Onus on Japan to lead world into next stage of capitalism

There's nothing historians can do if asked to predict the future of the global economy. However, what the American Pulitzer-winning historian John Dower said when asked about what it means to be a historian -- seeking "patterns in complexity" -- provides food for thought. It is when figuring out how a global economic shift will change our society becomes the issue that the historian's modus operandi of finding patterns is infused with meaning.

Former chief economist for Mitsubishi UFJ Morgan Stanley Securities Kazuo Mizuno -- who in early September became the Cabinet Office's deputy director-general for economic and fiscal analysis -- discusses the ongoing upheaval using this very method. He has adjusted statistics derived from countless studies for timeless comparability, and created a graph in which the vertical axis comprises the world's real GDP per capita, and the horizontal axis the long history of humankind. Illustrating the changes that have taken place in the past 1 million years in one graph could not have been an easy task.

From the data, Mizuno has managed to tease out a thrilling argument. The modern period began in the 1600s, with the age of exploration in full-swing. The principle on which society was based during this period was capitalism, a system in which a handful of people in the first world comprising less than 20 percent of the global population bought cheap resources from people in the third world constituting 80 percent of the global population, in turn selling products at high prices.

The system worked well for 400 years, which was why developed countries flourished until the 1970s. However, Mizuno argues, as the emerging self-assertiveness of oil-rich countries, falling profit rates among major corporations, and stalling crude steel production accurately suggested, capitalism entered a stage of stagnation after peaking in 1974.

Leading the world in this modernization race were the U.S. and Japan. When real investment hit a wall, they had nowhere to turn but bubbles. First, Japan dove straight into a real estate bubble in the 1980s, with the U.S. following suit in the 1990s in the realm of finance. The bursting of both bubbles brings our economic history to the present day.

As a result of the globalization of the world economy, the system based on 20 percent of the world exploiting the remaining 80 percent is proving no longer viable. Mizuno says in his book, "Hitobito wa naze gurobaru keizai no honshitsu o miayamaru noka" (Why do people misread the global economy?), that if this major upheaval represents what economic history can teach us about the future, Japan -- which has heretofore been at the head of the pack -- should be the very nation to move onto the next stage first.

If this is true, what is the future that awaits us? To answer this question, it is worthwhile to look at how during the oil crisis of the 1970s, Japan became the first to overcome the crisis through energy-efficient technology. Next, factor in the reality that a scramble for rare resources, including fossil fuels, has already begun. With that in mind, try to envision a future in which 3 billion consumers from emerging countries demand technologies, products, and systems appropriate for a society no longer dependent on fossil fuels. In order to be able to sell any such products and systems overseas, Japan must pull off its own full-fledged disengagement from fossil fuels ahead of anyone else.

What I find so intriguing about Mizuno's argument is his presupposition of Japan's position as a global forerunner. At one time, it was common for us to explain Japan's capitalism using words like "unconventional" and "exceptional." As a result, exposure to Mizuno's unique theory which places Japan's real estate bubble on the same level with the U.S. financial bubble evokes an oddly profound emotion.

Japan as a nation is worthy of in-depth analysis in that it has served as a "preview" of what is to come in the rest of the world. What the U.S. has directed toward Afghanistan and Iraq after Sept. 11, 2001, is more a gaze aimed at the subject of punitive action than at countries with which one is at war. The way the U.S. sees Afghanistan and Iraq is similar to the way in which Japan saw China during the Sino-Japanese War. It is precisely because Japan has set so many precedents for the world that it bears the responsibility of paving the way to a new stage of capitalism. No, this is not an attempt at satire. This is hope.