Why Stiglitz is Wrong About Abenomics
by Mike Whitney - CounterPunchLiberal economists in the US are absolutely ga-ga about Abenomics, and for good reason. Under Japanese Prime Minister Shinzo Abe’s leadership the Bank of Japan (BoJ) has flooded financial markets with money pushing stocks up nearly 80 percent in a matter of months, while $116 billion in fiscal stimulus has turbo-charged the real economy lifting First Quarter GDP to an eye-watering 4.1 percent. Naturally, this astonishing performance has attracted the attention of pundits in the US who have lavished praise on Abe for his three-pronged approach to revitalizing the moribund Japanese economy and for his commitment to beating two decades of entrenched deflation.
Nobel prize winning economist, Paul Krugman recently devoted an entire column to the topic in the New York Times where he congratulated Abe for his “sharp turn towards monetary and fiscal stimulus” noting that “stocks have soared, while the yen has fallen (which is) very good news for Japan because it makes the country’s export industries more competitive.” Here’s more from the Krugman piece:
“So the overall verdict on Japan’s effort to turn its economy around is so far, so good. And let’s hope that this verdict both stands and strengthens over time. For if Abenomics works, it will serve a dual purpose, giving Japan itself a much-needed boost and the rest of us an even more-needed antidote to policy lethargy.” (“Japan the Model”, Paul Krugman, New York Times)
While Krugman is somewhat cautious in his praise for Abe’s gigantic Quantitative and Qualitative Easing (QQE) program—which is on track to double the money supply in just two years– fellow Nobel prize winner, Joseph Stiglitz, shows no such restraint. In a breathless editorial in the New York Times, Stiglitz goes on and on about the virtues of Abe’s monetary and fiscal policies opining that “Abe… has done what America should have done long ago.” Here’s more from the same article:
“Mr. Abe’s plan also reflects an understanding that monetary policy can only go so far. One needs to have coordinated monetary, fiscal and structural policies.
Those who see Japan’s performance over the last decades as an unmitigated failure have too narrow a conception of economic success. Along many dimensions — greater income equality, longer life expectancy, lower unemployment, greater investments in children’s education and health, and even greater productivity relative to the size of the labor force — Japan has done better than the United States. It may have quite a lot to teach us. If Abenomics is even half as successful as its advocates hope, it will have still more to teach us….
Abenomics is, without a doubt, a huge step in the right direction.” —(“Japan Is a Model, Not a Cautionary Tale”, Joseph Stiglitz, New York Times)
Stiglitz is not only a top-notch economist, he’s also a really good guy. Still, I think he’s wrong about Abenomics, in fact, I think that if Krugman or Stiglitz read a little more about Abe’s so called structural reforms, they’d see that all the monetary and fiscal hullaballoo is just a smokescreen to conceal the same old trickle down, Voodoo reforms that have increased poverty, widened inequality, and fueled social unrest everywhere they’ve been implemented. The truth is, Abenomics is just a cover for plain old class warfare. (like QE in the US.) Now take a look at this excerpt from an article in the Economist: ”One area that reformers hoped the committees would tackle is Japan’s labour market. Unless they are going out of business, firms are barred from firing staff employees…….”
This provision to fire-workers-at-will is at the very top of Abe’s list of reforms. So how does handing out pink slips fight deflation? How does it fix the tax code so capital is taxed at a higher rate than labor so personal consumption rebounds and real wages increase? (Wages have been drifting lower in Japan for 20 years.) How does that increase labor’s share of productivity gains so workers can spend more at the grocery store, shopping malls or car lots?
It doesn’t help anything, does it? It’s just another giveaway to big business. And, remember, kicking employees to the curb, (“labor flexibility”) is at the top of Abe’s list of “reforms”.
And what other reforms does Abe have in mind? Here’s more from the Economist:
“Agriculture is in urgent need of reform as Japan enters negotiations for the Trans Pacific Partnership, a free-trade agreement, in July. Most farmers, tending tiny plots on a part-time basis, are uncompetitive. Companies should be allowed to buy farmland, said private-sector members of the ICC; at present they may only rent, and are bound by tight regulations.” (Economist)
Great. So Abe wants to sock-it-to the smalltime farmers who are busting their ass just to make ends meet so he can give a bigger share of the profits to the corporate cutthroats in Big Ag. That ought to fix the economy, don’t you think?
Then he plans to sign the sovereignty-eviscerating TPP which will give unprecedented legal powers to corrupt multinationals and thieving financial institutions. How does that improve the economy? And when has “free trade” ever benefited ordinary working people? Never, that’s when.
Abe also wants to create “a series of deregulated and lightly taxed zones around the country, to be overseen by a new minister.” (“Misfire: The Third Arrow of Abenomics”, The Economist)
That’s how you fight deflation; by creating tax free hideaways where slave-wage workers toil under prison camp conditions to boost profits for obscenely wealthy mega corporations? And–according to the Economist–this the “centerpiece” of Abe’s reforms. Some centerpiece, eh? Can you feel the love?
This is why I think Abenomics is a fraud that will fail miserably, because all the Keynesian claptrap surrounding the fiscal and monetary stimulus is just a fig leaf to conceal the real policy objectives, which are (as always) the privatization of public assets, the dismantling of vital market-stabilizing regulations, tax breaks for the wealthy, and a full-blown assault on working people.
Shinzo Abe is a fanatical, right-wing, militarist crackpot who is trying desperately to spark an economic revival so his rapacious pig-friends can enjoy another looting spree. Liberals like Stiglitz and Krugman would be well advised not to support that effort.
MIKE WHITNEY lives in Washington state. He is a contributor to Hopeless: Barack Obama and the Politics of Illusion (AK Press). Hopeless is also available in a Kindle edition. Whitney’s story on how the banks targeted blacks for toxic subprime mortgages appears in the May issue of CounterPunch magazine. He can be reached at email@example.com.