CBS’s Joseph Stiglitz Dissects Japan’s Potential to Finally Rebound
Columbia Business School (CBS) recently published an op-ed article by Columbia Professor and Nobel Laureate in Economics Joseph Stiglitz on a golden moment for Japanese economic growth following “a quarter-century of malaise.”
Japan is the world’s third-largest single economy, and its productivity steadily increases as its population growth curbs, with “growth in output per working-age person” exceeding American and European figures since at least 2008.
Recent attempts to address Japan’s supply and demand concerns have “failed to achieve their inflation target, restore confidence or boost growth to the level desired,” Stiglitz writes. But he believes there are viable solutions just under Japan’s nose.
He suggests that the one-two punch of a large carbon tax coupled with green finance could generate enough income to “reduce government debt or finance investments in technology and education.” He adds: “A natural niche for Japan would be technology developments in the service sector—such as the development of diagnostic instruments in the healthcare industry.”
Stiglitz believes Japan could “inoculate itself” by exchanging debt for “perpetuities—bonds that are never repaid—but pay a (small) interest rate each year,” which would shift the risk entirely off the government’s books. Japan can also stave off a massive “interest-rate spike” by publicly acknowledging that the country is mostly indebted to itself.
Stiglitz elaborates: “Many on Wall Street don’t seem to understand that what matters is what the government owes to the rest of society. If the government repaid the money it owes to itself—netting it out, in effect—no one would know the difference. But those on Wall Street who look only at the headline debt-to-GDP ratio would suddenly feel better about Japan.”
The supply side seems to leave a lot to be desired. Stiglitz believes that Prime Minister Shinzo Abe is mistaken in his support of the Trans-Pacific Partnership (TPP) trade deal. “Abe believes the TPP would force needed reforms in domestic agriculture, which would have a miniscule effect on GDP, simply because agriculture is a very small part of output.”
Nevertheless, Stiglitz concludes that any “policies that can help raise standards of living in Japan will stimulate demand and growth elsewhere in the global economy.”
About the Author
Jonathan Pfeffer
Jonathan Pfeffer joined the Clear Admit and MetroMBA teams in 2015 after spending several years as an arts/culture writer, editor, and radio producer. In addition to his role as contributing writer at MetroMBA and contributing editor at Clear Admit, he is co-founder and lead producer of the Clear Admit MBA Admissions Podcast. He holds a BA in Film/Video, Ethnomusicology, and Media Studies from Oberlin College.
