[Opinion] Japan’s Golden Age

The so-called Golden Age of capitalism was from the end of World War 2 until the 1970s. During the period, countries around the world posted high growth thanks to Keynsian policies. British economist John Maynard Keynes advocated an interventionist government policy. He favored a big government. That is, a welfare state with full employment and income averaging through taxes. However, the days of big government ended when stagflation continued from the mid 1970s.

The Japanese economy is recovering with small government policies, booming for 53 straight months from February 2002. This is due to the many economic reforms carried out by the private sector, while in the past, the government was mainly in charge of such reforms. The U.S. and England used this strategy from the 80s. They cut down the number of public servants and drastically reduced regulations. Japan privatized its postal system, which proved to be highly effective. This year, facilities investment growth by Japan’s private sector was 14.5 percent, the greatest since 1989. Companies, now, are finding it difficult to hire employees.

The Japanese government announced strategies for economic growth recently, in order to continue prosperity for another 10 years. The plan includes posting annual growth of over 2 percent by expanding the service market and easing regulations. Its aim of 2 percent is a high growth when considering that its potential growth rate is 1 percent. The strategy also includes reducing regulations and improving systems that block commercialization of advance research achievements by forming a body consisting of representatives of government, private sector, and academia. This is an ambitious plan aiming to make Japan the world’s top technology innovation center.

President Roh, on the other hand, tilted toward big government and failed to achieve potential growth of 5 percent since he came into office. The economy showed signs of recovery, but is expected to stagger with strong won and high oil prices. The economy is aging, and people from ages 25-49 are projected to decrease from 2008. Facility investment growth recorded a mere 0.3 percent since 2001. It must keep in mind that no country that adopted big government policies succeeded in economic growth.

Lim Gyu-jin, Editorial Writer, mhjh22@donga.com