When we consider the stark contrast of our economy with that of Japan, it should make us aware that there is much room for improvement in our economic system. It should be a wake up call that unless we make major changes quickly, Japanís economy may soon smother ours.
This may be hard to believe and come as a shock but just look at the comparative statistics and accomplishments of Japan versus America.
To put this in perspective, this is how America compares with a country as small as Japan:
Land: Japan is a country with only 4% of our land mass (smaller than California) and is 90% mountainous and infertile.
Resources: Japan has minimal natural resources - no oil, no coal, and no iron, just fish!
Manufacturing: To manufacture a product, Japan must import all of its required resources. Even after this expense, they have an $88 billion per year balance of trade surplus with America alone (their exports versus imports with America) (2006, US Census Bureau) and also accumulate one-third of the world's savings (US News & World Report, March 19, 2001).
Wages: Few Americans realize that Japanese hourly compensation costs in US dollars were nearly identical to that of US hourly compensation in 2005 according to the US Bureau of Labor Statistics.
Savings and Debt: The average Japanese family has a savings equivalent to $117,000 US Dollars (US News & World Report, March 19, 2001). American families average $85,000 in debt (USA Today, October 4, 2004).
Income Through Trade: Japan had the worldís second highest current account surplus (net trade plus interest and other income) next to China in 2006 of $170 billion while the US current account deficit including goods, services, income, transfers was a staggering $857 billion loss, the worldís largest, according to the US Department of Commerce and the International Monetary Fund.
Investment Income: Japan earned $118 billion on its foreign investments in 2006 and the US actually lost $7 billion according to the International Monetary Fund.
Japan must be doing something right! Better planning, direction, and a more responsive government are keys to their success. They have learned much from us and have improved on it. Perhaps it would be wise for us to study their improvements for our own benefit.
Interest Expense: The US public debt is almost 50% financed by other countries whereas Japanís public debt is nearly 100% financed by its own citizens. Japanís government borrows money at rates as low as 0.6% percent (sixth tenths of one percent) whereas the US government short-term rate is almost 8-10x higher. What does that say about the confidence in the country and comparative strength of the two economies? To put this in perspective, the US government paid out over $405 billion to pay interest alone in 2006 on the nearly $9 trillion of government debt.
Foreign Reserves: Japan has foreign currency reserves (redeemable for foreign assets, corporations, resources, etc. on demand) of $909 billion. These are economic bullets poised to take out any American company, most of which are for sale on the open stock market. The US has foreign currency reserves of merely $66 billion.
America is a large country (2 1/2 times Japan's population and 2.3x the labor force, plus much land and natural resources), but we are producing less, importing more, and borrowing more than ever before as well as selling our irreplaceable assets to pay for imports and debt. We have sold over 14,000 of our best companies to foreign interests since 1978 (See the list of American companies sold on www.economyincrisis.org, Itís unheard of to see any major Japanese company ever sold to foreign interests. Their companies are their wealth producing national treasures).
Production: For example, Japan was the highest producer of steel in 2005 behind only China. Japan outproduced the US by 22 million tons. Furthermore, at least 20% of the domestic US steel industry is foreign owned according to the IRS and we import nearly 30% of the steel that we consume. Nearly none of Japanís key industries are foreign owned.
Unemployment: Japan also had the lowest unemployment rate of all countries surveyed in 2006 by the US Bureau of Labor Statistics.
America's wealth was accumulated by previous generations, as we had world-beating manufacturing capabilities. America is presently relinquishing much of its manufacturing to outsourcing (giving away our technology and jobs to foreign companies and have them produce for us in their country thus totally dismantling our industrial base) and insourcing (subsidizing foreign companies to manufacturer in America to produce for their benefit and their profit, which quickly displaces many American-owned factories and entire industries).
We are becoming vulnerably dependant on foreign companies for jobs and products.
American owned manufacturing is becoming obsolete and second rate. We are no longer competitive with Japan, China and others. As we canít compete with Chinaís wage rates, and Japanís technology in manufacturing, we have become unquestionably second rate (auto industry is a prime example). Ask yourself in what areas does the U.S. lead the world?
America is the only major industrialized country which depends on foreign suppliers for large amounts of steel. It also depends on foreigners for critical inputs needed by strategic industries.
When you compare our strengths and weaknesses with Japan itís so easy to see (but many do not want to believe it) that the U.S. is developing an economic profile of a 3rd world country masquerading as a super power. How can we now afford to fight three wars (Iraq, Afghanistan, and the internal terrorist war) when we canít even support ourselves?
Our present leaders are not coping with our problems or properly managing for our future. Where are we headed? Can't America do better?