It has been amusing to observe how people keep have been getting Japan wrong throughout the years, both fundamentally, when it comes to society’s structure and wealth, as well as asset price-wise.
For example, the widow-maker’s trade: betting on higher JGB yields ‘for ever’ not realizing the power of technology to create superfluous extra (surplus) capital and labor in peace time. In fact, if one thinks of the famous hockey stick chart of human progress (also the chart used by Kurzweil to show Singularity), the chart of global developed markets sovereign yields going back centuries has a similar shape but in the opposite direction: steep and high 2000 years ago to flat and zero now. You could say, the higher the “culture” the lower the yield.
Similar for stock prices: people have been betting on higher stock prices not realizing the Japanese corporates’ eroding profitability due to the hidden cost of BS jobs and corporate Universal Basic Income (both represented in the low unemployment figures, see below).
Demographics plays a very small role in GDP because as society progresses labor’s utility in the production function has greatly diminished at the expense of technology. It is not that dissimilar on the consumption side either. In the post-consumerism (increasingly digital) society that we live in, the young are consuming even less material things (the ones that matter for GDP) than the old. In Japan specifically, demographics has long ago stopped to matter.
Productivity, on the other hand, is a function of both labor and technology. We can very easily increase productivity when we substitute labor with technology. We have chosen to do the opposite, despite plenty of advances in technology, however, because we do not have an alternative method of distributing wealth rather than Work=Job=Income. In fact, if we choose to increase productivity right now while using the same old method of wealth distribution, inequality will rise even more.
Demographics and productivity are basically remnants of the old industrial model of classical economics – the same model which only looks at how to increase GDP without regard to human wealth being (again, it is very easy to increase GDP if that is our goal but that does not mean society would be better off).
Japan’s GDP per worker (i.e. a much narrower definition than GDP per capita) is and has been actually higher than the equivalent in the US during Japan’s supposedly lost decades (and that is despite a very slow adoption of technology – slower than what it could have been given an alternative wealth distribution method).
I can see a lot of similarities between how Japan has decided to structure its society and how some rich oil countries in the Middle East have done the same. Japan uses technology and the corporates to distribute wealth, while in the Middle East, is the state distributing and the source of wealth is abundant oil (note, there is a similar UBI mechanism also in Alaska and Norway).
There are numerous other UBI experiments going on in many different countries and cities. I wonder if the fact that society is very homogeneous in Japan and the Middle East help with UBI being more accepted: here I mean the right to citizenship being very strict and narrow. For example, in the Middle East, where technology is not so well advanced yet, it is foreigners who do most of the everyday jobs; Japan could easily use more robots to do the work. In both cases, only citizens would receive, unconditionally, the benefits of (someone else’s) labor and the spoils of technology or the luck of natural resources.
I am struggling to reconcile this new reality with the idea that in the past immigration and an open society have greatly contributed to human advancement by allowing for diversity and the free dissemination of knowledge. Now open borders seem to be a hurdle for any county which wants to introduce this new model of wealth distribution. In addition, ideas disseminate much easier due to the Internet and open source also allows anyone to benefit from new inventions.
Oil (and all natural resources) are finite, while demographics means Japan is slowly running out of people to employ. None of this is a problem if the Middle East invests its substantial wealth in labor saving technologies (and constantly innovates) or if Japan changes it wealth distribution model. Is a country a free rider if it chooses to close its borders and take care only of its own citizens? What is the right model to structure society so that it works for everyone not just for only a small number of countries?