Another lesson in the limits of economic management

I was startled by some of the information in this article. The most startling thing I learned today might be that Japan is only 39 percent self-sufficient as far as calories. I knew Japan relied on significant imports of fuels given their natural resource limitations. But food? This is a developed country, one that was supposed to rival the economic might of the United States in the 1980s. Relying on imports for such a significant part of food consumption can be a serious issue. Combine this with economic stagnation and an aging population and it hardly seems like a recipe for an economic turnaround.

Abenomics apparently does not believe in income and substitution effects. Rising prices of necessities, such as food, force consumers to scale back purchases of cars, clothes, you name it. This is to say nothing of the distrust and animosity it will inspire in the population. In the end the policy just looks to be self defeating as talking up the prices without generating increases in incomes just makes people poorer.

2 Comments, RSS

  1. LT June 13, 2014 @ 2:37 pm

    I’m curious about your concern for Japan’s calorie self-sufficiency. Would their low calorie self-sufficiency concern you if they were one of the many territories that make up the United States? I believe that the demographic and geographic characterstics make it difficult or near impossible to produce enough calories to sustain its population, but is that necessarily a cause for concern? I suspect the calorie self-sufficiency of Alaska is also quite low, but that is the beauty of trade: what I cannot produce for myself, I am able to trade for if I can produce other goods and/or services that are of value to others.

    Converseley, if they were 100% calorie self-sufficient, wouldn’t that be of far greater concern in that just one bad weather event could subject the population to immense risk/distress since supply chains & infrastructure to receive “imported” calories would not exist?

    I would be interested in your thoughts on Japan’s public policy that may affect that 39% figure, potentially distorting a more ideal (if there even is such a thing) calorie self-sufficiency.

    • David June 13, 2014 @ 3:24 pm

      I don’t think there would be an ideal figure for calorie self-sufficiency. As you pointed out, 100% self-sufficiency carries with it certain risks that in the face of events, such as a tsunami and nuclear plant disaster, could jeopardize large amounts or even all of the food supply. It is also clearly the case that free-trade allows Japan to specialize and increase the standard of living for the country’s population.

      I do not think the comparison of Alaska is directly on point though. Alaska is one state in a larger country and I would expect national policy to attempt to prevent state level self-sufficiency in the name of specialization and national growth.

      I am not sure that my concern is completely about Japan’s calorie self-sufficiency. It was simply very surprising. The article does unveil one of the potential flaws in the economic plan the government is following. Prices are rising, apparently it is very notable for food. However wages are not following suit, at least not yet, and as a result people are forced into consumption changes. If wage growth does not occur these individuals will feel like heir standard of living declined, whether it did or not would require more data than the article mentioned or than I have currently.

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