A message to Japan Forum members

My offer to debate the “basket case Japan” story has generated more heat than light at the National Bureau of Asian Research’s Japan Forum.

As a matter of policy, I do not participate in online forums but, as friends have alerted me to some exceptionally egregious misrepresentations in the Japan Forum in the last couple of days, it is time to respond.

I know that the great majority of forum members believe in fairness and intellectual honesty and it is to them that I address this message.

The first thing to note is that the critics rarely quote me directly. Rather they paraphrase me or at least purport to do so — and thereby often completely traduce my meaning. I am, for instance, alleged to have written in 1995 about how well equipped the average Japanese apartment was. The point I made was entirely the opposite: that the authorities in those days strongly suppressed consumption and as a result Japanese homes lacked many of the consumer durables taken for granted in other advanced nations.

Japan Forum members have more than once even suggested that I have misrepresented my credentials. In a reference to the DFS, a 1990s-era discussion group on Japan, one forum member has described me in these terms: “He had a very selective memory (claiming to have foreseen the bubble’s 1991 collapse, for example, but a [DFS] list member went back to his own writings to find that he instead was preaching the opposite).” I am actually virtually alone among foreign economic commentators in bubble-era Tokyo in being able to document a record of having predicted the crash. An article containing the first of my predictions can be read here. I never diverged from that view and the suggestion that I somehow “was preaching the opposite” is fiction. It incumbent on the person responsible, a Harvard-educated professor of economics, to acknowledge his error and withdraw his allegation.

The most prominent of my recent critics, a semi-retired scholar who is currently an adjunct professor at Johns Hopkins, continues to refuse to substantiate allegations of major inaccuracy in an article I published in Foreign Affairs in 1995. He has stated that “there were so many errors of fact and economic logic that I did not know where to begin.” Differences of opinion or interpretation are one thing but “errors of fact” are, if substantiated, a serious matter. Yet this scholar, the recipient of an award from the Japanese government for “distinguished service” in promoting understanding of Japan, has in recent days insouciantly told the Japan Forum that he does not “have the time or inclination” to resolve the matter. If he knows of any genuine “errors of fact,” I ask that he specify them. If not, it is incumbent on him as a responsible public intellectual to withdraw his allegation.

His substantive contribution to the Japan Forum has been to enunciate a novel theory of national trade balances. Whereas down the ages virtually all economists, of whatever political stripe and of whatever nation, have agreed that, other things equal, a current account surplus is better than a current account deficit and that it therefore makes sense for a nation to try to avoid deficits, this man seems to hold the opposite view. The huge increase in Japan’s current account surplus, he avers, “says nothing about economic strength; indeed, quite the reverse is the case.” He is perfectly entitled to his views. But speaking in a tone implying he is articulating holy writ, he crosses a line in suggesting that anyone who disagrees with him “knows little about economics, and cares less.” In reality his theory is a recent invention of the Washington foreign trade lobby and is widely seen in the economics profession as a public relations gambit to calm fears about the hollowing out of the United States.

This brings me to the subtitle of my 1995 book Blindside — “Why Japan Is Still on Track to Overtake the U.S. by the Year 2000.” I have, of course, acknowledged many times that this was wrong. I have also pointed out — which the critics rarely mention — that my error was not in reading Japanese economics but rather American politics. The subtitle was a prediction that Washington would by 2000 feel compelled to instigate an epochal devaluation to pull American manufacturing out of its power dive. Washington instead went for a high dollar, which was wonderful for American consumers in the short run, but the result was that by 2000 America’s once-world-beating manufacturing base had already become a Potemkin Village as Japanese manufacturers had established a near impregnable lead almost right across the board in advanced producers’ goods. Because the necessary policy measures were not taken in the 1990s, the United States is now a true basket case — in worse shape indeed than the Ottoman empire a century ago.

The key thing in all this is that I have issued an invitation to the ten most prominent proponents of the “two lost decades” story to join me in a Washington debate. As an inducement I have offered to make a $5,000 donation to charity if any of them is prepared to come forward. If the Japan Forum critics are serious about resolving the contradictions in the “lost decades” story, they might usefully direct their efforts towards persuading at least one of my invitees to come forward. Instead they have generally avoided all mention of my offer and, even more tellingly, they have studiously avoided comment on my recent blogs at theatlantic.com and at fingleton.net.

There is a case to answer and it is summarized in those blogs.

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