating large vertical and horizontal conglomerates. And the banks were right there, too. Making questionable loans to corporations. To feed Japan Inc. To prop up this vast government/business machine. With the government right behind the banks to bail them out if anyone got in trouble. Low Interest construction spending Rates caused Irrational Exuberance in the Stock and Real Estate Markets
As the Eighties dawned the service-oriented sector (wholesaling, retailing, finance, insurance, construction spending real estate, transportation, communications, etc.) grew. As did government. With a mature economy and loads of new jobs for highly educated college graduates consumption took
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