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To be sure, China today finances an even larger portion of American deficits than Japan does, but Japan has been at it for 35 years. Japanese financing of the American external deficits was one crucial factor that has permitted the United States to live beyond its means for several decades, thereby propping up the external market into which “Asian drivers” could dispose of surplus production. That competition was certainly “a” if not “the” explanation for the restructuring of the American economy in the 1990s with far reaching effects on such developing economies as Mexico that make their way primarily as suppliers to the United States. Since that time, we have seen Japanese competition lay waste to whole industrial sectors in Europe and the United States. If this doesn’t qualify as “severe disruption to the global economy” I don’t know what would.

Putting aside the pre-World War 2 history - the fear in the West of floods of cheap Japanese imports that helped bring on the beggar-thy-neighbor policies of the 1930s for example - it was the inability of the postwar Bretton Woods regime of fixed exchange rates pivoting on the dollar to accommodate the appearance of Japanese trade surpluses in the late 1960s that brought about its demise. More to the point, Japan’s rise to global economic pre-eminence had momentous effects on both the world of the time and on everything that has happened since. Lesotho, #144, and one of the places the authors use as a case study to measure China’s impact on other developing economies, is a small country. To be sure, India and China are far larger, but to call Japan and Korea “small” is to destroy the meaning of the word. Ranked by population, Japan comes in number 10 (well ahead of every country in Europe except Russia) and South Korea number 25. There are some 220 independent countries in the world. Even by the measure of population – the authors’ sole criterion for evaluating size – both are among the world’s largest. Small countries? Japan and Korea are, respectively, the world’s second and ninth largest economies. The title could be fixed easily enough, but when I encountered the sentence “So, unlike the case of Korea and Japan, which could grow without severe disruption to the global economy we have to suspend the ‘small country’ assumption in the case of the Asian Drivers,” my doubts were compounded.

If the authors had labeled their piece “The Impact of New Asian Drivers” they would have had no quibble from me, but a piece that discusses “Asian drivers” while largely ignoring Japan is comparable to one on “European drivers” that slights Germany. Japan in 2007 exported some $200 billion of financial capital that “drives” economies worldwide. Chinese factories are stuffed with capital goods of Japanese origin. Japan invests more in China than does any other country, is probably China’s largest trading partner, and, unlike the United States and the EU, runs a trade surplus with China.

Asian Drivers? The last time I checked, the Japanese economy was still larger than that of both India and China combined. No reasonable person could disagree with the proposition that the “questions” posed by the rise of “Asian Drivers,” to use the authors’ label for India and China, “need to be addressed in a systematic framework” and the list of such questions the authors volunteer on page 202 – what are the consequences who wins and loses what are the implications for the environment, for institutions of global governance, for other developing country plans and so forth – is a worthy enough start.īut really coming to grips with these questions means getting the history and context right, and from the title on I began to have doubts. Two new economic behemoths pushing their way into the club of great powers are naturally going to upset many apple carts.

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New Asian Drivers, Japan, Korea and the Lessons of HistoryĪs a long-time observer of the Japanese economy, I found myself growing irritated as I read Raphael Kaplinsky’s and Dirk Messner’s Introduction to “ The Impact of Asian Drivers on the Developing World.” Of course China and India have already had a huge impact on the global economy and that impact shows every sign of getting yet larger.

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