07w43:4 A comparison between USA & Japan

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Immanuel Wallerstein’s Commentary No. 219, Oct. 15, 2007:

“Japan, the United States, and the World-Economy”

Sometimes startling and revealing news items are buried in the back pages of the news media. On October 3, The New York Times ran a small table in its business section about access to the internet. It listed ten countries with strong economies and showed two figures for each: average speed of broadband connections in megabytes a second, and price per month of service (one megabyte a second). The country that was fastest and cheapest was Japan (61.0 and $0.27). The runner-up was South Korea (45.6 and $0.45).

What was interesting about this table was how the United States stood in relation to Japan. The United States at 4.8 was fourteen times slower than Japan and at $3.33 twelve times more expensive. It is piquant to note that France, so frequently scorned in the United States for its economic backwardness, while not up to Japan’s level, was over three times faster than the United States (17.6) and half as expensive ($1.64).

The explanation of this enormous discrepancy is the relation to the capitalist market of enterprises in Japan and in the United States. For Japan to be what the Times calls a “broadband paradise,” Japanese enterprises have had to make heavy investments and give deep discounts to customers. They do this on the theory that disregarding short-term profits and pouring billions into long-term projects will pay off eventually. This was the philosophy that allowed Japan to create one of the two fastest railway lines in the world – the Shinkansen. Its only competitor in this field is France’s TGV. The United States, as everyone knows, has a miserable train system known as Amtrak, which hardly anyone uses and is always losing money.

The two crucial differences between Japan and the United States is that U.S. corporate executives are under great pressure to justify any capital expenditures that might eat into this year’s returns, and that the U.S. government is unwilling to give financial incentives to companies to help finance long-term investment.

The reasons for both are obvious. U.S. corporations today are dominated by a speculative ethos, in which top personnel turnover is constant and buyouts ever on the horizon. This year’s bottom line is all that matters to a CEO who may not be in a position to profit from next year’s bottom line (not to speak of next decade’s bottom line). And the U.S. government is spending all its money on military investment and tax breaks for the very wealthy. There is nothing left over for long-term capitalist investment. The Japanese are instead investing in a “once-in-a-century transformation,” according to Kazuhiko Ogawa, general manager of the network strategy section at Nippon Telegraph & Telephone.

The bubble in U.S. stocks may possibly continue for a little while longer. But in a decade, the United States may be embarrassingly far behind the Japanese (and the South Koreans, and even the French) in informatics, which everyone is always saying is one of the key sectors of today’s capitalist economy.

This is the way that hegemonic decline builds on itself. The leading country concentrates on the short-term situation, and overinvests in unfruitful military expenditure. Speculation replaces innovation as the source of profits. And before one knows it, the others (in this case the Japanese, but not they alone) speed ahead controlling the technology of the future. This is what the United States did when it was, oh so long ago, an ascending economic power.

The only way to turn this around, even partially, is a major cultural shift in the United States. George W. Bush is not at all ready even to think about it. Are Hillary Clinton or Barack Obama ready to exert their leadership in this direction? Nothing is less sure.

by Immanuel Wallerstein

[Copyright by Immanuel Wallerstein, distributed by Agence Global. For rights and permissions, including translations and posting to non-commercial sites, and contact: rights@agenceglobal.com, 1.336.686.9002 or 1.336.286.6606. Permission is granted to download, forward electronically, or e-mail to others, provided the essay remains intact and the copyright note is displayed. To contact author, write: immanuel.wallerstein@yale.edu.

These commentaries, published twice monthly, are intended to be reflections on the contemporary world scene, as seen from the perspective not of the immediate headlines but of the long term.]

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