Friday, February 19, 2016

The Lesson of Japan

The small country of Japan was the biggest of the post-World War II miracles.  Even today, Japan has the third largest economy in the world and only recently ceded the second spot to China.

But, for the last 25 years, Japan has had essentially no economic growth.  This is truly an amazing reversal of fortune, because post-World War II Japan had the fastest economic growth rates in the world.  What happened?   The welfare state happened.  And Japan grew older.

Japan's population is falling, which is true for every developed country in the world, if one ignores immigration.  Japan's population is aging, which is also true for every developed country in the world.

The problem with the welfare state is that the vast bulk of the benefits accrue to old folks (that's why young folks vote for Bernie and old folks vote for Hillary).  The welfare state is inevitably accompanied by massive new restrictions on business and a growing contempt for the capitalist ethic.  Everyone wants and is promised free stuff and fewer and fewer are left to provide all of the free stuff that has been promised.

For a long time, Japan and the rest of the world had relatively few old folks, so the welfare state appeared affordable.  Now, the developed world is aging and it is becoming increasing obvious that the welfare state is not even close to being affordable -- in Japan, the US, Europe or anywhere else.

The result has been the dramatic expansion in sovereign debt loads worldwide, but especially in Japan, Europe and the US.  These soaring debt levels will soon accelerate to levels never before contemplated.  The end result is obvious.  The bankruptcy of the welfare state and the failure to produce the benefits promised to future generations of old folks, who will be left to fend for themselves.  This is what is increasingly happening in modern Japan.

Eventually the hollow promises of leftist political leaders lead to the beggary of their elderly populations.  That promise is still mostly ahead of us, but it is coming and Japan is beginning to show the early stages.

By promising an elaborate system of health care and income maintenance for the elderly, the elderly lose the incentive to provide for themselves for their future needs.  When the promise turns out to be a false promise, the elderly are left with nothing, exactly at the time that their health care needs and income needs are paramount. 

This is the lesson of Japan.  The Clinton-Sanders voters are setting up America's elderly for a cruel fate.

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