When I was in college, prominent experts and journalists — Lester Thurow, Robert Reich, James Fallows, Kevin Phillips, et al. — were insisting Japan would be the next world economic superpower. In the late 1980s, Jacques Attali, the first head of the European Bank for Reconstruction and Development, claimed that “America has become Japan’s granary, like Poland was for Flanders in the 17th century.” Attali did allow for the possibility that the U.S.’s West Coast might do okay, but only because it was “in the gravitational pull of Japanese financial power and geographic proximity.”
Japan is now well into its third “lost decade.” Over the years, it has poured money into “stimulative” infrastructure projects that have yet to stimulate and protected industries that have steadily lost their competitive edge. Economic growth has averaged less than 1 percent since 2000, while government debt is now more than twice its GDP. If a highly educated work force, support for allegedly cutting-edge industries, and lavish spending on infrastructure was the recipe for economic growth (and if debt didn’t matter), Japan would be doing great.
Obama surely wants to see some real economic growth. Perhaps the problem is that he thinks investing in a much bigger cart to put before the horse will get him where he wants to go.