On Fareed Zakaria GPS last Sunday, Sony CEO Sir Howard Stringer observed in the video above that Japan's culture of calm in response to devastating crises will not only allow it to recover but also to rebuild, make changes in the economy and re-emerge as a more dynamic country than before the crisis.
Japan was certainly able to dramatically recover from World War II. The Japanese post-war economic miracle, however, was followed by the world oil crisis in 1973, the asset price bubble in 1991 and the "Lost Decade" 1991-2000. Understanding whether Japan will recover from the 2011 earthquake, tsunami and nuclear crisis should depend, to some extent, on an accurate understanding of how Japan responded to prior historical crises.
A lot has been written about Japan in the late 20th century. What is particularly interesting is the bubble-and-collapse history compared to the suggested policy responses. Most of the writers seem to be arguing that some type of policy response would have (counterfactually) prevented or at least diminished the period of collapse after the bubble. However, if the Japanese economy was returning to a dynamic attractor after each bubble, there is really little that could be done to have prevented the return.
The 2011 earthquake, tsunami and nuclear crisis coupled with the atomic destruction of Hiroshima during World War II is a shocking history for any country to endure. Over the next year (or however long it will take), I'd like to try to understand Japan's late 20th century economic history and deepen my connection to the Japanese people. Here's my current reading list which will certainly expand over time:
- Paul Krugman The Return of Depression Economics and the Crisis of 2008
- Herman Kahn The Japanese challenge: The success and failure of economic success.
- Ezra Vogel Japan as Number One: Lessons for America.
- Edward Denison and William Chung How Japan's Economy Grew So Fast: Sources of Postward Expansion
Other books on my reading list:
- Christopher Wood The Bubble Economy: Japan's Extraordinary Speculative Boom of the '80s and the Dramatic Bust of the '90s.
- Takatoshi Ito, Hugh Patrick and David E. Weinstein Reviving Japan's Economy: Problems and Prescriptions
- Gary Saxonhouse and Robert Stern Japan's Lost Decade: Origins, Consequences and Prospects for Recovery.
- Richard Koo The Holy Grail of Macroeconomics: Lessons from Japan's Great Recession.
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