In his book, "The Wealth of Nations" written in 1776, Adam Smith wrote, and I paraphrase, When two rich persons meet, it is usually to conspire against the common wealth and to raise prices. A profound fact that we have discussed at length on this blog.
Fine. Then what is the alternative? The democratic process tells us that it must be populism: Give the people what they want and we'll end up with prosperity in a system everybody loves. The two examples bellow show us that although it usually start that way, it always ends up sooner or later in misery.
The first example is Bolivia where Evo Morales was President from 2006 to 2019 and where he literally gave people what they wanted. Cheap oil and subsidies for almost everyone. The prosperity, this time, (There were many "previous" times including silver earlier on.) was based on gas. Poverty was reduced but Bolivia "forgot" to invest in the future and when the future arrived, there was nothing left to keep the machine humming and avoid bankruptcy which is now starring the country in the eyes. As explained in the great video below:
Bolivia: How To Literally Run Out Of Everything (Video - 14mn)
Japan is a much larger country and the story is therefore far more complex. But in a nutshell, Japan spent the last 3 decades avoiding a reckoning and changing as little as possible to a system which had been so successful before. Why should they?
Over time, the country ended up with a staggeringly huge pile of debt, companies which are the shadow of their former self but amazingly a society still fundamentally sound if far poorer than it was earlier. What is most striking about Japan is the immense amount of mal-investment the country has managed to generate over the years. From bridges to nowhere, Shinkansen stations in the countryside, to the recent crop of super high sky-scrappers now dotting the skyline of Tokyo for armies of salarymen who are on the verge of being replaced by AI. Or by nothing at all considering their low productivity!
Eventually what decides the outcome of an investment is rarely productivity, but the rate of interest you must pay to roll over your debt. And the debt of Japan is so large that soon when interest rates rise as they always do, you end up unable to pay back your debt.
Japan's Collapse (Video - 12mn)
These are two very different example but the outcome will be the same. The only difference is that the world can cope with the bankruptcy of Bolivia, whereas the bankruptcy of Japan will be far more difficult to absorb.
In both cases, as Mencken famously didn't said but implied 100 years ago; Give the ordinary people what they want and watch your country go up in flames. He probably would have been appalled more than thrilled (but Mencken was a pessimist) to be so fundamentally proven right!
Both Evo Morales and Sanae Takaichi, a passionate of... Manga, have done their very best indeed to prove him right.
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