This used to be called "secular stagnation". There's not much forward progress, but nobody really understands why. Japan hit this first, in their 1989 housing crash. In the mid-1980s, Japan seemed poised to dominate the world economy. After the crash, Japan never came back.[1]
There was a fear that the US would hit that after the 2008 crash. But the US did come back. At least until the epidemic.
Macroeconomists think macroeconomics determines what happens. Sometimes it does, and sometimes it doesn't. When it doesn't, central bankers are totally lost about what to do.
Should a country have an industrial policy? The traditional answer in capitalist countries is "no". But it worked for Japan, S. Korea, Singapore, and China, which now make most of the world's good stuff. China's current industrial policy, set in 2015, is called "China 2025"[2][3]. The plan is to achieve dominance in the remaining sectors where China is behind - aircraft, ICs, etc. It's not talked about much outside China, but it's still the operating plan. The main items in 2015 were:
1. New advanced information technology
2. Automated machine tools & robotics
3. Aerospace and aeronautical equipment
4. Maritime equipment and high-tech shipping;
5. Modern rail transport equipment
6. New-energy vehicles and equipment
7. Power equipment
8. Agricultural equipment
9. New materials
10. Biopharma and advanced medical products
Halfway through the 10-year plan, China is doing well on at least 7 of those items.
Western countries are assuming that the knobs controlled by the financial system determine what happens. When the biggest country on the planet isn't playing that game, that approach may not be competitive.
> This used to be called "secular stagnation". There's not much forward progress, but nobody really understands why. Japan hit this first, in their 1989 housing crash. In the mid-1980s, Japan seemed poised to dominate the world economy. After the crash, Japan never came back.
Scott Sumner disagrees on no one understanding this. They’re not printing enough money. Basic sketch of the market monetarist position is that Friedman was right about money being really important but very, very wrong about the appropriate target. Keep printing money until nominal GDP growth hits target, then stop. Better to target NGDP future to reduce instability. Japan’s central bank’s is up there with the Fed causing the Great Depression by contracting the money supply by a third at the beginning of a recession in terms of economic mismanagement.
Japan has an ageing population. So, it's not GDP or even GDP per capita, but GDP per working hour to look for, and, on that measure, Japan isn't doing too badly.
Japan's problem seems to be very low net household savings and too high savings by corporates. It would be preferable to shift income towards households instead of running up public debt to keep every one employed.
There was a fear that the US would hit that after the 2008 crash. But the US did come back. At least until the epidemic.
Macroeconomists think macroeconomics determines what happens. Sometimes it does, and sometimes it doesn't. When it doesn't, central bankers are totally lost about what to do.
Should a country have an industrial policy? The traditional answer in capitalist countries is "no". But it worked for Japan, S. Korea, Singapore, and China, which now make most of the world's good stuff. China's current industrial policy, set in 2015, is called "China 2025"[2][3]. The plan is to achieve dominance in the remaining sectors where China is behind - aircraft, ICs, etc. It's not talked about much outside China, but it's still the operating plan. The main items in 2015 were:
1. New advanced information technology
2. Automated machine tools & robotics
3. Aerospace and aeronautical equipment
4. Maritime equipment and high-tech shipping;
5. Modern rail transport equipment
6. New-energy vehicles and equipment
7. Power equipment
8. Agricultural equipment
9. New materials
10. Biopharma and advanced medical products
Halfway through the 10-year plan, China is doing well on at least 7 of those items.
Western countries are assuming that the knobs controlled by the financial system determine what happens. When the biggest country on the planet isn't playing that game, that approach may not be competitive.
[1] https://www.csis.org/analysis/made-china-2025
[2] https://www.pbs.org/wgbh/frontline/article/made-in-china-202...
[3] https://static.seekingalpha.com/uploads/2019/1/21/saupload_J...