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Japan’s false dawns

Brian asked if Japan was only pretending to do badly. He seemed to think that there were some grounds for doubting the news of Japanese economic stagnation.

Looking at the World Economic Freedom report I discovered the following interesting figures.

  1. Income Tax top rates as percentages:
    (1st figure 1990), (2nd 1995), 3rd 2000.

    Japan 65, 65, 50
    USA 33, 42, 42
    UK 40, 40, 40
    Ireland 58, 48, 42
    Sweden 72, 58, 51
    OECD average 53, 50, 47

  2. Corporate Taxes (including regiuonal, state, local etc),
    also top rates as percentages: 1990, 1995, 2000

    Japan 42, 42, 42
    USA 40, 40, 40
    UK 30, 30, 30
    Ireland 24, 20, 16
    Sweden 28, 28, 28
    OECD average 34, 33, 31

Note that Japan is consistently higher than the OECD average. Note also that Sweden’s business taxation always was low. The US corporate taxes may be close to Japan’s, but the US economy hasn’t needed tax cuts for the past ten years to stimulate growth.

My conclusion is that Japanese “stimulus packages” are clearly not addressing incentives to produce.

Finally, the overall ranking between 1990 and 2000 is highly revealing:

USA 3rd in 2000, 4th in 1990
UK 4th (2000), 6th (1990)
Ireland 7th (2000), 20th (1990)
Sweden 19th (2000), 26th (1990)
JAPAN 24th (2000), 7th (1990)

Before David Carr wonders how the heck a Labour government pushed the UK up 2 places: 1) independent Bank of England, 2) you should have seen what other governments were like…

A case example of (relative) economic freedom being a precondition for (relative) economic prosperity.

6 comments to Japan’s false dawns

  • Actually, UK fiscal policy was pretty encouraging going back a few years. Gordon Brown was taking some positive steps. I haven’t been following the current direction very closely but I vaguely sense that lower taxes is off the agenda. So you may see a change in UK standing in the next survey.

  • George Reisman’s Capitalism says: “What has enabled Sweden to have one of the world’s highest burdens of taxation and, at the same time, to remain a modern country, more or less advancing, is the fact that the tax burden in Sweden falls far more heavily on the average Swedish wage earner than it does on Swedish business”

  • Kevin Connors

    What about sales, property, value added, capital gains, etc. etc. etc. taxes?

  • Bonsai Dave

    Why has the formerly fearsome Japanese economy been soooo weak? Your tax numbers tell part of the regulatory nightmare. Meanwhile our shelves are now innundated with wonderful, cheap, Chinese products. Of which, the quality and sophistication grows quicly….

    Of course stats from China are harder to get and harder to trust. Further, it’s so hard to imagine that a country without western democracy and civil liberties could be booming for the same reason Japan is stagnating…but it’s true.

    Travel anywhere in China and ask people why the communal farm was dropped and they will explain the parable of the “Iron Rice Bowl”…. that formerly you got a bowl that could neither grow nor shrink, depending on your input….thus there was little input. Read Henry George and imagine China telling 80%of their populace that in one year they would be put on land for which rent would be charged but virtually no taxation.

    That’s real land reform! In the first year everyone’s diet improved dramatically. Most families suddenly could afford plenty of rice, some vegetables regularly and a bit of fish and fowl. Fruit trees take longer.

    Of course the low-tax personal responsibility revolution has been neither as fast nor as pure during it’s spread to more urban and industrial work units, but the spread seems to continue apace. Can you imagine vast Chinese provinces (the size of European countries), in which economic growth has AVERAGED over 10% a year for a whole generation?

    Why are libertarians not selling the dream that in a single generation an 8-FOLD INCREASE IN PROSPERITY IS POSSIBLE? Why couldn’t it happen for struggling children in Afganistan, Bolivia, or South Dakota? Shouldn’t it be concerning that Willie Nelson has to do concerts for farm kids while we allot over a hundred billion dollars in subsidies to huge agricultural corporations? And 1.2 billion chinese could explain to you why we are going in the wrong direction here.

  • I believe that it was on the Daily Reckoning site that I read this quote a few days ago: “Canada is a socialist country pretending to be capitalist and China is a capitalist country pretending to be socialist”.

  • Jacob

    We can also say: Canada is a socialist country with democratic government and China is a capitalist country with a dictatorial government. Chile, in the 70-80′ies was the same under Pinochet. Both porsperred.