Chinese billionaire Jack Ma has a contrarian suggestion for Donald Trump: To make America great again, make America more Japanese.
The Alibaba founder didn’t say that specifically in Davos when he opined on the existential crisis facing American capitalism. Much has been written about Ma arguing that Washington blew $14 trillion on wars in recent decades that would’ve been better invested in the middle class. That misallocation of resources and focus left U.S. infrastructure, education, health care and economic incentives second rate.
“You’re supposed to spend money on your own people,” Ma said last week, clearly hoping a U.S. president threatening another kind of war against China, a trade one, is listening. “It’s not that other countries steal American jobs. It is your strategy — that you did not distribute the money in a proper way.”
Some will dismiss Ma as an agent of China’s Communist Party, on which he relies to maintain his e-commerce monopolies. Ma’s government, meanwhile, is making a pitch for its communist system over Western-style democracy, which Beijing mouthpiece People’s Daily says has been “kidnapped” and “become the weapon for capitalists to chase profits.”
But Ma is speaking far less about China than Japan, whose model is written between the lines in bold type. With its deflation, aging population and political paralysis, Japan strikes few as an exemplar today. But its relative egalitarianism, social stability, universal literacy, environmental sustainability and world-beating infrastructure is as much a goal for China as it is for nations from South Korea to Vietnam. Beijing and Tokyo quarrel about history and geopolitical rivalries, but Xi Jinping’s planners — and mainland moguls like Ma — have immense respect for Japan’s kinder, gentler capitalism.
Could the U.S. be so lucky to emulate Japan? When overseas economists look at Tokyo’s ticking demographics-and-debt time bomb, its perma-zero interest rate matrix, deflationary mindset and timid politicians punting on badly-needed reforms, “lucky” rarely comes to mind. Fact is, though, Japan hasn’t unraveled as two lost decades of flat wages and wealth creation stretch well into a third. Crime and homelessness didn’t skyrocket, and humankind’s longest lifespans kept increasing. Its economic downshift had a genteel, almost hydraulic quality. Households adjusted, businesses reined in costs to avoid mass layoffs and banks supported Japan Inc. as best they could.
While free-market purists will surely protest, Japan’s socialist-capitalism model is far more distributive than Washington’s. Even though the economy shrank in absolute terms, per-capita income held up relatively well compared to the U.S. and Europe over the last dozen years. Not a bad showing for a place that saw almost as much asset wealth destroyed since its bubble burst as the $14 trillion figure Ma assigned to America’s wars.
One feature of Japan-style capitalism is fewer excesses. In 2008, for example, the roughly $14 trillion of household financial savings — another figure close to Ma’s — helped Japanese consumers get by. All too many American households, by contrast, couldn’t go two months without a paycheck. Herein lies the real reason Japan is resisting the populist tide upending political systems around the globe. It’s worth considering as Trump’s Cabinet of billionaires, bankers and oilmen try their hands at government policy.
Most of the talk from the Trump White House is about pruning back regulations, cutting corporate taxes and striking better trade deals. But as Ma points out, American multinational companies have been making ever-increasing bundles from globalization for the past 30 years, mentioning IBM, Cisco and Microsoft by name. “The profits they’ve made are much more than the four Chinese banks put together,” Ma said. “But where did the money go?”
Too much of it, Ma says, flows to Wall Street and Silicon Valley. That mints many new millionaires and billionaires, but leads to greater inequality nationally. Because companies aren’t sharing their profits and investing wisely in future growth and innovation, average workers feel anxious and underappreciated. They’re likely to be underserved, too, by a new White House fighting yesterday’s wars. The days when the U.S. can wrestle manufacturing jobs back from China are so 2007, not 2017. Factories leaving China will go to India or Vietnam, not Texas or Pennsylvania. The 2017 threat to America is technological change from within — Detroit’s robots, not Shenzhen’s sweatshops.
I’m not suggesting all’s grand in Japan, whose own model is coming up short these days. Prime Minister Shinzo Abe’s policies since 2012 widened the gap between the superrich and everyone else while the population ages, birthrates fall and debt rises. The challenge for Abe, Trump and other leaders is making globalization work better, not trying to turn back the clock. Abe needs to work harder and faster to ensure the modest growth Japan generates is shared more broadly.
But for all Tokyo’s challenges, its successes in sanding down capitalism’s rough edges are worth studying as populism spreads.
William Pesek is executive editor of Barron’s Asia. www.barronsasia.com
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