A Comparative Analysis of Two Superpowers, Japan and America

Superpowers and Their Economic History

In the late 1980s, the United States suffered from a number of economic problems that led to some analysts to believe that Japan would soon become the economic hegemon. By the late 1990’s the United States economy was apparently in a much better condition and the United States once again was clearly the global hegemon.

Therefore, it presents the question...

What changes in the intervening decade account for this turnaround in American economic fortunes? What was the most important characteristics of Japan that was missed in terms of evaluation of its overall power?

While post-war Japan’s economy flourished during the 1980’s, the United States wasn’t having as much success. A number of factors led to the economic problems and successes that made analysts question the future of these countries and their economic standings. Through analyzing the events leading up to these two situations, other outside factors, and the current events during that time period, one can make an educated decision on how these economic changes occurred. These factors and many more can determine why the United States, when in a recession, was able to bounce back and become the leading economic superpower.

The United States in the 1980’s had gone through three presidents, with Jimmy Carter for one year, Ronald Reagan for eight years, and George Bush for one year. This decade was called the ‘Reagan Revolution’ while the economy was simultaneously in recession starting and ending in 1980. This recession was mainly caused by the energy crisis which lead to rapidly increased inflation, and resolved by Carter reducing cuts and budget spending. The energy crisis was a time where petroleum supplies were short and prices skyrocketed. Major industrial countries and areas were affected quite heavily by this like the United States, Japan, Australia, and Western Europe. The Arabs placed an embargo, or ban, on selling oil to the United States because of our alliance and help to the Israelis. This embargo lasted a year, and exposed the United States large reliance and need for obtaining oil. This event was extremely important to the rest of the decade, as this had a lasting effect on oil prices even after the embargo.

Two years later it is discovered that while there is a 10.4% rate of unemployment, there is also an 11.4% increase in population since the 1970’s (Thenlen, 2004). This is the highest unemployment rate in United States history. In my opinion, these two rates are correlated, and population is a large factor in employment rates. The percentages are actually quite similar, with only a 1 percent difference. It makes sense though, the amount of children in the world would increase since the 1970s and the amount of jobs in the 1970s aren’t enough to support families and there aren’t enough jobs for those who become of age to find a job. This is a result of the recession, and thankfully by the end of the decade the United States will see the lowest unemployment rates since the 1940’s.

There were other misfortunes as well in the United States, dealing with internal and external issues. For example, Reagan had to ban the sale of grains and high technology to the Soviet Union due to the invasion of Afghanistan due to the Soviet-Afghan War. This along with the arms race created a large loss of revenue for the United States along with the rapidly increasing military spending that reached 400 billion per year and did not fall until the 1990’s. The stock market crash was another misfortune, losing 30 billion in market shares (Thenlen, 2004). The United States is hard to sway, but it seemed as if it was one misfortune after another.

Terrorism was quite prevalent within the United States as they became more and more involved in western politics. There were multiple hostage strikes and even 52 Americans hostages were held in Tehran. Eight billion dollars had to be passed to these Iranians to retrieve these Americans. Another instance would be when the World Trade Center was bombed by islamic terrorists in 1993 and killed six while injuring one thousand. Opinions, well informed and not, were being made about these countries that the US was involved in, and weren’t usually good. There were a lot of people even against how the US handled some of these situations. Instances like this dampered American morale, with outside and internal issues plaguing the country.

The United States was able to bounce back by the late 1990’s and reclaimed dominance over Japan economically. This occurred through a multitude of events, however the main factor that helped was when the arms race ended and the Soviet Union dissolved. Only in 1980, the United States had created 2,000 launchers, 10,000 warheads, and 4,000 megatonnage, not including the actual stockpile already created. This cost a huge amount for the government to build places to make them, hire people to build them, and to get the materials needed for these weapons. This extreme amount of money that was being poured into such a foolish purpose was now able to be directed elsewhere, to more important matters within the United States. The US was finally able to focus on themselves and their internal struggles than the spread of communism.

As mentioned, there were a couple drawbacks in the 1990’s in the United States including wars, frauds, and terrorism. These all affected American morale and their opinion of our country/people in power. An example is The Gulf War, codenamed Operation Desert Shield, started when Iraq invaded its neighbor Kuwait. This was when Iraqi leader Saddam Hussein invaded Kuwait and Arab powers called on the United States to intervene. This war cost 61 billion with US spending under 20 billion of the overall cost. Overall, there was not too many drawbacks that significantly and negatively affected the economy of the United States.

The Japanese had great success during the 1980’s and was referred to as the ‘Bubble Economy’. Japan first industrialized after WW11 by creating industrial and financial business groups that was called zaibatsus (Okina et al, 2001). These were usually created in groups of families and then others would purchase shares and formed strong business relationships. This along with the US Marshal Plan aided Japan in its economic rebuild and prosperity. President Truman signed the US Marshall Plan to help aid post WW11 Europe to rebuild their economies and prevent the spread of communism. The Bank of Japan also gave out more money in loans to people, stimulating the economy. All of these factors played into the growth of the economy in Japan

The Japanese lacked natural resources however they adapted by creating innovative technology and increased efficiency to make up for this. They would make money by taking western ideas and creating them and selling them back to the western countries for cheaper prices. Japan became especially successful in the automobile and electronics industry. Some large Japanese car brands in this decade was Toyota, Mitsubishi, and Mazda. The Japanese also created things like the gel pen which would end up being a huge fad in the

Unfortunately this success and prosperity would not last forever. The 1990’s for the Japanese was considered and named ‘the lost decade’ due to the stagnation of the economy during those years. Japan had ended up taking a turn for the worst, abruptly faltering and crashing in 1991, leading to a recession. GDP had ended up falling almost a trillion in the decade and ended up having some extreme consequences (BIS, 2001).

I believe there were a few important characteristics that were left out when analyzing Japan as a superpower. First of all, the resources available in Japan, and the population. Resources are extremely important because Japan had to buy natural resources and other items needed through other countries. The cost can add up through transportation and buying these resources from other countries for greater prices. Population and size is also another matter when determining who is a greater superpower. The greater size and population means the more GDP, more resources, and more growth potential. Japan is a little over the size of California, at 142,000 square miles. How could such a small country beat a 3.8 million square mile country? The United States has much more resources and many more people, and could easily beat Japan if they needed. The United States had a 249.6 million population in 1990 while Japan 123.5 million(BIS, 2001). The size and population of each of these countries are extremely important

Overall the United States was able to stay the leading superpower even when their economy was faltering. The United States size, resources, and population will keep the country above Japan in terms of power. There are many factors that lead to changes in the economy, such as patriotism/morale, wars, public opinion, internal and external conflict, trade, and expenditures/ revenues. These all were extremely important in Japan’s ‘bubble economy’ and their ‘lost decade along with the United States ‘economic boom’ and ‘Reagan revolution’.