A spectre is haunting Japan – the spectre of deflation. With this ironic twist on the Communist Manifesto, we are witnessing the downside of capitalism in Japan. An article in the NYTimes by Martin Fackler chronicles the recent decline in the economic output in Japan and the hardships it is creating. Caught in a business cycle with no upside in sight, the Japanese economy has fallen behind China’s. The original Asian Tiger, even before that term was in vogue, is little more than an old alley cat.
The article paints a dark, painful picture of people living in a multi-storied home on only a few hundred square feet. In our world of mega-mansions, this is little more than a master bedroom closet.
The downsizing of Japan’s ambitions can be seen on the streets of Tokyo, where concrete “microhouses” have become popular among younger Japanese who cannot afford even the famously cramped housing of their parents, or lack the job security to take out a traditional multidecade loan.
These matchbox-size homes stand on plots of land barely large enough to park a sport utility vehicle, yet have three stories of closet-size bedrooms, suitcase-size closets and a tiny kitchen that properly belongs on a submarine.
The fall from economic grace is not only depressing in financial terms but also in human terms.
Japan’s loss of gumption is most visible among its young men, who are widely derided as “herbivores” for lacking their elders’ willingness to toil for endless hours at the office, or even to succeed in romance, which many here blame, only half jokingly, for their country’s shrinking birthrate. “The Japanese used to be called economic animals,” said Mitsuo Ohashi, former chief executive officer of the chemicals giant Showa Denko. “But somewhere along the way, Japan lost its animal spirits.”
“Deflation destroys the risk-taking that capitalist economies need in order to grow,” said Shumpei Takemori, an economist at Keio University in Tokyo. “Creative destruction is replaced with what is just destructive destruction.”
But against this effect of the economic downturn, the story points to another adaptive change.
Deflation has also affected businesspeople by forcing them to invent new ways to survive in an economy where prices and profits only go down, not up.
There’s not much more said about this, but, given the general tenor of the story, I would expect economists to see it as a wholly negative consequence. Imagine people learning to live with less. Horrors. I am sure that this change is painful and difficult, but perhaps there is an upside to it. As a fully vested member of the sustainability club that doesn’t believe that we can grow our way out of unsustainability even with expected gains in efficiency, I see this protracted period of behavioral and attitudinal adaptation as an important experiment in testing ways to shrink our material economies. I am not familiar with any sociological or psychological work that has looked more closely at the impact on individuals, but hope that some scholars might have seen this unplanned social experiment as a unexpected research opportunity. The more we can learn about the actual impact of economic stasis or shrinkage on people, the more we can design transition strategies to enable all the billions of us to live and flourish on a single, finite planet.