THE IMPORTANCE OF THE JAPANESE ECONOMY
By Bob Confer
Japan is not an island Ė or collection of islands Ė unto itself. As small as that archipelago may be, itís undeniably powerful, one of the most important participants of the global markets. In 2010 its 42-year reign as the worldís second largest economy came to end, giving way to China and its explosive growth in export-based manufacturing and domestic consumerism. Regardless, its gross domestic product in 2010 was estimated to be $4.34 trillion dollars. Thatís a far cry from our economic output of $14.72 trillion but it far rivals that of other nations that are assumed to be economic powerhouses like Germany, England, and Russia, all of which linger in the 2 to 3 trillion dollar range. Itís an impressive feat to nearly double the likes of those super powers.
The world would look like an entirely different place without Japan. Weíre going to experience exactly that for the short-term. Think of how our nation recessed economically following the September 11 attacks. We retreated into a shell; we were unable to travel or do business as we did in the days prior and we were quite unwilling to as well, our pride replaced with hesitancy, if not fear. As horrible as the events of that day were, they pale in comparison to what has happened Ė and will happen - to Japan. Not only is the death toll higher, but the damage is almost incalculable. Whole cities have been forever wiped out. Infrastructure was torn asunder. The electrical grid lost a huge chunk of its capacity. The nuclear crisis will serve to dampen future development.
With every movement of the Earth, every larger-than-normal wave, the Japanese people will worry about their lives and those of their loved ones. They are a stoic, well-prepared people, but theyíre human, too. Fear can be the strongest Ė and most-stifling - of emotions and no amount of preparedness can ready you for Mother Natureís full fury. Not only do they have to rebuild vast swaths of their nation, they have to rebuild their confidence, too. In both cases, itís going to take some time and a serious investment of blood, sweat and tears. The process will take years. The re-invention of Japan could take decades.
This isnít just Japanís economic crisis. Itís all of ours. The world has been teetering on the edge of a double-dip global recession for some time due to a wide variety of factors which include financial that caused the Great Recession and remains unaddressed since, unrelenting unemployment, nearly-contagious national debt, skyrocketing food and oil prices, and sociopolitical unrest throughout North Africa and the Middle East with a sampling of the same in Europe. With all of that already in play, Japanís imminent collapse will be the straw that breaks the camelís back. Such is to be expected when one considers that Japan is the both the fifth largest exporter and fifth largest importer. It puts $765 billion into the global economy, while bringing in $637 billion. Itís a net-exporter, something Americans now aspire to be.
Speaking of America, we import 16% of Japanís total international output while accounting for 11% of their imports. Given they have the capital, we might see an upswing in exports to Japan as theyíll have an insatiable appetite for resources, building supplies and heavy equipment as they rebuild. But, that will mask the most alarming aspect of Japanís demise which is the shot in the arm it gives China. Lacking the infrastructure and investment power needed for salvaging the factories and generators that were lost, Japanís manufacturing exports will be replaced by Chinese output. We certainly donít have the ability Ė or drive - to mass produce electronics and luxury items as the Japanese do. China does. This will only accelerate their ascent to the Number One spot in the world. Prior to the quake, China was destined to assume that role in 2030. What are we looking at now, the end of this decade?
Itís a mess. You certainly canít place a cost on human suffering, but you can make an educated guess about what that misery might do to the marketplace. Because of its value to its trade partners, Japanís earthquake-related disaster will send aftershocks well beyond its borders. The global economy will see its own version of a tsunami, a flood of economic malaise that will tear apart its very foundation. A global recession was almost certain before the earthquake. Now itís guaranteed.
Bob Confer is a Gasport resident and vice president of Confer Plastics Inc. in North Tonawanda. E-mail him at email@example.com.
This column originally ran in the 21 March 2011 Greater
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