For many years Japan has been criticized for the lack of growth of its economy, resulting in what has been labelled its ¨lost decades.¨ I argue below that far from an aging, backwards-looking country, Japan may have anticipated (consciously or not) the winning formula for economic life in our globally warming, AI future.
During the 1980s, the Japanese economy grew strongly, with asset prices tripling, fueled by seemingly unlimited bank lending. When this financial bubble finally burst, Japan entered a long period of zero or negative growth and commentators in the West criticized Japan’s lack of economic dynamism. This aging nation of savers refrained from consumer spending and protected existing jobs over the creation of new ones. But what if they were right?
In the West we have largely been avoiding the bursting of bubbles by simply moving debt around and inflating new bubbles. Thus, the savings and loan crisis begat the internet bubble which begat the mortgage crisis which may yet beget a sovereign debt crisis. We are addicted to growth, much to the detriment of our warming planet. Of late, I have begun to think that perhaps the Japanese are better placed than Americans to weather the looming shift of work from humans to machines. While traditionally economists have looked to population growth as the principal long-run driver of GDP growth, if there won’t be enough work to go around, perhaps a shrinking and aging but wealthy population is better placed to make this transition. It will certainly consume fewer fossil fuels.
Interesting new economic solutions such as Universal Basic Income (UBI) have been proposed to replace wage-based employment as a source of family income. However, no one can be confident that former workers will be able to adjust to not “working for a living” with the concomitant loss of self-worth. The whole notion of “growth” may need a rethink in a future AI-driven economy where not only machines produce most of the goods, but they also trade with one another. Productivity and hence GDP may initially rise as learning algorithms get more efficient, but this will likely plateau at some point. In such a world we may come eventually to value health, learning and art over growth and consumerism.
It may, of course, not turn out so rosy. For example, a class of future Zuckerbergs may come to own most of the wealth on the planet and fuse AI with genomics to perpetuate a new hybrid race of super humans; or killer AIs may decide to annihilate Homo Sapiens entirely or relegate us to a human zoo; or without being expressly targeted we might all fall prey to Nick Bostrom’s famous out-of-control paperclip optimizer.. I’d like to think that we will figure out a way to not destroy the richness of human civilization we have worked so hard to create. Towards this end we could do worse than study the Japanese example of fewer, older, wealthier and less violent citizens.
Perhaps Mrs. Watanabe knows what she is doing.