Is Japan's Demographic Disaster a Foretaste of Our Global Future?

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The economic implications of Demographic Winter and the "population implosion" are finally plain for all to see.  Twenty-five years ago, Japan's economy was conquering the world; today, "it has fallen and can't get up."   Much the same reality is ahead for every country that bought into the "population bomb" misconception.

At the moment, the United States is the only major advanced economy that is likely to avoid much of this crisis.  India and much of the developing world has not yet experienced the birthrate collapse.  China will not face big problems until after 2025, even though its workforce will peak in 2015.  Europe will have many of the same troubles as Japan, and because of the lack of social cohesion, its problems are likely to be even worse.  Consider the violent reaction in Greece to its deficit reduction efforts; imagine what will happen when the dependency ratio explodes. 

We have described many of the basic drivers of the problem in prior issues of Trends.  But what has really happened in Japan as theory has become reality?

Japan's troubles were recently summed up in an article from DailyFinance.com.1  The young people of that nation graduate from college with few opportunities for meaningful jobs.  They wind up doing temporary work or contract labor.  They earn as little as one-third of what their fathers earned and have no job security — which has always been a cultural mainstay of the Japanese economy.  Because they earn so little, they wind up living with their parents. 

One of the effects of this stagnation has been that Japan, once a beacon of egalitarianism, has turned into a nation of the rich and the poor with not much in between.2  While millions are struggling to make ends meet, the Nomura Research Institute recently estimated that there are 60,000 Japanese households with assets of more than $3.6 million, and the number is growing. 

Japan used to offer employees a guarantee of lifetime employment in exchange for hard work and complete loyalty to the company. But, as Japan's property and stock market bubbles began to sag in the late 1980s, companies began downsizing and easing those traditional employees out.  The social contract fell apart. 

The younger generation saw this happening to their parents and came to the conclusion that hard work and loyalty were for losers.  They have now chosen a life as free agents — called "freeters" — who flit from job to job and spend their time pursuing their own interests.  By 2001, half of high school graduates and a third of college graduates were quitting their jobs within the first three years...

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