It’s Time to Break With 'Capitalism Without Rules'

5-28-09, 9:00 am

Original source: Akahata (Japan)

Japan’s economic growth measured by gross domestic product (GDP) fell four percent, or a 15.2 percent annualized rate, in the fourth quarter (January-March 2009) of FY 2008.

In addition, the previous quarter’s contraction in GDP was revised downward to 3.8 percent (14.4 percent annualized rate) from 3.2 percent (12.1 percent annualized rate).

For two consecutive quarters, Japan’s GDP growth fell below the previously worst-ever minus growth of 3.4 percent (13.1 percent annualized rate) in the fourth quarter of FY 1974, the year following the “oil shock.”

Consumers are being discouraged from spending money

Economic growth in the fourth quarter was impacted by sharper declines in domestic demand than in the previous quarter. This is due to the mass layoffs of temporary and fixed-term contract workers carried out by large exporting companies in response to rapid declines in foreign demand, including that in the United States.

The nation’s nominal and seasonally adjusted employee compensation decreased 0.4 percent in the third quarter. In the fourth quarter, it decreased 0.7 percent. At an annualized rate, workers’ compensation fell two trillion yen from the previous quarter, a decrease of 18 trillion yen from the record high mark in the second quarter of FY 1997. Household spending in the fourth quarter showed a steep decline, down 1.1 percent from the previous rate of 0.8 percent.

Despite these serious circumstances, the Aso Cabinet and the ruling parties are optimistic. Prime Minister Aso Taro at the House of Councilors Budget Committee on May 20 said, “Industrial-production index has been on an upward trend.” He even said, “Little by little, the government’s economic measures) are starting to producing results.”

In its monthly economic report, the government made an upward revision to its economic outlook for the first time in three years. It further seeks to start the general election campaign after declaring that the economy has ceased receding, aiming to appeal to the public on the supposed positive effects of the stimulus package pushed through by the Liberal Democratic and Komei Parties.

The recent recovery in industrial output can be attributed to the fact that large exporters reduced their inventories faster than ever at home and abroad. It happens that levels of production and exports appear to be stronger than they actually are in the course of returning to normal levels of inventory. The “recovery” is nothing but a temporary phase of the conventional economy led by exports.

The Aso Cabinet, which was shortly before calling for a “change to domestic demand playing a leading role,” has turned back to its position of high dependence on exports after the immediate danger is seemingly past. To comply with requests from financial circles, its supplementary budget now being discussed in the Diet includes expenditures favorable to large corporations dependent on the export market.

In the United States, the major source of Japan’s trade surplus, the household economy has been heavily hit by the collapse of the housing bubble. The United States is urged to turn away from its economic pattern in which households borrow money in order to spend more, which eventually leads to economic growth. Unless the Japanese government squarely faces up to the fact that the U.S. consumption bubble has burst and takes the initiative to change the economy into one led by domestic demand, the Japanese economy will face a bleak future.

For an economy that is led by domestic demand

A Reuters survey shows that 40 percent of the leading manufacturers in Japan are planning to cut full-time jobs. Large corporations are responsible for the collapse of the job market, which is worsening people’s livelihoods and the national economy at the same time.

It is imperative for the government to order large corporations to stop laying off workers by paying out part of their enormous internal reserves in order to prevent the economic downturn from becoming worse as well as to change the economy into one led by domestic demand.

The mass media abroad are watching Japan because they think that such things as karoshi (death from overwork), unpaid overtime and the growth of the working poor are unimaginable in Europe. The task of reforming “capitalism not governed by rules,” which is an aberration in the world, cannot wait any longer.