A few months ago I was speaking at a conference at which Nouriel Roubini gave a talk about his view on the future of the world economy. He spoke about V-shaped recovery, U shaped, W shaped, and, the horror, the horror, the L-shaped version. An L-shaped recovery is one in which there is essentially no recovery at all. Japan in the 1990s was held up as the poster child and, I hope there are no Japanese reading this, was just about the worst thing that could possibly happen to a country, to be avoided at all costs, even if it means throwing money into the system (quantitative easing) or starting another war. (That’s my interpretation, not his, I hasten to add!) I gave my talk after his and, improvising, said something like this…
Have you any experience of Japan in the 1990s? Well I have. And it didn’t seem too bad to me. Were there hordes of people begging on the subway? Not that I recall. Was it dangerous roaming the streets for fear of being mugged? No, it seemed safe enough when I was there. Was there high unemployment and general desititution? No. More on this anon.
Japan in the 1990s was, as it still is, a safe, enjoyable place, with a very high standard of living, and at the cutting edge technology wise. Not the hell hole that economists like to paint. And so I really cannot imagine what Japan would be like now if they’d had a V-shaped recovery. They’d all be communicating by telepathy and travelling via matter transporter I guess.
To me the important point about the economy is not what letter of the alphabet best represents it, nor its percentage growth. After all, is it really necessary to grow at x percent per annum in order to maintain the feeling of status quo? Like the shark, which supposedly has to keep moving forward in order to stay alive. What sort of life is that? I believe what is most important is the well being of the people, and that’s not the same as GDP. It is, however, closely linked to rate of employment. And that’s where Japan does remarkably well. That’s what governments should focus on, to L with growth!
I’m a simple person. (Easy now!) I take holidays in the Isle of Man and frequent thrift shops, for god’s sake! So rampant growth really doesn’t do it for me. I confess that I was kind of looking forward to a world with a little bit more of something beginning with L. But it looks like we are back on the treadmill, back to the bumper bonuses. And I believe we’ve just missed a great opportunity for making the world a better place. (Mind you, if we get the double dip maybe we should treat that as a second chance!)