Thursday, January 05, 2006

Japan's Population and National Budget are Shrinking – So how come Guptara argues that its Economy will Expand to Number One by 2020?

I have just finished writing an article on why Japan (and neither China nor India) will become the number one economy in the world by 2020. The editor tells me that he is making it the lead article in the edition of The Globalist in the week after next. So you might like to watch out for it.

In the meanwhile, the figures for the Japanese national budget for 2006 make interesting reading.

Inspite of an economy that has been in the doldrums for nearly a third of a century, Japan marked a fifth straight yearly increase in R&D expenditure, to a record 17 trillion yen. In percentage of gross domestic product, the R&D expenditure remained at an all-time high 3.35% and is among the world's highest. BTW, the number of researchers in Japan has also increased to a record 790,900.

That is particularly notable in view of the fact that, at the same time, Japan has set its LOWEST national budget in 8 years, down from 82.18 Trillion Yen in 2005 to 79.69 Trillion Yen in 2006. So what's being cut? Tax grants to local governments will go down to 14.56 trillion Yen (that's 1.53 trillion less than last year) and there will be a cut of 920 billion Yen in other areas of policy-related expenditure, so that comes down to 46.37 trillion Yen. General spending is going to include a 4.4% cut to public works projects. In brief, that's pain for general welfare, gain for science and technology.

I also see that, according to a survey by the Japanese Ministry of Health, Labour and Welfare, Japan's population has started to shrink for the first time ever this year (2005). The number of births fell to a record low of 1,067,000 and the number of deaths increased by 48,000 to 1,077,000. The balance between births and deaths is therefore minus 10,000 – representing the first natural decline in Japan's population since records started being kept in 1899. Political and business circles are apparently taken aback at the drop in population. In 2002, the National Institute of Population and Social Security Research had predicted that the country's population (including immigrants) would begin to decline only in 2007. The concern is that the decline in the birth rate will begin to lead to a decline in the working population and therefore a decline in GDP and consumption, and that the decline in the number of workers would make it difficult to maintain social security.

This is typical of bureaucratic nationalistic thinking which makes it impossible to see the effects of the robotic revolution that Japan is launching.

BTW even The Japan Robot Association (JARA) suffers from this kind of compartmentalised nationalism. The history of JARA, a voluntary organization, goes back to March 1971, and records its aims as furthering "the development of the robot manufacturing industry by encouraging research and development on robots and associated system products and promoting the use of robot technology. Through this, the Association strives to promote the use of advanced technology in industry and to enhance the welfare of the nation".

Note that there is apparently no understanding or concern for the impact of robots on the welfare of humanity as a whole. But that is not surprising, considering that robots will benefit Japan but create chaos in the rest of the world as Japanese robots displace most workers worldwide. That is what will happen very quickly if the current international arrangements in taxation, subsidy, retraining, education, finance, monetary policy and so on don't change rapidly - as I have been urging for some time now.

If you are not aware of my recommendations, read the article in The Globlalist, the week after next.

ENDS Sphere: Related Content


Scruples said...

Robots? Will it be the end of civilization as we know it? I'd like to see a little more substantiation of your assertion about the impact of robots on our society. Do you have articles you could link to?

_ivan said...

Enlighten me, in which direction should current international arrangements in taxation, subsidy, retraining, education, finance, monetary policy and so on change rapidly? I've been used to thinking of the protectionistic import barriers of the EU as a great evil, excluding everyone else's goods, (but I guess this is a small problem for fx. certain African nations that on some goods have set an import tax of 2-300% thereby warringly holding each other down, meaning to say that it is not solely the EU who is to blame for world poverty [hmm] ) but is this too general thinking? Should we seek to exclude the Japanese robots in my little Denmark?

Prabhu Guptara said...

Dear Scruples
In order to understand the background, you need to read my chapter titled "Managers' Lives, Work and Careers in the Twenty First Century" in the book LEADERSHIP AND MANAGEMENT IN THE 21ST CENTURY, edited by Cary L. Cooper, published by Oxford University Press, December 2004. A copy of this chapter is on my website: (go to "articles and reviews/ by subject/ business and management and see "Article Life Work..."

Prabhu Guptara said...

Dear Ivan

It would take too long to discuss your post if you had asked for the details. But as you ask for "the direction" in which the following need to change, here are my answers:

1. Taxation - towards harmonisation around the world (oh, also BTW harmonisation of environmental, pension, wage and social security benefits around the world)

2. Subsidies for industry, commerce and that sort of thing - best eradicated completely everywhere, as long as we proceed in the direction of the current sort of free market capitalism of the Anglo-American sort

3. Retraining - this DOES need to be subsidised (see my Blog "The Robots at Aichi") so that people whose jobs are going to be made redundant by advances in technology (e.g. robots) have the opportunity to be trained in one of the newer fields of work that will open up (e.g. robot maintainence)

4. Education - away from its current narrow technocentric focus and towards a much broader focus on the joy of learning for its own sake (and not only in technological and/or scientific fields but also in history, philosophy, theology, art, music and so on)

5. Finance -
(a) away from the fiat currencies that make it possible for humanity to grow economies very fast but at cost of very much greater vulnerability and volatility (see my article "Regulation versus Transformation of our Financial and Economic System" on my website: under Articles and Reviews/By Subject/ Business and Management")

(b) Margrit Kennedy's easy-to-read book, Interest and Inflation Free Money (Published by Seva International; ISBN 0-9643025-0-0)


Mark Stewart said...

isn't one of the reasons Japan will do so well is they are investing so much into R&D? I heard an Prof. from MIT talk about "Left Hand" management, saying a company always had to look passed what works/sales now, but look to what the next thing people want/need. If they don't they will fall behind. Could it be the same for a country?