The Old G-2

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On the recommendation of Tyler Cowen I picked up Taggart Murphy’s book  Japan and the Shackles of the Past. This book has impressed me; there are enough interesting ideas in it to make up several different posts. But today I’ll limit myself to one thought provoking excerpt:

By the fall of 1989, all this seemed in place. The 1988 presidential campaign in the United States had unnerved many in Tokyo; it looked as if the Democrats might nominate Richard Gephardt running on a protectionist, anti-Japanese platform. But the election was won by George H. W. Bush, the kind of moderate Republican with whom the Japanese political elite had long been the most comfortable. It seemed that after all there would be no significant political opposition in the United States to the emergence of what scholars and analysts on both sides of the Pacific were increasingly calling the “Nichi-Bei” or “G-2” global economy— that is, a global economy where the really significant decisions would be made by the two economic superpowers, the United States and Japan. 

The Americans would continue to provide security and a global currency while supplying commodities (wheat, corn, soybeans) and certain “soft” economic goods (movies, for example, or popular music). Japanese companies such as Sony and Matsushita could acquire major stakes in Hollywood, the global capital of popular culture— thus guaranteeing streams of content for their televisions, VCRs, and Walkmen— while other industrial companies were assured that when necessary they could buy up the emerging technologies that the Americans still seemed to be so good at spawning, allowing Japan to play to its core competency in commercializing them. Enough Japanese plants would be located in the United States to keep employment levels at politically acceptable levels in America, and the Japanese would leave to the Americans a couple of key manufacturing sectors such as commercial aircraft that had extensive overlap with defense industries, although Japanese suppliers would provide much of the value-added in these sectors. Tokyo and Washington would work together to manage global currency and trading frameworks while Washington would continue, with extensive Japanese financial support, to act as the global policeman. [1]

Today it seems laughable to imagine a future global order divided between Japan and the United States but when Bush I was entering office this seemed not only possible but probable. There was more to this prediction than the size of the economies involved; Taggart relates in detail how intertwined the political economy of both countries were, and argues that the economic strategies each employed during that era were not possible without the active cooperation of the other. In fact, if you were one of those people who passed along that silly Foreign Affairs essay claiming that the United States has not “employed economic means to achieve strategic ends” since the days of Kennedy and Eisenhower, this might be a necessary read for you. [2] Japanese foreign policy in the post war world is the example of “economic statecraft” par excellence and this book will give you a flavor of what terms like ‘economic statecraft’ ought to mean. American statecraft is not given the same weight (this is, after all, a book about Japan), but Taggart narrates enough about how American statesmen decided to respond to Japanese maneuvers to expose the ‘American economic policy hasn’t been geopolitical enough’ crowd as fools.

However, the world of international policy abounds in fools. As the passage quoted above suggests,  even the bests analysts play the fool sooner or later. Knowing what we know now, it is obvious that visions of a “Nichi-Bei” global order were fantastical. But foolishness is never seen as such in the moment, at least not by those caught up in it. This is the problem with futuristics and forecasting as a whole: it is too easy to project the zeitgeist of the moment onto an uncertain and unknown future. Analysts must have the humility to declare that this is what the future really is: uncertain and unknown. It is true, there are a few factors, like demographics and the like, who move so slowly that the flower’s shape may be known long before it blooms. But these are the exceptions. Wars and contentions, discoveries and inventions, the wild chase of the animal spirits–none of these can be seen decades before hand. Praise the pundit who has the humility to admit this.


[1] Murphy Taggart,  Japan and the Shackles of the Past (What Everyone Needs to Know) (Oxford: Oxford University Press, 2014), 186-187.

[2] Robert D. Blackwill and Jennifer M. Harris, “The Lost Art of Economic Statecraft,” Foreign Affairs, March/April 2016 Issue.

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"Praise the pundit who has the humility to admit this."

The problem here is that most pundits are being paid to create an illusion of understanding ("we understand all the relevant factors and can make wise policy decisions" "the world works the way my ideology says it works") or to make things happen by saying them (“x is unelectable” “y is going to make billions, and you should get in on the ground floor”). If they admit that the world is complicated and no statement about the future is certain, they may find that they are out of a job. Fortunately for them, they belong to a species which is very good at convincing itself that it has more knowledge of complex systems than it actually does, for reasons which psychologists have named and defined. So I suspect that even in areas where there is strong evidence that most 'experts' do not know much, most of the professional givers-of-advice sincerely believe that they are part of the lucky few who does have special knowledge.