Tuesday, February 17, 2004

For those who can't seem to get their heads around the concept of Ricardian competitive advantage, for those that seem to think that the only country to ever export jobs is their own, the New York Times points out the current flow of jobs and capital from Japan to China, and the way in which that outflow is keeping Japan's weak economy above water. In many ways, the Japanese economy is far more fragile and weaker than the United States'. We enjoy a highly diversified economy, with copious internal resources, a world-striding agricultural sector, the world's largest industrial complex, and a cultural/creative industry without peer. Japan, on the other hand, has no resources to speak of, and feels compelled to spend more absolutely on agricultural subsidies for its deeply uncompetitive agricultural sector than the United States spends on a vastly larger agricultural economy. Japan's only economic assets are industrial development and cultural/creative power. They're exporting industrial development - and it's what is keeping them afloat. A protectionist turning-inward on Japan's part would cause a catastrophic implosion of their economy. They rely on trade to a degree only matched by other Asian Tigers like South Korea. (take a look at their numbers in that graph in the Drezner link above. Higher relatively than Japan's!)

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