Tue Mar 10th, 2009 at 02:30:09 AM EST
We've had a couple of exchanges in comments about economists warnings of the danger of falling into the Japanese trap, wondering if the "lost decade" was so terrible. Paul Krugman seems to be having similar thoughts:
Well, I’m sure I’m not the only person to notice this: Japan doesn’t look so bad these days.
For one thing, the famed sluggishness of Japanese policy — the refusal to face up to banking system losses and pour in the funds needed to recapitalize the system, the refusal to let zombie banks die, the stop-go nature of fiscal policy, with concerns about rising debt warring with concerns about the economy — all of that seems entirely comprehensible now, doesn’t it? Even with the knowledge of what happened to Japan to motivate us, so far we’re following exactly the same path.
And given what the next couple of years are likely to look like, Japan’s lost decade — yes, growth was slow, but there wasn’t mass unemployment or mass suffering — is actually starting to look pretty good. We may or may not be about to face our own lost decade, but the sheer misery millions of Americans will face in the near future probably exceeds anything that happened in Japan during the 90s.
Japan's perceived problem was that GDP growth didn't keep up with the rest of the developed world, especially the US, but it seems that our GDP growth was largely illusory anyway. Measured as a business in liquidation - GDP is stupid measure - Japan was doing badly. Can we work out how it doing as a going concern?