Blog Post 3

 In my third blog post, I wanted to discuss global economy, and specifically, Strange's article that discussed the difference between Japan's financial power compared to the United State's (keep in mind that this article was written in 1990). Strange's core argument is that the reasoning behind the disparity between the financial powers of Japan compared to the united states comes down to the fact that Japan's power was "relational", while the United State's was structural. Essentially, the international use of the Yen along with the "percentages of Japanese trade invoiced in Yen" (269). Strange argues that these two indicators fell short on the international playing field, as the use of the Yen made up very small percentages in international trade. The United States, on the other hand, dominated in terms of the use of the dollar, and even had exchange rate protections for imports and exports. 

The point of my discussion, however, is to discuss what happened after this paper was published. Last year, I took an economics elective in which I was assigned to write an extensive paper on the economic history of Japan. Although I did not go into depth about Japan's international economic behavior, I did extensive research on how Japan's economy operated internally, and how the country rose from economic ruin post WWII. However, in 1991, shortly after this paper was written, Japan entered what they now call the "Great Recession" that lasted until around 2004. In short, Japan's financial system was centered around banks, also known as "bank-loan capitalism". Essentially what this means is that the central banks prioritized creating liquidity through a number of strategies. To avoid going into too much detail, I'll give a brief summary of how this failed. The Japanese banks operated under a risky monetary system that was characterized by over-lending and over-borrowing. With increased loans from banks, investments increased in the real estate and stock market. The bubble eventually burst (for a number of reasons but mainly because this over-lending and over-borrowing was not immune to external factors, such as a change in the value of the U.S. dollar). 

I find it extremely interesting that this paper was written just a year before this bubble burst and Japan entered a lengthy recession. In the article, the author is discussing whether or not Japan will ever "catch up" to the United States in terms of financial power, and here we can see that Japan certainly did not. The reason I wanted to discuss this, and why I found it relevant is because Strange seemed to be unaware of the potential disaster that was looming over Japan, and yet a year later it occurred. It makes me wonder, as we discussed in class, whether the United States can maintain the financial power that we have today. I think the effects of covid in terms of unemployment and growth rates in the U.S. may be lasting, and may cause future problems that may disrupt our financial hegemony. Particularly with what is happening now, with the "anti work" movement, and lack of jobs, or a lack of jobs that pay a living wage, we may see more financial struggle before we see an uptake. 

I think to move forward, there must be significant policy reform regarding wages, as well as employee protections. I think working class American's have been waiting for the opportunity to reform the minimum wage problem, and the gap between the upper-middle-lower classes for a long time, and I think we are beginning to see that these sentiments are starting to be heard and create a movement for fairer wages and working environments.