------------------------- Via Workers World News Service Reprinted from the March 29, 2001 issue of Workers World newspaper ------------------------- GLOBAL CAPITALISM IN CRISIS: JAPAN ECONOMY BUCKLES AS U.S. MARKETS SHRINK By Deirdre Griswold Prices are dropping in Japan. The country is in a state of deflation for the first time since World War II, the government announced on March 16. Three days later, after a meeting with President George W. Bush in Washington, Japanese Prime Minister Yoshiro Mori announced the Bank of Japan was dropping its interest rate to zero in an effort to stimulate the economy. Before that, former Finance Minister Kiichi Miyazawa had warned that government finances were "near a state of collapse" after years of large budget deficits. This touched off fears of a banking crisis. What has happened? Japan is still the second-largest economy in the world--and a very modern one at that. It has a highly developed infrastructure and industrial base. In the 1980s, economists everywhere praised it for its rapid annual growth rate, which had been close to 12 percent. But then, in 1990, the stock market and real estate bubble burst. The Japanese capitalist economy has never recovered. U.S. TURMOIL AFFECTS JAPAN For a decade, U.S. imperialism took advantage of the Japanese bourgeoisie's weakened position to try to force it to "open up" and allow in more foreign investment and products. Now, however, with their own economy in turmoil, the gurus on Wall Street are most anxious to stabilize Japanese capitalism before a deepening of the crisis there pulls down world markets even further. The problem is, how do they do it? Can this small change in interest rates turn things around--especially when the U.S., the largest importer of Japanese products, is itself going into a recession? Japan's central bank already had the lowest interest rates in the developed world. As the U.S. stock markets showed when they continued dropping on March 20 after an announcement from the Federal Reserve Bank, a reduction of half a percentage point or less in interest rates may do nothing for markets that are depressed by a steady decline in corporate profits. The whole idea of lowering interest rates is to encourage corporations and individuals to borrow more. The individuals are supposed to then make big purchases, while the corporations are supposed to invest the borrowed money in expanded production. But what if the markets are glutted? And what if the individuals are already maxxed out on their credit? What if the individuals are facing layoffs and don't know how they'll pay back loans? In the U.S., workers and middle-class individuals encouraged to buy a car or home by lower interest rates may be equally discouraged by the new bankruptcy law, which can saddle them with the debt for the rest of their lives, even if their earnings become drastically reduced. A PREVIEW OF THINGS TO COME? What has happened in Japan over the last decade seems to have been a preview of the economic crisis now developing throughout world capitalism. But there are also features that are specific to Japan's situation after World War II. The leaders of U.S. foreign policy decided in the late 1940s, when Japan was still in ruins from the war, to stimulate the stabilization and growth of Japanese capitalism by opening up U.S. markets to Japan ese products. >From then on, Japan's economy was export-driven. Its dynamic growth blunted the class struggle at home and at the same time assured that Japan would orient economically to the U.S., rather than to nearby China with its hundreds of millions of people. This policy was deepened by the final victory of the Chinese Revolution in 1949. Within a year, the U.S. went to war on the Korean peninsula and came close to invading China itself. Building up Japan as a capitalist economic, but not military, bulwark was the underpinning of Washington's Asia strategy during the Cold War. The Pentagon would have the monopoly on militarism, planting its troops in bases across Japan, especially on colonized Okinawa. By 1989, however, the Soviet Union was breaking up and the U.S. was pursuing a guarded relationship with the new market- oriented Chinese Communist leadership. No longer so concerned about building up Japan, the U.S. ruling class became more resistant to Japanese imports while demanding that Japan promote policies that would increase its domestic market for U.S. products. Also undercutting Japanese exports was Ronald Reagan's devaluation of the dollar, which had given U.S. manufacturers an advantage on the world market while it made imported items more expensive for workers in this country. In the next decade, stocks on the Japanese markets, which at their peak had been valued at 50 percent of world equity, dropped to 10 percent. They are now at one-third of their peak level in 1989. Japan's trade surplus with the U.S., although still large, has dropped by billions of dollars. PUBLIC SPENDING LEADS TO BUDGET CRISIS The Japanese government has tried to compensate for the decline by pouring money into public works. This has prevented the massive unemployment that otherwise might have followed the market crisis. However, the crisis has only been transferred to the capitalist government. Its budget deficit is now some 130 percent of gross domestic product. Up until just recently, Washington was pressuring Japan to deregulate and accept some of the same austerity measures that have devastated the Third World. Even without this, homelessness has been growing in Japan and tent colonies for the jobless have sprung up in industrial cities like Osaka. The most recent industry to feel the crisis is insurance. Japan's low interest rates have bankrupted insurance companies that had guaranteed a larger return on the money people have put into pension plans. So many of these pension plans have gone under that many people have just stopped paying premiums. Last year for the first time there was a net decline in the money going into and out of pension funds. This has grave social implications because Japan's population is one of the oldest in the world. Millions depend upon pensions to survive. The question now is whether the banks themselves will be next. The crisis in Japan shows how quickly a capitalist economy can unravel, just when prosperity appears to have reached its peak. Millions of workers face a frightening future. WHAT'S THE ANSWER? Yet Japan still has modern factories, good schools, new highways and bridges, modern communications, and all the material requirements for prosperity. Why should the people have to worry about a roof over their heads or whether they'll be able to afford their next meal? They wouldn't, if the working class had its own state and was in charge of organizing production to meet human need. Not only could goods be produced in abundance, but the feverish pace of production could be slowed down so people had time to enjoy life. It is this capitalist profit system, in which U.S. banks and corporations still control the lion's share of the world's economy, which has pushed Japan to the brink of a monumental crisis. The only antidote to capitalist greed is working-class solidarity and the struggle for a new society. The workers in every country face the great historic challenge of uniting to bring humanity through this epoch of wars and crisis and replacing capitalist competition with socialist cooperation. - END - (Copyright Workers World Service: Everyone is permitted to copy and distribute verbatim copies of this document, but changing it is not allowed. For more information contact Workers World, 55 W. 17 St., NY, NY 10011; via e-mail: [EMAIL PROTECTED] For subscription info send message to: [EMAIL PROTECTED] Web: http://www.workers.org) ------------------ This message is sent to you by Workers World News Service. To subscribe, E-mail to: <[EMAIL PROTECTED]> To unsubscribe, E-mail to: <[EMAIL PROTECTED]> To switch to the DIGEST mode, E-mail to <[EMAIL PROTECTED]> Send administrative queries to <[EMAIL PROTECTED]>
