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Since the early days of the recession there's been a lot of talk about whether the U.S. would experience the equivalent of Japan's "lost decade" of economic stagnation in the 1990s.
Business Insider, citing data from Deutsche Bank, shows that there's one way our current economic doldrums are different from Japan's, and it's not necessarily something to celebrate.
When Japan's economy hit the skids in the early 1990s, Japanese companies largely held onto workers even as the economy slumped along.
In the U.S., however, companies were quick to slash jobs by the millions, and they haven't been eager to hire those workers back. Although the National Bureau of Economic Research said this week that the recession officially ended in 2009, unemployment remains startlingly high. The U.S. unemployment rate was 9.6 percent in August, with about 14.9 million people looking for work.
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Germany, like Japan, also has a policy of retaining workers. The government subsidizes companies to keep employees on the payroll, even if their hours must be cut. The result is much lower unemployment, and people still go to work. Isn't that a much better policy than what we have here - massive layoffs, and then cutting off unemployment benefits?
Corporations have far too much control over our government. And unbridled capitalism really isn't working for us. We're in this for the long haul now. A Japanese 'Lost Decade' is the best we can hope for.
Unemployed germans have a nasty habit of voting for hitlers. Totally different motivation over there.
To correct bs detector: Unemployed 'people' have a nasty habit of voting for Hitlers. No different motivation over there than here. Frustrated people will do insane things. Watch what happens as 'we' vote for 'anyone' other than the incumbents this November. It can happen here just as fast as it did in Germany last century. Think it's bad now... just wait.
Ummm, has anyone looked at Japan's numbers recently? The "lost decade" is more like 2 'lost decades,' as the economy has been stuck just a-little-above-the-bottom ever since the bleeding was stopped. Taxes are slightly higher than the U.S., with the consumption tax surely increasing in the near future, which Americans surely [and mistakenly?] are not in favor of. Sure, unemployment is relatively low, but paying workers to flag people in and out of parking lots is not the most admirable way to keep the populace employed. As well, the "bridge to nowhere" phenomenon has been a regular part of the construction industry of Japan for years. How long such subsidizing and 'un-tapping of true potential" can continue in Japan is anyone's guess. As mentioned above, such subsidizing may even be the current cause of the economy's remaining flat [actually, deflation has recently reared its ugly head]. As someone who spent a few years in Japan, I would honestly say that the Japanese government is as far from figuring out the money game as the American government is. I do however believe that both systems can look towards each other for certain successful 'policy-fragments' that could be used to construct a more solid overall approach -- more career/class mobility in Japan, a higher expectation of expertise in the U.S., etc. That whole 'middle ground' thesis might have something to it after all. Too bad we're all stuck in our "I'm Japanese and 'we' don't do that!" or "I'm American and 'we' don't do that!" holes. Identity is killing us softly...
With reduced hours I wonder if their underemployment is higher than ours which would end up with everything being the same overall except for far more people barely making it or barely not making it rather than having unemployment being more polarized of your screwed vs your fine.
Mike,
That where the subsidy comes in - the government pays the difference. So you work 6 hours, get paid for 8, and unemployment stays low. Even better, when it's time to ramp up production again, all your original workers are still there.
We pay people to stay at home, until we get tired of it. There's a big difference.
While this may seem harsh, retaining those very same employees that are no longer contributing to the profitability of the company was partly responsible for the "Lost Decade" that Japan experienced, exasperating the decline.
Indeed, Japan STILL has not reclaimed the heights it reached during the late 80's.
While Germany & also France have enviable unemployment, their labor unions strangle the ability of business to be as profitable as they could be, which would lead to even more employment. The collateral damage of these countries labor policies includes the suffocation of entrepeneurship, except for those well heeled indviduals that can bear the expense of those very same policies.
Government subsidization of workers at companies only increases the debt and taps into the pocket of the taxpayer. Liberals are always looking for a way to get something for nothing. You cannot pay people to do nothing and expect to have a healthy economy. There's too many deadheads both in Europe and the U.S. These are people with no skills or education and cannot be retrained. These people are only capable of doing repetitive, mundane work such as that on an assembly line or in construction. Sadly, the WalMart crowd is expending.
Yes, this expanding group of disinfranchised folks will eventually begin to cause real problems. We as a country better figure out how to better involve more people in our economic success instead of less or we will have real problems. Riots in the streets? i give it 10-15 years and we will begin to see real class warfare.
Wow! I hope that you never own a company using assembly lines, or a construction company. You have an elitist, head in the sand attitude of the realities of these jobs and of the workers who perform them.
Assemblers work at a high rate of speed, using specialized tools and instruments. It requires meticulous attention to detail. In fact, accuracy is so important many companies have replaced some human workers with computerized robots. We're not building Model T's any more!
As for construction, an understanding of higher level math is required, in addition to physical strength and endurance. There are complicated building codes and restrictions to follow. Construction work must be coordinated with that of many other specialty fields, such as plumbing and electricity. New construction is expensive, making construction one field where experience and knowledge is critical.
Like I said, I wouldn't consider buying any product you might manufacture, or live in any house or work in any building you might construct.
Shark is a typical conservative who only thinks of himself and assumes that anyone in favor of any type of social program must be expecting to directly benefit from said program. Believe it or not Shark, there are people in favor of such programs purely for the benefit of others. Teresa is correct about construction. It is complicated and there are plenty of uneducated people in it who have a lot of skill and make decent money.
Because of his on screen name, I'm guessing Shark thinks of himself as a shark, who eats fish (mere mortals such as myself) when in reality he's probably nothing more than a tiny shark (a shark is a fish) who will be eaten soon by the big sharks like the rest of us.
Japan has virtually no "mobility of labor." Lifetime employment isn't as universal as is perceived, but it is far more difficult to change jobs in Japan than in the US, even if you're unemployed. So thoughts like Schumpeter's "destructive capitalism" have serious fundamental barriers in Japan. Pay is relatively low in professional jobs and savings go to retirement, which is also paltry. The alternative to keeping people on the payroll may be open rebellion.
The history of capitalism is boom/bust cycles. The roaring industrial age was fraught with people subsistance living. The rate of poverty from 1900 to 1929 dropped from 30% down to 20% and went back up to 25-30% in the 1930's. The projected rate of subsitance living was 40% prior to 1900. The current poverty rate is 13.3%. I am not sure that free market capitalism is good for the country. I am not sure that pure socialism is good for the country. Ask anyone in the now defunct USSR, Greece, or Argentina. There must be a happy medium. A middle of the road.
boom/bust cycles is what makes capitalism work. Its like the music stopping in musical chairs. Once you realize that and do the correct things according to your role in capitalism, its the best way to sort out what works and what doesnt. Unfortunately, schools dont teach that anymore.
TJ,
The safeguards put in place by FDR during the 30s ended a cyclical series of booms/busts, and kept them under control for nearly 40 years. When the Reagan Admin began dismantling these safeguards, we had the S&L crisis, several recessions, and the meltdown of 2008.
Unbridled capitalism is what we just saw destroy our economy. Communism doesn't work, either - I saw Yugoslavia, East Germany, and Poland in the mid-1980s - devastated by that approach.
There IS a happy medium, and it's working very well in the EU.
It wasn't totally unbridled capitalism. Also contributing was a socialist way of the government wanting to "give" houses to those who couldn't really afford them. That may also be a problem in some EU countries but I don't think it is a problem in Japan.
What a mess they Congress caused by not trusting capitalism to take care of the housing situation.
To bs detector-- We do not allow capitalism to work in this country.
From my elementary school days, I remember one thing that was tied in with successful capitalism: the Law of Supply and Demand. It has been circumvented by the unwritten Rule of Acquire and Eliminate. All that's needed is enough money/capital to induce stockholders to sell. POOF! We now have companies in existence solely to supply such capital, trolling for companies to buy and merge into one super company. Aren't we smart! Look what we've done! Short term, it's genius. Long term, well . . . we're starting to see the folly. But that's OK - those responsible have sheltered their profits to avoid taxes, and many have off-shore havens where they can retire and reap their rewards. The rest of us had better learn to garden, hunt, and fish.
FDR's policy is like what we used to do at national park. We put out any chance of a forest fire, so all the crappy bushes overgrow and when the fire really hit, it destroyed everything.
Liberals are idiots like communists that believe in Santa Claus and Uniron. Can't face the real life? should just say so.
There are more people in Japan that are willing to learn and perform the simple, mondane duties for what's offered. If a task is repetitive and simple, they don't expect much pay. They'll do that when attending school for engineering or marketing and then move up to more modest pay when they've earned a degree of certification.
The pay structure in the US has advanced faster & higher than the average skills required to perform the same simple tasks historically. China & the US are in a import/export trade conflict because most of the US's elite manufacturing companies have shifted their most basic work to China, India, etc to save money & earn a larger profit margin...not necessarily to stay in business for the long term.
When a certain quantity of working Americans realize that they can possibly survive on minimum wages with minimum health benefits, will manufacturing really return to the US. The real corporate earnings come from exporting goods to other countries. That's why all these foreign business love the US... we buy their stuff for a tarif-induced premium. That $2,500 60" LCD-HDTV at BestBuy can be purchased for maybe $1300 in the manufacturer's home country. There are very few discount shops that can compete with that; only a select number of consumers know where and have the access to get those great (year-end, holiday-like) prices all year long.
Part of the problem in the US is that people aren't working because the government is paying them more in unemployment than they would make actually working which is BS. Unemployment benefits should be a short term answer to a problem not a career move.
You do realize unemployment payments are very finite, right?
I think one of the big problems we have is that the unemployment system in place was designed for a manufacturing economy. In the stable, pre-service economy, if a plant cut production for a few months, workers could go on unemployment for those months, with a reasonable expectation of being called back to work. Now, layoff is just a nice term to describe being terminated permanently.
The concept of subsidizing payrolls probably makes conservatives seethe with anger, but I think it could work here. Fewer people would be stuck at home with nothing to do, there would be less temptation to get into trouble, they would feel more secure...and most importantly, for the new service-oriented economy, a business wouldn't lose the institutional knowledge that workers build up over time. I work in IT, and it's amazing how little gets documented of various systems even if there's formal processes in place to ensure it. When you get sent in to clean up something that was left undocumented because someone who got fired thought it gave them job security, you see the problem.
Also, referring to the comment that this would smother entrepreneurship -- that's not necessarily a bad thing. Only people with large amounts of reserve capital and connections should even think about starting a business. The last thing we want to do is encourage millions of unemployed workers to take out a huge loan and open up some franchise that will most likely fail and bankrupt them. The successful "rugged individualist" is a rare thing, even if there's a huge ethos built up around that idea. People forget that there is a wide distribution of skill levels out there. The economy was stable when we had "knowledge-worker" jobs for the high end and mundane factory jobs for the low end. Now the low end is being kicked out, and we are seeing the result. Retraining just doesn't work for some people.
We pay people aproximately less half their working wage--on which they struggle to survive--to stay home. We no longer value knowledge and experience, choosing instead to "downsize" or "offer early retirement packages" or "restructure the work force", or "move offshore" and eliminate their higher wages or salaries. They do not pass these lower costs along to the consumer.
Germany and Japan pay people to retain knowledge and experience. Also, by subsidizing their period of lay-off or reduced hours, the government ensures their citizens can still afford to spend, which keeps their economy stronger.
Our companies do not re-hire; they keep running as long as possible on reduced workforce, most of whom are willing to work longer hours at possibly a reduced wage just for the privilege of keeping a job. Our companies preserve stockholder dividends and executive pay first. Our companies do not pay American dollars to maintain and modernize their manufacturing facilities; instead, they use cheaper offshore labor and build in other countries to take advantage of their lower, sometimes slavishly lower wages.
Capitalism has worked well for the United States, but for some varying periods of time it has not worked well. The current recession follows at least a decade of ever increasing greed. Corporations that have a vested interest in their communities, that feel a responsibility to the citizens of their communities, and that feel a responsibility to their employees, are in the minority. Unethical corporate conduct no longer carries the stigma it did in decades past. Honor has slipped down the list of desirable characteristics for management.
Unfortunately, the loss of these-- honor, responsibility, law abiding ethics--is proving to many in other countries that America is greedy, self centered, and dishonorable. What a shame!
Nice comments guys! All on subject and constructive. Not one mention of Bush or racism here. How refreshing.
I try to keep one thing in mind before I bash a president: He alone does not make policy. For everyone who despises NAFTA ,remember that this came about with input from industry leaders anxious to increase their profits. Industry leaders who give many $$ to support politicians who support their interests. Industry also creates lobbying firms to vigorously push their agenda. Like any good mystery novel tells you . . . follow the money! Who has the most to gain?
NAFTA gave them the perfect opportunity (many offshore companies were bought and paid for by US companies, not by the foreign government. China is an exception.) While cost of goods dramatically decreased, prices did not follow. So, the way I see it, big business sold out the average American to increase their profit and thus their salary and bonuses. Win for them, loss for us.
To make it even worse, many believe whatever they hear without either doing the math, thinking it through, or using common sense. They just continue to pay the same high prices for a shirt that once cost X amount to make by American workers, and now costs .000x to make by impoverished foreigners.
Corporate greed left us ripe for the picking.
If I wanted to be japanese I would move to japan. I hate rice, when are people going to realize WE DON'T WANT TO BE JAPANESE! What we need to do is BAN ALL THEIR JUNK FROM OUR SHORES! WE NEED TO VIEW THEM AS THEY VIEW US...........AS THE ENEMY!
STAND UP FOR AMERICA AND AMERICAN WORKERS.......GROW A FUC#ING BACKBONE!
Subsidizing payrolls by the feds sounds really weak to me. I hate to see people out on the street also, but when it happened to me it was a wakeup call. I got my butt in gear and found a new and better situation. As far as people stuck at home… States should setup welfare farms and factories so these people can work for themselves to get the food they need. Housing can be provided by local charity and neighborhood contributions. If people donated to their churches half of the money they have to pay the federal government in taxes to provide for others what a savings that would be. By all means keep the federal government out of it. They are just a big waste. Welfare should be a state and local issue. And what is wrong with companies saving up cash to keep employees though hard times. Companies should stay debt free and save up for rainy days. What happened to personal, neighborly, and corporate responsibility? It is sad that the government is expected to do everything for us!
Yea, let the churches control the money. That sounds like a good idea!
PS: Please note the sarcasm in my "voice".
EconMan,
Not so easy to do when there are 5 unemployed people for each 1 opening. And if you're over 50, forget about it altogether.
Last year, Tom Coburn (R-OK) told a woman with a very sick husband to ask her church for help, and hold bake sales. So much for anyone caring anymore.
Physicist,
What Coburn told the woman was correct, go to your support system for help. Too many people think the Government should make sure everyone has it equal and everyone it taken care of.
Jeremy,
What if there is no support system for that person? What was it that Scrooge said when he was asked to give to charity to help poor people? Something to the effect that those people should be housed in prison or something wasn't it? We should do that! Wait a minute, you'd complain about that too wouldn't you. I know you think poor people are the root of all our troubles but they are not.
GoSteelers,
Exactly right.
Jeremy,
I hope you never have to find out just how feeble your support system is. How are bake sales going to cover the costs of an uninsured man with MS? Too bad for him, right?
Selfish beyond belief.
Selfish would be those who DON'T give and then expect the federal government to solve all the problems. Support systems are everywhere. My church (takes no money from the fed) and my community (who probably do take some fed money) do a fantastic job. Keep it local please.
Econ,
Your church takes no money from the fed? Please.
Unless your church pays taxes (and I don't know any that do) it takes plenty from the fed. And from you. And from me, and from everyone else.
EconMan: Why is so important to you that it stay local?
Physicist-retired - My church saves the government money by taking care of their own. No they don't pay taxes but the members, who are good honest hard working people, pay enough so that the church doesn't have to. They also donate an extreme amount of their time in charity service. The church is in no way a burden on you or any other taxpayer. The church has its own welfare program and it donates millions to humanitarian aid to help in disaster relief for this nation and many others. You are blessed to have the help they and their members render.
Steelers. The federal government is totally out of control, wasteful, and lack integrity. The closer the resources are to home the easier they are to watch. It is not always good locally either like in Bell, Calif. But as least they got caught. How much is wasted on the federal level we have no idea. It would be much better if the feds would just do the military, build roads, run air traffic, and take care of border disputes. Most everything else could be run by a state, a county, or a city-town. But I’m probably a whacko in your eyes.
I never once said or implied poor people are the root of all evil.
Govenment benefits like unemployment, food stamps and etc are needed. THe problem is way too many people take advantage of them and feel the government HAS to take care of them. That should not be the case.
I like your response. However, the problem you describe is the root of many peoples current anger with the government and while it's a problem, we have many bigger problems.
It seems to me that this is a cycle. People don't buy things because they don't have the money because they are unemployed. So the companies cut back, and lay off more people, which means there are less people that can buy. I also note that despite the high unemployment rates I don't see a lot of Americans going out into the fields to pick strawberries and the like either. And I agree, being in that over 50 category myself, trying to get a job is next to impossible.
Rob,
Bingo. It absolutely is a cycle.
So what can be done when we have fewer jobs, less buying, reduced revenues, more layoffs, fewer jobs... over and over? Who can spend when people and corporations can't?
FDR knew the answer. Hoover broke this country with austerity measures. There are still people alive (many) who learned this lesson the hard way. And yet we're set to do it all over again.
The only other countries currently taking the austerisy approach are Ireland and Greece. And they are both officially in recession and deflation as a result, with unemployment MUCH higher than ours.
Physicist: You know what's going on. Most people are too young and/or too ignorant of history to be trusted to have the answers. "Those who ignore history are destined to repeat it"
GoSteelers,
Ditto. And BTW, Go Steelers!
Well really, Calvin Coolidge had it right and then Hoover messed it up bad like you say. FDR was luckly the war came allong because his policies were in no way liberty friedly or making any progress in cleaning up the mess.
EconMan,
Your name is almost ironic! FDR was NOT lucky that the war came along. Really, with a moniker like that you MUST know more than you're letting on.
FDR did the WPA and other government spending, thus stimulating the economy - and greatly reducing unemployment and poverty. It was going just great, until 1937 - when Congress forced him into austerity measures (to reduce the deficit!) - and then unemployment and national debt skyrocketed again.
You are right that war spending pulled us out in the end. But this would not have been necessary if the 1937 Congress hadn't imposed austerity in the first place.
This is a zombie lie - one that is repeatedly killed, only to rise from the dead again. I have to ask - why do you call yourself EconMan when you are (apparently) unfamiliar with theses critical phases of the U.S. economy?
It should be noted that FDR yielded to fiscal conservatives' debt-worries and scaled back public-works and assistance programs after two years. Result, unemployment again spiked and the economy once again sank. Only aid to European allies and clumsy pre-war rearmament revived manufacturing several years later.
Japan's doldrums were related to over-investment OUTSIDE Japan in trophy properties, coupled with the collapse of their internal banking system due to speculation and over-reliance on the postal system as the bank. At the same time, their chief industries were working with the Koreans, Mexicans and even the Americans, to move production from Japan to less expensive labor and transportation markets. These efforts continued to suppress their relatively low pay, for an INDUSTRIAL country, while internal protectionism forced a high basic cost of living. This did lead to a period of high unemployment, at least in their eyes, and a disillusionment with both the government and societal values. Remember the rioting and increases in crime of the mid to late 90's. Even cherished traditions like the government old age pension came under attack, both by the jobless and the under-employed.
I think we are a LOT more like Japan of the 1990's than we care to admit. What will happen to the age 50+ displaced workers? What is the future for the majority of the 18-25 year olds entering the market? I fear for a society that depends on filling and emptyng bedpans.
Bill,
An excellent post.
We ARE much more like Japan than we'd like to admit. Our federal fiscal policy has been too slow to react (like Japan). Even worse - how does one sustain an economy based on consumerism?
Our fiscal policy must undergo a fundamental change if we are to keep a first-world status. We (like Germany) must MAKE things, export at least as much as we import, and institute a tax policy that sustains a middle class.
I'm no fan of Henry Ford's social policies in general, but even HE knew that.
Go Steelers!
Jugabonito wrote...
"While Germany & also France have enviable unemployment, their labor unions strangle the ability of business to be as profitable as they could be, which would lead to even more employment. The collateral damage of these countries labor policies includes the suffocation of entrepeneurship, except for those well heeled indviduals that can bear the expense of those very same policies."
Wow! You obviously don't have a clue about what you are talking about. The German company, that I work for, is still highly unionized and it is probably one of the most technologically advanced, healthiest and most profitable companies on the planet.