Prof. Norman Bailey compares European and Japanese "lost decades"

by Norman A. Bailey  |  August 25, 2013  |  ARTICLES

EurosEurope's disastrous decade
By just about every measure, Japan performed better during its "lost decade" than Europe has since the adoption of the euro in 2002.

As we know, Europe shuts down over August. One result of this is that both good and bad news, unless it is of an earthshaking nature, gets overlooked until after the holidays. That makes it a good time for others to step back and put Europe's economic and financial (and as a result social and political) situation in some sort of perspective. One perspective that is often adopted is a comparison of Europe today with Japan's so-called "lost decade", from 1991 to 2001 (Japanese economic performance has not been much better since).

The "lost decade" in Japan was characterized by economic stagnation, with very low or slightly negative growth rates. Unlike Europe now, however, unemployment in Japan was low during this period, and although the total governmental debt rose almost alarmingly, it is almost all held domestically and denominated in yen, so that no debt crisis erupted. As a result, there has been nothing in Japan to compare with the demonstrations and riots in various Eurozone countries, along with the emergence of extreme leftist and rightist political parties. A recent study by Leto Market Insight, a Washington-area consulting firm, has brought to light several other differences between the Japanese experience and the European one, and the comparison does not favor Europe.

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