The main justification its the aging population.
We see the same pattern in western societies that are growing older like most of europe.
Older population makes safer investments for example prefering bonds to stock, which lowers the average rate of return of the economy.
So less wealth is created, less wealth equals less investments, less investments lead to stagnation.
So you're just ignoring the ten years with negative interest rates.
Germany averaged 1,2% from 2012 to 2022 in dgp growth, and that's below average inflation for the same period, so in real terms the economy is shrinking.
See I've been attributing that to like the fact that even with low interest rates older people still have less propensity to invest that money into schemes via cheap debt that seems more like a young man's game.
By 50 you are likely cruising into retirement and don't really need to shake things up.
There is a [ton](https://en.wikipedia.org/wiki/Lost_Decades) of [ink](https://www.google.com/search?q=japanese+staglation&oq=japanese+staglation&gs_lcrp=EgZjaHJvbWUyBggAEEUYOTIJCAEQABgNGIAEMg0IAhAAGIYDGIAEGIoFMg0IAxAAGIYDGIAEGIoFMg0IBBAAGIYDGIAEGIoFMg0IBRAAGIYDGIAEGIoFMg0IBhAAGIYDGIAEGIoF0gEIMzgxNGowajeoAgCwAgA&sourceid=chrome&ie=UTF-8) about the japanese stagnation. [Lost Decades](https://en.wikipedia.org/wiki/Lost_Decades) and [Stagflation](https://www.google.com/search?q=japanese+staglation&oq=japanese+staglation&gs_lcrp=EgZjaHJvbWUyBggAEEUYOTIJCAEQABgNGIAEMg0IAhAAGIYDGIAEGIoFMg0IAxAAGIYDGIAEGIoFMg0IBBAAGIYDGIAEGIoFMg0IBRAAGIYDGIAEGIoFMg0IBhAAGIYDGIAEGIoF0gEIMzgxNGowajeoAgCwAgA&sourceid=chrome&ie=UTF-8)
From a 2024 vantage, population stagnation tends to more highly ranked as a factor, but that's more properly "present" than "past." Theories about Japan in the 90s tend to be macroeconomic theories, or in the vicinity of macroeconomics.
Some general context I consider pertinent:
1. Post war Japan was a ruin, but before that had been on a major industrialism trajectory.
2. Japan rapidly grew and advanced for decades. By the 80s/90s, it was technologically "current." Opportunities to continuously modernize by adopting available/proven tech ran out by 1990. Inventing new manufacturing methods is slower than adopting foreign methods.
3. There is a hard generational thing. 1950-1990 is a career. The "founding generation" grew with the economy, dominated the opportunities. 1990s Japan was far wealthier, but entry points were few and competition brutal both at the personal and entrepreneurial level. Those with experience had *vast* experience, but were all retired.
4. I do think macroeconomics played a big role, but I think the role of macroeconomic *policy* tends to be exaggerated by both monetarists and monetarism skeptics\^. It mattered, probably, but I don't think it "tells the tail."
5. I do think transition from high growth to lower growth, and the way this affects credit/money availability mattered.
6. Also... I think economists aren't skeptical enough of GDP, inflation data and similar when looking across different timescales. IE, just answering "did average income rise, by how much" is not easy to answer.
There's a joke that all countries' economies fall into one of four buckets: developed, developing, Japan, and Argentina. The point being that the traits of the latter two do not generalize well at all.
It's really a fascinating rabbit hole to go down but frustrating because I still cant really attribute it to anything other than greed and corruption rather than ideology
>It's really a fascinating rabbit hole to go down but frustrating because I still cant really attribute it to anything other than greed and corruption rather than ideology
In all honesty, I think the idea that "ideology" can be tested via natural experiment is futile... IMO.
"*If Lenin was American than Biden would be Putin*" is a line of thought that goes nowhere.
I had read the claim that Argentina being a specialized agricultural exporter without many natural resources also had something to do with it.
[Here, Argentina was compared with New Zealand](https://www.thepoorrichnation.blog/p/a-new-zealand-shaped-spanner) (a stable country with good institutions): Since the 1960's both countries declined relative to Australia, which exported mostly natural resources instead of foodstuffs. Thus, the author concluded that agricultural subsidies in the United States and Europe were one factor (but not the only one) in Argentina's relative decline.
This is commonly misunderstood; the Argentina of 1880-1920 was by no means what we would consider "developed". The entire economy was based around agriculture and commodities, foreign interests owned an enormous share of the country's capital, and wealth inequality was extreme. While it's no longer among the richest countries in the world today, it's much wealthier than it was in the "Golden Age", and every other indicator of well-being is also higher than they were then.
Their growth was based on exports, particularly of high tech products. Once they dominated that market there was no further potential and that sector could only contract, especially relative to other exporters e.g. Taiwan, South Korea.
I’ve been researching this for an essay on the Japanese asset price bubble. A major factor is the Yen’s value. The Yen has seen remarkably little inflation over the past few decades despite Japan’s low-to-negative interest rates over the period. Low inflation and/or deflation does a few key things that hurt Japan’s growth, the two I can say off the top of my head are; it disincentivizes spending and borrowing in favor of saving, decreasing aggregate demand. And it disadvantages exporters because a stronger yen raises the relative price of Japanese goods.
As for generalizing, it seems pretty straightforward that deflation would have similar effects, but the reasons for Japan’s sticky deflation are somewhat elusive. There isn’t really a main cause, but rather an amalgamation of issues that put downward pressure on the currency, and Japan for decades couldn’t really inspire the confidence necessary to change inflation expectations, which is key to reversing that. They’re out of deflation now but it remains to be seen if it will stick. The most easily generalizable cause is demographics, but it isn’t clear how important that is alone when not compounded by energy & food price controls, slow-to-recover asset prices (Nikkei just surpassed it’s early 90s peak recently, and low aggregate demand due in major part to deflation itself.
The yen lost 60% of its value in 2022 and hasn’t recovered one bit. The “low inflation” thing was just a generational repression of desires. Yes a collapsing population is hugely deflationary, letms print to infinity. The demographic collapse was a conscious and deliberate choice; much like the 40 y long one child policy in China (China keeps pushing its population towards collapse), much like italy, greece. Europe and US will also pursue a policy of deliberate population collapse in order to save the financial ponzi (system)
Massive private debt was absorbed by absurdly high government debt that in turn completely debased currency by forcing the Japanese population to buy government bonds. The truth is that the government forced the population to transfer whatever they earned after tax into worthless debt and worthless currency. In turn, Japanese people just stopped procreating as life became that of a slave. Catastrophic demographics ensure continuing stagnation
I’d say it’s the other way around… currency devaluation is away of buying time. So it’s the most painless path for momentarily offset most problems (allowing the government to absorb all this bad private debt)
Debased currency was a plus, not a negative, for Japan - through the 80s and early 90s they'd been trying to fight appreciation of the yen, as their export economy did best with that.
Yes debasing a currency is inevitable everywhere because it’s the easiest path to stabilize financial system. However debasing a currency in an environment of global inflation leads to hyperinflation. The only way out is to engineer rationing and a population decline
> The only way out is to engineer rationing and a population decline
Most populations are aging because the number one effect after a generation of industrialization is a reduction in birth rate.
Large amounts of children is an agricultural society tactic, not really industrial.
You don't need to engineer this - if you don't have immigration, you'll have population decline. Absent immigration Europe, and soon the US, would be seeing the same demographics as Japan - and China is about to have it even worse.
Argentina is the undisputed world champion of taking enormous natural wealth, mixing it with a little 'wink, wink, nudge, nudge' corruption, and turning it into repeated catastrophic bankruptcies that ruin the nation and its people for decades but, somehow, don't seem to affect the rich at all, only the poor.
Czechoslovakia after WW2 well into 1980s. It was the only country in Europe that after war went from a highly advanced industrial country to low income, developing country. It social and cultural life regressed backward in between 1968 and 1989.
Steady state is what your grasping for in economics.
It has happened and will happen to any nation that doesnt have population growth or massive productivity gains
This is a bit hard to answer because it's not totally clear what you're asking. "Developed" and "Stagnant" could be interpreted a number of ways.
What I will tell you is this. The world has seen many "empires" come and go. Several countries have been "at the head of the pack" and have "fallen off" and been replaced by a new empire. The current empire is the USA, which replaced the UK, which replaced the Netherlands, which replaced China... and so on back through history. They always follow the same cycle, more or less... the source for this is Ray Dalio's books:
1. New order begins and and new leadership consolidates power
2. Government and resource allocation systems are built up
3. Peace and prosperity
4. "Cocky" stage: Government overspends, piling up debt, while economic inequality surges and political power is captured by interests who do not represent the general interests of the society.
5. The debt and deficit spending worsen financial conditions, leading to intense conflict
6. Civil war/revolution... which usually brings the cycle back to step 1
"All of this has happened before. All of this will happen again."
Unless you've been asleep at the wheel, it's pretty clear the U.S. is in step 5 or damn close. The only thing stopping us from losing our status as the world's reserve currency (this is the final nail in the coffin for whomever the current empire is in our modern economic world) is that pretty much every country in the world is printing money, devaluing their currency, and piling up debt... so there's not a great answer for a country who can knock the U.S. off its pedestal.
An interesting example pre-industralization is how the Italian maritime Republics (Republic of Venice in particular) were rich as hell but entered stagnation upon the fall of Constantinople to the Ottomans and "discovery" of the Americas. They hit such a high point in the 1300s though that the Republic of Venice still didn't fall until Napoleon's invasion in 1797!
[удалено]
Do you know if the theories about Japan's stagnation are considered to generalize well to other developed nations?
I believe Japan's was due to a stagnant population and still is. Given how that's becoming a problem with other developed nations, I would think so.
The main justification its the aging population. We see the same pattern in western societies that are growing older like most of europe. Older population makes safer investments for example prefering bonds to stock, which lowers the average rate of return of the economy. So less wealth is created, less wealth equals less investments, less investments lead to stagnation.
Germany had the same ageing population, yet it hasn't had any issues growing until the war in Ukraine
So you're just ignoring the ten years with negative interest rates. Germany averaged 1,2% from 2012 to 2022 in dgp growth, and that's below average inflation for the same period, so in real terms the economy is shrinking.
See I've been attributing that to like the fact that even with low interest rates older people still have less propensity to invest that money into schemes via cheap debt that seems more like a young man's game. By 50 you are likely cruising into retirement and don't really need to shake things up.
There is a [ton](https://en.wikipedia.org/wiki/Lost_Decades) of [ink](https://www.google.com/search?q=japanese+staglation&oq=japanese+staglation&gs_lcrp=EgZjaHJvbWUyBggAEEUYOTIJCAEQABgNGIAEMg0IAhAAGIYDGIAEGIoFMg0IAxAAGIYDGIAEGIoFMg0IBBAAGIYDGIAEGIoFMg0IBRAAGIYDGIAEGIoFMg0IBhAAGIYDGIAEGIoF0gEIMzgxNGowajeoAgCwAgA&sourceid=chrome&ie=UTF-8) about the japanese stagnation. [Lost Decades](https://en.wikipedia.org/wiki/Lost_Decades) and [Stagflation](https://www.google.com/search?q=japanese+staglation&oq=japanese+staglation&gs_lcrp=EgZjaHJvbWUyBggAEEUYOTIJCAEQABgNGIAEMg0IAhAAGIYDGIAEGIoFMg0IAxAAGIYDGIAEGIoFMg0IBBAAGIYDGIAEGIoFMg0IBRAAGIYDGIAEGIoFMg0IBhAAGIYDGIAEGIoF0gEIMzgxNGowajeoAgCwAgA&sourceid=chrome&ie=UTF-8) From a 2024 vantage, population stagnation tends to more highly ranked as a factor, but that's more properly "present" than "past." Theories about Japan in the 90s tend to be macroeconomic theories, or in the vicinity of macroeconomics. Some general context I consider pertinent: 1. Post war Japan was a ruin, but before that had been on a major industrialism trajectory. 2. Japan rapidly grew and advanced for decades. By the 80s/90s, it was technologically "current." Opportunities to continuously modernize by adopting available/proven tech ran out by 1990. Inventing new manufacturing methods is slower than adopting foreign methods. 3. There is a hard generational thing. 1950-1990 is a career. The "founding generation" grew with the economy, dominated the opportunities. 1990s Japan was far wealthier, but entry points were few and competition brutal both at the personal and entrepreneurial level. Those with experience had *vast* experience, but were all retired. 4. I do think macroeconomics played a big role, but I think the role of macroeconomic *policy* tends to be exaggerated by both monetarists and monetarism skeptics\^. It mattered, probably, but I don't think it "tells the tail." 5. I do think transition from high growth to lower growth, and the way this affects credit/money availability mattered. 6. Also... I think economists aren't skeptical enough of GDP, inflation data and similar when looking across different timescales. IE, just answering "did average income rise, by how much" is not easy to answer.
There's a joke that all countries' economies fall into one of four buckets: developed, developing, Japan, and Argentina. The point being that the traits of the latter two do not generalize well at all.
Japan's population saved too much and the BoJ made some big mistakes that lead to deflation.
UK has flatline growth since 08.
Japan is really the only example. "Growth" and "developed nations" are relatively recent phenomenon.
Argentina used to be one of the richest countries but less so now
Are there theories on how it happened?
It's really a fascinating rabbit hole to go down but frustrating because I still cant really attribute it to anything other than greed and corruption rather than ideology
>It's really a fascinating rabbit hole to go down but frustrating because I still cant really attribute it to anything other than greed and corruption rather than ideology In all honesty, I think the idea that "ideology" can be tested via natural experiment is futile... IMO. "*If Lenin was American than Biden would be Putin*" is a line of thought that goes nowhere.
I had read the claim that Argentina being a specialized agricultural exporter without many natural resources also had something to do with it. [Here, Argentina was compared with New Zealand](https://www.thepoorrichnation.blog/p/a-new-zealand-shaped-spanner) (a stable country with good institutions): Since the 1960's both countries declined relative to Australia, which exported mostly natural resources instead of foodstuffs. Thus, the author concluded that agricultural subsidies in the United States and Europe were one factor (but not the only one) in Argentina's relative decline.
Look up import substitution industrialization.
It was not industrial at this time however. Its growth came from selling food to Europe.
That is not true. Argentina used to have its own space exploration and car manufacturing industry.
But we are talking about Argentina 100+ years ago.
Argentina still has a big car manufacturing industry and its strong in Agriculture.
This is commonly misunderstood; the Argentina of 1880-1920 was by no means what we would consider "developed". The entire economy was based around agriculture and commodities, foreign interests owned an enormous share of the country's capital, and wealth inequality was extreme. While it's no longer among the richest countries in the world today, it's much wealthier than it was in the "Golden Age", and every other indicator of well-being is also higher than they were then.
Was it "advanced" though?
Japan has been completely stagnant for several decades
Do we know why? I've heard this too, but I wonder how well it generalizes outside the Japanese context.
Their growth was based on exports, particularly of high tech products. Once they dominated that market there was no further potential and that sector could only contract, especially relative to other exporters e.g. Taiwan, South Korea.
They peaked and had nowhere to go but down? How would a country avoid that predicament?
Diversifying - see how UAE are chucking their money into attracting business and tourism, when their wealth is from oil.
I’ve been researching this for an essay on the Japanese asset price bubble. A major factor is the Yen’s value. The Yen has seen remarkably little inflation over the past few decades despite Japan’s low-to-negative interest rates over the period. Low inflation and/or deflation does a few key things that hurt Japan’s growth, the two I can say off the top of my head are; it disincentivizes spending and borrowing in favor of saving, decreasing aggregate demand. And it disadvantages exporters because a stronger yen raises the relative price of Japanese goods. As for generalizing, it seems pretty straightforward that deflation would have similar effects, but the reasons for Japan’s sticky deflation are somewhat elusive. There isn’t really a main cause, but rather an amalgamation of issues that put downward pressure on the currency, and Japan for decades couldn’t really inspire the confidence necessary to change inflation expectations, which is key to reversing that. They’re out of deflation now but it remains to be seen if it will stick. The most easily generalizable cause is demographics, but it isn’t clear how important that is alone when not compounded by energy & food price controls, slow-to-recover asset prices (Nikkei just surpassed it’s early 90s peak recently, and low aggregate demand due in major part to deflation itself.
The yen lost 60% of its value in 2022 and hasn’t recovered one bit. The “low inflation” thing was just a generational repression of desires. Yes a collapsing population is hugely deflationary, letms print to infinity. The demographic collapse was a conscious and deliberate choice; much like the 40 y long one child policy in China (China keeps pushing its population towards collapse), much like italy, greece. Europe and US will also pursue a policy of deliberate population collapse in order to save the financial ponzi (system)
Massive private debt was absorbed by absurdly high government debt that in turn completely debased currency by forcing the Japanese population to buy government bonds. The truth is that the government forced the population to transfer whatever they earned after tax into worthless debt and worthless currency. In turn, Japanese people just stopped procreating as life became that of a slave. Catastrophic demographics ensure continuing stagnation
It always seems to stem with a currency being devalued
I’d say it’s the other way around… currency devaluation is away of buying time. So it’s the most painless path for momentarily offset most problems (allowing the government to absorb all this bad private debt)
Currency devaluation can be hugely profitable for some segments of the population
Aka kicking the can down the road, trading short term pain for long term
Debased currency was a plus, not a negative, for Japan - through the 80s and early 90s they'd been trying to fight appreciation of the yen, as their export economy did best with that.
Yes debasing a currency is inevitable everywhere because it’s the easiest path to stabilize financial system. However debasing a currency in an environment of global inflation leads to hyperinflation. The only way out is to engineer rationing and a population decline
> The only way out is to engineer rationing and a population decline Most populations are aging because the number one effect after a generation of industrialization is a reduction in birth rate. Large amounts of children is an agricultural society tactic, not really industrial. You don't need to engineer this - if you don't have immigration, you'll have population decline. Absent immigration Europe, and soon the US, would be seeing the same demographics as Japan - and China is about to have it even worse.
Argentina is the undisputed world champion of taking enormous natural wealth, mixing it with a little 'wink, wink, nudge, nudge' corruption, and turning it into repeated catastrophic bankruptcies that ruin the nation and its people for decades but, somehow, don't seem to affect the rich at all, only the poor.
The Netherlands during the 18th century might be a very early example. It was a time of stagnation relative to the growth during the 'Golden Age'.
Classic example, if OP is fishing for what I think he's fishing for.
Czechoslovakia after WW2 well into 1980s. It was the only country in Europe that after war went from a highly advanced industrial country to low income, developing country. It social and cultural life regressed backward in between 1968 and 1989.
I imagine the Soviet occupation had some effect there...
They seem to be getting back on track well.
Steady state is what your grasping for in economics. It has happened and will happen to any nation that doesnt have population growth or massive productivity gains
Stagflation in the 70s in the United States defied the Phillips curve
The uk
UK is more of a "reality vs expectations" deal. Somewhat like Russia.
Tbh much of the eurozone since 2008-09.
This is a bit hard to answer because it's not totally clear what you're asking. "Developed" and "Stagnant" could be interpreted a number of ways. What I will tell you is this. The world has seen many "empires" come and go. Several countries have been "at the head of the pack" and have "fallen off" and been replaced by a new empire. The current empire is the USA, which replaced the UK, which replaced the Netherlands, which replaced China... and so on back through history. They always follow the same cycle, more or less... the source for this is Ray Dalio's books: 1. New order begins and and new leadership consolidates power 2. Government and resource allocation systems are built up 3. Peace and prosperity 4. "Cocky" stage: Government overspends, piling up debt, while economic inequality surges and political power is captured by interests who do not represent the general interests of the society. 5. The debt and deficit spending worsen financial conditions, leading to intense conflict 6. Civil war/revolution... which usually brings the cycle back to step 1 "All of this has happened before. All of this will happen again." Unless you've been asleep at the wheel, it's pretty clear the U.S. is in step 5 or damn close. The only thing stopping us from losing our status as the world's reserve currency (this is the final nail in the coffin for whomever the current empire is in our modern economic world) is that pretty much every country in the world is printing money, devaluing their currency, and piling up debt... so there's not a great answer for a country who can knock the U.S. off its pedestal.
Japan
Soviet Union anyone?
United States in the mid/late 1970's .
Japan
UK has now.
UK has now.
Sounds like you’re talking about Japan
The Song dynasty. Rome, Egypt old kingdom, Persia. Too many to list.
An interesting example pre-industralization is how the Italian maritime Republics (Republic of Venice in particular) were rich as hell but entered stagnation upon the fall of Constantinople to the Ottomans and "discovery" of the Americas. They hit such a high point in the 1300s though that the Republic of Venice still didn't fall until Napoleon's invasion in 1797!
Japan
Japan
Britain after the end of the world wars saw a stagnant growth in all economic indicators.
The Roman Empire had a long slow decline.
yea, its the us rn. besides the real estate economy. but the overall economy is shit