And yet, somehow I doubt he’ll admit that his neo-Keynesian advocacy of more government spending, more money printing, and more debt is incorrect when Abenomics, as applied Keynesian stimulus in Japan is known, fails. We already know that when it fails, it will be for the same reason that Obama’s $787 billion stimulus package failed: it was too small.
These days we are, in economic terms, all
Japanese — which is why the ongoing economic experiment in the country
that started it all is so important, not just for Japan, but for the
world. In a sense, the really remarkable thing about “Abenomics” — the sharp
turn toward monetary and fiscal stimulus adopted by the government of
Prime Minster Shinzo Abe — is that nobody else in the advanced world is
trying anything similar. In fact, the Western world seems overtaken by
economic defeatism….It would be easy for Japanese officials to make the same excuses for
inaction that we hear all around the North Atlantic: they are hamstrung
by a rapidly aging population; the economy is weighed down by structural
problems (and Japan’s structural problems, especially its
discrimination against women, are legendary); debt is too high (far
higher, as a share of the economy, than that of Greece). And in the
past, Japanese officials have, indeed, been very fond of making such
excuses.The truth, however — a truth that the Abe government apparently gets —
is that all of these problems are made worse by economic stagnation. A
short-term boost to growth won’t cure all of Japan’s ills, but, if it
can be achieved, it can be the first step toward a much brighter future.So, how is Abenomics working? The safe answer is that it’s too soon to tell. But the early signs are good — and, no, Thursday’s sudden drop in Japanese stocks doesn’t change that story.
What is the difference between Keynesianism and Neo-Keynesianism? The true Keynesian believes that there is a time for government spending to contract. The Neo-Keynesian says: in times of growth, spending must be maintained in order to preserve economic growth. And in times of contraction, spending must be increased in order to kickstart it.