An economy is like a balloon. Pump hot air into it and it will soar up into the heavens. If it soars too high for too long, it eventually gets worn or torn, or both, and starts to collapse.
A soaring balloon is not that difficult to keep in control. You can always pull it down with a string.
A collapsing balloon is a good deal trickier to manage. The same string that you used to pull it down cannot be expected to hold the thing up for you.
What a collapsing balloon needs is two things. It needs more hot air and it needs an overhaul to mend its frayed fabric. As a matter of economic policy, the former is called fiscal policy and the latter structural reform.
A well-balanced combination of the two is what is needed to salvage a collapsing balloon. Overhaul operations in the sky without any provision of hot air would only hasten the collapse. All hot air and no overhaul would only lead to the same problem in magnified form later on in the day, as likely as not with greater casualties.
The nature of the overhaul is important.
It needs to be surgical. Being surgical with a balloon is admittedly dangerous business, but the weak bits do need to be removed. Trying to varnish over the fraying areas is a futile exercise and will do nothing to prevent the eventual collapse.
The nature of the hot air is equally important.
This kind of air is all too often toxic. It is apt to induce such malaise as chronic dependency, cronyism and corruption. The air needs to be fresh, there needs to be plenty of it, and the method of injection must be quick and imaginative. Stale air in driblets is the worst kind of medicine in an emergency.
There is in fact a different set of sources from which the hot air and the surgical treatment could be provided. This is to say, substitute fiscal policy with “Asianization” and structural reforms with “Wimbledonization.”
Asianization stands for the promotion of greater economic interpenetration with our nearest and fastest-growing neighbors. Their youthful economies are an ideal source of fresh air.
Many would argue that far from Japan benefiting from an injection of air, it would be a case of the rest of Asia sucking all the remaining air out of the Japanese economy.
This is a legitimate concern, but also a defeatist one. It assumes that the Japanese economy has no capacity to evolve out of the status quo.
Wimbledonization is a term that has already been around for some time. It was used to illustrate the United Kingdom’s approach to overcoming the British disease.
Wimbledon is the pride of Britain in the world of tennis. The world’s best players flock there annually. Very few of them are actually British, but that does not stop Wimbledon from being the place where the global standard of tennis is established. Open up your economy to the best and brightest talents in the world, and your economy enjoys the benefits. So does the homegrown talent, eventually, because of the greater opportunities that come their way.
Asianization and Wimbledonization will not happen overnight. Even in the unlikely event of neither policy nor political interference, these are directions that require a lot of courage to pursue.
Meanwhile, the more conventional measures of keeping the balloon up will still be needed. In fact, all of the above are needed in substantial doses if the final collapse is to be avoided.
Yet none of the above seems to be happening in any meaningful measures at the moment. That is the tragedy.
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