Avoiding America’s Lost Decades
October 18, 2011
The warning bells were sounded in early 2009: The U.S.
government had to act swiftly and forcefully to avoid repeating Japan’s painful
experience of sustained economic stagnation.
[1]The Obama Administration’s policies have
failed to this point, and Japanese-style long-term stagnation may well ensue
unless a fundamental course correction and decisive steps are taken. The two
most important steps are to halt the federal government’s regulatory onslaught
and to put the federal budget on a credible path toward balance by cutting
spending quickly and steadily.
Japan’s Fall
It is hard to exaggerate the shift in Japan’s fortunes over
the past two decades. The Japanese economic miracle lasted over 40 years and
saw the country climb out of true devastation from World War II to have the
globe’s second-largest economy, as measured by gross domestic product (GDP).
Many observers thought it was only a matter of time before Japan replaced the
United States as the world’s leading economy.
How times have changed. The conventional wisdom now is that
Japan suffered a “lost decade.” Actually, it has been almost two decades, and
there is no end in sight to the stagnation. In 2010, the Japanese economy looks
to have been smaller than it was in 1992, an incredibly poor result. It is not
just a matter of a decline in output; it is also a remarkable decline in total
wealth. In 1991, excluding micro-states like Luxembourg, Japan was the
fourth-richest country in the world as measured by GDP per capita. In 2010, it
was no longer in the top 20, was below the OECD average, and would have likely
fell further but for Europe’s own economic troubles.
[2] …
http://www.heritage.org/Research/Reports/2011/10/Avoiding-Americas-Lost-Decades
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