Japan: The Keynesian Genocide

Miscellaneous History
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Japan: The Keynesian Genocide

As if. As if we had not billed enough things yet on John’s head. From wars to poverty, from unemployment to famines, the list of ills he is responsible for is already too big for one single man’s shoulders. Keynes is already currently waiting in line to qualify as the worst thinker ever. He single-handedly did more damage to the 20th century than any other individual most can think of. Unclear if one single page in Wikipedia will suffice.

But wait. I have here with me today a brand new trophy for him (and his team) to bring back home: a genocide.

For let us call things like they need to be called. Let us find the courage once to not hide behind words and keep playing ostriches. And we are talking of no small country, either. We are talking about Japan.

Allow me to drive us back a few decades ago, bring it all the way back to 1971. February 1, to be precise. For this is the infamous day where the Japanese started drinking heavily from the Keynesian elixir. That was the day the people decided to focus on the “seen” jobs. Quick, ship all your wealth abroad, the foreigners are broke, we do not want to lose our jobs.

The Japanese central bank embarked on a debasing spree of the JPY, shipping all of their savings abroad, buying treasures from a variety of countries starting with the US, in an attempt to avoid a badly awaited domestic recession which meant to correct for the increasing absence of real customers abroad. The Japanese central bank, instead of simply allowing the Japanese households to enjoy the fruit of their labor and lower their working hours and go for that second or third kid, shipped every wealth in sight to broken foreigners, just so that “exporters” could keep their jobs. Quick. Ship more. A low JPY will hurt our economy. Hurry.

By doing so the Japanese households have had to tighten their belts. Real tight. Mothers today have had to join the work force. Fathers are left with the labor part of their work, not the wealth part of their work. They both clean all day and are left with only the bruises on knees and elbows to show up for, nothing clean to really sit on, and relax a bit. They both, mothers and fathers, work today, they call it “tomo-bataraki”, and yet still barely manage to pay for most bills. Where did the days go where a single man could provide for 5 bellies with a simple job. To add insult to injury, the JPY dropped from 360 to 80 in the process, and yet the Keynesian bankers keep the course, they almost argue, they will even insist, wait, look, see, the numbers of fish the US owes Japan is the same, so this is an investment, see? - not noticing Japan shipped fatty tunas and are getting nothing back but smelly sardines in exchange, 40 years later. And as if this was not enough, the money sent did not (never did - never will) help anybody really in need. From bombing a dozen of diverse locations around the planet, ranging from Kosovo to Afghanistan, the Japanese central bank has been removing wealth from its citizens to feed a palette of distorted political agendas, allowing in the process a lot of Western bureaucrats not to have to show up with the real “bill” to their own constituents.

In the US, typically, when people complain, they make it loud and clear, Texan pilots crash directly into their IRS buildings and the message is pretty unequivocal and unambiguous. Here, in Japan, well… people aim for more, how shall I put it, circumspect and discreet methods. In recent times “karoshi” has been the main social term used. “Death from overwork”.

This upcoming February 1, we will all be celebrating the 40th anniversary of the day this extravagant circus started. How a whole country of 125 inhabitants has given up their third kid. Then gradually gave up on their second. I do not even want to look at what the last numbers say regarding the most recent birth rates in Japan. A whole generation of kids if not more - to be left to the unseen. I barely find the courage to open up my eyes when someone shows me an up-to-date demographic graph of Japan, with population in y versus time in x. This peculiar and eerie Gaussian look and feel to it - is almost sickening. Ship all your wealth abroad, quick, the foreigners are broke, we do not want to lose our jobs. The JPY is gaining value. Quick.

People with indirect blood on their hands are regularly handed out prizes of all sorts, Nobel or others, from Kissinger to Obama - no reason why we should leave our Lord Baron out of this one race.

Welcome to the club, John.

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Less rhetoric, more praxeological analysis.

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Thanks for the comment. Well, what if I told you… that this text is, in fact, nothing but praxeological, to me, that is, of course, in that the very act of me taking a few minutes to jot my thoughts down yesterday just like they felt to let the stuff in my head fly out for an instant was simply intended to improve my own personal satisfaction, and that it was not concerned with an end satisfaction per say, but merely represented a way for me to remove sources of dissatisfaction or uneasiness. I have been watching this debacle for years now (I am based in Tokyo) - I guess I just had to let it all out. I could have focused on talking stats and numbers - but I just needed to let things out, I needed to let my rhetorical self rant out loud for once, just like perhaps those who started understanding what was really happening in Auschwitz needed to find a way out of their vertigo.

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Without a doubt your diatribe was the end result of action aiming at the concrete end of removing some felt uneasiness but what I’m requesting, if somewhat bluntly, is that you branch more deeply into an analysis of any number of Japanese market interventions and their effects on Human Action. I am aware of the various measures the Japanese state has engaged in to prevent their markets from clearing but it is hard to find Japan-centric analysis that strays from the typical neo-Keynesian, Nomura Bank-esque groupthink.

And now that I know you, an Austrian, actually lives IN Japan, I will humbly ask that you hit me with some knowledge. Any economic observations/deductions you can make that may be of interest, please.

Arigatogozaimashita!

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Dear ThreeTrees,

Thanks for your prompt reply again. Glad to hear someone read my “diatribe”… :slight_smile:
In all seriousness, I guess I simply needed to open up the window once and shout, just like in the movie, “I’m as mad as hell!”…

Well, you have unfortunately outsmarted me in only two small posts so I don’t really know of anything I can teach you that you don’t probably know (and/or understand) already. Let me know if you have any specific question about a precise topic - but your post sounds probably a bit too broad in range right now for me (for me to reply in any precise way, that is).

Economic observations/deductions, you also ask - well, none, really, but for the very obvious, that on one hand you have Asia sacrificing “stuff” (from kids to wealth - I’ll let you pick your feature in all of the “unseen”) and the West engaging in loads of Bismarckian programs and meaningless wars abroad that most constituents could not pay for, if costs were to come out of their own pockets (/labor). Shipping most of its wealth abroad to vendor-finance broken foreigners is only one part of the problem for Japan. The land of the rising sun is struggling today with 78+ different types of taxes, more regulations than the Beatles got songs (not saying China’s better but…), the January 1960 Anpo Joyaku is probably at the root cause of them buying so much foreign treasuries (i.e. them loosing the war in the first place, i.e. them engaging in the WW2 in the first place, i.e them engaging with China prior to that, you can actually pull things way - way - back if you like, doesn’t beat the Middle East in how far back they can go in time for who’s really to blame for what, but it makes for a relatively descent race), one can still feel today the footprints of Fukuzawa Yukichi’s work (/Gakumon no susume) in most sectors and most industries (even when you speak with bureaucrats), so it’s not all “lost” per say, you still find the remnants of a strong responsible customer oriented economy with “ostracism” as main punishment at best for low quality providers, the kind that Rothbard would have most probably agreed with, along with some form of “self-responsibility” overall social mood to it all. It would not take much to turn this country around into a some form of vibrant economy.

Koizumi tried to ease the pressure with several (meaningful) interventions when he was in office, privatizing the post office, increasing the private ratio of medical health care (20% back to 30%), abolishing several regulations (company law, etc) - but the real surgery lies (just like for most countries today) in finding a way to deal with the central bank’s tendency to debase and buy every crap bond in sight. Note that Greenspan himself apparently described the 2004 BOJ massive intervention - on MOF’s behalf - as “awesome”, and since then, Yosano and friends repeatedly consult with Krugman wannabes (starting with Krugman himself). Kan Naoto, the poorest (in level of wealth amassed in his life time prior to office - I think, double check required, but almost certain) prime minister ever in Japan is not particularly ill-meant but he is clearly lost and has no clue, which renders the comparison with Obama (& Gordon Brown, & Segolene Royal, etc) really tempting.

Needless to add that Japan is afraid of North-Korea like there was no tomorrow and the news of China slowly piling up weapons of all sorts drives Japan crazier every day… As a result not only the BOJ, but even the private sector has started to buy up all the US treasuries they can put their hands on, in an attempt to keep America on it’s side in case of any potential “heated discussion” with the rest of Asia.

Like you have also finally correctly noted, it is very hard to find in Japan an analyst or a banker with something correct to say, most of them only know how to do a cut & paste on the fallacy that “a low JPY will hurt the economy” - very grotesque. But that’s the world we live in. I’m as mad as hell! Ahh, already feels much better… :slight_smile:

Cheers.

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PS: Sorry, I meant to write, the fallacy that a “high JPY will hurt the economy” - darn, this thing is contagious… :slight_smile:

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I despise the abuse of the term “genocide” as hyperbole.

I can actually overlook this, in mild cases like the intentional killing of a group not defined by its culture or genetics.

But the idea that a slightly higher death rate, in an ethnically and culturally diverse nation-state, and one fallen upon by accident (not the Keynesians’ intention that they die) might be called genocide is just asinine.

And that’s even aside from what you charactarize as “Keynesian” being a set of behaviors that Keynes opposed.

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Genocide is an extremely harsh term and probably innacurate term as I know of no one who has ever been killed directly by the policies. How about “Wealth Destruction Policies” or “Economic Growth Destruction Policies” or probably most accurately described as “Necessary and Massive Correction Prevention Policies”.

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As for getting awards, it seems like the Sweedish dudes who give the Peace and Economics prizes out will distribute them to quite a few folks who seek neither Peace or better economic policy.

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Hi Kaz,

Thanks for the message. Your comments are correct, hyperbole, yes, totally agreed, and not intentional, indeed yes also. True and true. I guess one needs to take what I wrote like say a father simply shouting “you killed my daughter!” to someone’s drunk driving resulting in the daughter’s death. It was not intentional and there’s no behavioral case to be made and it doesn’t bear any legal meaning, surely - but the absence is unfortunately there to outline.

I also (if anything) wanted to counterbalance with all the people focusing systematically on the “seen” end of the Japanese market, car sales, health costs, and hoped to throw white dust on the “invisible-evil” in the room to invite people to focus on all of the potential “unseen”. Japan “vendor financing” the rest of the planet for so long is at the root cause of the demographic distortion. Some bother to argue that Japan and China hold roughly the same amount of treasuries - forgetting Japan is one tenth in population (i.e. same burden but “times ten” in proportion). Don’t want to get too personal here, but the look in the eyes of the mothers/fathers breaking under the work load in trains around Tokyo along with grand-parents wondering around with no grand-kids to speak off, one needs a rock instead of a heart not to want to denounce the lunacy and the overall madness, this whole “a high JPY will hurt the economy” idea promoted by Krugman and other Keynesians ended up wiping a full generation of kids, if not two.

Mind you, there’s no “slightly higher death rate” to really speak off (maybe you misunderstood me there). I’m just throwing white dust on the unseen cloud, to reveal its presence even if only for a few moments.

Cheers.

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Hi Humphrey,

Ah! “Necessary correction prevention policy”! Long - but indeed, correct… :slight_smile: Didn’t read it right the very first time around.

Regarding the Nobel peace prize, indeed, agreed, what an insult to the overall moral integrity of our era, I mean, one would guess that they would at least (at least) know better and that they would at least avoid picking “statesmen” heavily involved in weird wars, and heck, even if they did they did pick politicians, one would hope that they would opt for characters such as Gandhi and others, but noooo, they aim directly at the Kissinger and Obama of our world… go figure… :slight_smile:

Cheers.

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Kaz,

Sorry for coming back at such a late stage - but your reply really got stuck in my throat… the fact that you just wrote that the idea was just “asinine”… I tried to let go, but I really had to reply, because your comment seems somewhat indicative of a lack of understanding, either of the situation, or of what I wrote.

So - the US government borrowing like drunken sailors since early 1970 from Japan to bomb dozens (and counting) of locations from Kosovo to Afghanistan, depleting and driving a whole country like Japan completely mad by excess borrowing (a more hypocritical and subtle version of the Versailles Treaty), that the fact that we’re not on a gold standard allows the Japanese central bank to debase to infinity and beyond by playing around and lying about the CPI year in year out to buy up more of the West’s debt due to military pressure (Anpo Joyaku) leading to full blown “yet transparent in CPI” inflation in Japan, that a full country like Japan has had to deprive itself and buckle up and prevent from consuming just to “pay up” by sweating and working and shipping always more goods abroad in exchange for nothing more than little pieces of papers with numbers on them (dollars) for 40 odd years now, thus leading to having Japanese families giving up on their third kid, then second kid (then no kid at all?), is NOT vulgar/asinine/insulting in your mind as an act - but that the fact of having someone like myself calling Keynesian economists like Krugman and others who convince the Japanese people with the propaganda that a “low JPY is good for Japan” translated into a full blown wipe out of an entire generation of kids in this country… and that the old population in this country with all these overworked parents alone around today resembles nothing less than a genocide in its result… is asinine?

Either you didn’t understand what I wrote (my text has nothing to do with a “slightly higher death rate” like you wrote - in fact, it has everything to do with a “dramatically lower birth rate”), or you think that the first people to denunciate Auschwitz for the extermination camp it was was just “asinine”, but don’t be fooled, the only (only) reason why Japan has a lower birth rate, a dropping dead economy, an aging population, it all has to do with (nothing but) the Japanese central bank shipping all the wealth of its citizens abroad to finance Western governments for 40 years in a row for all of the wars and Bismarckian programs engaged by mostly North-American administrations.

Let me know if you don’t see it - I’m curious to know if I need to refine my phrasing… Sure, Keynes ideas were not meant to kill anyone. The minimum wage laws were not meant to throw anyone out of work. Saying Keynes ideas translated into a genocide is like saying that the minimum wage law translates into unemployment.

Cheers.

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I agree with Melcabara.

I had writing a political science paper, with Japanese Economic History as one case study.

Seeing the leadership of worthy people like Masuda Takashi in the business sphere or Itagaki Taisuke (i.e., “Liberty-will-never-die”) in the political sphere, replaced over time by the modern salad of socialist bureacrats (who, as the saying went, created an environment where people “were electrocuted if they touched Marxism or Keynesianism without worshipping”) and banks-are-a-public-institution-and-must-be-bailed-out central bankers, is very sad.

It is indeed a very serious problem with an extremely low birth rate, because as Ludwig Mises reasoned, labour is the scarcest of all commodities, given that there is always some capital that cannot be used because of insufficient labour complementary to it.

Edit: Oh, today is 30th, but this topic is from the 10th of January! Didn’t notice it back then. I was in the Bahamas…

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Dear Thelion,

Thanks for the post - indeed, I first wrote on the 10th, people replied, my tiny brain tried to digest the comments shipped my way for a few weeks, then I replied yesterday, thus the delay in posts. Welcome back from the Bahamas - weather here in Tokyo says blue skies and chilly, as all winters in Japan do.

Quickly, what do you think of Iwasaki-san (the guy who launched Mitsubishi back in the mid-19th century)? Weirdly I don’t find myself “liking” Mitsubishi (as a brand) too much “today”, but Iwasaki-san seems to be one great fellow, so I must be missing on some link somewhere… Was it the fact that “Mitsubishi” got nationalized (WW2) and that the brand dropped down dramatically in the later half of the 20th century? Or I am being too rough on Mitsubishi? Anyway, I’ll take any insights you may be willing to share.

Regarding this post, well, I am somehow amazed at how arrogant Western “civilizations” (including me that is - for that’s where I’m from) have become and how they/we simply damage the planet, the seen wars on one side, the unseen/unnamed/uncalled genocides on the other, and don’t even bother to say “oops, sorry” - never. Everyone argues about the famous debt, we use billions and trillions to look smarter than the guy next door, people shout murder and blame Bush, Clinton, Obama, Pelosi, you name them, but nobody, never (ever), really bothers to turn around (even if only once) to say “oh, and, err, thanks” to all those (Asians in our case) who provided for all the labor (let’s just call it slavery, shall we) and who sacrificed kids and/or some form of wealth in the process over the past few decades.

Anyway. Are you based in Japan?

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I’m Russian, now in the USA. I am, however, interested in Chinese and Japanese economic history.

From what I understand, Iwasaki Yataro was someone who understood what business was all about: consumer sovereignty, helping him grow companies he led very quickly. He was one of several entrepreneurs and teachers who broke the old prejudices against free trade, although I’m unsure if he participated in politics much in the Jiyu vs. German State Socialism debates in 1870’s and 1880’s.

But in the 1900’s, quite a bit after after Iwasaki’s death and his son taking over, Mitsubishi, started being highly involved in getting government subsidies, which redirected its activities in an altogether negative manner (just like Mitsui, after Masuda retired). Why?

Basically, from the data I’ve managed to find, by 1910, even though trade and value of merchandise with the country had multiplied about 30 times over relative what it was in 1870, government military expenditures multiplied roughly 100 times over for army and navy, not including all other government expenditures. This, I guess, shifted incentives to make companies compete for government contracts, given the massive size of these contracts, leading to all the other problems. Temporary nationalizations only made problems worse after WWII, of course.

By 1910’s and through 1920’s and 1930’s, several cabinets declared periodically that they would not allow banks to fail, leading to bank managers not caring about making bad investments. This ended in major financial crisis in 1929-1930, which opened the path to more and more government intervention.

According to Araki, Mitsutaro, Financial System in Japan (Tokyo, 1933):

“It is not too much to say that the Government, misled by the beautiful name of public institutions given to banks, promised them implicitly that it would help them should they fail, and that, thus armed by Government promise of aid, they rushed into profit-making.”

Back in 1890’s, people like Itagaki had no other option but to resign over government spending disputes, but like Itagaki himself, they were merely over replaced in power by politicians who had no problem with massive government spending or tariff increases to stimulate exports over imports, that is, following the advice of the German Historical School. This went up to the end of WWII. This trend was interrupted by the reformation of post-WWII Liberal Party, but after that merged with the Democratic Party, the protectionist and government spending/credit expansion people came back into power.

And businesses fall in line, like they do anywhere in these sorts of environments, because if they don’t take the government subsidies and follow the state plan, other competitors might instead, even if all businesses involved know that this is bad in the long run.

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Dear Thelion,

Thanks for the prompt (and brilliantly written) reply. Boy I wish you were here in Tokyo helping us all out in trying to restore a bit of sanity in this country’s economy - not a game for fragile hearts, I have to admit, for indeed, this country really is an environment where people are “electrocuted if they touch Marxism or Keynesianism without worshipping”, like you wrote. :slight_smile:

Yes, I often seem to see pictures of both Iwasaki Yataro and Fukuzawa Yukichi in the same places, at the Edo Museum for example, etc - so both of them are (to this date) obviously remembered as important actors (together) of the liberal social foundations which lead to the Meiji Restoration and what came after…

Question for you: many Japanese seem to tell me that the only (?) reason why Japan embarked “back then” on such a military spending spree between 1890 and 1910 was mostly because of their fear of western countries colonizing everything around, Macao (becoming an “official” Portuguese colony in 1887), Hong Kong (with the UK expansions of 1898), the French battles around Taiwan (around 1884-1885), and so it is often repeated that Japan was scared to death that Westerners would try to eat up Japan next… hence, the intense run for always more weapons, to counteract Western invasions in and around Asia… what is your take on the subject?

To be honest it has become really hard to earn a straight living in this country (Japan) - I’m a young entrepreneur here and “real” money (not mafia controlled centrally planned project money) is somewhat scarce… drives me nuts, the first half of the wealth generated by the population in this country goes to feed government programs ranging from useless highways all the way to empty airports in every prefecture, and the second half goes to the US to make sure that governments there can repeatedly bomb Iraq, Kosovo, Afghanistan, etc, to their liking, without ever having to remove the SUV from daddy’s garage and the iPad from the kid’s hands, the usual “we’ll just let the Asians do all the sweating - and we won’t even say thanks”, argh, not very elegant, a full shame it is, it really is harder than I had thought on the spirit to witness it all… Mind you, Japan still has a very strong “private” infrastructure - i.e. the private sector really is “beautiful” (like nowhere on the planet).

Let me know if you ever visit, would be delighted to meet.

Cheers.

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Thanks for the invitation. I am hoping I get the chance sometime in the near future to travel Japan for an extended period of time.

I hope you’ll excuse the length of my response to your next question.

That Japan was afraid of becoming a Western Colony was more of a political slogan by early Meiji politicans, it would actually seem.

It is like the fact that although Tokugawa officals always claimed Japan went into seclusion for 200 years because of Catholic missionaries trying to convert Japanese and grab territory. In reality, Chinese government’s massive inflationism and playing around with the silver supply destabilized money for the entire region, causing Japan to switch to older feudal rice-stipend barter economy, which created the conditions for the Tokugawa regime to exist.

The groups of politicans that expanded military budgets did not really think industrialization would help them defend Japan–rather, they thought, for reasons outlined below, that military expansion would speed up industrialization, make them rich, and result in prestige for them, based on the economic theory they found to their liking.

  1. Sugiyama, Chuhei, Origins of Economic Thought in Modern Japan (London, 1994), places the blame for militarism entirely on the emulation of Germany.

Of the Japanese innovators who went in the 1870’s to study Europe and America, seeking a way out of barter economy and into industrial production, some of them were amazed by German bureaucrat-managed industrialization, as opposed to French and British free trade. These people looked at German military build-up and emulated.

Others sided with French free traders, and gained only a few cabinets in between being persecuted (even though it was these people, who by their encouraging the merchants and former samurai into business, and setting up private technical schools, were actually responsible for getting Japan on its feet so rapidly).

  1. Hane, Mikiso, Peasants, Rebels, & Outcasts (New York, 1982), argued instead that farming was a very miserable occupation in 1880’s - 1930’s, because industrialization did not reach far enough beyond the cities. He claimed that people enlisted in the military originally because the tedium of military bureacracy was still better than farming, since a pension was supposed to be awarded at the end of duty.

This caused the army and navy to expand, and finally, it reached such proportions that it had to be made use of.

  1. I suspect Sugiyama (1) is correct, as opposed to (2), because ideas have alot of power and determine material conditions, i.e., they determine what people do with limited resources. And bad ideas can cause bad outcomes.

If indeed German political thought was gaining popularity with ranking politicians, then is it surprising that state socialism and imperialism became the dominant ideologies? That is, after all, exactly what happened in Europe and the USA starting at about the same time.

Even moderates and pioneers, like Okuma Shigenobu, who had in the 1870’s-1900 rejected state socialism, turned around and began saying around the turn of the century that a mix of capitalism and socialism is good for the country, and advocated increasing military budgets.

They thought, apparently, this would keep them in line with changing opinion in favour of emulating Germany.

That seems, looking back, to have been a bad move, because that just lended credibility and more acceptance to their militarist political opponents, who promptly replaced them on even more interventionist platform. Their platform: stimulate industry through war.

This was always a chief idea of the German Historical School, according to Guyot, Yves, Causes and Consequences of the War (New York, 1916), and led directly to the first World War in Europe. Perhaps it led to the same situation in Japan.

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Dear Thelion,

Thanks for the (once again) brilliant reply - you helped me shed much awaited light on all of the “Western inspiration” Japan managed to “import” towards the end of the 19th century (it was somewhat fuzzy until… well, until… your last message), some of it indeed coming from the “free market approach”, and some of it coming from a more “bureaucratic approach”, indeed, it all seems to make clear sense now that you mention it… I still have to figure out what Japan “felt like”, prior to all this “inspiration”, I am told the “Shi-Nou-Kou-Shou” vertical structure was much worse in terms of unfairness and/or social injustice than say France and all the other “feudal” countries in Europe, and that the local “ruling class” (Samurai, etc) really had a full grip on the population. Still, to this day (2010), Japan feels like quite a very weird mix of “coercive bureaucratic top-down” society, along with a full blown “free market customer oriented” structure… it can be very confusing at times to try to decipher the one main fundamental vibe behind the whole country. I still also have to study the role of the Emperor, much fuzziness there too, what role did he have, did he have any, did things really change for the Emperor in 1868, etc etc.

Anyway, thank you (deeply) for sharing your thoughts, I will make sure to share forward in Tokyo to those with whom I chat. You obviously have reviewed your subject and know your history (and have your references/books ready) - do keep me posted if you ever visit Japan/Tokyo, I would be (extremely) delighted to meet up, we are by the way currently launching a small “Tea Party” here in Tokyo (called in Japanese “Cha-Kai”) and things are moving (slowly) “forward” towards a freer society, but there is still a lot of really good work to be done ahead.

I will also try to check up the books you have recommended - just found “Les causes et les consequences de la guerre” (Yves Guyot / in French) on the internet, and will also look in to Sugiyama’s book.

Talk soon.