Why Abenomics is Failing

Abenomics is yet another failure for Japan.  It’s sad to see Japan’s continued struggle to regain economic dynamism after 20 years of waiting for it to clean up its act.  I was very optimistic when Hashimoto implemented his “big bang” financial liberalization program, and then when Koizumi followed up with his privatization plan.  However, much remains to be done in the realm of structural reform.  PM Abe’s “three arrows” rhetoric has failed to produce results in the third arrow, structural reform.

Foreign Affairs has a piece out lamenting the lack of progress in this area.  Low-hanging fruit includes trade liberalization:

The Road to War (Part II: The Balance of Power in a Multi-polar World)

 

Part II in a continuing series, this topic will deal with the events precipitating a Thucydides Trap between the United States and China. The Thucydides Trap was coined by a Harvard professor to refer to a scenario where “a rising power causes fear in an established power, which escalates towards war” (per the Wikipedia definition). Previous examples of this include Athens challenging Sparta, and the German Empire challenging the British Empire. Will the Chinese challenge to the United States become another such event?

Pax Sinica

The Carnegie Endowment published a piece called Pax Sinica: China and the New Russia that both questions the sustainability of China’s rise, and also whether Russia can truly gain salvation by pivoting towards China in the wake of its frosty relations with Europe:

Pax Sinica has come (or perhaps “Pax Cynica”). Countries in China’s orbit will be given security guarantees and trade preferences as long as they remain allegiant to China.

Is China’s Rise Over?

National Interest has a stark piece out today questioning China’s ability to continue growing at a high rate, predicting China will fall into the middle income trap:

http://nationalinterest.org/feature/the-great-fall-grace-china%E2%80%99s-rise-over-11649?page=show

This week marks the two-year anniversary of Xi Jinping’s ascendance to General Secretary of the Chinese Communist Party. Xi inherited serious economic problems, underappreciated at the time, and his response thus far has been largely cheap talk. The combination of inaction and daunting challenges threatens the end of China’s economic rise. Not a delay, the end.

The key points supporting this argument are as follows: