Posted on 9-1-2002

Japan at the Crossroads
By Hazel Henderson*

Japan is the world's first economy to attain maturity. From the
perspective of GDP growth indicators and conventional economic theory,
Japan, we are told, is "stagnating." US economists dispense advice almost
frantically: "loosen monetary policy," "liberalize," "open Japan's economy
wider," "cut company payrolls and make Japan's labor force more flexible"
and from the usually conservative, London-based The Economist: "print money"!

From a futurist's perspective, all this advice is nonsensical. Japan is
transitioning from short-term, material economic growth at whatever social
and environmental costs - to more mature long-term economic optimization.
Recognizing that Japan has reached a comfortably high plateau of
widely-shared, materialistic achievement, will require a new national
debate. Japan is discovering that it needs a new economic game plan. This
change of course, will require a new scorecard of national wealth and
progress, which can measure advances toward greater quality-of-life for all
Japanese citizens.

As people acquire more and more material assets - cars, well-furnished
homes, high-quality food, clothing, TVs, cellphones, toys and novelties -
they turn to more spiritual, non-material concerns. Such satiated
consumers look for personal development, intellectual challenges,
opportunities to volunteer and make their communities more livable. These
higher goals become new measures of satisfaction.

All this is reflected in the public sector. Japan already has the finest
public buildings, trains, roads, bridges and cities in the world. Like
most visitors, I love Toyko's clean, safe, orderly streets and efficient
subways, riding on the Hikari to Osaka and Kyoto and the ease with which I
can visit Fukuoka and Sapporo. Japanese people have higher average
educational attainment than Americans. Decades of low unemployment and
wide income distribution maintained social harmony and avoided US-style
poverty gaps. Japan retained many valuable traditions and aesthetics, which
visitors admire. In a word, the quality-of-life in Japan seems higher on
many social and environmental indicators than that in the USA.

Japan's economy is twice as energy-efficient as that of the USA, which
means half as much pollution and waste. Japanese people can still shop in
friendly, small stores in local neighborhoods - while Americans must get in
to their gas-guzzling 2-ton SUVs and often drive 25 miles for a container
of milk. During the trade-related "structural impediments" debates of the
1980s, US "free traders" tried to make Japan as energy-wasteful as the USA!

So why all the advice from foreign economists to sacrifice such social
amenities to hype material growth of GDP? Growth rates must always be
related to the base size of an economy - as it grows large - the rate of
growth naturally must slow. Why keep constructing ever more highways,
bridges and other unneeded public works - just to boost such "adolescent"
economic growth rates to impress global markets and raise investors rates
of financial return? Does money always equate with wealth?

Japan is admonished, "you must keep GDP growth rates high, get the Nikkei
moving back up so your banks will stay solvent and you can reduce your
"shockingly high" public debt of some 120% of your GDP."

Let's look a bit closer at that public debt. Yes, it is high, but look at
all of the fine array of public assets, those funds bought: the railways,
roads, public education, universities, etc.. These assets are still there
- and will be for hundreds of years! And what about the generations of
healthy, well-nourished, highly educated citizens these public funds have
produced, which will go on paying social dividends for many decades?

Today, there is no need to go on trying to hype GDP-growth by more
construction projects. There are new and better ways to grow. Japan can
invest in improving quality-of-life, human development and an
ecologically-sustainable economy with "greener," high-tech companies,
products and services. Prime Minister Koizumi has some of the right ideas:
like having government departments buy new energy-efficient, less polluting
cars, such as the hybrids of Honda and the Toyota Prius, which I own.

But the first thing Koizumi needs to do is challenge those economists who
don't understand the difference between money and true wealth, between a
society's "adolescent" growth stage and its wiser, adult maturity. Imagine
if your son and daughter kept on growing at their teenage rate. They would
end up as monsters! Parents hope their teenagers will learn and grow
spiritually - to become good citizens. Economies and societies can also
reach for non-material goals, higher levels of services, culture, art and
spiritual development.

Prime Minister Koizumi could announce that GDP is no longer an appropriate
measure of economic maturity and that GDP will be re-calculated to include
social and environmental costs and benefits. As a start, in the same way
that the USA did in January 1996 and Canada adopted in 1998, Japan's public
works investments in national infrastructure will not only be recorded as
public debt. These public infrastructure investments will also be accounted
as the long-term assets they are - and amortized over their 5-100 year
useful life (just as factories are on company balance sheets). This would
correct the false impression that Japan is carrying any more public debt
than the USA or any other OECD country. Indeed, it was this very same
accounting change in the USA that contributed in large part to the much
vaunted (but now shrinking) US budget surplus! The same happy national
account recalculation produced a $50 billion windfall, which put Canada's
budget in surplus.

Once Japan has corrected its national accounts in the same way, the banking
"crisis" will recede and restructuring can proceed more easily. Japan's
budget will look more manageable - if not show a surplus. Victory can be
declared, and Japan will announce to the world that it is now calculating
its national progress even beyond this new GDP. The new mature Japan's
scorecard will measure Quality-of-Life - using selected new statistical
measures similar to the UN's Human Development Index (HDI) and the World
Bank's new Wealth Index, which counts 60% of the wealth of nations as human
capital and social assets, 20% as ecological assets and only 20% the built
assets (financial capital, factories, etc.), which GDP measures.

Even economist John Maynard Keynes wrote in 1930 in his "Economic
Possibilities for Our Grandchildren," the economics problems may be solved
in 100 years," Then man(sic) will be faced with his real, permanent
problem,….how to use his freedom and occupy his "leisure." This is mature
Japan's new challenge.

* HAZEL HENDERSON, author, futurist and consultant on sustainable
development. Her latest book is Beyond Globalization: Shaping a
Sustainable Global Economy. www.hazelhenderson.com Henderson's Quality of
Life Indicators, partnered with the US based Calvert Group of
socially-responsible mutual funds are at www.calvert-henderson.com