Western Economic Decline Exists Because Western Economists And Politicians Have Ignored Shimomuran Economics. How Long Will the West lag behind?
Fri 27th Dec 2013
Photograph of Dr Osamu Shimomura from the cover of his 1987 book “Nippon wa Warukunai”, (Japan Is Not At Fault)
1 The Significance of Dr Osamu Shimomura
The second most important economist of the 20th century (after John Maynard Keynes) was Dr Osamu Shimomura, the “Father of the Japanese Economic Miracle” because according to the Development Bank of Japan’s website he was “ Japan’s most influential economist.” He had developed and implemented, through his position as an advisor at the Bank of Japan, the key policy of Investment Credit Creation. That policy propelled Japan, within a few decades, from being a war-devastated impoverished country into being one of the leading industrial powers in the world. See http://londonprogressivejournal.com/article/view/1566/the-origin-of-shimomuras-japanese-economic-miracle-or-the-second-economic-bomb-japan-from-to-economic-miracles-part
2 The Key Publications
In 1961, Dr Osamu Shimomura presented his Model of the Japanese Economy and its equations to the joint meeting of the Japanese Economic Association and the Japanese Econometric Society. His presentation was then published under the title “Seicho Seisaku No Kihon Mondai” (Basic Problems of Growth Policy) in Riron Keizaigaku, March 1961. Also in 1961, Dr Shinohara published “The Secret of Accelerated Growth.” The year after that, Dr Kenneth Kenkichi Kurihara wrote a seminal article in Kyklos, Vol XV, 1962, and repeated his observations in the Appendix to Chapter 5 of his 1963 book. He then further repeated and expanded his observations in his book, “The Growth Potential of the Japanese Economy”, John Hopkins Press Maryland 1971.
3 The Lag in Western Economic Understanding
Judging from the dates of these publications, it appears to me that Eurocentric Western economics is probably lagging Asian economic understanding by at least half a century and perhaps by three-quarters of a century, taking into account the first practice of these economic understandings in the USA in 1938. That disparity may explain most of the difference in the economic growth rates of China and the West.
4 The Rise of Chinese Economic Understanding
After the Nixon-inspired Sino-Japanese rapprochement of 29 September 1972, many Chinese delegations visited Tokyo to find out how Japan had grown so rapidly and to copy that procedure back home in Beijing. Some of these delegations met Shimomura. How could they not meet him, given their stated objectives?
5 How long will the West Lag behind?
In the mid-1970s these Chinese delegations discovered Shimomuran high-growth wealth-creating economics. Some members of these Chinese delegations probably asked:
“How long will it be before the West catches on to this better, high-growth, wealth-creating economics?”
I can only speculate on how the Japanese (or perhaps even Shimomura himself) might have replied to that question. But any answer would be bound to respond by covering the following key points:
“Well, you are here in Tokyo, to find out how we in Japan have grown rapidly and no Western government has so far shown a similar initiative. We have been practicing this high-growth economics since 1946, and although a couple of Western economists (such as the Australian Kenneth Bieda and the Japanese-American Kenneth K Kurihara) have written about it, the great majority of Western economists have not caught on or caught up. This is surprising because the first economy to practice investment credit economics was the USA from 1938 to 1944, but the Americans have apparently forgotten what they did then. Their lack of economic understanding is, of course, our opportunity to develop and to make money.”
(For some detail on FDR’s American economic miracle, see http://londonprogressivejournal.com/article/view/1507/fdrs-american-economic-miracle-or-the-first-economic-bomb-the-usa-from-to-part )
And they might have added:
“The West might never catch on. Their econometrics is so well developed and their theoretical economic understanding is very great, but their practical understanding and knowledge about how to make an economy truly prosperous - and to do that in decades rather than the centuries some Western economies have taken to develop - does not exist in the West.”
And they might have concluded:
“So they invent, and we invest!” As we do and they do.
6 The Shimomuran Conclusion
After studying Shimomuran economics, the master growth economist Kenneth Kenkichi Kurihara concluded
“If, therefore, greater investment can be financed partly by credits, there is no need for that 'abstinence' which the classical economists considered necessary for economic progress, any more than there is for that 'austerity' which some present day underdeveloped countries impose on already under-consuming populations at the constant peril of social unrest. Nor is it difficult, in such credit-creating circumstances, to agree with Keynes' observation that investment and consumption should be regarded as complementary rather than competitive."
(Kenneth K. Kurihara, Growth Potential of the Japanese Economy, Baltimore, John Hopkins Press 1971 page 138)
Shimomuran economics not only ends any need for “abstinence” and “austerity” which imposes suffering on the people in the nation imposed from the political heights, but it ends the intellectual confusion experienced by many economists between investment and consumption, because it ends the intellectual seesaw between investment and consumption. It is no longer necessary to cut consumption to increase investment or vice versa. Economics is no longer a static intellectual zero sum game in which gains in investment can only be made by reducing consumption, and vice versa. Consumption can continually increase as investment credit continually provides the funds for the new investments. There is an investment-providing money tree located in the central bank of all nations which still have control of their currency. Many badly-advised Western politicians supported by wrong-headed economists have said that isn’t so, but it certainly is.
Western economics, Western economists, and Western economies are no longer much good at producing the goods. China is using Shimomuran economics to become the preponderant economic, military and political power in the world. It is now essential that investment credit economics - which is bringing that situation about - is better understood in the Western economies. Shimomuran economics is the key to Western economic recovery, to the rapid reduction of poverty in the third World, and to a better life for everyone in a more rapidly developing and more integrated world economy. When appropriately used, it is the best route to the more full flowering of all the cultures of mankind.
That will happen.
© George Tait Edwards 2013