At 02:00 PM 3/24/00 -0500, you wrote:
>I said I thought Japan looked to be in the throes of a classic
>overaccumulation/profitability crisis. For decades, state policy and the
>financial/governance structure permitted firms to invest to gain market
>share without paying much attention to ROI. Now they've had their
>reckoning - but state policy has still put a floor under the deflation,
>preventing the full-scale liquidation that might clear the way for a new
>round of accumulation. Also, the Japanese ruling class seems not to have
>had either the power or the confidence to crush its working class the way
>the Americans have, a la Volcker/Reagan in the late 1970s/early 1980s.
In standard macroeconomic terms, this says that Japan's problem isn't the
matter of the "liquidity trap" (horizontal LM, perhaps due to the fact that
nominal rates can't fall below zero) but a vertical or very steep IS curve.
In prose, businesses won't accumulate fixed capital and people won't buy
(very many) new houses or consumer durables no matter how low the real
interest rate is.
This means that the Krugman plan (inflation driving real interest rates
negative) won't work, because businesses don't want to accumulate further
debt or more capacity, while consumers also don't want more debt. A low
interest rate would most stimulate the Japanese economy if it caused the
Yen to fall, encouraging their net exports to rise. That is, it would help
Japan only at other countries' expense. (Of course, the US is the world's
buyer of last resort at this point, so that the US helping to keep Japan
from falling even lower.)
Doug is suggesting that the problem _might_ be solved the good old Maggie
Thatcher or Attila the Hun way, imposing a shake-out that drives out the
weakling capitalists and imposing wage cuts, deunionization, etc. on the
working class. This would raise the rate of profit and eventually stimulate
accumulation and recovery, if it doesn't cause underconsumption.
Jim Devine [EMAIL PROTECTED] & http://liberalarts.lmu.edu/~jdevine
