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When Consumers Cut Back: An Object Lesson From Japan

February 25 2009 at 7:59 PM

  (Premier Login Oscar50)
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Is this our future?

When Consumers Cut Back: An Object Lesson From Japan
Published: February 21, 2009

TOKYO As recession-wary Americans adapt to a new frugality, Japan offers a peek at how thrift can take lasting hold of a consumer society, to disastrous effect.

The economic malaise that plagued Japan from the 1990s until the early 2000s brought stunted wages and depressed stock prices, turning free-spending consumers into misers and making them dead weight on Japans economy.

Today, years after the recovery, even well-off Japanese households use old bath water to do laundry, a popular way to save on utility bills. Sales of whiskey, the favorite drink among moneyed Tokyoites in the booming 80s, have fallen to a fifth of their peak. And the nation is losing interest in cars; sales have fallen by half since 1990.

The Takigasaki family in the Tokyo suburb of Nakano goes further to save a yen or two. Although the family has a comfortable nest egg, Hiroko Takigasaki carefully rations her vegetables. When she goes through too many in a given week, she reverts to her cost-saving standby: cabbage stew.

You can make almost anything with some cabbage, and perhaps some potato, says Mrs. Takigasaki, 49, who works part time at a home for people with disabilities.

Her husband has a well-paying job with the electronics giant Fujitsu, but I dont know when the ax will drop, she says. Really, we need to save much, much more.

Japan eventually pulled itself out of the Lost Decade of the 1990s, thanks in part to a boom in exports to the United States and China. But even as the economy expanded, shell-shocked consumers refused to spend. Between 2001 and 2007, per-capita consumer spending rose only 0.2 percent.

Now, as exports dry up amid a worldwide collapse in demand, Japans economy is in free-fall because it cannot rely on domestic consumption to pick up the slack.

In the last three months of 2008, Japans economy shrank at an annualized rate of 12.7 percent, the sharpest decline since the oil shocks of the 1970s.

Japan is so dependent on exports that when overseas markets slow down, Japans economy teeters on collapse, said Hideo Kumano, an economist at the Dai-ichi Life Research Institute. On the surface, Japan looked like it had recovered from its Lost Decade of the 1990s. But Japan in fact entered a second Lost Decade that of lost consumption.

The Japanese have had some good reasons to scale back spending.

Perhaps most important, the average workers paycheck has shrunk in recent years, even after companies rebounded and bolstered their profits.

That discrepancy is the result of aggressive cost-cutting on the part of Japanese exporters like Toyota and Sony. They, like American companies now, have sought to fend off cutthroat competition from companies in emerging economies like South Korea and Taiwan, where labor costs are low.

To better compete, companies slashed jobs and wages, replacing much of their work force with temporary workers who had no job security and fewer benefits. Nontraditional workers now make up more than a third of Japans labor force.

Younger people are feeling the brunt of that shift. Some 48 percent of workers age 24 or younger are temps. These workers, who came of age during a tough job market, tend to shun conspicuous consumption.

They tend to be uninterested in cars; a survey last year by the business daily Nikkei found that only 25 percent of Japanese men in their 20s wanted a car, down from 48 percent in 2000, contributing to the slump in sales.

Young Japanese women even seem to be losing their once- insatiable thirst for foreign fashion. Louis Vuitton, for example, reported a 10 percent drop in its sales in Japan in 2008.

Im not interested in big spending, says Risa Masaki, 20, a college student in Tokyo and a neighbor of the Takigasakis. I just want a humble life.

Japans aging population is not helping consumption. Businesses had hoped that baby boomers the generation that reaped the benefits of Japans postwar breakneck economic growth would splurge their lifetime savings upon retirement, which began en masse in 2007. But that has not happened at the scale that companies had hoped.

Economists blame this slow spending on widespread distrust of Japans pension system, which is buckling under the weight of one of the worlds most rapidly aging societies. That could serve as a warning for the United States, where workers 401(k)s have been ravaged by declining stocks, pensions are disappearing, and the long-term solvency of the Social Security system is in question.

My husband is retiring in five years, and Im very concerned, says Ms. Masakis mother, Naoko, 52. She says it is no relief that her husband, a public servant, can expect a hefty retirement package; pension payments could fall, and she has two unmarried children to worry about.

I want him to find another job, and work as long as hes able, Mrs. Masaki says. We must be ready to fend for ourselves.

Economic stimulus programs like the one President Obama signed into law last week have been hampered in Japan by deflation, the downward spiral of prices and wages that occurs when consumers hold down spending in part because they expect goods to be cheaper in the future.

Economists say deflation could interfere with the two trillion yen ($21 billion) in cash handouts that the Japanese government is planning, because consumers might save the extra money on the hunch that it will be more valuable in the future than it is now.

The same fear grips many economists and policymakers in the United States. Deflation is a real risk facing the economy, President Obamas chief economic adviser, Lawrence H. Summers, told reporters this month.

Hiromi Kobayashi, 38, a Tokyo homemaker, has taken to sewing childrens ballet clothes at home to supplement income from her husbands job at a movie distribution company. The family has not gone on vacation in two years and still watches a cathode-ray tube TV. Mrs. Kobayashi has her eye on a flat-panel TV but is holding off.

Im going to find a bargain, then wait until it gets even cheaper, she says.


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When consumers cut back

February 26 2009, 5:33 AM 

Every person who has been living on an amphetamine high eventually has to come down to normal. To this individual, normal, during the period of adjustment, can seem like depression. Led by America's insatiable greed, by its desire for more, more, more, the entire planet has been living on the amphetamine called unregulated Capitalism. For a time, during its period of adjustment, normal will seem like depression? Is the human race, the true Prodigal son, living with swine? Will...CAN...it kick its addiction, or will it get back on the drug called greed?

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(Premier Login Oscar50)
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The house of cards is collapsing

February 26 2009, 7:52 AM 

Long ago when the outsourcing thing first started, in a response to investors wanting higher returns on investment really, I noted that these would work for the short term. A big part of making it work is to be absolutely ruthless in not allowing workers to organize. Which is a right, one that many extreme right wingers detest.

Inevitably though, it seems that the standard of living in the outsourcing country will improve. The wages will go up, and the plants will move to a cheaper alternative, and so on. In the meantime, back in the West, the people that used to do this work, are now marginalized a bit more. Taking lower paying jobs. Lower paying jobs which takes them out of that consumer class to some degree.

You probably see where this is going. Eventually there are no markets left. If the people that were making too much money ostensibly were a large part of the consumer group, then as they make less money their consumption goes down. So even if those products can be made cheaper, at some point -- who is going to buy them?

What bothered me about the Japanese story, is the huge number of temporary workers. Read "no benefits", and lower income. Is this really a better future? Sure I agree that the greed factor, and addiction to stuff needs to end. But we need some balance. Decent paying full time jobs with benefits. Sounds like a good idea to me, and those folks can at least do some consuming, some purchasing, keeping the economy healthy.

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Von Klumpen

It seems good to me

February 26 2009, 12:28 PM 

in most cases where one is trying to find a solution to a problem, to imagine scenarios in the extremes ........ and then work out some kind of middle ground.

What would you have in an idealistic society?

A community of people all dedicated to their mutually best interests. Some "god" or leader of the community would evaluate how life was going in the community and see where the community's inefficiencies lay.

Every individual going out and scrounging for food. Every individual needing to gather firewood with which to cook. Individuals, constantly needing to put fresh boughs onto their shelters to keep out the wind and rain.

So this god would say, "we're living very inefficiently here. We could organize ourselves far better so that the food gatherers concentrate more exclusively on THAT task ......... spend a bit more time and gather enough for several people, rather than just get enough for themselves for each single day.

Meantime the skills of fixers would be utilized to maintain the dwellings and the skills of the thoughtful would be utilized to brainstorm, finding ways to make thing even easier by building machines to help them all produce greater quantities of goods with less human effort.

Maybe they'd find a way of routing in running water to all of their huts ...... thus eliminating the need for daily water carrying etc.

The time they saved by their organization and ingenuity, they would put into exploring and having fun.

On the other end of the spectrum, what do you have in the most undesirable society?

You have a group of people who are constantly trying to exploit others ...... steal from others ......... con others ....... enslave others ..... eliminate competition etc. ............ in order to horde the best life for themSELVES.

The argument could be made for both societies that the methods they adopt for living are absolutely crucial for survival ........ and maybe they are -for their own given society- but obviously, their methods are completely different.

It seems to me that when we discuss or debate the problems of social economy, we are always thinking ONLY in terms of balancing our own system. Do we go left or do we go right now? Maybe we've gone right too long and now we should be going left?

We don't look beyond what we've accepted as "the norm" and don't comprehend possibilities that lie outside of what we've "always done."

What if we were to consider brand NEW ways of doing things? Like ...... gradually move away from the money system we now rely on?

What if we moved away from the belief that consumerism is the only answer to a robust and healthy economy? That the accumulation of property is the only valid reason to exist in this life?

What if we were to focus on quality of life for ALL? Everyone works in areas of their own interests as much as possible and everyone pools their resources so that the needs of ALL are taken care of.

Now........ that concept is called "socialism" and is immediately decried by the more ambitious people as being a lazy society which spawns dependency on the system ........... and they can point -justifiably- at what happens when people are given easy welfare or healthcare of unemployment benefits etc.

HOWEVER ........ what these more ambitious people fail to comprehend is that their OWN attitude is largely responsible for such a situation as well.

How so?

Well, ambitious people who are motivated by property acquisition and consumerism do NOT get what they pursue through their OWN labor. It never happens. "Rich" people never get rich without exploiting the labors of others. Even when an ambitious person is shrewdly working on a new deal or angle, and calculating how best and most efficiently to EXTRACT what he wants ............ from the most willingly vulnerable, in "deals" ........ he is NOT truthfully "working hard" himself by his own labors, to create what he wants ....... but rather, to extract what someone else has produced and to get it for himself.

So-o ........ you have people who are unemployed and collecting insurance money for doing so......

What are THESE people doing? Pretty much exactly the same thing. They're extracting the best deal they can for themselves ....... same as the rich people.

Now IF the ambitious folks were actually community oriented or minded, they would recognize that essentially they don't CARE what happens to people in the lower social strata as LONG AS they're producing and their products can be extracted and exploited for personal gain.

So the caring/awareness plays hugely into the motivation of the lower classes to produce.

Supposing you had a society where -yes, there ARE more and less ambitious people but ......... it isn't POSSIBLE to exploit anyone. (Well, it's heavily frowned upon, anyway). Then you'd have the ambitious people simply gaining from their own industriousness. Since they're industrious, they would see that they could vastly improve their own productivity by engaging the labors of the less industrious and mutually satisfy the needs of themselves AND the less ambitious.

Ok, here's the fine point difference between that ........ and what happens in our job economy today ........

The industrious would SEEK OUT the assistance of the less ambitious.

In other words, their interests and focus would change from one of offering jobs anonymously to all comers (and then cull the best of them out of whoever shows up to get the best advantage for themselves) ......... to one of actively recruiting the assistance of those who had time and interest to help them.

See the difference? On one hand, you have companies putting out job ads to strangers and culling the comers to get the best personal advantage for themselves .............. and on the other hand you have ambitious individuals going into the community, finding available and willing people to join into a new venture that will be mutually beneficial for all.

Now, I'm not naive enough to think we could ever create such an ideal situation in our present world but just trying to present the contrasting scenarios for thought stimulation.

The answers to solving economic crisis are really not that hard to implement. The hard part is changing perception and attitude.

The ambitious need to realize that they NEED and must VALUE the worker and that the worker deserves to get as much benefit from mutual cooperation as the ambitious plan to get for themselves.

Just giving the rich more breaks so that they can create more jobs through their ambitious ventures and thereby benefit the lower class through "trickle down economy" ............. is a silly idea and we've already seen how that works (or we should). It doesn't happen. The rich will ALWAYS look for ways to cut their costs and squeeze the workers more and more until they're finally left life-less. The entire system strangles itself.

Does a totally socialistic society stifle production? People often point at Russia as an example of what happens in a forced socialistic society. All incentive is lost to produce voluntarily and mindfully. Workers simply do as much as they're told and no more ......... and produce only as automatons.

Well, but what actually HAPPENED in Russia? The entire system was forced and monitored by secret police. What for? Was such a layer of suspicion and coercion actually necessary?

When you have an economy where everyone cares and wants to cooperate and contribute for the good of all -say, like right after WW2- you get very positive results. It's not a greed driven economy, it's an opportunity driven economy. It's like a fresh start with high hopes and dreams. Everyone cares about everyone else to a great degree. Employees feel good about their companies and proud to represent them and they work very hard because they want to. Employers feel very attached to their work force and proud of their efforts and RESPONSIBLE for keeping everyone working so that they have a good life too.

So-o .......... ultimately, to solve an economic crisis, the attitude has to change from extreme thinking of advantage for either end ........... to one of mutual advantage for all.

Once the ambitious actually care for the welfare of the less fortunate, less intelligent, less ambitiously driven ......... the lower class will have more interest in cooperating and offering their labor to support the schemes of their administrators .......... and unemployment and welfare will taper down.


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(Premier Login Oscar50)
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How Can the U.S. Economy Recover Without Manufacturing Capacity?

February 26 2009, 8:17 AM 

That's the bottom line isn't it? All of this outsourcing .. which lead to short term profits for investors, ultimately in large part, is contributing to the poor performance of the stock market, and the downslide of the economy. Without manufacturing, what type of "recovery" can we expect to see?


"You can't put people to work in American factories that don't exist."

The strength of the federal economic stimulus package is seriously diluted by the fact that many of the manufactured goods that will be purchased for the attempted recovery must be imported from outside the United States. America simply doesn't make lots of things, anymore. That means many billions of dollars that folks assumed would go towards fueling an American economic comeback, will instead provide work and paychecks to employees in other countries, that still have manufacturing bases. That's fine with the U.S. Chamber of Commerce, which is dominated by large multinational corporations - the same guys that began stripping the United States of manufacturing jobs decades ago.

The U.S. Chamber of Commerce was one of the main lobbyists opposed to provisions that would have mandated that stimulus money go to U.S. companies. The Chamber is a U.S. organization in name only, like its finance capital comrades, the guys that gave the world such a bad case of the dreaded "American Disease," much of the planet is praying that cash-rich China will eventually bail everybody out.

The United States' lack of a manufacturing capacity makes it even less likely that anything resembling a lasting recovery can emerge from President Obama's approach to the economic crisis. The infrastructure projects that are supposed to be central to the recovery scheme are only valued at $150 billion - which is not much of a jolt, especially when much of what will have to be bought is only available in other countries, made by foreign workers. Barack Obama has put a huge emphasis on building a green economy. However, according to the New York Times , most of the sources of solar panels and wind turbines are located in Europe and Asia. There can be no green economy without a mass transit makeover of the United States, but the U.S. hasn't made subway and light rail cars in many years. They'd have to be imported.

"Most of the sources of solar panels and wind turbines are located in Europe and Asia."

http://www.marketoracle.co.uk/Article9109.html">How Can the U.S. Economy Recover Without Manufacturing Capacity?

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Does tax code send U.S. jobs offshore?

February 26 2009, 11:46 AM 

Heard anything about this lately?

Does tax code send U.S. jobs offshore?
By David J. Lynch, USA TODAY
Updated 3/21/2008 4:20 AM |

Democratic presidential contenders Hillary Rodham Clinton and Barack Obama have cast it as an outrage that should be a key target for the next president: a tax break they say encourages employers to ship American jobs abroad.

The charge could be dismissed as typical campaign-trail exaggeration during a Democratic primary season marked by populism, except for one thing. Many analysts say it's true. "The U.S. tax system does provide an incentive to locate production offshore," says Martin Sullivan, a contributing editor to Tax Notes, a non-profit publication that tracks tax issues.

At issue is the U.S. tax code's treatment of profits earned by foreign subsidiaries of American corporations. Profits earned in the United States are subject to the 35% corporate tax. But multinational corporations can defer paying U.S. taxes on their overseas profits until they return them to the USA transfers that often don't happen for years. General Electric, for example, has $62 billion in "undistributed earnings" parked offshore, according to recent Securities and Exchange Commission filings. Drug giant Pfizer boasts $60 billion. ExxonMobil has $56 billion.

"If you had two companies in Pittsburgh that both were going to expand capacity and create 100 jobs, our tax code puts the company who chooses to put the plant in Pittsburgh at a competitive disadvantage over the company that chooses to move to a tax haven," says former White House economist Gene Sperling, a Clinton adviser.

The Democrats, saying the United States has overlooked the costs to working Americans in its rush to embrace globalization, have vowed to eliminate any tax incentive for further offshoring.


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Von Klumpen

Beat their swords into plowshares....

February 26 2009, 12:59 PM 

From Isaiah 2:4 ; Micah 4:3 ...

What happens in a war economy? Domestic production is quickly modified to produce weaponry.

Ever hear jokes about Buicks? Built like tanks? Well, maybe they WERE ....... because Buick actually built the most effective tank of WW2!~ (The thing could go almost 60 mph, floating along on the famous Buick rock and roll suspension. It could move quicker than a German Panther turret could turn).

[linked image]

Well, if a war economy can switch over, so can a civilian economy. Time to get all the American war machinery production companies to start producing civilian equipment!~


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